EXHIBIT 10.1
EXECUTION VERSION
PIPELINES AGREEMENT
This Pipelines Agreement (this "Agreement") is dated as of July 8, 2005,
by and among Holly Corporation, a Delaware corporation ("Holly"), Navajo
Refining Company, L.P., a Delaware limited partnership ("Navajo Refining" and,
together with Holly, the "Holly Entities"), Holly Energy Partners, L.P., a
Delaware limited partnership (the "Partnership"), Holly Energy
Partners-Operating, L.P., a Delaware limited partnership (the "Operating
Partnership"), HEP Pipeline, L.L.C., a Delaware limited liability company ("HEP
Pipeline"), HEP Logistics Holdings, L.P., a Delaware limited partnership (the
"General Partner"), Holly Logistic Services, L.L.C., a Delaware limited
liability company ("Holly GP"), and HEP Logistics GP, L.L.C., a Delaware limited
liability company ("OLP GP" and, together with the Partnership, the Operating
Partnership, HEP Pipeline, the General Partner and Holly GP, the "Partnership
Entities"). Each of the Holly Entities and the Partnership Entities are
individually referred to herein as a "Party" and collectively as the "Parties."
RECITALS:
Pursuant to that certain Purchase and Sale Agreement dated as of July 6,
2005 (the "Purchase Agreement") by and among Holly, Navajo Refining and Navajo
Pipeline Co., L.P. ("Navajo Pipeline"), and the Partnership, the Operating
Partnership and HEP Pipeline, Navajo Pipeline and Navajo Refining have agreed to
transfer and convey to HEP Pipeline, and HEP Pipeline has agreed to acquire, the
Intermediate Product Pipelines which historically have been utilized by the
Holly Entities to transport Intermediate Products.
The Holly Entities desire to continue to transport Intermediate Products
in the Intermediate Product Pipelines and the Partnership desires to provide
transportation services to the Holly Entities, all on the terms set forth in
this Agreement.
NOW, THEREFORE, in consideration of the covenants and obligations
contained herein, the Parties hereby agree as follows:
SECTION 1. DEFINITIONS
Capitalized terms used throughout this Agreement and not otherwise defined
herein shall have the meanings set forth below.
"Additives" has the meaning set forth in Section 2(d).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question,
excluding, in the case of Holly, the Partnership Entities.
"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.
"Artesia Refinery" means the refining facilities owned by Navajo Refining
in Artesia.
"bpd" means barrels per day.
"Claim" means any existing or threatened future claim, demand, suit,
action, investigation, proceeding, governmental action or cause of action of any
kind or character (in each case, whether civil, criminal, investigative or
administrative), known or unknown, under any theory, including those based on
theories of contract, tort, statutory liability, strict liability, employer
liability, premises liability, products liability, breach of warranty or
malpractice.
"Claimant" has the meaning set forth in Section 10(f).
"Conflicts Committee" means the Conflicts Committee of Holly Logistic
Services, L.L.C., as general partner of HEP Logistics Holdings, L.P., the sole
general partner of the Partnership.
"Contract Quarter" means a three-month period that commences on July 1,
October 1, January 1, or April 1, and ends on September 30, December 31, March
31 or June 30, respectively, except that the initial Contract Quarter shall
commence on the Effective Date.
"Contract Year" means a year that commences on July 1 and ends on the last
day of June, except that the initial Contract Year shall commence on the
Effective Date.
"Control" (including with correlative meaning, the term "controlled by")
means, as used with respect to any Person, the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise.
"Controlled Affiliates" means with respect to any Person, any other Person
that directly or indirectly through one or more intermediaries is controlled by
such Person, excluding in the case of Holly, the Partnership Entities.
"Deficiency Notice" has the meaning set forth in Section 9(a).
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"Deficiency Payment" has the meaning set forth in Section 9(a).
"Effective Date" means the date of the closing of the Purchase Agreement.
"Force Majeure" means acts of God, strikes, lockouts or other industrial
disturbances, acts of the public enemy, wars, blockades, insurrections, riots,
storms, floods, washouts, arrests, the order of any court or Governmental
Authority having jurisdiction while the same is in force and effect, civil
disturbances, explosions, breakage, accident to machinery, storage tanks or
lines of pipe, inability to obtain or unavoidable delay in obtaining material or
equipment, and any other causes whether of the kind herein enumerated or
otherwise not reasonably within the control of the Party claiming suspension and
which by the exercise of due diligence such Party is unable to prevent or
overcome. Notwithstanding anything in this Agreement to the contrary, inability
of a Party to make payments when due, be profitable or to secure funds, arrange
bank loans or other financing, obtain credit or have adequate capacity or
production (other than for reasons of Force Majeure) shall not be regarded as
events of Force Majeure.
"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.
"Incentive Tariff" has the meaning set forth in Section 2(b)(ii).
"Intermediate Products" means crude oil, gas oil, diesel, kerosene,
casinghead, naphtha, normal butane and isobutane, all of which should be
characteristically equal to like products that have been transported on the
Intermediate Product Pipelines after January 1, 2003.
"Intermediate Product Pipelines" means the pipelines described on Exhibit
A attached hereto.
"Lovington Refinery" means the refining facilities owned by Navajo
Refining near Lovington, New Mexico.
"Minimum Revenue Commitment" has the meaning set forth in Section 2(a).
"Omnibus Agreement" means the Omnibus Agreement, dated as of the July 13,
2004, among Holly, the Partnership, the Operating Partnership, the General
Partner, Holly GP, OLP GP and Navajo Pipeline, as amended.
"Parties" or "Party" has the meaning set forth in the preamble to this
Agreement.
"PPI" has the meaning set forth in Section 2(a).
"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.
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"Prime Rate" means the prime rate per annum announced by Union Bank of
California, N.A., or if Union Bank of California, N.A. no longer announces a
prime rate for any reason, the prime rate per annum announced by the largest
U.S. bank measured by deposits from time to time as its base rate on corporate
loans, automatically fluctuating upward or downward with each announcement of
such prime rate.
"Refineries" means, collectively, the Artesia Refinery and the Lovington
Refinery.
"Refund" has the meaning set forth in Section 9(c).
"Respondent" has the meaning set forth in Section 10(f).
SECTION 2. AGREEMENT TO USE SERVICES RELATING TO PIPELINES.
This Agreement sets forth a commercial arrangement consistent with
historical operational practices between the Holly Entities and the Partnership
Entities as well as the objectives of the Parties. The Parties intend to be
strictly bound by the terms set forth in this Agreement, which set forth the
Minimum Revenue Commitment on the part of the Holly Entities and require the
Partnership Entities to provide certain transportation services to the Holly
Entities. The principal objective of the Partnership Entities is for the Holly
Entities to meet or exceed the Minimum Revenue Commitment. The principal
objective of the Holly Entities is for the Partnership Entities to provide
services to the Holly Entities in a manner that enables the Holly Entities to
operate their assets in a manner at least as favorably as their historical
practice when the Holly Entities were the owners of the Intermediate Product
Pipelines.
(a) Minimum Revenue Commitment. During the term of this Agreement and
subject to the terms and conditions of this Agreement, the Holly Entities agree
as follows:
(i) Subject to Section 3, for a term of 15 Contract Years commencing
on the Effective Date, the Holly Entities will transport on the
Intermediate Product Pipelines an amount of Intermediate Products in the
aggregate that will produce revenue to the Partnership Entities in an
amount at least equal to $2,956,500 per Contract Quarter (the "Minimum
Revenue Commitment"). Notwithstanding the foregoing, in the event that the
Effective Date is any date other than the first day of a calendar quarter,
then the Minimum Revenue Commitment for the initial Contract Quarter shall
be prorated based upon the number of days actually in such calendar
quarter and the initial Contract Quarter.
(ii) The Minimum Revenue Commitment shall be adjusted on July 1 of
each Contract Year commencing on July 1, 2006, by an amount equal to the
percentage increase, if any, between the two preceding calendar years, in
the Producer Price Index for Finished Goods, seasonally adjusted, as
published by the Department of Labor ("PPI"); provided, however, that the
Minimum Revenue Commitment will not decrease as a result of any decrease
in the PPI. If that index is no longer published, the Holly Entities and
the Partnership Entities shall negotiate in good faith to agree on a new
index that gives comparable protection against inflation and the same
method of adjustment for increases in the new index shall be used to
calculate increases in the Minimum Revenue Commitment. If the Holly
Entities and the Partnership Entities are unable to agree, a new
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index will be determined by binding arbitration in accordance with Section
10(f) of this Agreement and the same method of adjustment for increases in
the new index shall be used to calculate increases in the Minimum Revenue
Commitment.
(iii) If the Holly Entities are unable for a period in excess of
thirty (30) consecutive days to transport on the Intermediate Product
Pipelines the volumes of Intermediate Products required to meet the
Minimum Revenue Commitment as a result of the Partnership Entities'
operational difficulties, prorationing, or inability to provide the 72,000
bpd capacity, then upon written notice by the Holly Entities to the
Partnership Entities, the Minimum Revenue Commitment will be reduced for
such period of time by an amount equal to: (1) the volume of Intermediate
Products that the Holly Entities are unable to transport on the
Intermediate Product Pipelines as a result of the Partnership Entities'
operational difficulties, prorationing or inability to provide the 72,000
bpd capacity multiplied by (2) the applicable tariffs.
(b) Tariffs.
(i) The initial tariff rates, and the rules and regulations
applicable to intrastate service on the Intermediate Product Pipelines
shall be as set forth in Exhibit B attached hereto and made a part hereof
for all purposes. The initial non-incentive tariff rates shall be adjusted
on July 1 of each Contract Year commencing on July 1, 2006, by an amount
equal to the percentage change, if any, between the two immediately
preceding calendar years, in the PPI. If that index is no longer
published, the Holly Entities and the Partnership Entities shall negotiate
in good faith to agree on a new index that gives comparable protection
against inflation or deflation and the same method of adjustment for
increases or decreases in the new index shall be used to calculate
increases or decreases in the non-incentive tariff rates. If the Holly
Entities and the Partnership Entities are unable to agree, a new index
will be determined by binding arbitration in accordance with Section 10(f)
of this Agreement and the same method of adjustment for increases or
decreases in the new index shall be used to calculate increases or
decreases in the non-incentive tariff rates. Notwithstanding that the
Minimum Revenue Commitment will be determined on a Contract Year basis,
the applicable fees, tariff rates and other charges provided for in this
Agreement will become effective as of the date of this Agreement.
(ii) Holly shall pay the Partnership an incentive tariff (the
"Incentive Tariff") equal to $0.25 per barrel for barrels shipped in
excess of 72,000 bpd up to and including 95,000 bpd; provided, that the
Partnership will receive its full base tariff of $0.45 per barrel
escalated annually at PPI for any and all non-Holly-owned barrels shipped
on the Intermediate Product Pipelines. The Incentive Tariff shall be
adjusted on July 1 of each Contract Year, commencing on July 1, 2006, as
provided in Section 2(a)(ii).
(iii) As soon as practicable following any Contract Year during
which Incentive Tariffs paid to the Partnership did not provide the
Partnership with a profit margin of at least 25% on its incremental costs
for shipping such additional barrels, Holly shall pay to the Partnership
an amount equal to the dollar amount that, when combined
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with the Incentive Tariffs paid to the Partnership for such Contract Year,
would have provided the Partnership a profit margin of 25% on its
incremental costs for shipping such additional barrels.
(c) Obligations of the Partnership Entities. During the term of this
Agreement and subject to the terms and conditions of this Agreement, including
Section 10(c), the Partnership Entities agree to own or lease, operate and
maintain the assets necessary to accept the deliveries from the Holly Entities
and to provide the services required under this Agreement. Notwithstanding the
preceding sentence, subject to Section 10(c) of this Agreement and Article VI of
the Omnibus Agreement, the Partnership Entities are free to sell any of their
assets, including assets that provide services under this Agreement, and the
Partnership or any of the Partnership Entities are free to merge with another
entity (whether or not the Partnership or any of the Partnership Entities is the
surviving entity in such merger) and are free to sell all of their assets or all
of their equity to another entity at any time. At the request of the Holly
Entities, and subject in each case to any applicable common carrier proration
duties, the Partnership Entities agree to use commercially reasonable efforts to
transport by pipeline for the Holly Entities each month during the term of this
Agreement 72,000 bpd of Intermediate Products on the Intermediate Product
Pipelines. To the extent that the Holly Entities are entitled to an exception
under Section 3 of this Agreement to their obligations under Section 2(a) of
this Agreement, the corresponding obligations of the Partnership Entities under
this Section 2(c) will be proportionately reduced.
(d) Pour Point Depressant and Additives. The Partnership Entities shall
add pour point depressant to the Intermediate Products as may be requested by
the Holly Entities or as may be otherwise required to move certain Intermediate
Products in the quantities necessary to meet the Holly Entities schedule. The
Holly Entities agree to reimburse the Partnership Entities for the cost of
adding pour point depressant to those certain Intermediate Products. All fuel
additives, dyes and other additives ("Additives") requested to be added to the
Holly Entities' Intermediate Products will be provided by the Holly Entities at
no cost to the Partnership Entities or, if the Partnership Entities provide
Additives, then the Holly Entities agree to reimburse the Partnership Entities
for the costs of the Additives.
(e) Taxes. The Holly Entities will pay all taxes, import duties, license
fees and other charges by any Governmental Authority levied on or with respect
to the Intermediate Products delivered by the Holly Entities for transportation
by the Partnership Entities in the Intermediate Product Pipelines including, but
not limited to, any New Mexico gross receipts and compensating (use) taxes. The
Holly Entities will reimburse the Partnership Entities for the New Mexico gross
receipts tax, but not income tax, levied on or with respect to the
transportation services provided by the Partnership Entities to the Holly
Entities under this Agreement. Should any Party be required to pay or collect
any taxes, duties, charges and or assessments pursuant to any federal, state,
county or municipal law or authority now in effect or hereafter to become
effective which are payable by the any other Party pursuant to this Section 2(e)
the proper Party shall promptly reimburse the other Party therefor.
(f) Timing of Payments. The Holly Entities will make payments to the
Partnership Entities by wire transfer of immediately available funds on a
monthly basis during the term of this Agreement with respect to services
rendered by the Partnership Entities under this
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Agreement in the prior month. Payments not received by the Partnership Entities
on or prior to the applicable payment date will accrue interest at the Prime
Rate from the applicable payment date until paid.
(g) Pipeline Direction. Without Holly's prior written consent, which shall
not be unreasonably withheld, the Partnership Entities will not reverse the
direction of any Intermediate Product Pipeline or connect any other pipeline to
the Intermediate Product Pipelines; provided, however, that the Partnership
Entities may take any necessary emergency action to prevent or remedy a release
of Intermediate Products from an Intermediate Product Pipeline without obtaining
the consent required by this Section 2(g). The Holly Entities shall have the
right to reverse the direction of any Intermediate Product Pipelines so long as
the Holly Entities agree to reimburse the Partnership Entities for the
additional costs and expenses incurred by the Partnership Entities as a result
of changing the direction of any Intermediate Products on the Intermediate
Product Pipelines (both to reverse and re-reverse), and (ii) to pay the flow
reversal rates as set forth on Exhibit B. The tariff rates applicable to any
such flow reversal shall be as set forth on Exhibit B and shall be adjusted each
year as provided in Section 2(a)(ii).
(h) Notification of Utilization. When requested by the Partnership
Entities, Holly will provide to the Partnership Entities written notification of
Holly's reasonable good faith estimate of its anticipated future utilization of
the Intermediate Product Pipelines of the Partnership Entities.
(i) Scheduling of Product Movements. The Partnership Entities will use
their reasonable commercial efforts to schedule Intermediate Products movements
and accept deliveries of Intermediate Products hereunder in a manner that is
consistent with the historical dealings between the Parties, as such dealings
may change from time to time.
(j) Increases in Pipeline Tariff Rates. If new laws or regulations are
enacted that require the Partnership Entities to make substantial and
unanticipated capital expenditures with respect to the Intermediate Product
Pipelines, the Partnership Entities may amend the tariff rates in order to
recover the Partnership Entities' cost of complying with these laws or
regulations (including a reasonable return). The Holly Entities and the
Partnership Entities shall use their reasonable commercial efforts to comply
with these laws and regulations, and shall negotiate in good faith to mitigate
the impact of these laws and regulations and to determine the amount of the new
tariff rates. If the Holly Entities and the Partnership Entities are unable to
agree on the amount of the new tariff rates that the Partnership Entities will
charge, such tariff rates will be determined by binding arbitration in
accordance with Section 10(f) of this Agreement.
SECTION 3. EXCEPTIONS TO THE HOLLY ENTITIES' OBLIGATIONS
(a) Intentionally Omitted.
(b) Force Majeure. In the event that any Party is rendered unable, wholly
or in part, by a Force Majeure event from performing its obligations under this
Agreement for a period of more than 30 days, then upon the delivery of notice
and full particulars of the Force Majeure event in writing within a reasonable
time after the occurrence of the Force Majeure event relied on, the obligations
of the Parties, so far as they are affected by the Force Majeure event, shall be
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suspended for the duration of any inability so caused. Any suspension of the
obligations of the Parties as a result of this Section 3(b) shall extend the
term of this Agreement. The Holly Entities will be required to pay any amounts
accrued and due under this Agreement at the time of the Force Majeure event. The
cause of the Force Majeure event shall so far as possible be remedied with all
reasonable dispatch, except that no Party shall be compelled to resolve any
strikes, lockouts or other industrial disputes other than as it shall determine
to be in its best interests. In the event a Force Majeure event prevents the
Partnership Entities or the Holly Entities from performing their respective
obligations under this Agreement for a period of more than one year, this
Agreement may be terminated by the Partnership Entities or the Holly Entities.
Nothing in this Section 3(b) shall alter the liability of the Partnership
Entities as set forth in the rules and regulations tariffs for the Intermediate
Product Pipelines attached hereto as Exhibit B.
SECTION 4. AGREEMENT TO REMAIN SHIPPER
With respect to any Intermediate Products that are produced at a Refinery
and transported in any Intermediate Product Pipeline, the Holly Entities agree
that they will continue their historical commercial practice of owning such
Intermediate Products from such point as such Intermediate Products leave the
Refinery until at least such point as they will not be further transported in an
Intermediate Product Pipeline and to continue acting in the capacity of the
shipper of any such Intermediate Products for their own account at all times
that such Intermediate Products are in an Intermediate Product Pipeline.
SECTION 5. AGREEMENT NOT TO CHALLENGE TARIFFS
The Holly Entities agree to any tariff rate changes for the Intermediate
Product Pipelines determined in accordance with this Agreement. The Holly
Entities agree (a) not to challenge, nor to cause their Controlled Affiliates to
challenge, nor to encourage or recommend to any other Person that it challenge,
or voluntarily assist in any way any other Person in challenging, in any forum,
intrastate tariffs (including joint tariffs) of the Partnership Entities that
the Partnership Entities have filed or may file containing rates, rules or
regulations that are in effect at any time during the term of this Agreement and
regulate the transportation of Intermediate Products, and (b) not to protest or
file a complaint, nor cause their Controlled Affiliates to protest or file a
complaint, nor encourage or recommend to any other Person that it protest or
file a complaint, or voluntarily assist in any way any other Person in
protesting or filing a complaint, with respect to regulatory filings that the
Partnership Entities have made or may make at any time during the term of this
Agreement to change intrastate tariffs (including joint tariffs) for
transportation of Intermediate Products in each case so long as such tariffs,
regulatory filings or rates changed do not conflict with the terms of this
Agreement.
SECTION 6. EFFECTIVENESS AND TERM
This Agreement shall be effective as of the Effective Date, and shall
terminate at 12:01 a.m. Dallas, Texas, time on July 8, 2020, unless extended by
written mutual agreement of the Parties hereto or as set forth in Section 7;
provided, however, that Section 5 shall survive the termination of this
Agreement. The Party desiring to extend this Agreement pursuant to this
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Section 6 shall provide at least 12 months prior written notice to the other
Party of its desire to so extend this Agreement.
SECTION 7. RIGHT TO ENTER INTO A NEW AGREEMENT
For a period of one year following termination without renewal of this
Agreement, the Holly Entities will have the right to enter into a new pipelines
agreement with the Partnership Entities on commercial terms that substantially
match the terms upon which the Partnership Entities propose to enter into an
agreement with a third party for similar services on the Intermediate Product
Pipelines. The Partnership Entities shall give the Holly Entities 45 days prior
written notice of any proposed new pipelines agreement with a third party, and
shall inform the Holly Entities of the fee schedules, tariffs, duration and any
other terms of the proposed third party agreement.
SECTION 8. NOTICES
All notices or requests or consents provided for by, or permitted to be
given pursuant to, this Agreement must be in writing and must be given by
depositing same in the United States mail, addressed to the Person to be
notified, postpaid, and registered or certified with return receipt requested or
by delivering such notice in person or by telecopier or telegram to such Party.
Notice given by personal delivery or mail shall be effective upon actual
receipt. Notice given by telegram or telecopier shall be effective upon actual
receipt if received during the recipient's normal business hours or at the
beginning of the recipient's next business day after receipt if not received
during the recipient's normal business hours. All notices to be sent to a Party
pursuant to this Agreement shall be sent to or made at the address set forth
below or at such other address as such Party may stipulate to the other Parties
in the manner provided in this Section 8:
if to the Holly Entities:
Holly Corporation
100 Crescent Court
Suite 1600
Dallas, Texas 75201
Attn: Matthew P. Clifton
Telecopy: 1-214-615-9372
if to the Partnership Entities:
Holly Energy Partners, L.P.
c/o Holly Logistic Services, L.L.C.
100 Crescent Court
Suite 1600
Dallas, Texas 75201
Attn: James G. Townsend
Telecopy: 1-505-748-6827
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SECTION 9. DEFICIENCY PAYMENTS
(a) As soon as practicable following the end of each Contract Quarter
under this Agreement, the Partnership Entities shall deliver to the Holly
Entities a written notice (the "Deficiency Notice") detailing any failure of the
Holly Entities to meet any of their obligations under Section 2(a) of this
Agreement. The Deficiency Notice shall (i) specify in reasonable detail the
nature of any deficiency and (ii) specify the approximate dollar amount that the
Partnership Entities believe would have been paid by the Holly Entities to the
Partnership Entities if the Holly Entities had complied with Section 2(a) of
this Agreement (the "Deficiency Payment"). The Holly Entities shall pay the
Deficiency Payment to the Partnership Entities upon the later of: (1) 10 days
after their receipt of the Deficiency Notice and (2) 30 days following the end
of the related Contract Quarter.
(b) If the Holly Entities disagree with the Deficiency Notice, then
following the payment of the Deficiency Payment to the Partnership Entities, the
chief financial officers of Holly (on behalf of the Holly Entities) and Holly GP
(on behalf of the Partnership Entities) shall meet or communicate by telephone
at a mutually acceptable time and place, and thereafter as often as they
reasonably deem necessary and shall negotiate in good faith to attempt to
resolve any differences that they may have with respect to matters specified in
the Deficiency Notice. During the 30-day period following the payment of the
Deficiency Payment, the Holly Entities shall have access to the working papers
of the Partnership Entities relating to the Deficiency Notice. If such
differences are not resolved within 30 days following the payment of the
Deficiency Payment, the Holly Entities and the Partnership Entities shall,
within 45 days following the payment of the Deficiency Payment, submit any and
all matters which remain in dispute and which were properly included in the
Deficiency Notice to arbitration in accordance with Section 10(f).
(c) If it is finally determined pursuant to this Section 9 that the Holly
Entities are not required to make any or all of the Deficiency Payment (the
"Refund"), the Partnership Entities shall promptly pay to the Holly Entities the
Refund, together with interest thereon at the Prime Rate, in immediately
available funds.
(d) Deficiency Payments will be credited against any payments owed by the
Holly Entities in the following four Contract Quarters in excess of the Minimum
Revenue Commitments established by this Agreement for such Contract Quarters;
provided, however, that the Holly Entities will not receive credit for any
Deficiency Payment in any of the following four Contract Quarters until it has
met the Minimum Revenue Commitment in the succeeding Contract Quarter.
SECTION 10. MISCELLANEOUS
(a) Intention as to Refineries. The Holly Entities represent to the
Partnership Entities that, as of the date of this Agreement, they are not
considering a shut down of any of the Refineries or any changes to any of the
Refineries that would have a material adverse effect on the operation of any of
the Refineries.
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(b) Amendments and Waivers. No amendment or modification of this Agreement
shall be valid unless it is in writing and signed by the Parties hereto and, in
the case of any amendment or modification adverse to the Partnership Entities,
approved by the Conflicts Committee of Holly GP. No waiver of any provision of
this Agreement shall be valid unless it is in writing and signed by the Party
against whom the waiver is sought to be enforced, and, in the case of any waiver
by the Partnership Entities, approved by the Conflicts Committee of Holly GP. No
failure or delay in exercising any right hereunder, and no course of conduct,
shall operate as a waiver of any provision of this Agreement. No single or
partial exercise of a right hereunder shall preclude further or complete
exercise of that right or any other right hereunder.
(c) Successors and Assigns. This Agreement shall inure to the benefit of,
and shall be binding upon, the Holly Entities, the Partnership Entities and
their respective successors and permitted assigns. Neither this Agreement nor
any of the rights or obligations hereunder shall be assigned without the prior
written consent of Holly (in the case of any assignment by the Partnership
Entities) or the Conflicts Committee of Holly GP (in the case of any assignment
by the Holly Entities), in each case, such consent is not to be unreasonably
withheld or delayed; provided, however, that (i) the Partnership Entities may
make such an assignment (including a partial pro rata assignment) to an
Affiliate of the Partnership Entities without Holly's consent, (ii) the Holly
Entities may make such an assignment (including a pro rata partial assignment)
to an Affiliate of the Holly Entities without the Conflicts Committee of Holly
GP's consent, (iii) the Holly Entities may make a collateral assignment of their
rights and obligations hereunder and/or grant a security interest in all or a
portion of the Intermediate Product Pipelines to any bona fide third party
lender or debt holder, or trustee or representative for any of them, and (iv)
the Partnership Entities may make a collateral assignment of their rights
hereunder and/or grant a security interest in all or a portion of the
Intermediate Product Pipelines to a bona fide third party lender or debt holder,
or trustee or representative for any of them, if such third party lender, debt
holder or trustee shall have executed and delivered to the Holly Entities a
non-disturbance agreement in such form as is reasonably satisfactory to the
Holly Entities and the Holly Entities execute an acknowledgement of such
collateral assignment in such form as may from time to time be reasonably
requested. Any attempt to make an assignment otherwise than as permitted by the
foregoing shall be null and void. The Parties agree to require their respective
successors, if any, to expressly assume, in a form of agreement acceptable to
the other Parties, their obligations under this Agreement.
(d) Severability. If any provision of this Agreement shall be held invalid
or unenforceable by a court or regulatory body of competent jurisdiction, the
remainder of this Agreement shall remain in full force and effect.
(e) Choice of Law. This Agreement shall be subject to and governed by the
laws of the State of Texas, excluding any conflicts-of-law rule or principle
that might refer the construction or interpretation of this Agreement to the
laws of another state.
(f) Arbitration Provision. Any and all Arbitrable Disputes must be
resolved through the use of binding arbitration using three arbitrators, in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, as supplemented to the extent necessary to determine any procedural
appeal questions by the Federal Arbitration Act (Title 9 of the United States
Code). If there is any inconsistency between this Section and the Commercial
11
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 or for it, and the Respondent will pay the
compensation and expenses of the arbitrator named by or for it. The costs of
petitioning for the appointment of an arbitrator, if any, shall be paid by
Respondent. The Claimant and Respondent will each pay one-half of the
compensation and expenses of the third arbitrator. All arbitrators must (i) 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 (ii)
have not less than seven years experience in the energy industry. The hearing
will be conducted in Dallas, Texas and commence within 30 days after the
selection of the third arbitrator. The Holly Entities, the Partnership Entities
and the arbitrators shall proceed diligently and in good faith in order that the
award may be made as promptly as possible. Except as provided in the Federal
Arbitration Act, the decision of the arbitrators will be binding on and
non-appealable by the Parties hereto. The arbitrators shall have no right to
grant or award indirect, consequential, punitive or exemplary damages of any
kind.
(g) Rights of Limited Partners. The provisions of this Agreement are
enforceable solely by the Parties, 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 comply with the terms of
this Agreement.
(h) Further Assurances. In connection with this Agreement and all
transactions contemplated by this Agreement, each signatory Party hereto agrees
to execute and deliver such additional documents and instruments and to perform
such additional acts as may be necessary or appropriate to effectuate, carry out
and perform all of the terms, provisions and conditions of this Agreement and
all such transactions.
[Remainder of page intentionally left blank. Signature pages follow.]
12
IN WITNESS WHEREOF, the undersigned Parties have executed this Agreement
as of the date first written above.
HOLLY CORPORATION
By: /s/ Stephen H. McDonnell
--------------------------------------------
Stephen J. McDonnell,
Vice President and Chief Financial Officer
NAVAJO REFINING COMPANY, L.P.
By: NAVAJO REFINING GP, L.L.C.,
its general partner
By: /s/ Stephen H. McDonnell
--------------------------------------------
Stephen J. McDonnell,
Vice President and Chief Financial Officer
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/ Stephen J. McDonnell
---------------------------------------
Stephen J. McDonnell,
Vice President and Chief Financial Officer
Signature Page 1 of 3 to the Pipelines Agreement
HOLLY ENERGY PARTNERS-OPERATING, L.P.
By: HEP LOGISTICS GP, L.L.C.,
its general partner
By: HOLLY ENERGY PARTNERS, L.P.
its sole member
By: HEP LOGISTICS HOLDINGS, L.P.,
its general partner
By: HOLLY LOGISTIC SERVICES, L.L.C.,
its general partner
By: /s/ Stephen J. McDonnell
-------------------------------------------
Stephen J. McDonnell,
Vice President and Chief Financial Officer
HEP PIPELINE, L.L.C.
By: HOLLY ENERGY PARTNERS -- OPERATING, L.P.
its sole member
By: HEP LOGISTICS GP, LLC.,
its general partner
By: HOLLY ENERGY PARTNERS, L.P.,
its general partner
By: HEP LOGISTICS HOLDINGS, L.P.,
its general partner
By: HOLLY LOGISTIC SERVICES, L.L.C.,
its general partner
By: /s/ Stephen J. McDonnell
-------------------------------------------
Stephen J. McDonnell,
Vice President and Chief Financial
Officer
Signature Page 2 of 3 to the Pipelines Agreement
HEP LOGISTICS HOLDINGS, L.P.
By: HOLLY LOGISTIC SERVICES, L.L.C.,
its general partner
By: /s/ Stephen J. McDonnell
-----------------------------------------
Stephen J. McDonnell,
Vice President and Chief Financial
Officer
HOLLY LOGISTIC SERVICES, L.L.C.
By: /s/ Stephen J. McDonnell
--------------------------------------------
Stephen J. McDonnell,
Vice President and Chief Financial Officer
HEP LOGISTICS GP, L.L.C.
By: HOLLY ENERGY PARTNERS, L.P.,
its general partner
By: HEP LOGISTICS HOLDINGS, L.P.,
its general partner
By: HOLLY LOGISTIC SERVICES, L.L.C.,
its general partner
By: /s/ Stephen J. McDonnell
-------------------------------------------
Stephen J. McDonnell,
Vice President and Chief Financial Officer
Signature Page 3 of 3 to the Pipelines Agreement
EXHIBIT A
INTERMEDIATE PRODUCT PIPELINES
"Intermediate Pipelines" means approximately 65 miles of 8" feedstock pipeline
and 10" feedstock pipeline, each of which begins at the inlet flange of the
delivery manifold motor operated valves at the Lovington Refinery, near
Lovington, New Mexico and ends at the outlet flange of the turbine meter at the
Artesia Refinery in Artesia, New Mexico, along with any and all connection
facilities, including the Enterprise/MAPL connection, field booster pump
stations, spare parts, pipes, valves, motors and miscellaneous equipment
directly associated with the 8" inch and 10" feedstock pipelines.
A-1
EXHIBIT B
ATTACHED TO AND MADE
PART OF THE PIPELINES AGREEMENT,
DATED JULY 8, 2005
RATES, RULES AND REGULATIONS
================================================================================
TABLE OF RATES
RATES IN CENTS PER BARREL OF 42 UNITED STATES GALLONS
ORIGIN RATE
CARRIER'S RECEIVING POINT DESTINATION RATE TYPE
- ------------------------- --------------------- ----- -------------
Lovington, New Mexico Artesia, New Mexico 0.450 Non-Incentive
0.250 Incentive
- - Barnsdal Station Lovington, New Mexico 0.450 Flow Reversal
- - Artesia, New Mexico Lovington, New Mexico 0.450 Flow Reversal
INCENTIVE RATE TERMS: See Section 2(b)(ii) of the Agreement for the Incentive
Rate terms.
NON-INCENTIVE RATE TERMS: See Section 2(a)(i) of the Agreement for the
Non-Incentive Rate terms.
FLOW REVERSAL RATE TERMS: See Section 2(g) of the Agreement for additional Flow
Reversal terms.
RULES AND REGULATIONS
Company will receive Intermediate Products for interstate transportation only to
established delivery stations on its own lines, and lines of connecting pipeline
companies, on the following conditions:
ITEM NO. SUBJECT APPLICATION
- -------- --------------- ------------------------------------------------------------------------------------------------
As used in these rules and regulations, the following terms have the following meanings:
"Barrels" means 42 United States gallons at sixty degrees (60 degree) Fahrenheit.
"Carrier" means Holly Energy Partners - Operating, L.P.
"Company" means Holly Energy Partners - Operating, L.P.
"Consignee" means the party to whom a Shipper has ordered the delivery of Intermediate Products.
"Intermediate Products" means crude oil, gas oil, diesel, kerosene, casinghead, naphtha, normal
butane and isobutane, all of which should be characteristically equal to like products that
have been transported on the Intermediate Product Pipelines after January 1, 2003.
"Nomination" means an offer by a Shipper to Carrier of a stated quantity of Intermediate Products
for transportation from origin to specified destination.
5 Definitions "Shipment" means a volume of Intermediate Products offered to and accepted by Carrier for
transportation.
"Shipper" means the party who contracts with the Carrier for transportation of Intermediate
Products under the terms of this tariff.
"Transmix" means the mixture that occurs in normal pipeline operations between non-compatible
Intermediate Products.
Intermediate Products will be accepted for transportation at such time as Intermediate Products
of same quality and specifications are currently being transported from receiving point to
destination. Prior to acceptance of Intermediate Products for transportation the Company may
require from the Shipper a certificate setting forth, in detail, the specifications of each
shipment of Intermediate Products. Carrier may also make such tests as it deems necessary.
All additives and inhibitors to be included in Shipper's Intermediate Products must first be
Specifications approved by the Carrier before such Intermediate Products will be accepted for
and transportation. If Intermediate Products tendered by Shipper do not contain corrosion
10 Acceptance inhibitor compound which is satisfactory to Carrier, then Carrier may, at Shipper's
of expense, inject corrosion inhibitor compound in the Intermediate Products to be
Product transported, and Shipper and Consignee will accept delivery of shipments at destination
containing portions of the corrosion inhibitor compound.
Intermediate Products will be accepted for transportation when Shipper has made necessary
arrangements (a) to provide facilities to tender such Intermediate Products and deliver same at
Carrier's receiving manifold at the origin at pumping rates and pressures as required by
Carrier, and (b) to provide facilities at the destination to receive the Intermediate Products
tendered for transportation at flow rates and pressures as required by Carrier.
Carrier may require Shipper to supply adequate buffer material when necessary for quality control
purposes to maintain segregation of Shipments of Intermediate Products.
Shipper will be required to schedule its Intermediate Products for delivery into Carrier's
Shipments- receiving tanks or suction manifold at the origin to meet the cycle within which Carrier
15 Nominations and schedules the Intermediate Products to move. Intermediate Products shall be available for
Minimum shipment 24 hours before the scheduled date for movement into the Carrier's pipeline
Tender system. Shipper shall deliver Intermediate Products to Carrier at a pressure no greater
than 256 psig and at a flowing pressure of at least 100 psig, at a temperature of no greater
than 120 degrees Fahrenheit.
B-2
ITEM NO. SUBJECT APPLICATION
- -------- --------------- ------------------------------------------------------------------------------------------------
Mixing with Carrier will endeavor to deliver substantially the same Intermediate Products as received
Other from Shipper to the extent permitted by Carrier's facilities. However, all shipments will
20 Refined be accepted for transportation only on condition that it shall be subject to such changes
Petroleum in gravity or quality while in transit as may result from the mixture with other
Products Intermediate Products in the pipelines.
Carrier will allocate all Transmix to Shipper. Shipper must accept delivery of Transmix from
Carrier no later than 5 days after notification that Transmix is available for distribution to
Shipper. Shipper will have sole responsibility for the disposition of its Transmix.
Refined Company shall have the right to decline to receive any Intermediate Products which may be
Petroleum involved in litigation or the title of which may be in dispute, and it may require of the
Products Shipper satisfactory evidence of his perfect and unencumbered title or satisfactory
to be Free indemnity bond to protect Company.
25 from Liens
and
Charges
Company is engaged in the transportation of Intermediate Products exclusively and therefore
30 Commodity will not accept any other commodity for transportation.
Carrier shall not be liable for loss of Intermediate Products in its custody, damage thereto, or
delay caused by fire, storm, flood, epidemics, Acts of God, riots, insurrection, rebellion,
war, act of the public enemy, quarantine, nuclear or atomic explosion, strikes, picketing, or
other labor stoppages, whether of Carriers employees or other, the authority of law,
requisition or necessity of Government of the United States in time of war, default of Shipper
or Shipper's Consignee or any other cause not due to the sole negligence of Carrier, whether
Liability similar or dissimilar to the cause herein enumerated. In the event of such loss, Shipper
40 of shall bear the loss. Transportation charges will be assessed only on the quantity delivered
Carrier net of volume corrections as set forth in Item No. 45 herein.
Shipments tendered to Carrier for transportation shall be tested by a representative of
Carrier, and gauged or measured by automatic equipment approved by Carrier or by other
methods acceptable in the industry, at locations designated by Carrier. The Shipper shall
Gauging, have the privilege of being present or represented at the gauging and testing. Quantities
Testing, will be computed from correctly compiled tank tables or by Carrier approved meters.
45 and Corrections will be made for temperature from observed degrees Fahrenheit to sixty degrees
Volume (60 degrees) Fahrenheit.
Corrections
Shipper shall bear the actual product losses for shrinkage and evaporation incident to pipeline
transportation up to a maximum of twenty-five hundredths (0.25) of a percent. Carrier shall
offset such product losses with any product gains and shall determine the net product losses on
a calendar quarterly basis.
Either prior to or after the acceptance of Shipments for transportation through Carrier's
pipeline system, Carrier may, upon reasonable notice, require each Shipper to provide a pro
55 Line Fill rata part of the volume of Intermediate Products necessary for pipeline fill. Intermediate
Products provided by a Shipper for this purpose may be withdrawn from the system only with the
prior approval of Carrier or after reasonable notice of such Shipper's intention.
B-3
ITEM NO. SUBJECT APPLICATION
- -------- --------------- ------------------------------------------------------------------------------------------------
As a condition precedent to recovery, claims must be filed in writing with Carrier within nine
Claims, (9) months after delivery of the property, or in case of failure to make delivery, then within
Suits, nine (9) months after a reasonable time for delivery has elapsed; and suits shall be instituted
65 Time against Carrier only within two (2) years and one (1) day from the day when notice in writing
for is given by Carrier to the claimant that Carrier has disallowed the claim or any part or parts
Filing thereof specified in the notice. Where claims are not filed or suits are not instituted thereon
in accordance with the foregoing provisions, Carrier shall not be liable, and such claims will
not be paid.
B-4