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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 6, 2010 (March 31, 2010)
HOLLY CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware
(State or other
jurisdiction of
incorporation)
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001-03876
(Commission File Number)
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75-1056913
(I.R.S. Employer
Identification Number) |
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100 Crescent Court,
Suite 1600
Dallas, Texas
(Address of principal
executive offices)
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75201-6915
(Zip code) |
Registrants telephone number, including area code: (214) 871-3555
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
References herein to Holly Corporation (Holly) include Holly Corporation and its
consolidated subsidiaries. References herein to Holly Energy Partners, L.P. (the Partnership or
"HEP) include Holly Energy Partners, L.P. and its consolidated subsidiaries. This document
contains certain disclosures of agreements that are specific to subsidiaries of Holly Corporation
and Holly Energy Partners, L.P. and do not necessarily represent
obligations of Holly Corporation or
Holly Energy Partners, L.P. Holly controls the general partner of the Partnership.
First Amended and Restated Pipelines, Tankage and Loading Rack Throughput Agreement (Tulsa East)
On March 31, 2010, Holly and certain of its subsidiaries, including Holly Refining &
Marketing-Tulsa LLC (Holly Tulsa) and Lea Refining Company (Lea), and certain subsidiaries of
the Partnership, including HEP Tulsa LLC (HEP Tulsa) and HEP Refining, L.L.C. (HEP Refining),
entered into and simultaneously closed an LLC Interest Purchase Agreement (the Purchase
Agreement) for the Partnership to acquire from Holly (i) all of the issued and outstanding
membership interests of Holly Energy Storage-Tulsa LLC (HEP Storage-Tulsa), which owns
approximately 2 million barrels of hydrocarbon storage tanks, a rail loading rack, and a truck
unloading rack (the Additional Tulsa East Assets) located at Hollys Tulsa refinery site for a
purchase price of $88.6 million and (ii) all of the issued and outstanding membership interests of
Holly Energy Storage-Lovington LLC (HEP Storage-Lovington), which owns an asphalt loading rack
and terminal building, including weigh scales, located at Hollys Lovington, New Mexico facility
(the Lovington Assets) for a purchase price of $4.4 million.
On March 31, 2010, in connection with the closing of the transactions contemplated by the
Purchase Agreement, HEP Tulsa, HEP Storage-Tulsa and Holly Tulsa entered into a First Amended and
Restated Pipelines, Tankage and Loading Rack Throughput Agreement (Tulsa East) (the Amended Tulsa
East Throughput Agreement). Holly Tulsa is a wholly owned subsidiary of Holly, the entity that
controls the Partnerships general partner.
The Amended Tulsa East Throughput Agreement amends and restates the 15-year Pipelines, Tankage
and Loading Rack Throughput Agreement, dated as of December 1, 2009, that was previously filed as
an exhibit to Hollys Current Report on Form 8-K filed December 7, 2009, relating to the storage
tank, pipeline and loading rack assets purchased by HEP Tulsa from Sinclair Tulsa Refining Company
on December 1, 2009 (the Original Tulsa East Assets).
Pursuant to the Amended Tulsa East Throughput Agreement, HEP Tulsa will operate and maintain
the Original Tulsa East Assets and HEP Storage-Tulsa will operate and maintain the Additional Tulsa
East Assets. HEP Tulsa and HEP Storage-Tulsa will provide certain transportation, storage and
loading services to Holly Tulsa, and Holly Tulsa will pay
HEP Tulsa, for the Original Tulsa East Assets:
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a pipeline tariff of $.10 for each barrel of refined products moved on the
refined product pipelines with a guaranteed minimum throughput of 60,000 barrels
per day (bpd) of refined products moved; |
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a tankage base tariff of $.30 for each barrel for use of tankage up to 80,000
barrels of refined products, $.10 per barrel for volumes in excess of 80,000 but
less than 120,000, and $.22 per barrel for volumes in excess of 120,000, with a
guaranteed minimum throughput of 80,000 bpd; and
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a loading rack tariff of $.30 for each barrel of refined products, LPG,
intermediate products, and heavy products loaded over the loading racks with a
guaranteed minimum throughput of 26,000 bpd; |
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HEP Storage-Tulsa, for the Additional Tulsa East Assets:
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a tankage base tariff of $.40 for each barrel for use of tankage up to 90,000
barrels of crude oil and intermediate products, $.10 per barrel for volumes in
excess of 90,000 but less than 120,000, and $.22 per barrel for volumes in excess
of 120,000, with a guaranteed minimum throughput of 90,000 bpd; and |
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a loading rack tariff of $.35 for each barrel of refined products, LPG,
intermediate products, and heavy products loaded over the loading racks with a
guaranteed minimum throughput of 1,800 bpd. |
These tariffs are subject to various adjustments, including limited upward adjustments for
changes in the Producer Price Index-Commodities-Finished Goods (PPI) produced by the U.S.
Department of Labor, Bureaus of Statistics, and limited upward adjustment if actual
non-extraordinary operating expenses regarding the Original Tulsa East Assets and the Additional
Tulsa East Assets exceed assumed operating expenses.
The Amended Tulsa East Throughput Agreement provides that Holly Tulsa will indemnify HEP Tulsa
and HEP Storage-Tulsa for certain environmental matters arising from the pre-closing ownership or
operation of the Original Tulsa East Assets and the Additional Tulsa East Assets, and that HEP
Tulsa and HEP Storage-Tulsa will indemnify Holly Tulsa for certain environmental matters arising
after the closing. These indemnification obligations are uncapped and unlimited. Holly will
guaranty the obligations of Holly Tulsa under the Amended Tulsa East Throughput Agreement, and the
Partnership and Holly Energy Partners-Operating, L.P., a subsidiary of the Partnership (HEP
Operating), will guaranty the obligations of HEP Tulsa and HEP Storage-Tulsa under the Amended
Tulsa East Throughput Agreement.
The description of the Amended Tulsa East Throughput Agreement herein is qualified by
reference to the copy of the Amended Tulsa East Throughput Agreement, filed as Exhibit 10.1 to this
report, which is incorporated by reference into this report in its entirety.
Loading Rack Throughput Agreement (Lovington)
On March 31, 2010, in connection with the closing of the transactions contemplated by the
Purchase Agreement, HEP Storage-Lovington and Navajo Refining Company, L.L.C. (Navajo Refining)
entered into a Loading Rack Throughput Agreement (Lovington) (the Lovington Throughput
Agreement). Navajo Refining is a wholly owned subsidiary of Holly, the entity that controls the
Partnerships general partner.
Pursuant to the Lovington Throughput Agreement, HEP Storage-Lovington will operate and
maintain the Lovington Assets located at Hollys Lovington, New Mexico facility and will provide
certain loading services to Navajo Refining, and Navajo Refining will pay HEP Storage-Lovington a
loading rack tariff of $.35 for each barrel of asphalt and any other petroleum or petroleum based
or derived products loaded over the loading racks with a guaranteed minimum throughput of 4,000
bpd.
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These tariffs are subject to various adjustments, including limited upward adjustments for
changes in the Producer Price Index-Commodities-Finished Goods (PPI) produced by the U.S.
Department of Labor, Bureaus of Statistics, and limited upward adjustment if actual
non-extraordinary operating expenses regarding the Lovington Assets exceed assumed operating
expenses.
Holly will guaranty the obligations of Navajo Refining under the Lovington Throughput
Agreement, and the Partnership and HEP Operating will guaranty the obligations of HEP
Storage-Lovington.
The description of the Lovington Throughput Agreement herein is qualified by reference to the
copy of the Lovington Throughput Agreement, filed as Exhibit 10.2 to this report, which is
incorporated by reference into this report in its entirety.
Fourth Amended and Restated Omnibus Agreement
On March 31, 2010, in connection with the closing of the transactions contemplated by the
Purchase Agreement, Holly and the Partnership and certain of their respective subsidiaries entered
into a Fourth Amended and Restated Omnibus Agreement (the Fourth Restated Omnibus Agreement). The
Fourth Restated Omnibus Agreement amends and restates the Third Amended and Restated Omnibus
Agreement dated as of December 1, 2009, that was previously filed as an exhibit to Hollys Annual
Report on Form 10-K for the year ended December 31, 2009. Following is a description of the
material terms of the Fourth Restated Omnibus Agreement.
The Fourth Restated Omnibus Agreement amends and restates the omnibus agreement to, among
other things, subject the Additional Tulsa East Assets and Lovington Assets to Hollys right of
first refusal to purchase the Partnerships assets that serve Hollys refineries and to include the
Lovington Assets in the provisions of the agreement regarding indemnification for environmental
liabilities related to the Lovington Assets. The Fourth Restated Omnibus Agreement addresses,
among other things, the following matters:
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the Partnerships obligation to pay Holly an annual administrative fee,
currently in the amount of $2.3 million, for the provision by Holly of certain
general and administrative services; |
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Hollys and its affiliates agreement not to compete with the Partnership under
certain circumstances and the Partnerships right to notice of, and right of first
offer to purchase, certain logistics assets constructed by Holly or acquired as
part of an acquisition by Holly of refining assets; |
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an indemnity by Holly for certain potential environmental liabilities; |
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the Partnerships obligation to indemnify Holly for environmental liabilities
related to the Partnerships assets existing on the date of the Partnerships
initial public offering to the extent Holly is not required to indemnify the
Partnership; and |
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Hollys right of first refusal to purchase the Partnerships assets that serve
Hollys refineries. |
Under the Fourth Restated Omnibus Agreement, the Partnership pays Holly an annual
administrative fee, currently in the amount of $2.3 million, for the provision of various general
and administrative services for the Partnerships benefit. The Partnerships general partner may
agree to
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increases in the administrative fee in connection with expansions of the Partnerships
operations through the acquisition or construction of new assets or businesses.
The $2.3 million fee includes expenses incurred by Holly and its affiliates to perform
centralized corporate functions, such as legal, treasury, information technology and other
corporate services, including the administration of employee benefit plans. The fee does not
include salaries of pipeline and terminal personnel or other employees of the general partner of
the Partnerships general partner or the cost of their employee benefits, such as 401(k), pension,
and health insurance benefits, which are separately charged to the Partnership by Holly. The
Partnership also reimburses Holly and its affiliates for direct general and administrative expenses
they incur on the Partnerships behalf.
Holly and its affiliates have agreed, for so long as Holly controls the Partnerships general
partner, not to engage in, whether by acquisition or otherwise, the business of owning and/or
operating crude oil pipelines or terminals, refined products pipelines or terminals, intermediate
product pipelines or terminals, truck racks or crude oil gathering systems in the continental
United States. This restriction will not apply to:
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any business operated by Holly or any of its affiliates at the time of the
closing of the Partnerships initial public offering; |
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any business conducted by Holly with the approval of the Partnerships general
partner; |
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any business or asset that Holly or any of its affiliates acquires or constructs
that has a fair market value or construction cost of less than $5.0 million; and |
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any business or asset that Holly or any of its affiliates acquires or constructs
that has a fair market value or construction cost of $5.0 million or more if the
Partnership has been offered the opportunity to purchase the business or asset at
fair market value, and has declined to do so. |
The limitations on the ability of Holly and its affiliates to compete with the Partnership may
be terminated by Holly upon a change of control of Holly.
Under the Fourth Restated Omnibus Agreement, Holly has agreed to indemnify the Partnership up
to certain aggregate amounts for any environmental noncompliance and remediation liabilities
associated with assets transferred to the Partnership and occurring or existing prior to the date
of such transfers. The transfers that are covered by the agreement include the refined products
pipelines, terminals and tanks transferred by Hollys subsidiaries in connection with the
Partnerships initial public offering in July 2004, the intermediate pipelines transferred by
Hollys subsidiaries to the Partnership in July 2005, and the crude pipelines, tankage assets
transferred by Hollys subsidiaries to the Partnership in 2008 (the 2008 Assets), and the
Lovington Assets (collectively, the Indemnified Assets). The Fourth Restated Omnibus Agreement
provides environmental indemnification of up to $15.0 million for the Indemnified Assets, other
than the 2008 Assets, plus an additional $2.5 million for the intermediate pipelines acquired in
July 2005. Except with respect to the 2008 Assets, Hollys indemnification obligations described
above shall remain in effect for an asset for ten years following the date of transfer of such
asset to the Partnership. The Fourth Restated Omnibus Agreement also provides $7.5 million of
indemnification through 2023 for environmental noncompliance and remediation liabilities specific
to the 2008 Assets. Hollys indemnification obligations described above do not apply to (i) certain
truck and rail loading/unloading equipment located at Hollys refinery in Tulsa, Oklahoma acquired
by a subsidiary of the Partnership on August 1, 2009 (the Tulsa West Loading Rack), (ii) the 16
feedstock pipeline acquired by a subsidiary of the Partnership on June 1, 2009, currently running
65 miles from Hollys
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crude oil distillation and vacuum distillation facilities in Lovington, New Mexico to Hollys
petroleum refinery in Artesia, New Mexico, (iii) the 16 crude oil pipeline extending from
Slaughter station in Texas to Lovington, New Mexico owned by Roadrunner Pipeline, L.L.C., (iv) the
8 crude oil pipeline extending from Beeson station to Lovington, New Mexico, owned by HEP
Pipeline, L.L.C., (v) the Original Tulsa East Assets, or (vi) the Additional Tulsa East Assets.
The Fourth Restated Omnibus Agreement provides that the Partnership will indemnify Holly and
its affiliates against environmental liabilities relating to the Partnerships assets that occur
after the date the Partnership or its affiliates acquired such assets.
The Fourth Restated Omnibus Agreement also contains the terms under which Holly has a right of
first refusal to purchase the Partnerships assets that serve Hollys refineries. Before the
Partnership enters into any contract to sell pipeline, terminal and tankage assets serving Hollys
refineries, including the newly acquired Additional Tulsa East Assets and Lovington Assets, the
Partnership must give written notice of the terms of such proposed sale to Holly. The notice must
set forth the name of the third party purchaser, the assets to be sold, the purchase price and all
other material terms and conditions of the offer. To the extent the third party offer consists of
consideration other than cash (or in addition to cash), the purchase price shall be deemed equal to
the amount of any such cash plus the fair market value of such non-cash consideration, determined
as set forth in the Fourth Restated Omnibus Agreement. Holly will then have the sole and exclusive
option for a period of thirty days following receipt of the notice, to elect to purchase the
subject assets on the terms specified in the notice. Hollys right of first refusal described above
does not apply to the Tulsa West Loading Rack.
The Fourth Restated Omnibus Agreement contains an acknowledgment of the purchase options and
right of first refusal granted to Holly with respect to the Tulsa West Loading Rack in the Tulsa
Purchase Option Agreement dated August 1, 2009.
The description of the Fourth Restated Omnibus Agreement herein is qualified by reference to
the copy of the Fourth Restated Omnibus Agreement, filed as Exhibit 10.3 to this report, which is
incorporated by reference into this report in its entirety.
First Amended and Restated Lease and Access Agreement (East Tulsa)
On March 31, 2010, in connection with the closing of the transactions contemplated by the
Purchase Agreement, HEP Tulsa, HEP Storage-Tulsa, and Holly Tulsa entered into a First Amended and
Restated Lease and Access Agreement (East Tulsa) (the Tulsa Lease). Holly Tulsa is a wholly owned
subsidiary of Holly, the entity that controls the Partnerships general partner.
The Tulsa Lease amends and restates the Lease and Access Agreement, dated as of December 1,
2009, that was executed in connection with HEP Tulsas acquisition of the Original Tulsa East
Assets and that was previously filed as an exhibit to Hollys Current Report on Form 8-K filed
December 7, 2009.
Pursuant to the
Tulsa Lease, Holly Tulsa will lease, for a nominal amount, to HEP Tulsa, the
real property on which the Original Tulsa East Assets are situated at Hollys Tulsa refinery site
and to HEP Storage-Tulsa, the real property on which the Additional Tulsa East Assets are situated
at Hollys Tulsa refinery site, for a fifty-year initial term. Under the Tulsa Lease, Holly Tulsa
has agreed to permit HEP Tulsa, HEP Storage-Tulsa and their affiliates to have access to certain
portions of Hollys Tulsa refinery site that are reasonably necessary for access to and/or the
operation of the Original Tulsa East Assets and the Additional Tulsa East Assets. The Tulsa Lease also provides that,
following termination or
expiration of the Amended Tulsa East Throughput Agreement, Holly Tulsa will have the option to
purchase the Original Tulsa East Assets and the Additional Tulsa East Assets for fair market value.
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The description of the Tulsa Lease herein is qualified by reference to the copy of the Tulsa
Lease, filed as Exhibit 10.4 to this report, which is incorporated by reference into this report in
its entirety.
First Amendment to Pipeline Systems Operating Agreement
On March 31, 2010, in connection with the closing of the transactions contemplated by the
Purchase Agreement, certain subsidiaries of Holly and the Partnership entered into a First
Amendment to Pipeline Systems Operating Agreement (Amendment to Operating Agreement). Navajo
Refining, Lea, Woods Cross Refining Company and Holly Tulsa are parties to the Amendment to
Operating Agreement and are wholly owned subsidiaries of Holly, the entity that controls the
Partnerships general partner.
The Amendment to Operating Agreement amends the Pipeline Systems Operating Agreement, dated as
of February 8, 2010 (Original Operating Agreement), to be effective as of December 1, 2009, that
was previously filed as an exhibit to Hollys Current Report on Form 8-K filed February 9, 2010.
Pursuant to the Original Operating Agreement, the Partnership operates certain assets,
including crude oil and refined product storage tanks, pipelines, asphalt racks and terminal
buildings, owned by Holly and located at Hollys refineries, and Holly pays the Partnership an
annual management fee. Under the Amendment to Operating Agreement, Holly and the Partnership have
removed the Lovington Assets and the Additional Tulsa East Assets from the provisions of the
Original Operating Agreement and correspondingly decreased the annual management fee from
$1,355,000 to $215,000. All other terms and conditions of the Original Agreement remain in full
force and effect.
The description of the Amendment to Operating Agreement herein is qualified by reference to
the copy of the Amendment to Operating Agreement, filed as Exhibit 10.5 to this report, which is
incorporated by reference into this report in its entirety.
Item 7.01 Regulation FD Disclosure.
Furnished as Exhibit 99.1 and incorporated herein by reference in its entirety is a copy of a
press release issued by Holly and the Partnership on April 1, 2010, announcing the sale by Holly of
the Additional Tulsa East Assets and Lovington Assets to the Partnership.
In accordance with General Instruction B.2 of Form 8-K, the information furnished in this
report on Form 8-K pursuant to Item 7.01, including Exhibit 99.1, shall not be deemed to be filed
for the purposes of Section 18 of the Securities Exchange Act of 1934 (Exchange Act), or
otherwise subject to the liabilities of that section, unless Holly specifically incorporates it by
reference in a document filed under the Exchange Act or the Securities Act of 1933. By filing this
report on Form 8-K and furnishing the information pursuant to Item 7.01, Holly makes no admission
as to the materiality of any information in this report furnished pursuant to Item 7.01, including
Exhibit 99.1, or that any such information includes material investor information that is not
otherwise publicly available.
The information furnished in this report on Form 8-K pursuant to Item 7.01, including the
information contained in Exhibit 99.1, is summary information that is intended to be considered in
the context of Hollys Securities and Exchange Commission (SEC) filings and other public
announcements that Holly may make, by press release or otherwise, from time to time. Holly
disclaims any current intention to revise or update the information furnished in this report on
Form 8-K pursuant to Item 7.01, including the information contained in Exhibit 99.1, although Holly
may do so from time to time as its management believes is warranted. Any such updating may be made
through the furnishing or filing of other reports or documents with the SEC, through press releases
or through other public disclosure.
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Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
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Exhibit No. |
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Description |
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10.1
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First Amended and Restated Pipelines, Tankage and Loading
Rack Throughput Agreement (Tulsa East), dated as of March 31,
2010, by and among Holly Refining & Marketing-Tulsa, LLC, HEP
Tulsa LLC and Holly Energy Storage-Tulsa LLC. |
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10.2
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Loading Rack Throughput Agreement (Lovington), dated as of
March 31, 2010, by and between Navajo Refining Company,
L.L.C. and Holly Energy Storage-Lovington LLC. |
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10.3
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Fourth Amended and Restated Omnibus Agreement, dated as of
March 31, 2010, by and among Holly Corporation, Holly Energy
Partners, L.P. and certain of their respective subsidiaries. |
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10.4
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First Amended and Restated Lease and Access Agreement (East
Tulsa), dated as of March 31, 2010, by and among Holly
Refining & Marketing-Tulsa, LLC, HEP Tulsa LLC and Holly
Energy Storage-Tulsa LLC. |
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10.5
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First Amendment to Pipeline Systems Operating Agreement,
dated as of March 31, 2010, by and among Navajo Refining
Company, L.L.C., Lea Refining Company, Woods Cross Refining
Company, L.L.C., Holly Refining & Marketing-Tulsa, LLC and
Holly Energy Partners-Operating, L.P. |
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99.1
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Joint Press Release of Holly Corporation and Holly Energy Partners, L.P. issued April 1, 2010.* |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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HOLLY CORPORATION
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By: |
/s/
Bruce R. Shaw |
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Name: |
Bruce R. Shaw |
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Title: |
Senior Vice President
and Chief Financial Officer |
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Date: April 6, 2010
SIGNATURE PAGE
EXHIBIT INDEX
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Exhibit No. |
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Description |
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10.1
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First Amended and Restated Pipelines, Tankage and
Loading Rack Throughput Agreement (Tulsa East), dated as
of March 31, 2010, by and among Holly Refining &
Marketing-Tulsa, LLC, HEP Tulsa LLC and Holly Energy
Storage-Tulsa LLC. |
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10.2
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Loading Rack Throughput Agreement (Lovington), dated as
of March 31, 2010, by and between Navajo Refining
Company, L.L.C. and Holly Energy Storage-Lovington LLC. |
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10.3
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Fourth Amended and Restated Omnibus Agreement, dated as
of March 31, 2010, by and among Holly Corporation, Holly
Energy Partners, L.P. and certain of their respective
subsidiaries. |
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10.4
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First Amended and Restated Lease and Access Agreement
(East Tulsa), dated as of March 31, 2010, by and among
Holly Refining & Marketing-Tulsa, LLC, HEP Tulsa LLC and
Holly Energy Storage-Tulsa LLC. |
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10.5
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First Amendment to Pipeline Systems Operating Agreement,
dated as of March 31, 2010, by and among Navajo Refining
Company, L.L.C., Lea Refining Company, Woods Cross
Refining Company, L.L.C., Holly Refining &
Marketing-Tulsa, LLC and Holly Energy
Partners-Operating, L.P. |
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99.1
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Joint Press Release of Holly Corporation and Holly Energy Partners, L.P. issued April 1, 2010.* |