OPTION AGREEMENT

OPTION AGREEMENT

     THIS OPTION AGREEMENT (“ Agreement ”) is entered into as of January 31, 2008, and is by and among Holly Corporation, a Delaware corporation (“ Holly ”), Holly UNEV Pipeline Company, a Delaware corporation (“ Holly UNEV ”), Navajo Pipeline Co., L.P., a Delaware limited partnership, 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 ”), Holly Energy Partners, L.P., a Delaware limited partnership (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 (“ HEP-Operating ”). The above-named entities are sometimes referred to in this Agreement each as a “ Party ” and collectively as the “ Parties .”

     1. Certain of the Parties are also parties to the Omnibus Agreement entered into as of July 13, 2004, as amended as of the date hereof (the “ Omnibus Agreement ”).

     2. The Omnibus Agreement restricts the Holly Entities from engaging in any Restricted Business (as such term is defined in the Omnibus Agreement) to the extent provided in Article II thereof.

     3. Holly has entered into a Memorandum of Understanding dated June 26, 2007 with Sinclair Transportation Company (“ Sinclair ”) relating to the facilities and services required to initially transport 62,000 barrels per day of refined petroleum products from Salt Lake City, Utah to Las Vegas, Nevada, including a 12-inch diameter or greater pipeline with an ANSI 600# pressure rating and a length of approximately 400 miles, along with terminals in or near the Cedar City area of Southern Utah and Las Vegas, Nevada (the “ UNEV Project ”).

     4. The Parties desire by their execution of this Agreement to evidence their agreement that the provisions of Article II of the Omnibus Agreement shall not apply to the UNEV Project and are hereby waived to such extent and in lieu thereof HEP-Operating shall have an option to purchase the Holly UNEV Interests on the terms and conditions set forth herein.

     5. The Parties desire that the exercise price for the option shall be determined based on the principle that HEP-Operating shall acquire the Holly UNEV Interests in exchange for a cash payment equal to the Option Purchase Price.

     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
The Option

      1.1 Grant of Option . Subject to the terms and conditions hereof, Holly UNEV hereby grants to HEP-Operating an irrevocable option (the “ Option ”) to purchase all of the Holly UNEV Interests in the manner set forth below at a purchase price equal to the Option Purchase Price plus or minus the Closing Adjustment Amount payable in immediately available funds; provided , however , that at the election of Holly UNEV made at any time prior to 5:00 p.m. Central time on the third business day prior to the Closing (as defined below), up to five percent of the Option Purchase Price shall be payable in Common Units valued based on the average closing price for the five trading days ending on the date immediately prior to the Closing (as defined below).

      1.2 Exercise of Option . The Option may be exercised by HEP-Operating, in whole but not in part, at any time after the Project Completion Date and on or before 5:00 p.m., Central time, on the Expiration Date. In order to exercise the Option, HEP-Operating must send a written notice (an “ Exercise Notice ”) to Holly UNEV. Unless otherwise mutually agreed in writing by HEP-Operating and Holly UNEV, the closing (the “ Closing ”) of the exercise of the Option will take place on the first day of the month following the month in which the Exercise Notice is delivered (the “ Closing Date ”); provided , however , that if there are less than five business days from the date the Exercise Notice is delivered until the first day of the month following the month in which the Exercise Notice is delivered, the Closing Date shall be the first day of the month that is the second month following the month in which the Exercise Notice is delivered. Upon receipt of an Exercise Notice, Holly UNEV will be obligated to deliver the Holly UNEV Interests in accordance with Section 1.3 of this Agreement, HEP-Operating will be obligated to deliver the Option Purchase Price on the Closing Date (or if the Closing Date falls on a day that is not a business day, the business day immediately prior to the Closing Date) and HEP-Operating or Holly UNEV will be obligated to deliver the Closing Adjustment Amount in accordance with Section 1.6 if such amount is positive or negative, respectively. The Closing shall occur at the offices of Vinson & Elkins L.L.P., 3700 Trammell Crow Center, 2001 Ross Avenue, Dallas, Texas, unless another place is mutually agreed to in writing by HEP-Operating and Holly UNEV.

      1.3 Actions on the Closing Date . On the Closing Date, Holly UNEV shall cause the Holly UNEV Interests to be transferred to HEP-Operating free and clear of all liens, claims, encumbrances and security interests of any nature whatsoever against delivery of the Option Purchase Price in immediately available funds.

      1.4 Operations Amount Estimates . Holly UNEV shall (1) no later than five business days after the delivery of the Exercise Notice or the Termination Option Exercise Notice, deliver to HEP-Operating an estimated income statement and balance sheet of UNEV Pipeline for the period commencing on the Project Completion Date through 11:59 p.m. on the date immediately prior to the Closing Date or Termination Option Closing (either such time, the “ Effective Time ”) and as of the Effective Time, respectively, together with a certificate containing a good faith estimate of the Operations Amount calculated from such estimated income statement and balance sheet, and (2) no earlier than two days prior to the Closing or the Termination Option Closing, deliver to HEP-Operating an estimated income statement and balance sheet of UNEV

Pipeline for the period commencing on the Project Completion Date through the Effective Time and as of the Effective Time, respectively (collectively, the “ Closing Financial Statements ”), together with a certificate containing a good faith estimate of the Operations Amount calculated from the Closing Financial Statements (the “ Estimated Closing Operations Amount ”) (which shall be estimated prior to the application of any payments to be made under Section 1.2 or Section 3.6(c) ). The Closing Financial Statements shall be prepared in accordance with this Agreement and GAAP.

      1.5 Final Operations Amount Determination .

     (a) As promptly as practicable after the Closing or the Termination Option Closing (but in no event later than 45 days after the Closing or the Termination Option Closing), HEP-Operating shall deliver to Holly UNEV an income statement and balance sheet of UNEV Pipeline for the period commencing on the Project Completion Date through the Effective Time and as of the Effective Time, respectively (the “ Final Closing Financial Statements ”), together with a certificate stating the Operations Amount calculated from the Final Closing Financial Statements (the “ Closing Operations Amount ”). The Final Closing Financial Statements shall be prepared in accordance with this Agreement and GAAP. Following the delivery of the Final Closing Financial Statements to Holly UNEV, HEP-Operating shall afford Holly UNEV and its representatives the opportunity to review the Final Closing Financial Statements, and such supporting schedules, analyses, workpapers and other underlying records or documentation as are reasonably necessary and appropriate. HEP-Operating shall, cooperate fully and promptly with Holly UNEV and its representatives in such examination with respect to all reasonable requests related thereto, including providing answers to questions asked by Holly UNEV and its representatives, and HEP-Operating shall promptly make available to Holly UNEV and its representatives any records under HEP-Operating’s reasonable control that are reasonably requested by Holly UNEV and its representatives.

     (b) If within 45 days following delivery of the Final Closing Financial Statements to Holly UNEV, Holly UNEV has not delivered to HEP-Operating written notice (the “ Objection Notice ”) of its objections to the Closing Operations Amount certified by HEP–Operating (such Objection Notice must contain a statement describing in reasonable detail the basis of such objections and the amounts so disputed), then the Closing Operations Amount as calculated from such Final Closing Financial Statements shall be deemed final and conclusive and shall be “Final Operations Amount,” and each of the parties hereto agrees that such amounts shall thereafter not be subject to any appeal or further challenge hereunder or otherwise. If Holly UNEV delivers the Objection Notice within such 45-day period, then HEP-Operating and Holly UNEV shall submit the objections set forth in the Objection Notice to binding arbitration in accordance with Section 8.11 and “Final Operations Amount” will be determined pursuant to binding arbitration.

      1.6 Adjustment Payment . If the Final Operations Amount as determined pursuant to Section 1.5 would result in a (i) positive Closing Adjustment Amount, then HEP-Operating will promptly pay an amount in cash to Holly UNEV, in immediately available funds, equal to such

excess, or (ii) negative Closing Adjustment Amount, then Holly UNEV shall promptly pay an amount in cash to HEP-Operating, in immediately available funds, equal to such shortfall.

      1.7 Construction . The parties hereto covenant and agree that if any provision of Article I of this Agreement requires an amount or calculation to be “determined in accordance with this Agreement and GAAP” (or words of similar import), then to the extent that the terms of any provision of Article I of this Agreement conflict with, or are inconsistent with, GAAP in connection with such determination, the terms of Article I of this Agreement shall control.

ARTICLE II
Representations and Warranties

      2.1 Representations and Warranties of Holly UNEV .

Holly UNEV hereby represents and warrants to HEP-Operating that:

     (a) Holly UNEV has all necessary power and authority to enter into this Agreement and to sell, assign, transfer and deliver to HEP-Operating, pursuant to the terms and conditions of this Agreement, the Holly UNEV Interests;

     (b) Holly UNEV owns beneficially and of record all of the Holly UNEV Interests free and clear of all liens, claims, encumbrances and security interests of any nature whatsoever. Upon purchase of the Holly UNEV Interests pursuant to this Agreement, HEP-Operating shall receive good and marketable title to the Holly UNEV Interests free and clear of all liens, claims, encumbrances and security interests of any nature whatsoever other than those created by or on behalf of the HEP Parties; and

     (c) This Agreement is a legal, valid and binding agreement of Holly UNEV enforceable against Holly UNEV in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors’ rights generally and except that the availability of equitable remedies, including specific performance, is subject to the discretion of the court before which any proceeding therefor may be brought.

      2.2 Representations and Warranties of the HEP Parties .

The HEP Parties hereby represent and warrant to Holly UNEV that:

     (a) HEP-Operating has all necessary power and authority to enter into this Agreement and prior to the sending of the Exercise Notice or the Termination Option Exercise Notice will have all necessary power and authority to buy the Holly UNEV Interests from Holly UNEV pursuant to the terms and conditions of this Agreement; and

     (b) This Agreement is a legal, valid and binding agreement of the HEP Parties enforceable against them in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors’ rights generally and except that the availability of equitable remedies, including specific

performance, is subject to the discretion of the court before which any proceeding therefor may be brought.

ARTICLE III
Covenants

     Unless otherwise indicated, each of the covenants contained in Article III shall terminate and be of no further force or effect at the Closing or the Termination Option Closing, as applicable.

      3.1 Transfer of Holly UNEV Interests . On and after the date hereof and until the earliest of the (i) Closing, (ii) Termination Option Closing or (iii) termination of this Agreement pursuant to Section 5.1 , the Holly Entities may transfer Holly UNEV Interests only if immediately following such transfer, the Holly UNEV Share is at least 75%, unless such transfer is made pursuant to the exercise of the Option or the Termination Option.

      3.2 Conduct of the Project.

     (a) Holly UNEV shall use commercially reasonable efforts to have HEP-Operating designated as the initial operator of the UNEV Project commencing on or before the Project Completion Date, subject to the terms of any applicable operating agreement and any required consent of Sinclair;

     (b) From and after the delivery of an Exercise Notice pursuant to Section 1.2 , Holly UNEV shall, to the extent within its control, cause UNEV Pipeline to continue to maintain, operate, and administer the completed UNEV Project in a good and workmanlike manner, consistent with industry standards and the good routine operation of the completed UNEV Project in material compliance with all Applicable Laws except to the extent caused by actions taken or omitted by HEP-Operating as the operator of the UNEV Project;

     (c) Holly UNEV shall cause UNEV Pipeline to maintain , in accordance with GAAP, financial records and books of account with respect to the UNEV Project, including all expenditures incurred in performing the UNEV Project, that accurately reflect the transactions in the UNEV Project, and maintain proper and adequate system of internal accounting controls that provide reasonable assurance that transactions are accurately recorded in all material respects; and

     (d) Pursuant to the Project Management Agreement to be executed concurrently with this Agreement by Holly UNEV and UNEV Pipeline (the “ Project Management Agreement ”), Holly UNEV shall invoice UNEV Pipeline on a monthly basis for Holly UNEV’s services, which services include, without limitation, (i) right of way services that include a charge for indirect costs incurred by Holly UNEV of 10% of the cost of right-of-way services, (ii) pre-construction services that include a charge for indirect costs incurred by Holly UNEV of 10% of the cost of the pre-construction services, and (iii) construction management services for which Holly UNEV is paid $75,000 per month. All employee costs relating to the UNEV Project that are incurred by

Holly UNEV are intended to be covered by the fees paid under the Project Management Agreement.

      3.3 Consultation and Cooperation. Ninety (90) days prior to the estimated Project Completion Date through the Expiration Date:

     (a) Holly UNEV shall provide HEP-Operating the right to examine and make copies of the Records during normal business hours, upon reasonable advance notice to Holly UNEV, and in a manner so as not to unreasonably interfere with the normal business operations of UNEV Pipeline. Such right may be exercised through any agent or employee of HEP-Operating designated in writing by it, or by an independent accountant or attorney so designated. HEP-Operating shall bear all actual out-of-pocket third person expenses incurred in connection with any such examination or copying. Holly UNEV shall make available to HEP-Operating and its financing sources and other advisors, upon reasonable advance notice to Holly UNEV, during normal business hours, personnel of Holly UNEV who are knowledgeable with respect to the UNEV Project in order that HEP-Operating may make such diligence investigation as HEP-Operating reasonably considers desirable for any purpose that relates to the transactions contemplated by this Agreement, including, but not limited to, HEP-Operating’s efforts to obtain financing for the Option Purchase Price or the Termination Option Purchase Price, as applicable. Any information obtained by HEP-Operating, its employees, representatives, consultants, attorneys, agents, and its financing sources and other advisors under this Agreement (including, but not limited to, this Section 3.3(a) and Section 3.3(c) ) shall be maintained as confidential. Notwithstanding the foregoing, Holly UNEV shall not be required to, or required to cause UNEV Pipeline or any of their Affiliates to, grant access or furnish information to HEP-Operating or any of its agents or employees if such access or the furnishing of such information is prohibited by Applicable Law or an existing contract; provided , however , that Holly UNEV shall use commercially reasonable efforts to cause such access right to be granted to HEP-Operating and its representatives, but neither Holly UNEV, UNEV Pipeline nor any of their Affiliates shall be obligated to pay money to any third party for such consent or waiver;

     (b) Holly UNEV will cause UNEV Pipeline to grant to HEP-Operating the right, exercisable at HEP-Operating’s risk and expense, to make such surveys, tests and inspections of the UNEV Project as HEP-Operating may deem desirable, so long as such surveys, tests or inspections do not damage the UNEV Project or interfere in any material respect with the activities of UNEV Pipeline thereon and so long as HEP-Operating has furnished Holly UNEV and UNEV Pipeline with evidence that adequate liability insurance is in full force and effect;

     (c) Holly UNEV shall use its reasonable commercial efforts to provide to HEP-Operating and any of its financing sources all cooperation reasonably requested by HEP-Operating or such financing sources that is reasonably necessary or customary in connection with the financing of the Option Purchase Price or the Termination Option Purchase Price, as applicable (provided that such requested cooperation does not unreasonably interfere with the business or operations of Holly UNEV or UNEV

Pipeline), including furnishing HEP-Operating, within a commercially reasonable amount of time, with operational, financial and other pertinent information as may be reasonably requested by HEP-Operating in connection with the financing; provided that neither Holly UNEV nor UNEV Pipeline shall be required to pay any commitment or other similar fee or incur any other cost or expense in connection with such financing; provided , further , that, neither Holly UNEV nor UNEV Pipeline shall be required to incur any liability in connection with any such financing. HEP-Operating shall, promptly upon request by Holly UNEV, reimburse Holly UNEV for all reasonable documented out of pocket costs and expenses incurred by Holly UNEV and UNEV Pipeline in connection with such cooperation and shall indemnify and hold harmless Holly UNEV and UNEV Pipeline and their respective representatives from and against any and all liabilities, losses, damages, claims, expenses, interest, judgments and penalties suffered or incurred by them in connection with the arrangement of any such financing and any information utilized in connection therewith (other than information provided by Holly UNEV in accordance with the terms hereof); and

     (d) Holly UNEV will, within a commercially reasonable amount of time, provide to HEP-Operating true, correct and complete copies of (i) each of the Transaction Agreements, and (ii) the annual budgets related to the UNEV Project and unaudited annual and quarterly financial statements of UNEV Pipeline.

      3.4 Additional Covenants .

     (a) In connection with the UNEV Project, Holly UNEV may make such Material Modifications as Holly UNEV deems appropriate or necessary and in furtherance of, and consistent with, the overall intent and purpose of the UNEV Project. Holly UNEV shall notify HEP-Operating in writing promptly of any contemplated Material Modifications and Holly UNEV shall consult and discuss such Material Modifications with HEP-Operating to the extent reasonably requested by HEP-Operating. After such consultation and discussion, Holly UNEV shall be entitled, in its sole discretion, to cause UNEV Pipeline to approve and implement any Material Modification;

     (b) Holly UNEV shall keep HEP-Operating reasonably informed as to the status and progress of the UNEV Project and the operations of UNEV Pipeline.

     (c) Holly UNEV shall promptly notify HEP-Operating in writing if Holly UNEV determines that there will be a material deviation in the Project Schedule that would result in (i) Holly UNEV failing to substantially complete a material milestone specified in the Project Schedule by the date set forth therefor in the Project Schedule or (ii) the Project Completion Date being materially delayed from the date set forth in the Project Schedule.

     (d) Holly UNEV shall promptly notify HEP-Operating in writing if Holly UNEV determines that the Total Investment will be materially higher than the budgeted amount of $225,000,000.00.

     (e) Within 10 days following the Project Completion Date, Holly UNEV will deliver to HEP-Operating a reasonably detailed statement which calculates the Option Purchase Price as of the Project Completion Date, and within 30 days following the Project Completion Date, Holly UNEV will deliver to HEP-Operating an unaudited balance sheet of UNEV Pipeline as of the Project Completion Date and prepared in accordance with GAAP.

      3.5 Limitation on the Activities of UNEV Pipeline. With respect to the activities of UNEV Pipeline, Holly UNEV will not consent to UNEV Pipeline engaging in any activities other than the following: (i) the design, construction, development, maintenance, ownership and, after the Project Completion Date, operation of the UNEV Project, and (ii) engaging in any other business or activity that now or hereafter may be necessary, incidental, proper, advisable, or convenient to accomplish the foregoing purposes, whether directly or indirectly through the ownership and management of one or more Subsidiaries of UNEV Pipeline.

      3.6 Termination of the Project.

     (a) Notwithstanding any other provision of this Agreement, Holly UNEV reserves the right, without any liability or obligation to HEP-Operating whatsoever, to cause UNEV Pipeline to terminate the UNEV Project at any time and for any reason if Holly UNEV determines in its sole discretion that continuation of the UNEV Project is not in Holly UNEV’s best interest. If Holly UNEV decides to cause UNEV Pipeline to terminate the UNEV Project, it shall send prompt written notice (the “ Termination Notice ”) to HEP-Operating of such decision;

     (b) Upon receipt of the Termination Notice and subject to the terms and conditions hereof, HEP-Operating shall have an irrevocable option (the “ Termination Option ”) to purchase all of the Holly UNEV Interests in the manner set forth below at a purchase price equal to the Termination Option Purchase Price plus or minus the Closing Adjustment Amount payable in immediately available funds; provided , however , that at the election of Holly UNEV made at any time prior to 5:00 p.m. Central time on the third business day prior to the Termination Option Closing (as defined below), up to five percent of the Termination Option Purchase Price shall be payable in Common Units valued based on the average closing price for the five trading days ending on the date immediately prior to the Termination Option Closing (as defined below);

     (c) The Termination Option may be exercised by HEP-Operating, in whole but not in part, on or before 5:00 p.m., Central time, on the 30th day after the date of HEP-Operating’s receipt of the Termination Notice (the “ Termination Option Expiration Date ”). In order to exercise the Termination Option, HEP-Operating must send a written notice (a “ Termination Option Exercise Notice ”) to Holly UNEV. Unless otherwise mutually agreed in writing by HEP-Operating and Holly UNEV, the closing (the “ Termination Option Closing ”) of the exercise of the Termination Option will take place on the first day of the month following the month in which the Termination Option Exercise Notice is delivered (the “ Termination Option Closing Date ”); provided , however , that if there are less than five business days from the date the Termination Option Exercise Notice is delivered until the first day of the month

following the month in which the Termination Option Exercise Notice is delivered, the Termination Option Closing Date shall be the first day of the month that is the second month following the month in which the Termination Option Exercise Notice is delivered. Upon receipt of a Termination Option Exercise Noti