Item 1.01 Entry into a Material Agreement.
On November 3, 2009, Holly Energy Partners, L.P. (the "Partnership") entered
into an Underwriting Agreement (the "Underwriting Agreement") with Goldman,
Sachs & Co. and UBS Securities LLC, as representatives of the several
underwriters named therein (the "Underwriters"), with respect to the issuance
and sale in an underwritten public offering (the "Common Units Offering") by the
Partnership of 1,900,000 common units representing limited partner interests in
the Partnership (the "Common Units") at $35.78 per common unit. The Partnership
has granted the Underwriters a 30-day option to purchase up to an additional
285,000 Common Units. The Common Units to be sold in the Common Units Offering
were registered under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a registration statement on Form S-3 (Registration
No. 333-155537). The closing of the Common Units Offering is expected to occur
on November 6, 2009 (the "Closing Date"). Legal opinions related to the Common
Units are filed as Exhibits 5.1 and 8.1 to this Current Report on Form 8-K.
In the Underwriting Agreement, the Partnership agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the Underwriters may be required to
make because of any of those liabilities. A copy of the Underwriting Agreement
is filed as Exhibit 1.1 to this Current Report on Form 8-K and is incorporated
herein by reference. The description of the Underwriting Agreement in this
Current Report on Form 8-K is qualified in its entirety by the terms of the
Underwriting Agreement.
The Partnership intends to use a portion of the net proceeds from the Common
Units Offering of approximately $65.2 million (or approximately $74.9 million if
the Underwriters exercise in full their over-allotment option) and the general
partner contribution described in the following paragraph, to fund, through a
wholly-owned subsidiary, the cash portion of the purchase price for the pending
acquisition of tankage, loading racks and pipeline assets at a refining facility
in Tulsa, Oklahoma from Sinclair Tulsa Refining Company. The Partnership intends
to use the remainder of the net proceeds either to pay a portion of the purchase
price for the Partnership's potential acquisition from Holly Corporation of its
investments in two pipeline projects (the recently constructed pipeline from
Centurion Pipeline L.P.'s Slaughter station in west Texas to Lovington, New
Mexico and a pipeline that connects the Partnership's Artesia crude gathering
system to Holly Corporation's Lovington facility) pursuant to the Partnership's
option to purchase those investments at prices to be negotiated with Holly
Corporation or, instead, to repay bank debt, for other potential future
acquisitions or for general partnership purposes. If the acquisition of the
Sinclair assets does not close, the Partnership intends to use the net proceeds
for one or more of the following: to pay for all or substantially all of the
purchase price and related costs for the potential acquisitions from Holly
Corporation described above, to repay bank debt incurred under the Partnership's
credit agreement, for other potential future acquisitions or for general
partnership purposes.
In connection with the Common Units Offering, on the Closing Date, HEP
Logistics Holdings, L.P., the general partner of the Partnership, will
contribute $1.3 million (or $1.5 million if the Underwriters exercise in full
their option to purchase additional Common Units) to the Partnership in order to
maintain its 2% general partner interest in the Partnership.
