10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10‑Q

(Mark One)

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

For the quarterly period ended June 30, 2013

or

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

For the transition period from_____________________to__________

Commission File Number 1‑3473

TESORO CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	95‑0862768
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
19100 Ridgewood Pkwy, San Antonio, Texas 78259-1828
(Address of principal executive offices) (Zip Code)
210-626-6000
(Registrant’s telephone number, including area code)

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

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

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

Large accelerated filer  R	Accelerated filer £
Non-accelerated filer  £  (Do not check if a smaller reporting company)	Smaller reporting company £

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

There were 135,082,937 shares of the registrant’s Common Stock outstanding at July 31, 2013.

TESORO CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2013

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION	Page
Item 1. Financial Statements (Unaudited)
Condensed Statements of Consolidated Operations - Three and Six Months Ended June 30, 2013 and 2012	3
Condensed Statements of Consolidated Comprehensive Income - Three and Six Months Ended June 30, 3013 and 2012	4
Condensed Consolidated Balance Sheets - June 30, 2013 and December 31, 2012	5
Condensed Statements of Consolidated Cash Flows - Six Months Ended June 30, 2013 and 2012	6
Notes to Condensed Consolidated Financial Statements	7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3. Quantitative and Qualitative Disclosures About Market Risk	64
Item 4. Controls and Procedures	66
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	67
Item 1A. Risk Factors	67
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	67
Item 6. Exhibits	68
SIGNATURES	70

2

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TESORO CORPORATION

CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
	(In millions, except per share amounts)
REVENUES (a)	$	8,897		$	7,333		$	16,244		$	14,340
COSTS AND EXPENSES:
Cost of sales (a)	7,909			6,194			14,472			12,571
Operating expenses	441			342			809			655
Selling, general and administrative expenses	64			45			175			104
Depreciation and amortization expense	111			102			216			198
Loss on asset disposals and impairments	8			6			15			12
OPERATING INCOME	364			644			557			800
Interest and financing costs, net	(33		)	(34		)	(63		)	(70		)
Interest income	—			—			1			1
Other income (expense), net	56			(19		)	55			(19		)
EARNINGS BEFORE INCOME TAXES	387			591			550			712
Income tax expense	138			222			196			267
NET EARNINGS FROM CONTINUING OPERATIONS	249			369			354			445
Earnings (loss) from discontinued operations, net of tax	(11		)	24			(12		)	10
NET EARNINGS	238			393			342			455
Less: Net earnings from continuing operations attributable to noncontrolling interest	11			6			22			12
NET EARNINGS ATTRIBUTABLE TO TESORO CORPORATION	$	227		$	387		$	320		$	443
NET EARNINGS (LOSS) ATTRIBUTABLE TO TESORO CORPORATION
Continuing operations	$	238		$	363		$	332		$	433
Discontinued operations	(11		)	24			(12		)	10
Total	$	227		$	387		$	320		$	443
NET EARNINGS (LOSS) PER SHARE - BASIC:
Continuing operations	$	1.75		$	2.60		$	2.44		$	3.11
Discontinued operations	(0.08		)	0.17			(0.09		)	0.07
Total	$	1.67		$	2.77		$	2.35		$	3.18
Weighted average common shares outstanding - Basic	135.8			139.6			136.4			139.5
NET EARNINGS (LOSS) PER SHARE - DILUTED:
Continuing operations	$	1.72		$	2.58		$	2.39		$	3.07
Discontinued operations	(0.08		)	0.17			(0.09		)	0.07
Total	$	1.64		$	2.75		$	2.30		$	3.14
Weighted average common shares outstanding - Diluted	138.2			140.5			138.9			141.2
DIVIDENDS PER SHARE	$	0.20		$	—		$	0.40		$	—
SUPPLEMENTAL INFORMATION:
(a) Includes excise taxes collected by our retail segment	$	143		$	107		$	272		$	200

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

TESORO CORPORATION

CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(In millions)
COMPREHENSIVE INCOME
Net Earnings	$	238	$	393	$	342	$	455
Pension and other benefit liability adjustments, net of tax expense of $48 million	73		—		73		—
Total comprehensive income	311		393		415		455
Less: Noncontrolling interest in comprehensive income	11		6		22		12
COMPREHENSIVE INCOME ATTRIBUTABLE TO TESORO CORPORATION	$	300	$	387	$	393	$	443

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

TESORO CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30, 2013			December 31, 2012
	(Dollars in millions, except per share amounts)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	428		$	1,639
Receivables, less allowance for doubtful accounts	1,787			1,126
Inventories	2,373			1,338
Prepayments	471			54
Other current assets	265			142
Current assets related to discontinued operations	463			337
Total Current Assets	5,787			4,636
NET PROPERTY, PLANT AND EQUIPMENT	6,739			5,232
OTHER NONCURRENT ASSETS, NET
Acquired intangibles, net	322			214
Other noncurrent assets, net	821			602
Noncurrent assets related to discontinued operations	—			18
Total Other Noncurrent Assets, Net	1,143			834
Total Assets	$	13,669		$	10,702
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable	$	2,490		$	2,196
Other current liabilities	823			625
Current liabilities related to discontinued operations	58			60
Total Current Liabilities	3,371			2,881
DEFERRED INCOME TAXES	942			850
OTHER NONCURRENT LIABILITIES	678			644
DEBT	3,358			1,585
NONCURRENT LIABILITIES RELATED TO DISCONTINUED OPERATIONS	—			5
COMMITMENTS AND CONTINGENCIES (Note L)
EQUITY
TESORO CORPORATION STOCKHOLDERS’ EQUITY
Common stock, par value $0.162/3; authorized 200,000,000 shares; 154,540,056 shares issued (152,579,955 in 2012)	26			25
Preferred stock, no par value; authorized 5,000,000 shares; 0 shares issued	—			—
Additional paid-in capital	1,163			1,070
Retained earnings	3,914			3,649
Treasury stock, 18,925,496 common shares (14,417,533 in 2012), at cost	(597		)	(356		)
Accumulated other comprehensive loss	(64		)	(137		)
Total Tesoro Corporation Stockholders’ Equity	4,442			4,251
NONCONTROLLING INTEREST	878			486
Total Equity	5,320			4,737
Total Liabilities and Equity	$	13,669		$	10,702

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

TESORO CORPORATION

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

(Unaudited)

	Six Months Ended June 30,
	2013			2012
	(Dollars in millions)
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net earnings	$	342		$	455
Adjustments to reconcile net earnings to net cash from (used in) operating activities:
Depreciation and amortization expense	218			212
Amortization of debt issuance costs and discounts	6			6
Loss on asset disposals and impairments	1			12
Stock-based compensation expense	47			21
Deferred income taxes	42			146
Excess tax benefits from stock-based compensation arrangements	(11		)	(4		)
Deferred charges	(277		)	(192		)
Other changes in noncurrent assets and liabilities	(29		)	(13		)
Changes in current assets and current liabilities:
Receivables	(422		)	110
Inventories	(57		)	(13		)
Prepayments and other	(462		)	55
Accounts payable and accrued liabilities	441			(71		)
Net cash from (used in) operating activities	(161		)	724
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
Capital expenditures	(293		)	(243		)
Proceeds from asset sales	2			3
Investment in joint venture	(2		)	—
Acquisitions	(2,648		)	(38		)
Advance payments received for sale of assets	25			—
Net cash used in investing activities	(2,916		)	(278		)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
Borrowings under revolving credit agreements	2,068			185
Borrowings under term loan credit agreement	500			—
Repayments on revolving credit agreements	(824		)	(184		)
Repayments of debt	(2		)	(1		)
Dividend payments	(55		)	—
Proceeds from stock options exercised	68			14
Net proceeds from issuance of Tesoro Logistics LP common units	392			—
Distributions to noncontrolling interest	(28		)	(11		)
Purchases of common stock	(241		)	(31		)
Excess tax benefits from stock-based compensation arrangements	11			4
Financing costs and other	(23		)	—
Net cash from (used in) financing activities	1,866			(24		)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(1,211		)	422
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	1,639			900
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	428		$	1,322

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE A – BASIS OF PRESENTATION

As used in this report, the terms “Tesoro,” “we,” “us” or “our” may refer to Tesoro Corporation, one or more of its consolidated subsidiaries or all of them taken as a whole. The words “we,” “us” or “our” generally include Tesoro Logistics LP (“TLLP”) and its subsidiaries as consolidated subsidiaries of Tesoro Corporation with certain exceptions where there are transactions or obligations between TLLP and Tesoro Corporation or its other subsidiaries. When used in descriptions of agreements and transactions, “TLLP” or the “Partnership” refers to TLLP and its consolidated subsidiaries.

The interim condensed consolidated financial statements and notes thereto of Tesoro Corporation and its subsidiaries have been prepared by management without audit according to the rules and regulations of the Securities and Exchange Commission (“SEC”). The accompanying condensed consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary for a fair presentation of results for the periods presented. Such adjustments are of a normal recurring nature, unless otherwise disclosed.

The consolidated balance sheet at December 31, 2012 has been condensed from the audited consolidated financial statements at that date. Certain information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to the SEC’s rules and regulations. However, management believes that the disclosures presented herein are adequate to present the information fairly. The accompanying condensed consolidated financial statements and notes should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2012.

We prepare our condensed consolidated financial statements in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts and disclosures of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. We review our estimates on an ongoing basis, based on currently available information. Changes in facts and circumstances may result in revised estimates and actual results could differ from those estimates. The results of operations for any interim period are not necessarily indicative of results for the full year. Certain prior year balances have been aggregated or disaggregated in order to conform to the current year presentation.

We ceased refining operations at our Hawaii refinery and subsequently entered into an agreement to sell all of our interest in Tesoro Hawaii, LLC during the second quarter of 2013. As such, the results of operations and related assets and liabilities of the Hawaii refinery, retail stations and associated logistics assets (“Hawaii Business”) have been classified as discontinued operations in these condensed consolidated financial statements and accompanying footnotes for all periods presented. See Note D for additional information. Unless otherwise noted, the information in the notes to the condensed consolidated financial statements relates to our continuing operations.

The accompanying financial statements include the results of operations of our Carson refinery and related assets and retail stations since the acquisition on June 1, 2013. See Note B for additional information relating to this acquisition.

Our consolidated financial statements include TLLP, a variable interest entity. As the general partner of TLLP, we have the sole ability to direct the activities of TLLP that most significantly impact its economic performance. We are also considered to be the primary beneficiary for accounting purposes and are TLLP’s primary customer. Under our long-term transportation agreements with TLLP, transactions with us accounted for 90% and 91% of TLLP’s total revenues for the three and six months ended June 30, 2013, respectively. As TLLP does not derive a significant amount of revenue from third parties, there is limited risk to Tesoro associated with TLLP’s operations. However, in the event TLLP incurs a loss, our operating results will reflect TLLP’s loss, net of intercompany eliminations, to the extent of our ownership interest in TLLP. See Note C for additional information relating to TLLP.

7

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Significant Accounting Policies

Investments–Equity Method and Joint Ventures

Investments where we have the ability to exercise significant influence, but do not have control, are accounted for under the equity method of accounting and are included in other noncurrent assets in our condensed consolidated balance sheets. Our judgment regarding the level of influence over an equity method investment includes considering key factors such as our ownership interest, participation in policy-making and other significant decisions and material intercompany transactions. Under this method of accounting, our share of the net earnings or losses of the investee is included in other income (expense) in our condensed statements of consolidated operations. We evaluate our equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, a loss is recorded in earnings in the current period.

Effective April 22, 2013, we entered into an equally owned joint venture (“Tesoro Savage Petroleum Terminal LLC”) with Savage Companies to construct, own and operate a unit train unloading and marine loading terminal at the Port of Vancouver, Washington, subject to approval by regulatory agencies. Our investment in Tesoro Savage Petroleum Terminal LLC totaled $2 million as of June 30, 2013. Additionally, on June 1, 2013, in connection with the closing of the acquisition of our Carson refinery and related assets and retail stations, we acquired a 51% joint venture in the Watson cogeneration facility located near the Carson refinery. We account for the Company’s interest in both joint ventures using the equity method of accounting.

New Accounting Standards and Disclosures

Presentation of Comprehensive Income

The Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) in February 2013 that provides entities the option of presenting information related to reclassification adjustments on the face of the financial statements or in the notes to the financial statements for items that are reclassified from other comprehensive income to net income in the statement where those components are presented. The requirements from the new ASU are effective for interim and annual periods beginning after December 15, 2012. The adoption of this ASU did not have a material impact on our condensed consolidated financial statements.

Fair Value Measurements and Disclosures

The FASB issued an ASU in December 2011, which requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of these arrangements on its financial position. The guidance requires entities to disclose both gross and net information about both instruments and transactions eligible for offset in the balance sheet and instruments and transactions subject to an agreement similar to a master netting arrangement. In January 2013, the FASB amended and clarified the scope of the disclosures to include only derivative instruments, repurchase agreements and securities lending transactions. The provisions for this ASU are effective for interim and annual reporting periods beginning on January 1, 2013. The adoption of this ASU did not have a material impact on our condensed consolidated financial statements.

NOTE B - ACQUISITIONS AND OTHER CHANGES IN OPERATIONS

TLLP Acquisition of the Northwest Products System

On June 19, 2013, TLLP completed its acquisition of Chevron Pipe Line Company’s and Northwest Terminalling Company’s (collectively, “Chevron”) northwest products system (the “Northwest Products System”). For additional information regarding the acquisition, see Note C.

Hawaii Business

On June 17, 2013, we entered into an agreement to sell our Hawaii Business. For additional information regarding the probable sale of our Hawaii Business, see Note D.

8

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Carson Acquisition

On June 1, 2013, we acquired from BP West Coast Products, LLC and other affiliated sellers BP’s integrated Southern California refining, marketing and logistics business (the “Carson Acquisition”). The acquired assets include the 266 thousand barrel per day (“Mbpd”) Carson refinery located adjacent to our Wilmington refinery, related marine terminals, land terminals and pipelines. The assets also include the ARCO^® brand and associated registered trademarks, as well as a master franchisee license for the ampm^® convenience store brand and the supply rights to more than 800 branded dealer-operated and branded wholesale stations in central and southern California, Nevada and Arizona. Additionally, we acquired an anode coke calcining operation and a 51% ownership in the Watson cogeneration facility, both located near the Carson refinery. In conjunction with the acquisition, we also assumed certain environmental liabilities, primarily remediation obligations. For additional information regarding the assumed environmental remediation obligations and other contractual commitments assumed, see Note L.

The purchase price of these assets was $2.42 billion, including petroleum and non-hydrocarbon inventories of $1.1 billion (subject to post-closing adjustments). The amount paid at closing was reduced by advance deposits paid by the Company of $127 million, of which $90 million was paid in December 2012 upon execution of the purchase and sale agreement. We financed the transaction with $552 million in cash, $700 million borrowed on our revolving credit facility and $500 million borrowed under our term loan credit facility. The remaining $544 million was funded with cash received from TLLP to fund a portion of its acquisition of six marketing and storage terminal facilities in southern California (the “Carson Terminal Assets”) that occurred directly after the Carson Acquisition. TLLP funded the acquisition with borrowings under its senior secured revolving credit agreement (the “TLLP Revolving Credit Facility”). For additional information regarding the Carson Terminal Assets, see Note C.

The Carson Acquisition is consistent with our business strategy and provides an opportunity to combine two west coast refining, marketing and logistics businesses resulting in a more efficient integrated refining, marketing and logistics system.

The purchase price allocation for the Carson Acquisition is preliminary and has been allocated based on estimated fair values of the assets acquired and liabilities assumed at the acquisition date, pending the completion of an independent valuation and the assessment of environmental contingencies and other information as it becomes available to us.  Additionally, certain working capital amounts will be updated upon receipt of the final closing statement. The purchase price allocation adjustments can be made through the end of Tesoro’s measurement period, which is not to exceed one year from the acquisition date.

Included in our preliminary purchase price allocation are values for all of the assets acquired in the Carson Acquisition, including $100 million specifically identified for our 51% interest in the Watson cogeneration facility and $400 million for the Carson Terminal Assets that TLLP acquired from us.  However, certain valuations and other studies have yet to commence or progress to a state where there is sufficient information for a definitive measurement, including estimates for other refining, logistics and retail property, plant and equipment values and values for certain intangible assets. 

As of June 30, 2013, the asset amounts noted in the table below have been included in the refining segment assets and will be included in the appropriate segment in future periods when more information is available. Although the finalization of the appraisal and full evaluation of the liabilities will result in changes in the valuation of assets acquired and liabilities assumed, we believe these changes will not have a material impact on our financial position, results of operations or liquidity. The table below presents the preliminary purchase price allocation (in millions):

Receivables	$	234
Inventories	1,100
Prepayments and other current assets	68
Property, plant and equipment	1,023
Acquired intangible assets, net	114
Other noncurrent assets, net	101
Other current liabilities	(12		)
Other noncurrent liabilities	(171		)
Debt	(34		)
Total purchase price	$	2,423

9

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The acquired intangible assets include air emission credits, which are subject to amortization and have preliminary estimated useful lives of 15 years. Our 51% interest in the Watson cogeneration facility acquired in the transaction is accounted for using the equity method of accounting and is included in other noncurrent assets. Other noncurrent liabilities include $169 million of environmental remediation liabilities assumed in the Carson Acquisition including $101 million and $68 million associated with our refining and retail segments, respectively.

We have not provided disclosure of revenues and net earnings associated with the Carson Acquisition, commencing on June 1, 2013, included in our condensed statements of consolidated operations. Financial information, including the revenues and net earnings, for the Carson refinery operations for the period are not available. We are in the process of integrating the operations of our existing Wilmington refinery with the acquired Carson refinery and are operating and accounting for them as a combined facility, including the purchases and sales of crude oil and refined products. Refined products produced from the refining processing units are transported through common logistics assets and cannot be identified as Carson refinery production versus Wilmington refinery production. As a result, revenues and related cost of sales from products delivered through these common assets are unidentifiable to a specific refinery. Therefore, it is impracticable to provide this information.

While we do not have revenue and net earnings information specific to assets acquired in the Carson Acquisition, certain financial information is available for the California region operations, which includes the 266 Mbpd Carson refinery, the 97 Mbpd Wilmington refinery, the 166 Mbpd Martinez refinery and related retail and logistics operations. Total gross margin and operating income for the California region operations were $264 million and $100 million, respectively, from June 1, 2013 through June 30, 2013.

The following pro forma financial information presents our consolidated results assuming the Carson Acquisition occurred on January 1, 2012. The pro forma financial information is not necessarily indicative of the results of future operations.

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(In millions, except per share amounts)
Revenues	$	11,425	$	11,125	$	22,153	$	21,971
Net Earnings attributable to Tesoro Corporation Stockholders	239		508		415		586
Basic Earnings Per Share from Continuing Operations	1.84		3.47		3.13		4.13
Diluted Earnings Per Share from Continuing Operations	1.81		3.44		3.07		4.08

During the three and six months ended June 30, 2013, we incurred transaction and integration costs of approximately $18 million and $30 million, respectively, related to the Carson Acquisition, which are included in selling, general and administrative expenses in our condensed statements of consolidated operations.

NOTE C – TESORO LOGISTICS LP

TLLP is a publicly traded limited partnership that was formed to own, operate, develop and acquire logistics assets. Its assets are integral to the success of Tesoro’s refining and marketing operations and are used to gather crude oil and distribute, transport and store crude oil and refined products.

We held an approximate 40% interest in TLLP at June 30, 2013, including a 2% interest in the general partner. This interest includes 2,729,476 common units, 15,254,890 subordinated units and 958,587 general partner units. All intercompany transactions with TLLP are eliminated upon consolidation.

10

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Acquisitions

Northwest Products System Acquisition

On June 19, 2013, TLLP completed its acquisition of Chevron’s Northwest Products System for a purchase price of approximately $355 million. The Northwest Products System consists of a regulated common carrier products pipeline running from Salt Lake City, Utah to Spokane, Washington, a jet fuel pipeline to the Salt Lake City International Airport andthree refined products terminals in Boise and Pocatello, Idaho and Pasco, Washington. The amount paid by TLLP at closing was reduced by an advance deposit of $40 million that the Partnership paid in December 2012 upon execution of the asset sale and purchase agreements. Based on the preliminary valuation of the assets acquired and estimates of environmental liabilities, the preliminary purchase price allocation consisted of property, plant and equipment of $358 million, goodwill of $9 million, other noncurrent assets of $5 million and environmental liabilities of $17 million. This acquisition is not material to our consolidated financial statements.

In accordance with the sale and purchase agreements, as amended, for a period of two years, Chevron Pipe Line Company has retained financial and operational responsibility to remediate the site of a diesel fuel release that occurred on the Northwest Products System pipeline on March 18, 2013, in addition to paying any monetary fines and penalties assessed by any government authority arising from this incident. TLLP assumed responsibility for all other environmental contingencies. TLLP recognized an estimated $17 million of environmental liabilities assumed in connection with the acquisition of the Northwest Products System, including those obligations related to the diesel fuel release that were not indemnified by Chevron.

Carson Terminal Assets Acquisition

Effective June 1, 2013, TLLP entered into a transaction (the “Carson Terminal Assets Acquisition”) to acquire, from Tesoro, the Carson Terminal Assets. This transaction occurred immediately after the closing of the Carson Acquisition, discussed further in Note B. Tesoro received consideration of $640 million, comprised of $544 million in cash financed with borrowings under the TLLP Revolving Credit Facility and the issuance of TLLP equity with a combined fair value of $96 million. In connection with the Carson Terminal Assets Acquisition, we retained all of the liabilities we assumed in the Carson Acquisition to cleanup and monitor the environmental conditions related to the Carson Terminal Assets.

Revolver Amendments

Effective January 4, 2013, TLLP amended and restated the TLLP Revolving Credit Facility. On May 22, 2013, TLLP further amended the agreement. See Note I for more information regarding these amendments.

Equity Issuance

On January 14, 2013, TLLP closed an equity offering of 9,775,000 common units at a public offering price of $41.70 per unit. Net proceeds to TLLP from the sale of the units were approximately $392 million, which were used to fund the acquisition of Chevron’s Northwest Products System and for general partnership purposes. In connection with the offering, Tesoro Logistics GP, LLC (“TLGP”) purchased 199,490 general partner units at a price of $41.70 per unit to maintain its 2% general partner interest in TLLP.

Agreements with TLLP

TLLP generates revenue by charging fees for gathering, transporting and storing crude oil and for terminalling, transporting and storing crude oil and refined products. We do not provide financial or equity support through any liquidity arrangements or financial guarantees to TLLP.

TLLP provides us with various pipeline transportation, trucking, terminal distribution and storage services under long-term, fee-based commercial agreements expiring 2016 through 2023. Each of these agreements, with the exception of the storage and transportation services agreement, contain minimum volume commitments. Each agreement has fees that are indexed for inflation and, except for a trucking transportation services agreement, provides us with options to renew for two additional five-year terms.

11

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In addition to commercial agreements, we are also party to an omnibus agreement with TLLP, which among other things, addresses the payment of a fee to us for various general and administrative services provided to TLLP. The annual omnibus fee increased to $4 million, as of June 30, 2013, as a result of the Carson Terminal Assets Acquisition. We are also party to an operational services agreement with TLLP, under which TLLP reimburses us with a fee for the provision of certain operational services in support of their pipelines, terminals and storage facilities and directly reimburses us for specifically identifiable charges. The annual operational services fee increased to approximately $4 million at June 30, 2013 as a result of the Carson Terminal Assets Acquisition.

With the exception of affiliate balances, which are eliminated upon consolidation, and their impact on equity, the TLLP condensed consolidated balance sheets as of June 30, 2013 and December 31, 2012, as presented below, are included in the condensed consolidated balance sheets of Tesoro Corporation.

	June 30, 2013		December 31, 2012
	(In millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	76	$	19
Receivables
Trade	2		—
Affiliate	25		18
Prepayments	1		1
Other current assets	5		—
Total Current Assets	109		38
NET, PROPERTY, PLANT AND EQUIPMENT	1,053		274
DEPOSITS	—		40
GOODWILL	9		—
OTHER NONCURRENT ASSETS	17		11
Total Assets	$	1,188	$	363
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable
Trade	$	15	$	9
Affiliate	9		7
Deferred revenue - affiliate	2		2
Accrued interest and financing costs	5		6
Other current liabilities	17		3
Total Current Liabilities	48		27
OTHER NONCURRENT LIABILITIES	5		—
DEBT	903		354
EQUITY (DEFICIT)	232		(18		)
Total Liabilities and Equity (Deficit)	$	1,188	$	363

12

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE D - DISCONTINUED OPERATIONS

Hawaii Business

On June 17, 2013, we entered into an agreement with a subsidiary of Par Petroleum Corporation (“Par Petroleum”), to sell all of our interest in Tesoro Hawaii, LLC, which owns and operates our 94 Mbpd Hawaii refinery, retail stations and associated logistics assets for an agreed upon sales price of $75 million, plus the market value of inventory and other working capital at closing. Additional consideration includes an earnout arrangement payable over three years for an aggregate amount of up to $40 million based on consolidated gross margins. Because we had previously ceased refining operations at our Hawaii refinery, the agreement requires that we restart the refinery before the closing of the transaction. We have also agreed to indemnify the purchaser for up to $15 million of environmental remediation costs related to the Hawaii Business, subject to limitations described in the purchase agreement. Any income related to the earnout arrangement will not be recorded until it is considered realizable. We recently received Federal Trade Commission clearance for the transaction, and expect to complete the sale in the third quarter of 2013, subject to customary closing conditions.

The assets and liabilities related to the Hawaii Business as of June 30, 2013 and December 31, 2012 have been presented in the condensed consolidated balance sheets as “assets related to discontinued operations” and “liabilities related to discontinued operations,” respectively, as a result of our agreement with Par Petroleum to sell the business. Also, the results of operations for this business have been presented as discontinued operations in the condensed statements of consolidated operations for the three and six months ended June 30, 2013.

We recognized $248 million of impairment charges related to the Hawaii Business in the fourth quarter of 2012, which included $20 million related to estimated costs for asset retirement obligations (“AROs”). Par Petroleum has agreed to assume any AROs upon close of the transaction; therefore, we no longer expect to incur any removal or other closure costs for this business. We adjusted the AROs downward $14 million related to our Hawaii refinery, which is included in earnings from discontinued operations in the condensed statements of consolidated operations for the three and six months ended June 30, 2013 and 2012.

Revenues and earnings (loss) before and after tax from the discontinued Hawaii Business for the three and six months ended June 30, 2013 and 2012 were as follows:

	Three Months Ended June 30,					Six Months Ended June 30,
	2013			2012		2013			2012
	(In millions, except per share amounts)
Revenues	$	642		$	772	$	1,451		$	1,585
Earnings (loss) from discontinued operations before tax	$	(16	)	$	37	$	(17	)	$	15
Income tax expense (benefit)	(5		)	13		(5		)	5
Earnings (loss) from discontinued operations, net of tax	$	(11	)	$	24	$	(12	)	$	10

13

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following assets and liabilities relate to the discontinued Hawaii Business as of June 30, 2013 and December 31, 2012:

	June 30, 2013		December 31, 2012
	(In millions, except per share amounts)
Assets:
Receivables, less allowance for doubtful accounts	$	80	$	95
Inventories	362		240
Prepayments and other current assets	2		2
Total current assets related to discontinued operations	444		337
Net property, plant and equipment	14		13
Other noncurrent assets, net	5		5
Total assets related to discontinued operations	$	463	$	355
Liabilities:
Accounts payable	$	15	$	17
Other current liabilities	38		43
Total current liabilities related to discontinued operations	53		60
Other noncurrent liabilities	3		3
Debt	2		2
Total liabilities related to discontinued operations	$	58	$	65

Cash flows related to discontinued Hawaii Business have been combined with the cash flows from continuing operations in the condensed statements of consolidated cash flows for both periods presented and cash flows from operating and investing activities are summarized as follows (in millions):

	Six Months Ended June 30,
	2013			2012
Cash Flows From (Used in):
Operating activities	$	192		$	75
Investing activities	(2		)	(10		)

NOTE E – EARNINGS PER SHARE

We compute basic earnings per share by dividing net earnings attributable to Tesoro Corporation stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share include the effects of potentially dilutive shares outstanding during the period.

Share calculations are presented below (in millions):

	Three Months Ended June 30,		Six Months Ended June 30,
	2013	2012	2013	2012
Weighted average common shares outstanding	135.8	139.6	136.4	139.5
Common stock equivalents	2.4	0.9	2.5	1.7
Total diluted shares	138.2	140.5	138.9	141.2

Potentially dilutive common stock equivalents are excluded from the calculation of diluted earnings per share if the effect of including such securities in the calculation would have been anti-dilutive. Anti-dilutive securities were as follows (in millions):

	Three Months Ended June 30,		Six Months Ended June 30,
	2013	2012	2013	2012
Stock options	0.1	2.8	0.2	2.9

14

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE F – INVENTORIES

Components of inventories were as follows (in millions):

	June 30, 2013		December 31, 2012
Domestic crude oil and refined products	$	1,751	$	957
Foreign subsidiary crude oil	454		246
Materials and supplies	112		83
Oxygenates and by-products	41		38
Merchandise	15		14
Total Inventories	$	2,373	$	1,338

The total carrying value of our crude oil and refined product inventories was less than replacement cost by approximately $1.8 billion and $1.3 billion at June 30, 2013 and December 31, 2012, respectively. See Note B for more information regarding the inventory acquired in the Carson Acquisition.

NOTE G – FAIR VALUE MEASUREMENTS

We classify financial assets and financial liabilities into the following fair value hierarchy:

• level 1 - valued based on quoted prices in active markets for identical assets and liabilities;

• level 2 - valued based on quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability; and

• level 3 - valued based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

We measure fair value using level 1 inputs, when available, because they provide the most reliable evidence of fair value. Derivative instruments and our Renewable Identification Numbers (“RINs”) are our only financial assets and liabilities measured at fair value on a recurring basis. We did not have any financial assets or liabilities classified as level 3 at June 30, 2013 or December 31, 2012. See Note H for further information on the Company’s derivative instruments.

Our derivative instruments consist primarily of options (“Options”), exchange-traded futures (“Futures Contracts”), over-the-counter swaps and options (“OTC Swap Contracts” and “OTC Option Contracts,” respectively), and physical commodity forward purchase and sale contracts (“Forward Contracts”). Options are valued using quoted prices from exchanges and are categorized in level 1 of the fair value hierarchy. Futures Contracts are valued based on quoted prices from exchanges and are categorized in level 1 or level 2 of the fair value hierarchy based on the liquidity of the instrument. OTC Swap Contracts, OTC Option Contracts and Forward Contracts are valued using third-party broker quotes, industry pricing services and price curves derived from commodity exchange postings, with consideration of counterparty credit risk. These quotes are corroborated with market data and are categorized in level 2 of the fair value hierarchy.

Our RINs obligation represents our period-end deficit for the purchase of RINs to satisfy the requirement to blend biofuels into the products we have produced.  Our RINs obligation is based on our RINs deficit and the price of those RINs as of the balance sheet date.  Our RINs obligation is categorized in level 2 of the fair value hierarchy and is measured at fair value using the market approach based on quoted prices from an independent pricing service.

15

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Financial assets and liabilities recognized at fair value in our condensed consolidated balance sheets by level within the fair value hierarchy were as follows (in millions):

	Level 1		Level 2		Level 3		Netting and Collateral (a)			Total as of June 30, 2013
Assets:
Commodity Futures Contracts	$	172	$	7	$	—	$	(92	)	$	87
Commodity Forward Contracts	—		4		—		—			4
Total Assets	$	172	$	11	$	—	$	(92	)	$	91
Liabilities:
Commodity Futures Contracts	$	150	$	5	$	—	$	(135	)	$	20
Commodity Forward Contracts	—		4		—		—			4
RINs Obligation	—		11		—		—			11
Total Liabilities	$	150	$	20	$	—	$	(135	)	$	35

	Level 1		Level 2		Level 3		Netting and Collateral (a)			Total as of December 31, 2012
Assets:
Commodity Futures Contracts	$	91	$	4	$	—	$	(68	)	$	27
Total Assets	$	91	$	4	$	—	$	(68	)	$	27
Liabilities:
Commodity Futures Contracts	$	96	$	4	$	—	$	(95	)	$	5
Commodity Forward Contracts	—		1		—		—			1
RINs Obligation	—		1		—		—			1
Total Liabilities	$	96	$	6	$	—	$	(95	)	$	7

________________

(a) Represents the impact of netting assets, liabilities and cash collateral when a legal right of offset exists. As of June 30, 2013 and December 31, 2012, cash collateral amounts of $43 million and $27 million, respectively, are netted with mark-to-market derivative assets.

Certain of our derivative contracts, under master netting arrangements, include both asset and liability positions. We have elected to offset both the fair value amounts and any related cash collateral amounts recognized for multiple derivative instruments executed with the same counterparty when there is a legally enforceable right and an intention to settle net or simultaneously.

We believe the carrying value of our other financial instruments, including cash and cash equivalents, receivables, accounts payable and certain accrued liabilities approximate fair value. Our fair value assessment incorporates a variety of considerations, including:

• the short term duration of the instruments (less than one percent of our trade receivables and payables are outstanding for greater than 90 days); and

• the expected future insignificance of bad debt expense, which includes an evaluation of counterparty credit risk.

The borrowings under the Tesoro Corporation revolving credit facility (the “Revolving Credit Facility”), the TLLP Revolving Credit Facility and our term loan credit facility agreement (the “Term Loan Facility”), which include variable interest rates, approximate fair value. The fair value of our senior notes is based on prices from recent trade activity and is categorized in level 2 of the fair value hierarchy. The carrying value and fair value of our debt at June 30, 2013 were approximately $3.3 billion and $3.4 billion, respectively. The carrying value and fair value of our debt at December 31, 2012 were approximately $1.6 billion and $1.7 billion, respectively.

16

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE H - DERIVATIVE INSTRUMENTS

The timing, direction and overall change in refined product prices versus crude oil prices impacts profit margins and has a significant impact on our earnings and cash flows. Consequently, we use non-trading derivative instruments to manage exposure to commodity price risks associated with the purchase or sale of feedstocks, refined products and energy supplies to or from the Company’s refineries, terminals, retail operations and customers. We also use non-trading derivative instruments to manage price risks associated with inventories above or below our target levels. To achieve our objectives, we use derivative instruments such as Options, Futures Contracts, OTC Swap Contracts, OTC Option Contracts and Forward Contracts, which had remaining maturity dates within two years as of June 30, 2013. We believe that there is minimal credit risk with respect to our counterparties.

We are also exposed to exchange rate fluctuations on our purchases of Canadian crude oil. We enter into Forward Contracts of Canadian dollars to manage these monthly exchange rate fluctuations.

The accounting for changes in the fair value of a commodity derivative depends on whether the derivative has been designated in a hedging relationship and whether we have elected the normal purchases and normal sales exception. We did not designate any of our derivatives for hedge accounting during the three and six months ended June 30, 2013 and 2012, respectively. The accounting for the change in fair value can be summarized as follows:

Derivative Treatment	Accounting Method
Normal purchases and normal sales exception	Accrual accounting
Designated in qualifying hedging relationship	Hedge accounting
All other derivatives	Mark-to-market accounting

The primary derivative instruments that we use have the following characteristics. Options provide the right, but not the obligation to buy or sell the commodity at a specified price in the future. Forward Contracts are agreements to buy or sell the commodity at a predetermined price at a specified future date.  Futures Contracts are standardized agreements, traded on a futures exchange, to buy or sell the commodity at a predetermined price at a specified future date. OTC Swap Contracts and OTC Option Contracts require cash settlement for the commodity based on the difference between a contracted fixed or floating price and the market price on the settlement date. Certain of these contracts require cash collateral if our liability position exceeds specified thresholds.

The following table presents the fair value (in millions) of our derivative instruments as of June 30, 2013 and December 31, 2012. The fair value amounts below are presented on a gross basis and do not reflect the netting of asset and liability positions permitted under the terms of our master netting arrangements including cash collateral on deposit with, or received from, brokers. We have elected to offset the recognized fair value amounts for multiple derivative instruments executed with the same counterparty in our financial statements when a legal right of offset exists. As a result, the asset and liability amounts below will not agree with the amounts presented in our condensed consolidated balance sheets.

		Derivative Assets						Derivative Liabilities
	Balance Sheet Location	June 30, 2013			December 31, 2012			June 30, 2013			December 31, 2012
Commodity Futures Contracts	Prepayments and other current assets	$	152		$	76		$	140		$	83
Commodity Futures Contracts	Current assets related to discontinued operations	27			19			15			17
Commodity Forward Contracts	Receivables	4			—			4			—
Commodity Forward Contracts	Accounts payable	—			—			—			1
Total Gross Mark-to-Market Derivatives		183			95			159			101
Less: Counterparty Netting and Cash Collateral (a)		(92		)	(68		)	(135		)	(95		)
Total Net Fair Value of Derivatives		$	91		$	27		$	24		$	6

________________

(a) As of June 30, 2013 and December 31, 2012, cash collateral amounts of $43 million and $27 million, respectively, are netted with mark-to-market derivative assets.

17

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Gains (losses) for our mark-to market derivatives for the three and six months ended June 30, 2013 and 2012, were as follows (in millions):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Commodity Futures Contracts	$	10		$	50		$	(16	)	$	38
Commodity OTC Swap Contracts	—			—			—			(6		)
Commodity Forward Contracts	(2		)	6			(4		)	3
Foreign Currency Forward Contracts	(2		)	(2		)	(4		)	(1		)
Total Gain (Loss) on Mark-to-Market Derivatives	$	6		$	54		$	(24	)	$	34

The income statement location of gains (losses) for our mark-to market derivatives above were as follows (in millions):

	Three Months Ended June 30,						Six Months Ended June 30,
Income Statement Location:	2013			2012			2013			2012
Revenues	$	9		$	31		$	10		$	21
Cost of sales	2			24			(20		)	28
Other expense, net	(2		)	(2		)	(4		)	(1		)
Net earnings (loss) from discontinued operations	(3		)	1			(10		)	(14		)
Total Gain (Loss) on Mark-to-Market Derivatives	$	6		$	54		$	(24	)	$	34

Open Long (Short) Positions

All of our open positions are scheduled to mature within two years. The information below presents the net volume of outstanding commodity contracts by type of instrument and year of maturity as of June 30, 2013 (volumes in thousands of barrels):

Mark-to-Market Derivatives
Derivative instrument and Year of maturity	Long (Short) Contract Volumes
Futures
2013	537
2014	(100)
OTC Swaps
2013	500
Forwards
2013	548

NOTE I – DEBT

Our total debt balance at June 30, 2013 and December 31, 2012 was as follows (in millions):

	June 30, 2013		December 31, 2012
Total Debt	$	3,367	$	1,588
Less: Current maturities	9		3
Debt, less current maturities	$	3,358	$	1,585

18

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

6.125% TLLP Senior Notes due 2021

Effective August 1, 2013, TLLP completed a private offering of $550 million aggregate principal amount of 6.125% Senior Notes due 2021 (the “TLLP Notes”).  The proceeds of this offering were used to repay the amounts outstanding under the TLLP Revolving Credit Facility, which amounts were used to fund a portion of the Carson Terminal Assets Acquisition, and to pay a portion of the fees and expenses related to the offering of the TLLP Notes. The TLLP Notes have no sinking fund requirements. TLLP may redeem some or all of the TLLP Notes, prior to October 15, 2016, at a make-whole price plus accrued and unpaid interest and Special Interest, if any. On or after October 15, 2016, the TLLP Notes may be redeemed at premiums equal to 104.594% through October 15, 2017; 103.063% from October 15, 2017 through October 15, 2018; 101.531% from October 15, 2018 through October 15, 2019; and at par thereafter, plus accrued and unpaid interest in all circumstances. TLLP has the right to redeem up to 35% of the aggregate principal amount at 106.125% percent of face value with proceeds from certain equity issuances through October 15, 2016.

The TLLP Notes also contain customary terms, events of default and covenants for an issuance of non-investment debt grade securities. The TLLP Notes due 2021 are unsecured and guaranteed by all of TLLP’s domestic subsidiaries, except Tesoro Logistics Finance Corp., the co-issuer of the TLLP Notes, and are non-recourse to Tesoro, except for TLGP.

Credit Facilities Overview

We had available capacity under our credit agreements as follows at June 30, 2013 (in millions):

	Total Capacity		Amount Borrowed as of June 30, 2013		Outstanding Letters of Credit		Available Capacity		Expiration
Tesoro Corporation Revolving Credit Facility (a)	$	3,000	$	700	$	782	$	1,518	January 4, 2018
TLLP Revolving Credit Facility	575		544		—		31		December 31, 2017
Term Loan Credit Facility	500		499		—		—		May 30, 2016
Letter of Credit Facilities	1,362		—		336		1,026
Total credit agreements	$	5,437	$	1,743	$	1,118	$	2,575

________________

(a) Borrowing base is the lesser of the amount of the periodically adjusted borrowing base or the agreement’s total capacity.

As of June 30, 2013, our credit facilities were subject to the following expenses and fees:

Credit Facility	30 day Eurodollar (LIBOR) Rate	Eurodollar Margin	Base Rate	Base Rate Margin	Commitment Fee (unused portion)
Tesoro Corporation Revolving Credit Facility ($3.0 billion) (b)	0.19%	1.50%	3.25%	0.50%	0.375%
TLLP Revolving Credit Facility ($575 million) (c)	0.19%	2.00%	3.25%	1.00%	0.375%

________________

(b) We can elect the interest rate to apply to the Revolving Credit Facility between a base rate plus the base rate margin, or a Eurodollar rate, for the applicable term, plus, the Eurodollar margin at the time of the borrowing. The applicable margin varies based on the Revolving Credit Facility’s credit ratings. Letters of credit outstanding under the Revolving Credit Facility incur fees at the Eurodollar margin rate. We also incur commitment fees for the unused portion of the Revolving Credit Facility at an annual rate.

(c) TLLP can elect the interest rate to apply to the TLLP Revolving Credit Facility between a base rate plus the base rate margin, or a Eurodollar rate, for the applicable term, plus, the Eurodollar margin at the time of the borrowing. The applicable margin varies based upon a certain leverage ratio, as defined by the TLLP Revolving Credit Facility. TLLP incurs commitment fees for the unused portion of the TLLP Revolving Credit Facility at an annual rate.

19

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Tesoro Corporation Revolving Credit Facility

Effective January 4, 2013, we entered into the Sixth Amended and Restated Credit Agreement, which permitted us to increase the capacity of our Revolving Credit Facility to an aggregate of $3.0 billion, on May 21, 2013 (“Increase Effective Date”). Additionally, the agreement allows for us to request that the capacity be increased up to an aggregate of $4.0 billion, subject to receiving increased commitments from the lenders; however, we must offer to reduce the commitments by at least $500 million on or prior to the 18 month anniversary of the Increase Effective Date and by an additional $500 million on or prior to the two year anniversary of the Increase Effective Date. On May 30, 2013, we borrowed $700 million at an initial rate of 1.69%, per annum, under the Revolving Credit Facility to fund a portion of the Carson Acquisition.

At June 30, 2013, our Revolving Credit Facility provided for borrowings (including letters of credit) up to the lesser of the amount of a periodically adjusted borrowing base of approximately $3.7 billion, consisting of Tesoro’s eligible cash and cash equivalents, receivables and petroleum inventories, net of the standard reserve as defined, or the Revolving Credit Facility’s total capacity of$3.0 billion.

TLLP Revolving Credit Facility

Effective January 4, 2013, TLLP amended and restated the TLLP Revolving Credit Facility to increase commitments under the facility from $300 million to $500 million and to allow TLLP to request that the loan availability be increased up to an aggregate of $650 million, subject to receiving increased commitments from the lenders.

Effective May 22, 2013, TLLP further amended the TLLP Revolving Credit Facility to increase the total revolving loan availability from $500 million to $575 million and to modify the definition of Consolidated EBITDA and the calculation of the Consolidated Leverage Ratio. On May 30, 2013, TLLP borrowed $544 million at an initial rate of 2.19%, per annum, under the TLLP Revolving Credit Facility to partially fund its acquisition of the Carson Terminal Assets from Tesoro on June 1, 2013.

The TLLP Revolving Credit Facility is non-recourse to Tesoro, except for TLGP, and is guaranteed by all of TLLP’s subsidiaries and secured by substantially all of TLLP’s assets. Borrowings are available under the TLLP Revolving Credit Facility up to the total loan availability of the facility.

Term Loan Credit Facility

We borrowed $500 million under our Term Loan Facility on May 30, 2013, at an initial rate of 2.52%, which was used to fund a portion of the Carson Acquisition. The obligations under the Term Loan Facility are secured by all equity interests of Tesoro Refining & Marketing Company LLC and Tesoro Alaska Company, the Tesoro and USA Gasoline trademarks and those trademarks containing the name “ARCO” acquired in the Carson Acquisition and junior liens on certain assets.

The Term Loan Facility matures three years from the initial borrowing. The Term Loan Facility is subject to equal quarterly payments in an amount equal to 1.00% per annum of the initial borrowing with the final payment of all amounts outstanding due on May 30, 2016, the maturity date.

Letter of Credit Agreements

The Revolving Credit Facility allows us to obtain letters of credit under separate letter of credit agreements for foreign crude oil purchases. As of June 30, 2013, our six separate uncommitted letter of credit agreements had $336 million outstanding. Capacity under these letter of credit agreements is available on an uncommitted basis and can be terminated by either party, at any time.

20

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE J - PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, at cost, is as follows (in millions):

	June 30, 2013			December 31, 2012
Refining	$	7,885		$	6,268
Retail	721			712
Corporate	228			226
Property, plant and equipment, at cost	8,834			7,206
Accumulated depreciation	(2,095		)	(1,974		)
Net property, plant and equipment	$	6,739		$	5,232

We capitalize interest as part of the cost of major projects during the construction period. Capitalized interest totaled $5 million and $4 million for the three months ended June 30, 2013 and 2012, respectively, and $9 million and $8 million for the six months ended June 30, 2013 and 2012, respectively, and is recorded as a reduction to net interest and financing costs in our condensed statements of consolidated operations. See Note B for more information regarding the property, plant and equipment acquired in the Carson Acquisition.

NOTE K – BENEFIT PLANS

Tesoro sponsors the following four defined benefit pension plans: the funded qualified employee retirement plan, the unfunded nonqualified executive security plan, the unfunded nonqualified restoration retirement plan and the unfunded nonqualified supplemental executive retirement plan. Although our funded employee retirement plan fully meets all funding requirements under applicable laws and regulations, we voluntarily contributed $24 million during the six months ended June 30, 2013 to improve the funded status of the plan.

Tesoro also provides health care benefits to retirees who met certain service requirements and were participating in our group health insurance program at retirement.

As a result of the Carson Acquisition and the planned sale of our Hawaii Business, we remeasured our pension and other postretirement benefit obligations during the second quarter of 2013. The discount rates used to determine the pension and postretirement obligations, and the related net periodic benefit costs for the remainder of 2013, are 4.65% and 3.01%, respectively, compared to discount rates of 4.06% and 2.82%, respectively, used at December 31, 2012. We determine the discount rate primarily by reference to the effective yields on high quality corporate bonds that have a comparable cash flow pattern to the expected payments to be made under our plans. The remeasurement resulted in a $125 million decrease in pension and other postretirement liabilities during the second quarter of 2013. The benefit of this remeasurement will be amortized into income through 2023. The remeasurement for pension and other postretirement benefits did not have a material impact on our net periodic benefit expense during the three or six months ended June 30, 2013.

21

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The components of pension and other postretirement benefit expense (income), including amounts related to discontinued operations, included in the condensed statements of consolidated operations for the three and six months ended June 30, 2013 and 2012 were (in millions):

	Pension Benefits
	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Service cost	$	6		$	7		$	14		$	14
Interest cost	6			8			13			15
Expected return on plan assets	(6		)	(6		)	(12		)	(12		)
Recognized net actuarial loss	6			5			13			11
Net Periodic Benefit Expense	$	12		$	14		$	28		$	28
	Other Postretirement Benefits
	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Service cost	$	2		$	1		$	3		$	2
Interest cost	—			1			1			2
Amortization of prior service credit	(10		)	(10		)	(19		)	(19		)
Recognized net actuarial loss	3			3			5			6
Net Periodic Benefit Income	$	(5	)	$	(5	)	$	(10	)	$	(9	)

NOTE L - COMMITMENTS AND CONTINGENCIES

Environmental and Tax Matters

We are a party to various litigation and contingent loss situations, including environmental and income tax matters, arising in the ordinary course of business. Although we cannot predict the ultimate outcomes of these matters with certainty, we have accrued for the estimated liabilities when appropriate. We believe that the outcome of these matters will not have a material impact on our liquidity or financial position, although the resolution of certain of these matters could have a material impact on our interim or annual results of operations. Additionally, if applicable, we accrue receivables for probable third-party recoveries.

We are subject to extensive federal, state and local environmental laws and regulations. These laws, which change frequently, regulate the discharge of materials into the environment and may require us to remove or mitigate the environmental effects of the disposal or release of petroleum or chemical substances at various sites, install additional controls or make other modifications to certain emission sources, equipment or facilities.

We are subject to extensive federal, state and foreign tax laws and regulations. Newly enacted tax laws and regulations, and changes in existing tax laws and regulations, could result in increased expenditures in the future. We are also subject to audits by federal, state and foreign taxing authorities in the normal course of business. It is possible that tax audits could result in claims against us in excess of recorded liabilities. We believe that resolution of any such claim(s) would not have a material impact on our financial position, results of operations or liquidity. We do not expect our unrecognized tax benefits to change significantly over the next twelve months.

22

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Environmental Liabilities

We are incurring and expect to continue to incur expenses for environmental liabilities at a number of currently and previously owned or operated refining, pipeline, terminal and retail station properties. We have accrued liabilities for these expenses and believe these accruals are adequate based on current information and projections that can be reasonably estimated. Our environmental accruals are based on estimates including engineering assessments, and it is possible that our projections will change and that additional costs will be recorded as more information becomes available. Changes in our environmental liabilities for the six months ended June 30, 2013, were as follows (in millions):

Balance at December 31, 2012	$	85
Additions, net	2
Liabilities assumed in the Carson Acquisition	169
Liabilities assumed in the Northwest Products System Acquisition	17
Expenditures	(4		)
Balance at June 30, 2013	$	269

The environmental remediation liabilities assumed in the Carson Acquisition include amounts estimated for site cleanup activities and monitoring activities arising from operations at the Carson refinery, certain terminals and pipelines, and retail stations prior to our acquisition on June 1, 2013. These estimates for environmental liabilities are based on third-party assessments and available information. It is possible these estimates will change as additional information becomes available.

Our environmental liabilities also include $55 million at June 30, 2013 and $54 million at December 31, 2012, related to amounts estimated for site cleanup activities assumed from a prior owner, arising from operations at our Martinez refinery prior to August 2000. Of the $55 million accrued, approximately $46 million is subject to a cost-share agreement where we are responsible for 75% of the expenditures. We cannot reasonably determine the full extent of remedial activities that may be required at the Martinez refinery. Therefore, it is possible that we will identify additional investigation and remediation costs as more information becomes available. We have filed insurance claims under environmental insurance policies. These policies provide coverage up to $190 million for expenditures in excess of $50 million in self-insurance, but the insurer has challenged coverage and filed a declaratory relief action in federal court. We have not recognized possible insurance recoveries related to this matter.

We have investigated conditions at certain active wastewater treatment units at our Martinez refinery.  The investigation was driven by an order received in 2004 from the San Francisco Bay Regional Water Quality Control Board. The order named us as well as two previous owners of the Martinez refinery.  We cannot currently estimate the amount of the ultimate resolution of the order, but we believe it will not have a material adverse impact on our financial position, results of operations or liquidity.

Washington Refinery Fire

The naphtha hydrotreater unit at our Washington refinery was involved in a fire in April 2010, which fatally injured seven employees and rendered the unit inoperable. The Washington State Department of Labor & Industries (“L&I”), the U.S. Chemical Safety and Hazard Investigation Board and the U.S. Environmental Protection Agency (“EPA”) initiated separate investigations of the incident. L&I completed its investigation in October 2010, issued citations and assessed a $2.4 million fine, which we appealed. L&I reassumed jurisdiction of the citation and affirmed the allegations in December 2010. We disagree with L&I’s characterizations of operations at our Washington refinery and believe, based on available evidence and scientific reviews, that many of the agency’s conclusions are mistaken. We filed an appeal of the citation in January 2011.

We filed business interruption insurance and property damage insurance claims related to down time from this incident. Certain business interruption claims remain open as of June 30, 2013.

Other Matters

In the ordinary course of business, we become party to lawsuits, administrative proceedings and governmental investigations, including environmental, regulatory and other matters. Large, and sometimes unspecified, damages or penalties may be sought from us in some matters. We have not established accruals for these matters unless a loss is probable, and the amount of loss is currently estimable. On the basis of existing information, we believe that the resolution of these matters, individually or in the aggregate, will not have a material adverse impact on our liquidity or financial position, although the resolution of certain of these matters could have a material impact on our interim or annual results of operations.

23

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Legal

In 2007, we obtained a ruling from the California Public Utilities Commission (“CPUC”) that an intrastate crude oil pipeline, which transports heated crude oil to our Martinez Refinery from the area around Bakersfield, California, was a common carrier subject to the jurisdiction of the CPUC.  Since that time, we have participated in rate proceedings to determine an appropriate rate structure for this pipeline.  In May 2013, the CPUC issued final orders establishing just and reasonable rates for the pipeline for the period between April 1, 2005 and June 30, 2011 and held that we were entitled to receive refunds, including interest.  In accordance with this ruling, we received a refund of $54 million in June 2013, which is included in other income (expense), net in our condensed statements of consolidated operations.

We are a defendant, along with other manufacturing, supply and marketing defendants, in two remaining lawsuits alleging methyl tertiary butyl ether (“MTBE”) contamination in groundwater. The defendants are being sued for having manufactured MTBE and having manufactured, supplied and distributed gasoline containing MTBE. The plaintiffs in the remaining cases, all in California, are municipalities and governmental authorities. The plaintiffs allege, in part, that the defendants are liable for manufacturing or distributing a defective product. The suits generally seek individual, unquantified compensatory and punitive damages and attorney’s fees. We intend to vigorously assert our defenses against these claims. While we cannot currently estimate the final amount or timing of the resolution of these matters, we have established an accrual for them and believe that the outcome will not have a material impact on our financial position, results of operations or liquidity.

During 2009, Chevron filed a lawsuit against us claiming they are entitled to a share of the refunds we received in 2008 from the owners of the Trans-Alaska Pipeline System (“TAPS”). We received $50 million in 2008, net of contingent legal fees, for excessive intrastate rates charged by TAPS during 1997 through 2000 and the period of 2001 through June 2003. Chevron asserted that it is entitled to a share of its portion of the refunds for retroactive price adjustments under our previous crude oil contracts with them. The trial court judge granted Chevron’s motion for summary judgment and awarded them $16 million, including interest, in September 2010. We disagreed with the trial court and appealed the decision to the Alaska Supreme Court. In July 2013, the Alaska Supreme Court issued an order requiring the Superior Court to enter summary judgment in our favor. We had previously established an accrual for this matter, which will be reversed in the third quarter of 2013.

Environmental

The EPA has alleged that we have violated certain Clean Air Act regulations at our Alaska, Washington, Martinez, Hawaii and Utah refineries. We are continuing discussions of the EPA’s claims with the EPA and the U.S. Department of Justice (“DOJ”). We previously received a notice of violation (“NOV”) in March 2011 from the EPA alleging violations of Title V of the Clean Air Act at our Alaska refinery. The alleged violations in the NOV arise from a 2007 state of Alaska inspection and inspections by the EPA in 2008 and 2010. We also previously received NOVs in 2005 and 2008 alleging violations of the Clean Air Act at our Washington refinery. We are discussing all of these allegations with the EPA and DOJ. The ultimate resolution of these matters could require us to incur material capital expenditures and/or civil penalties. While we cannot currently estimate the amount or timing of the resolution of these matters and currently believe that the outcome will not have a material impact on our liquidity or financial position, the ultimate resolution could have a material impact on our interim or annual results of operations.

Contractual Commitments

In connection with the Carson Acquisition, we assumed various contractual commitments related to operating leases. Our assumed operating lease commitments include primarily refinery leases associated with the land, retail station sites, storage tanks and terminals. For the remainder of 2013, we expect to pay an estimated $16 million under these lease agreements, and for 2014, 2015, 2016 and 2017, we expect to pay $17 million, $12 million, $9 million and $8 million, respectively, under these agreements. Beyond 2017, lease payments associated with these agreements are estimated to total $50 million. We also assumed take-or-pay arrangements with third parties for the purchase of industrial gases, chemical processing services and essential utilities associated with the operation of the refinery. These agreements require minimum payments of approximately $37 million per year, and have various contract expiration dates.

We entered into one new crude supply arrangement associated with the Carson refinery with an initial term of one year. Prices under this agreement will fluctuate due to market responsive pricing provisions. To estimate our new commitments under this contract, we used actual market prices as of June 30, 2013 of $99 per barrel. For the remainder of 2013 and for 2014, we expect to pay approximately $909 million and $1.3 billion, respectively, under this agreement.

See our Annual Report on Form 10-K for additional information regarding our estimated contractual long-term commitments.

24

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE M - STOCKHOLDERS’ EQUITY

See Note N for information relating to stock-based compensation. Changes to equity during the six months ended June 30, 2013 are presented below (in millions):

	Tesoro Corporation Stockholders’ Equity			Noncontrolling  Interest			Total Equity
Balance at December 31, 2012	$	4,251		$	486		$	4,737
Net earnings	320			22			342
Other comprehensive income	73			—			73
Shares issued for equity-based compensation awards	69			—			69
Amortization of equity settled awards	20			—			20
Excess tax benefits from stock-based compensation arrangements, net	9			—			9
Purchases of common stock	(241		)	—			(241		)
Dividend payments	(55		)	—			(55		)
Net proceeds from issuance of Tesoro Logistics LP common units	(6		)	398			392
Distributions to noncontrolling interest	—			(28		)	(28		)
Other	2			—			2
Balance at June 30, 2013	$	4,442		$	878		$	5,320

We issued approximately 2.0 million and 1.9 million shares primarily for stock option exercises under our equity-based compensation plans during the six months ended June 30, 2013 and the year ended December 31, 2012, respectively. 

Share Repurchase Programs

Under a $500 million share repurchase program authorized by our Board of Directors (the “Board”), management is permitted to purchase Tesoro common stock at its discretion in the open market. The authorization has no time limit and may be suspended or discontinued at any time. Under this program, we purchased approximately 3.8 million shares of our common stock for $200 million during the six months ended June 30, 2013.

In addition, we purchased over 0.6 million shares of our common stock for approximately $36 million during the six months ended June 30, 2013 under the existing program designed to offset the dilutive effect of outstanding and future stock-based compensation awards.

Cash Dividends

On August 1, 2013, our Board declared a quarterly cash dividend on common stock of $0.25 per share, payable on September 13, 2013 to shareholders of record on August 30, 2013.

Our Revolving Credit Facility, senior notes and Term Loan Facility each limit our ability to pay cash dividends or buy back our stock. The limitation in each of our debt agreements is based on limits on restricted payments (as defined in our debt agreements), which include dividends, purchases of our stock or voluntary prepayments of subordinate debt. The aggregate amount of restricted payments cannot exceed an amount defined in each of the debt agreements. The indentures for our senior notes also limit certain of our subsidiaries ability to make certain payments and distributions.

25

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE N - STOCK-BASED COMPENSATION

Stock-based compensation expense (benefit), including amounts related to discontinued operations, included in our condensed statements of consolidated operations was as follows (in millions):    

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013		2012
Stock appreciation rights	$	(15	)	$	(9	)	$	24	$	3
Performance share awards	2			2			10		4
Market stock units	4			3			8		6
Other stock-based awards	4			4			5		8
Total Stock-Based Compensation Expense (Benefit)	$	(5	)	$	—		$	47	$	21

We have aggregated expenses for certain award types as they are not considered significant. The income tax effect recognized in the income statement for stock-based compensation was a $3 million and $1 million expense for the three months ended June 30, 2013 and 2012, respectively, and a $17 million and $7 million benefit for the six months ended June 30, 2013 and 2012, respectively. The reduction in current taxes payable recognized from tax deductions resulting from exercises and vestings under all of our stock-based compensation arrangements totaled $21 million and $4 million for the three months ended June 30, 2013 and 2012, respectively, and $38 million and $14 million for the six months ended June 30, 2013 and 2012, respectively.

Stock Appreciation Rights

A stock appreciation right (“SAR”) entitles an employee to receive cash in an amount equal to the excess of the fair market value of one share of common stock on the date of exercise over the grant price of the SAR. The fair value of each SAR is estimated at the end of each reporting period using the Black-Scholes option-pricing model. We have not granted any SARs since 2010. We paid cash of $30 million and $9 million to settle approximately 1.3 million and 0.7 million SARs that were exercised during the six months ended June 30, 2013 and 2012, respectively. We had $72 million and $79 million recorded in accrued liabilities associated with our SARs awards at June 30, 2013 and December 31, 2012, respectively.

Performance Share Awards

During the six months ended June 30, 2013, we granted 0.2 million performance share awards, including awards with performance and market conditions, at a weighted average grant date fair value of $53.75 per share.

Performance Conditions

We granted additional performance condition performance share awards under the 2011 Long-Term Incentive Plan (“2011 Plan”) during the first half of 2013. The vesting percentages of these equity awards, range from 0-200%, and are tied to performance conditions over a three-year period. These performance share awards vest at the end of the performance period. The fair value of performance share awards tied to performance measures is estimated using the market price of our common stock on the grant date. The estimated fair value of these performance share awards is amortized over a three-year vesting period using the straight-line method. The value of the award ultimately paid will be based on return on capital employed, which is measured against our performance peer group.

Market Conditions

We granted additional market condition performance share awards under the 2011 Plan during the first half of 2013. The vesting percentages of these equity awards range from 0-200% and are tied to market conditions over a three-year performance period. These performance share awards vest at the end of the performance period. The fair value of each performance share award is estimated on the grant date using a Monte Carlo simulation model. The estimated fair value of all market condition performance share awards is amortized over a three-year vesting period using the straight-line method. The value of the award ultimately paid will be based on relative total shareholder return, which is measured against our performance peer group and the S&P 500 Index.

26

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Market Stock Units

We granted 0.5 million market stock units at a grant date fair value of $65.96 per unit under the 2011 Plan during the six months ended June 30, 2013. These market stock units vest at the end of a three-year performance period. The number of shares ultimately issued will be based on Tesoro’s stock price changes over the performance period. The market stock units’ potential payout can range from 50-200% of targeted award value, unless the average closing stock price at vesting has decreased more than 50% from the average closing stock price at the grant date, then no market stock units will be paid out. The fair value of each market stock unit is estimated on the grant date using a Monte Carlo simulation model. The estimated fair value of these market stock units is amortized over a three-year vesting period using the straight-line method.

NOTE O - SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow disclosures are as follows (in millions):

	Six Months Ended June 30,
	2013		2012
Assets received for deposits paid in prior period	$	130	$	—
Interest paid, net of capitalized interest	43		50
Income taxes paid, net	95		1

Capital expenditures included in accounts payable were $73 million and $52 million at June 30, 2013 and June 30, 2012, respectively.

NOTE P - OPERATING SEGMENTS

The Company’s revenues are derived from two operating segments, refining and retail. Excluding the Hawaii refinery, we own and operate six petroleum refineries located in California, Washington, Alaska, North Dakota and Utah. These refineries manufacture gasoline and gasoline blendstocks, jet fuel, diesel fuel, residual fuel oil and other refined products. We sell these refined products, together with refined products purchased from third parties, at wholesale through terminal facilities and other locations. Our refining segment also sells refined products to unbranded marketers and opportunistically exports refined products to foreign markets. Excluding the Hawaii Business, our retail segment sells gasoline, diesel fuel and convenience store items through company-operated retail stations and branded jobber/dealers in 17 states. See Note B for additional information regarding the changes in our assets during the second quarter of 2013. We do not have significant operations in foreign countries. Therefore, revenue generated and long-lived assets located in foreign countries are not material to our operations.

We evaluate the performance of our segments based primarily on segment operating income. Segment operating income includes those revenues and expenses that are directly attributable to management of the respective segment. Intersegment sales from refining to retail are made at prevailing market rates. Income taxes, other expense, net, interest income, net interest and financing costs, corporate depreciation and corporate general and administrative expenses are excluded from segment operating income. Identifiable assets are those used by the segments, whereas corporate assets are principally cash and other assets that are not associated with a specific operating segment.

As discussed in Note B, certain valuations and other studies have yet to commence or progress to a state where there is sufficient information for a definitive measurement, including estimates for other refining, logistics and retail property, plant and equipment values and values for certain intangible assets.  As of June 30, 2013, these amounts have been included in the refining segment assets and will be included in the appropriate segment in future periods when more information is available.

27

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Segment information related to continuing operations is as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
	(In millions)
Revenues
Refining:
Refined products	$	8,146		$	7,026		$	14,890		$	13,791
Crude oil and other	603			133			1,076			287
Retail:
Fuel (a)	2,218			1,457			3,725			2,713
Merchandise and other	59			54			107			100
Intersegment sales from Refining to Retail	(2,129		)	(1,337		)	(3,554		)	(2,551		)
Total Revenues	$	8,897		$	7,333		$	16,244		$	14,340
Segment Operating Income
Refining (b)	$	395		$	610		$	678		$	823
Retail (b)	25			72			40			67
Total Segment Operating Income	420			682			718			890
Corporate and unallocated costs (c)	(56		)	(38		)	(161		)	(90		)
Operating Income	364			644			557			800
Interest and financing costs, net	(33		)	(34		)	(63		)	(70		)
Interest income	—			—			1			1
Other income (expense), net (d)	56			(19		)	55			(19		)
Earnings Before Income Taxes	$	387		$	591		$	550		$	712
Depreciation and Amortization Expense
Refining	$	97		$	87		$	189		$	172
Retail	9			9			17			18
Corporate	5			6			10			8
Total Depreciation and Amortization Expense	$	111		$	102		$	216		$	198
Capital Expenditures
Refining	$	156		$	116		$	265		$	203
Retail	9			23			16			31
Corporate	5			3			8			6
Total Capital Expenditures	$	170		$	142		$	289		$	240

28

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

________________

(a) Federal and state motor fuel taxes on sales by our retail segment are included in both revenues and cost of sales in our condensed statements of consolidated operations. These taxes totaled $143 million and $107 million for the three months ended June 30, 2013 and 2012, respectively, and $272 million and $200 million for the six months ended June 30, 2013 and 2012, respectively.

(b) Our refining segment uses RINs to satisfy its obligations under the Renewable Fuels Standard, in addition to physically blending required biofuels. Beginning in late 2012, we began to transfer the ownership of the biofuels to the retail segment prior to blending which resulted in a discount in the price paid by the retail segment for biofuels by the market value of RINs (“RINs Transfer Price Adjustment”). During 2012, the market price of RINs resulted in an immaterial impact to the segments. Effective April 1, 2013, we changed our intersegment pricing methodology and no longer reduce the amount retail pays for the biofuels by the market value of the RINs which we believe more closely approximates market rates during the period.  As a result, we conformed our segment presentation and reclassified $15 million of the RINs Transfer Price Adjustment related to the three months ended March 31, 2013 during the three months ended June 30, 2013 from our retail segment to our refining segment.  This resulted in a decrease in retail segment operating income and an increase in refining segment operating income for the three months ended June 30, 2013.

(c) Includes stock-based compensation benefit of $4 million for the three months ended June 30, 2013 and expense of $44 million and $19 million for the six months ended June 30, 2013 and 2012, respectively. The significant impact to stock-based compensation expense during the six months ended June 30, 2013 compared to the prior period is primarily a result of changes in Tesoro’s stock price during the three and six months ended June 30, 2013 as compared to the three and six months ended June 30, 2012. Also includes transaction and integration costs related to the Carson Acquisition and TLLP’s purchase of the Northwest Products System of $19 million and $33 million for the three and six months ended June 30, 2013, respectively.

(d) Includes $54 million in refunds from a settlement of a rate proceeding from the CPUC for the three and six months ended June 30, 2013. Also includes $18 million in accruals related to certain legal matters partially offset by receipts associated with the settlement of a pipeline rate proceeding for the three and six months ended June 30, 2012.

	June 30, 2013		December 31, 2012
	(In millions)
Identifiable Assets Related to Continuing Operations:
Refining	$	11,656	$	8,010
Retail	790		716
Corporate	760		1,621
Total Assets	$	13,206	$	10,347

NOTE Q - CONDENSED CONSOLIDATING FINANCIAL INFORMATION

Separate condensed consolidating financial information of Tesoro Corporation (the “Parent”), subsidiary guarantors and non-guarantors are presented below. At June 30, 2013, Tesoro and certain subsidiary guarantors have fully and unconditionally guaranteed our 4.250% Senior Notes due 2017, 9.750% Senior Notes due 2019 and 5.375% Senior Notes due 2022. TLLP, in which we had a 40% ownership interest as of June 30, 2013, and other subsidiaries have not guaranteed these obligations. As a result of these guarantee arrangements, we are required to present the following condensed consolidating financial information, which should be read in conjunction with the accompanying condensed consolidated financial statements and notes thereto. The following condensed consolidating financial information is provided as an alternative to providing separate financial statements for guarantor subsidiaries. Separate financial statements of Tesoro’s subsidiary guarantors are not included because the guarantees are full and unconditional and these subsidiary guarantors are 100% owned and are jointly and severally liable for Tesoro’s outstanding senior notes. The information is presented using the equity method of accounting for investments in subsidiaries. We ceased refining operations at our Hawaii refinery and subsequently entered into an agreement to sell all of our interest in Tesoro Hawaii, LLC during the second quarter of 2013. As a result, the results of operations and related assets and liabilities of the Hawaii Business have been classified as discontinued operations in these condensed consolidating statements of operations and comprehensive income and condensed consolidating balance sheets.

29

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Condensed Consolidating Statement of Operations and

Comprehensive Income for the Three Months EndedJune 30, 2013

(In millions)

	Parent			Guarantor Subsidiaries			Non- Guarantors			Eliminations			Consolidated
REVENUES	$	—		$	10,446		$	1,081		$	(2,630	)	$	8,897
COSTS AND EXPENSES:
Cost of sales	—			9,515			1,024			(2,630		)	7,909
Operating, selling, general and administrative expenses	6			466			33			—			505
Depreciation and amortization expense	—			103			8			—			111
Loss on asset disposals and impairments	—			8			—			—			8
OPERATING INCOME (LOSS)	(6		)	354			16			—			364
Equity in earnings of subsidiaries	234			12			46			(292		)	—
Interest and financing costs, net	(4		)	(26		)	(7		)	4			(33		)
Interest income	—			—			4			(4		)	—
Other income, net	—			53			3			—			56
EARNINGS BEFORE INCOME TAXES	224			393			62			(292		)	387
Income tax expense (benefit) (a)	(3		)	141			—			—			138
NET EARNINGS FROM CONTINUING OPERATIONS	227			252			62			(292		)	249
Loss from discontinued operations, net of tax	—			(11		)	—			—			(11		)
NET EARNINGS	227			241			62			(292		)	238
Less: Net earnings from continuing operations attributable to noncontrolling interest	—			—			11			—			11
NET EARNINGS ATTRIBUTABLE TO TESORO CORPORATION	$	227		$	241		$	51		$	(292	)	$	227
COMPREHENSIVE INCOME
Total comprehensive income	$	300		$	241		$	62		$	(292	)	$	311
Less: Noncontrolling interest in comprehensive income	—			—			11			—			11
COMPREHENSIVE INCOME ATTRIBUTABLE TO TESORO CORPORATION	$	300		$	241		$	51		$	(292	)	$	300

_______________

(a) The income tax expense (benefit) reflected in each column does not include any tax effect of the equity in earnings from corporate subsidiaries, but does include the tax effect of the corporate partners’ share of partnership income.

30

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Condensed Consolidating Statement of Operations and

Comprehensive Income for the Three Months EndedJune 30, 2012

(In millions)

	Parent			Guarantor Subsidiaries			Non- Guarantors			Eliminations			Consolidated
REVENUES	$	—		$	8,996		$	642		$	(2,305	)	$	7,333
COSTS AND EXPENSES:
Cost of sales	—			7,899			600			(2,305		)	6,194
Operating, selling, general and administrative expenses	3			365			19			—			387
Depreciation and amortization expense	—			98			4			—			102
Loss on asset disposals and impairments	—			6			—			—			6
OPERATING INCOME (LOSS)	(3		)	628			19			—			644
Equity in earnings of subsidiaries	391			13			10			(414		)	—
Interest and financing costs, net	(1		)	(31		)	(3		)	1			(34		)
Interest income	—			—			1			(1		)	—
Other expense, net	—			(19		)	—			—			(19		)
EARNINGS BEFORE INCOME TAXES	387			591			27			(414		)	591
Income tax expense (benefit) (a)	—			224			(2		)	—			222
NET EARNINGS FROM CONTINUING OPERATIONS	387			367			29			(414		)	369
Earnings from discontinued operations, net of tax	—			24			—			—			24
NET EARNINGS	387			391			29			(414		)	393
Less: Net earnings from continuing operations attributable to noncontrolling interest	—			—			6			—			6
NET EARNINGS ATTRIBUTABLE TO TESORO CORPORATION	$	387		$	391		$	23		$	(414	)	$	387
COMPREHENSIVE INCOME
Total comprehensive income	$	387		$	391		$	29		$	(414	)	$	393
Less: Noncontrolling interest in comprehensive income	—			—			6			—			6
COMPREHENSIVE INCOME ATTRIBUTABLE TO TESORO CORPORATION	$	387		$	391		$	23		$	(414	)	$	387

_______________

(a) The income tax expense (benefit) reflected in each column does not include any tax effect of the equity in earnings from corporate subsidiaries, but does include the tax effect of the corporate partners’ share of partnership income.

31

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Condensed Consolidating Statement of Operations and

Comprehensive Income for the Six Months EndedJune 30, 2013

(In millions)

	Parent			Guarantor Subsidiaries			Non- Guarantors			Eliminations			Consolidated
REVENUES	$	—		$	19,589		$	1,903		$	(5,248	)	$	16,244
COSTS AND EXPENSES:
Cost of sales	—			17,940			1,780			(5,248		)	14,472
Operating, selling, general and administrative expenses	7			916			61			—			984
Depreciation and amortization expense	—			203			13			—			216
Loss on asset disposals and impairments	—			12			3			—			15
OPERATING INCOME (LOSS)	(7		)	518			46			—			557
Equity in earnings of subsidiaries	330			6			90			(426		)	—
Interest and financing costs, net	(6		)	(51		)	(12		)	6			(63		)
Interest income	—			1			6			(6		)	1
Other income, net	—			52			3			—			55
EARNINGS BEFORE INCOME TAXES	317			526			133			(426		)	550
Income tax expense (benefit) (a)	(3		)	196			3			—			196
NET EARNINGS FROM CONTINUING OPERATIONS	320			330			130			(426		)	354
Loss from discontinued operations, net of tax	—			(12		)	—			—			(12		)
NET EARNINGS	320			318			130			(426		)	342
Less: Net earnings from continuing operations attributable to noncontrolling interest	—			—			22			—			22
NET EARNINGS ATTRIBUTABLE TO TESORO CORPORATION	$	320		$	318		$	108		$	(426	)	$	320
COMPREHENSIVE INCOME
Total comprehensive income	$	393		$	318		$	130		$	(426	)	$	415
Less: Noncontrolling interest in comprehensive income	—			—			22			—			22
COMPREHENSIVE INCOME ATTRIBUTABLE TO TESORO CORPORATION	$	393		$	318		$	108		$	(426	)	$	393

_______________

(a) The income tax expense (benefit) reflected in each column does not include any tax effect of the equity in earnings from corporate subsidiaries, but does include the tax effect of the corporate partners’ share of partnership income.

32

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Condensed Consolidating Statement of Operations and

Comprehensive Income for the Six Months EndedJune 30, 2012

(In millions)

	Parent			Guarantor Subsidiaries			Non- Guarantors			Eliminations			Consolidated
REVENUES	$	—		$	17,816		$	1,238		$	(4,714	)	$	14,340
COSTS AND EXPENSES:
Cost of sales	—			16,120			1,165			(4,714		)	12,571
Operating, selling, general and administrative expenses	5			717			37			—			759
Depreciation and amortization expense	—			191			7			—			198
Loss on asset disposals and impairments	—			11			1			—			12
OPERATING INCOME (LOSS)	(5		)	777			28			—			800
Equity in earnings of subsidiaries	450			—			41			(491		)	—
Interest and financing costs, net	(2		)	(64		)	(6		)	2			(70		)
Interest income	—			1			2			(2		)	1
Other expense, net	—			(19		)	—			—			(19		)
EARNINGS BEFORE INCOME TAXES	443			695			65			(491		)	712
Income tax expense (a)	—			267			—			—			267
NET EARNINGS FROM CONTINUING OPERATIONS	443			428			65			(491		)	445
Earnings from discontinued operations, net of tax	—			10			—			—			10
NET EARNINGS	443			438			65			(491		)	455
Less: Net earnings from continuing operations attributable to noncontrolling interest	—			—			12			—			12
NET EARNINGS ATTRIBUTABLE TO TESORO CORPORATION	$	443		$	438		$	53		$	(491	)	$	443
COMPREHENSIVE INCOME
Total comprehensive income	$	443		$	438		$	65		$	(491	)	$	455
Less: Noncontrolling interest in comprehensive income	—			—			12			—			12
COMPREHENSIVE INCOME ATTRIBUTABLE TO TESORO CORPORATION	$	443		$	438		$	53		$	(491	)	$	443

_______________

(a) The income tax expense reflected in each column does not include any tax effect of the equity in earnings from corporate subsidiaries, but does include the tax effect of the corporate partners’ share of partnership income.

33

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Condensed Consolidating Balance Sheet as of June 30, 2013

(In millions)

	Parent		Guarantor Subsidiaries		Non- Guarantors		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	—	$	323	$	105	$	—		$	428
Receivables, less allowance for doubtful accounts	1		1,607		180		(1		)	1,787
Short-term receivables from affiliates	—		—		31		(31		)	—
Inventories	—		1,920		453		—			2,373
Prepayments	59		414		2		(4		)	471
Other current assets	119		136		10		—			265
Current assets related to discontinued operations	—		463		—		—			463
Total Current Assets	179		4,863		781		(36		)	5,787
Net Property, Plant and Equipment	—		5,607		1,132		—			6,739
Investment in Subsidiaries	5,346		96		1,404		(6,846		)	—
Long-Term Receivables from Affiliates	3,632		—		—		(3,632		)	—
Other Noncurrent Assets, Net:
Acquired intangibles, net	—		322		—		—			322
Other noncurrent assets, net	62		635		1,008		(884		)	821
Noncurrent assets related to discontinued operations	—		—		—		—			—
Total Other Noncurrent Assets, Net	62		957		1,008		(884		)	1,143
Total Assets	$	9,219	$	11,523	$	4,325	$	(11,398	)	$	13,669
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	2	$	2,203	$	285	$	—		$	2,490
Other current liabilities	193		595		40		(5		)	823
Short-term payables to affiliates	—		31		—		(31		)	—
Current liabilities related to discontinued operations	—		58		—		—			58
Total Current Liabilities	195		2,887		325		(36		)	3,371
Long-Term Payables to Affiliates	—		3,231		401		(3,632		)	—
Deferred Income Taxes	942		—		—		—			942
Other Noncurrent Liabilities	345		327		6		—			678
Debt	3,295		14		933		(884		)	3,358
Noncurrent liabilities related to discontinued operations	—		—		—		—			—
Equity-Tesoro Corporation	4,442		5,064		1,782		(6,846		)	4,442
Equity-Noncontrolling Interest	—		—		878		—			878
Total Liabilities and Equity	$	9,219	$	11,523	$	4,325	$	(11,398	)	$	13,669

34

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Condensed Consolidating Balance Sheet as of December 31, 2012

(In millions)

	Parent		Guarantor Subsidiaries			Non- Guarantors		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	—	$	1,244		$	395	$	—		$	1,639
Receivables, less allowance for doubtful accounts	1		1,038			87		—			1,126
Short-term receivables from affiliates	—		—			47		(47		)	—
Inventories	—		1,091			247		—			1,338
Prepayments	17		36			1		—			54
Other current assets	114		25			3		—			142
Current assets related to discontinued operations	—		337			—		—			337
Total Current Assets	132		3,771			780		(47		)	4,636
Net Property, Plant and Equipment	—		4,873			359		—			5,232
Investment in Subsidiaries	5,041		(200		)	159		(5,000		)	—
Long-Term Receivables from Affiliates	1,846		—			—		(1,846		)	—
Other Noncurrent Assets, Net:
Acquired intangibles, net	—		214			—		—			214
Other noncurrent assets, net	47		505			160		(110		)	602
Noncurrent assets related to discontinued operations	—		18			—		—			18
Total Other Noncurrent Assets, Net	47		737			160		(110		)	834
Total Assets	$	7,066	$	9,181		$	1,458	$	(7,003	)	$	10,702
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	1	$	2,029		$	166	$	—		$	2,196
Other current liabilities	163		444			18		—			625
Short-term payables to affiliates	—		47			—		(47		)	—
Current liabilities related to discontinued operations	—		60			—		—			60
Total Current Liabilities	164		2,580			184		(47		)	2,881
Long-Term Payables to Affiliates	—		1,667			179		(1,846		)	—
Deferred Income Taxes	850		—			—		—			850
Other Noncurrent Liabilities	475		169			—		—			644
Debt	1,326		15			354		(110		)	1,585
Noncurrent liabilities related to discontinued operations	—		5			—		—			5
Equity-Tesoro Corporation	4,251		4,745			255		(5,000		)	4,251
Equity-Noncontrolling Interest	—		—			486		—			486
Total Liabilities and Equity	$	7,066	$	9,181		$	1,458	$	(7,003	)	$	10,702

35

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Condensed Consolidating Statement of Cash Flows for the Six Months EndedJune 30, 2013

(In millions)

	Parent			Guarantor Subsidiaries			Non- Guarantors			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash used in operating activities	$	(14	)	$	(22	)	$	(125	)	$	—		$	(161	)
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
Capital expenditures	—			(266		)	(27		)	—			(293		)
Proceeds from asset sales	—			—			2			—			2
Investment in joint venture	—			(2		)	—			—			(2		)
Acquisitions	—			(1,870		)	(778		)	—			(2,648		)
Advance payments received for sale of assets	—			25			—			—			25
Intercompany notes, net	(1,719		)	—			—			1,719			—
Net cash used in investing activities	(1,719		)	(2,113		)	(803		)	1,719			(2,916		)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
Borrowings under revolving credit agreements	1,524			—			544			—			2,068
Borrowings under term loan credit agreement	500			—			—			—			500
Repayments on revolving credit agreements	(824		)	—			—			—			(824		)
Repayments of debt	—			(2		)	—			—			(2		)
Dividend payments	(55		)	—			—			—			(55		)
Proceeds from stock options exercised	68			—			—			—			68
Distributions to noncontrolling interest	—			—			(28		)	—			(28		)
Purchases of common stock	(241		)	—			—			—			(241		)
Net proceeds from issuance of Tesoro Logistics LP common units	—			—			392			—			392
Excess tax benefits from stock-based compensation arrangements	—			11			—			—			11
Net intercompany borrowings (repayments)	—			1,197			522			(1,719		)	—
Borrowings from general partner	774			—			(774		)	—			—
Distributions to TLLP unitholders and general partner	7			8			(15		)	—			—
Financing costs and other	(20		)	—			(3		)	—			(23		)
Net cash from financing activities	1,733			1,214			638			(1,719		)	1,866
DECREASE IN CASH AND CASH EQUIVALENTS	—			(921		)	(290		)	—			(1,211		)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	—			1,244			395			—			1,639
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—		$	323		$	105		$	—		$	428

36

TESORO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Condensed Consolidating Statement of Cash Flows for the Six Months EndedJune 30, 2012

(In millions)

	Parent			Guarantor Subsidiaries			Non- Guarantors			Eliminations			Consolidated
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net cash from (used in) operating activities	$	9		$	717		$	(2	)	$	—		$	724
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
Capital expenditures	—			(234		)	(9		)	—			(243		)
Acquisitions	—			(38		)	—			—			(38		)
Proceeds from asset sales	—			3			—			—			3
Intercompany notes, net	(65		)	—			—			65			—
Net cash used in investing activities	(65		)	(269		)	(9		)	65			(278		)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
Borrowings under revolving credit agreements	—			—			185			—			185
Repayments on revolving credit agreements	—			—			(184		)	—			(184		)
Repayments of debt	—			(1		)	—			—			(1		)
Proceeds from stock options exercised	14			—			—			—			14
Distributions to noncontrolling interest	—			—			(11		)	—			(11		)
Purchases of common stock	(31		)	—			—			—			(31		)
Excess tax benefits from stock-based compensation arrangements	—			4			—			—			4
Net intercompany borrowings (repayments)	—			15			50			(65		)	—
Borrowings from general partner	68			—			(68		)	—			—
Distributions to TLLP unitholders and general partner	5			6			(11		)	—			—
Net cash from (used in) financing activities	56			24			(39		)	(65		)	(24		)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	—			472			(50		)	—			422
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	—			805			95			—			900
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—		$	1,277		$	45		$	—		$	1,322

37

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Those statements in this section that are not historical in nature should be deemed forward-looking statements that are inherently uncertain. See “Important Information Regarding Forward-Looking Statements” on pages 63-64 for a discussion of the factors that could cause actual results to differ materially from those projected in these statements. This section should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2012.

BUSINESS STRATEGY AND OVERVIEW

Strategy and Goals

Our vision is to be the premier low-cost supplier of transportation fuels in the refining and marketing business within our markets, providing value for our customers, while delivering industry leading returns for our shareholders and conducting ourselves responsibly in the communities in which we operate. To achieve these goals we are pursuing the following strategic priorities:

• improve operational efficiency and effectiveness by focusing on safety and reliability, system improvements and cost leadership;

• drive commercial excellence by strengthening our supply and trading activities to provide additional value to the business;

• strengthen our financial position by exercising capital discipline and focusing on improving our liquidity;

• capture value-driven growth through a focus on our logistics assets, growing our marketing business and other strategic opportunities accretive to shareholder value; and

• maintain a high performing culture by building leadership at all levels of the organization with employees from diverse backgrounds and experiences that are accountable for delivering on our commitments.

Our goals were focused on these strategic priorities and we accomplished the following in the first half of 2013:

	Operational Efficiency & Effectiveness	Commercial Excellence	Financial Discipline	Value Driven Growth	High Performing Culture
Successfully completed the Carson Acquisition and integrated the operations of BP’s integrated Southern California refining, marketing and logistics business	l	l	l	l	l
Leveraged our logistics operations to strategically source lower cost crude oil		l			l
Purchased 4.4 million shares of common stock under our share repurchase programs			l		l
Entered into an equally owned joint venture with Savage Companies to construct, own and operate a unit train unloading and marine loading terminal at the Port of Vancouver		l		l	l
Entered into an agreement to sell our Hawaii Business to a subsidiary of Par Petroleum Corporation			l		l
TLLP funded and acquired the Carson Terminal Assets from Tesoro for a purchase price of $640 million and the Northwest Products System for a purchase price of approximately $355 million				l	l
Strengthened refining and marketing integration through securing the rights to use the Exxon and Mobil brands at retail stations in certain states			l	l	l

38

Acquisitions and Dispositions

Hawaii Business

On June 17, 2013, we entered into an agreement with a subsidiary of Par Petroleum Corporation (“Par Petroleum”), to sell all of our interest in Tesoro Hawaii, LLC, which owns and operates our 94 thousand barrels per day (“Mbpd”) Hawaii refinery, retail stations and associated logistics assets (the “Hawaii Business”), for an agreed upon sales price of $75 million, plus the market value of inventory and other working capital at closing. Additional consideration includes an earnout arrangement payable over three years for an aggregate amount of up to $40 million based on consolidated gross margins. Because we had previously ceased refining operations at our Hawaii refinery, the agreement requires that we restart the refinery before the closing of the transaction. We have also agreed to indemnify the purchaser for up to $15 million of environmental remediation costs related to the Hawaii Business, subject to limitations described in the purchase agreement. Upon closing of the transaction, we expect to recognize a gain of approximately $60 million to $70 million, including the gain on the sale of the business and a $17 million curtailment gain related to the remeasurement of our pension and other post-retirement benefits as a result of the sale of the Hawaii Business. We recently received Federal Trade Commission clearance for the transaction, and expect to complete the sale in the third quarter of 2013, subject to customary closing conditions.

Carson Acquisition

On June 1, 2013, we acquired from BP West Coast Products, LLC and other affiliated sellers (the “Sellers”) BP’s integrated Southern California refining, marketing and logistics business (the “Carson Acquisition”). The acquired assets include the 266 Mbpd Carson refinery located adjacent to our Wilmington refinery, related marine terminals, land terminals and pipelines. The assets also include the ARCO^® brand and associated registered trademarks, as well as a master franchisee license for the ampm^® convenience store brand and the supply rights to more than 800 branded dealer-operated and branded wholesale stations in central and southern California, Nevada and Arizona. Additionally, we acquired an anode coke calcining operation and a 51% ownership in the Watson cogeneration facility, both located near the Carson refinery.

The purchase price of these assets was $2.42 billion, including petroleum and non-hydrocarbon inventories of $1.1 billion (subject to post-closing adjustments). We expect to realize significant operational synergies through the integrated crude oil supply, enhanced optimization of intermediate feedstocks and product distribution costs, improvements in light product yields and reductions in manufacturing costs and stationary source air emissions.

Upon the closing of the Carson Acquisition, the Sellers retained certain obligations, responsibilities, liabilities, costs and expenses arising out of the pre-closing operations of the assets. We assumed certain obligations, responsibilities, liabilities, costs and expenses arising out of or incurred in connection with decrees, orders and settlements the Sellers entered into with governmental and non-governmental entities prior to closing. We also assumed certain environmental liabilities, currently estimated to be $169 million, primarily related to remediation obligations. See Note B to our condensed consolidated financial statements in Item 1 for additional information regarding the acquisition.

Immediately subsequent to the closing of the Carson Acquisition, Tesoro Logistics LP (“TLLP”) acquired from us, six marketing and storage terminals located in southern California (the “Carson Terminal Assets”) with a total combined throughput capacity of 225 Mbpd and approximately 6.4 million barrels of storage capacity. Tesoro received consideration of $640 million, comprised of $544 million in cash financed with borrowings under TLLP’s senior secured revolving credit agreement (the “TLLP Revolving Credit Facility”) and the issuance of TLLP equity with a combined fair value of $96 million. In connection with TLLP's acquisition of the Carson Terminal Assets, we retained all of the liabilities we assumed in the Carson Acquisition to cleanup and monitor the environmental conditions related to the Carson Terminal Assets.

We intend to offer TLLP the remaining logistics assets acquired in the Carson Acquisition within nine months. The remaining logistics assets include two marine terminals, dedicated storage capacity and over one hundred miles of pipelines.

Tesoro Logistics LP

TLLP was formed to own, operate, develop and acquire logistics assets to gather crude oil and distribute, transport and store crude oil and refined products. Tesoro Logistics GP, LLC (“TLGP”), a 100% consolidated subsidiary, serves as the general partner of TLLP. As of June 30, 2013, TLLP’s assets consisted of a crude oil gathering system in the Williston Basin and terminalling, transportation and storage assets in the midwestern and western United States.

We held an approximate 40% interest in TLLP at June 30, 2013, including a 2% interest in the general partner. This interest includes 2,729,476 common units, 15,254,890 subordinated units and 958,587 general partner units.

39

Northwest Products System Acquisition

On June 19, 2013, TLLP completed its acquisition of Chevron Pipe Line Company’s and Northwest Terminalling Company’s (collectively, “Chevron”) northwest products system (the “Northwest Products System”) for a purchase price of approximately $355 million. The Northwest Products System consists of a regulated common carrier products pipeline running from Salt Lake City, Utah to Spokane, Washington, a jet fuel pipeline to the Salt Lake City International Airport and three refined products terminals in Boise and Pocatello, Idaho and Pasco, Washington.

In accordance with the sale and purchase agreements, as amended, for a period of two years, Chevron Pipe Line Company has retained financial and operational responsibility to remediate the site of a diesel fuel release that occurred on the Northwest Products System pipeline on March 18, 2013, in addition to paying any monetary fines and penalties assessed by any government authority arising from this incident. TLLP assumed responsibility for all other environmental contingencies. TLLP recognized an estimated $17 million of environmental liabilities assumed in connection with the acquisition of the Northwest Products System, including those obligations related to the diesel fuel release that were not indemnified by Chevron.

Revolver Amendments

Effective January 4, 2013, TLLP amended and restated the TLLP Revolving Credit Facility to increase commitments under the facility from $300 million to $500 million and to allow TLLP to request that the loan availability be increased up to an aggregate of $650 million, subject to receiving increased commitments from the lenders. Effective May 22, 2013, TLLP further amended the TLLP Revolving Credit Facility to increase commitments to $575 million, in order to fund the acquisition of the Carson Terminal Assets on June 1, 2013, as discussed above.

Equity Issuance

On January 14, 2013, TLLP closed an equity offering of 9,775,000 common units at a public offering price of $41.70 per unit. Net proceeds to TLLP from the sale of the units were approximately $392 million, which were used to fund the acquisition of Chevron’s Northwest Products System and for general partnership purposes. In connection with the offering, TLGP purchased 199,490 general partner units at a price of $41.70 per unit to maintain its 2% general partner interest in TLLP.

Joint Venture

Effective April 22, 2013, we entered into an equally owned joint venture with Savage Companies to construct, own and operate a unit train unloading and marine loading terminal at the Port of Vancouver, Washington, subject to approval by regulatory agencies. We recently received approval from the Port of Vancouver's Board of Commissioners for the ground lease related to this project. The project will allow for the expedited delivery of cost-advantaged North American crude oil to the U.S. West Coast. Tesoro expects its portion of the initial investment in the project will be between $37 million and $50 million. The facility, which is expected to be operational in 2014, will be designed to handle an estimated initial volume of 120 Mbpd with potential near-term expansion capability to over 280 Mbpd. The terminal is designed to accommodate various grades of North American crude oil. Tesoro is in the process of developing commercial agreements and an administrative service agreement related to the joint venture and intends to commit to the first 60 Mbpd of throughput at the facility. We do not expect that this commitment will have a material impact on our financial position, results of operations or liquidity.

As part of this strategy to deliver cost-advantaged North American crude oil to the West Coast, we have ordered additional rail cars with an expected mid-2014 delivery. We expect to have adequate U.S.-flag marine capabilities to execute the strategy.

40

Industry Overview

Our profitability is heavily influenced by the cost of crude oil and the aggregate value of the products we make from that crude oil and is affected by changes in economic conditions and supply and demand balance. Product values and crude oil costs are set by the market and are outside of the control of independent refiners.

Average Mid-Continent Benchmark

Product Differentials to WTI ($/barrel)

Source: PLATTS

Average West Coast Benchmark

Product Differentials to ANS ($/barrel)

Source: PLATTS

Both average Mid-Continent benchmark gasoline margins and diesel fuel margins were down approximately 4% as compared to the second quarter of 2012. Average U.S. West Coast benchmark gasoline and diesel fuel margins were up approximately 18% and 15%, respectively, in the second quarter of 2013, as compared to second quarter of 2012.

41

Average Crude Oil Prices

Source: PLATTS

Our Mid-Continent and Pacific Northwest refineries continue to benefit from processing crude oil from inland U.S. and Canada, much of which is priced off West Texas Intermediate (“WTI”) crude oil. This benefit is a result of a discount on the price of this crude oil compared to crude oil processed at our other coastal refineries, many of which are priced off Brent crude oil (“Brent”).

The WTI discount to Brent averaged approximately $9 per barrel during the second quarter of 2013, compared to nearly $15 per barrel during the second quarter of 2012.  We supply our North Dakota refinery exclusively with Bakken crude oil, our Washington refinery primarily with Canadian Light Sweet and Bakken crude oil and our Utah refinery with light sweet crude oil from Wyoming and Montana as well as Uinta Basin waxy crude oil. In the second quarter of 2013, the average discount of Bakken crude oil to WTI narrowed to about $1 per barrel, compared to an average discount of over $6 per barrel the second quarter of 2012. The average discount of Canadian Light Sweet crude oil to WTI decreased almost $4 per barrel during the second quarter of 2013 compared to the second quarter of 2012.

Our California refineries run a significant amount of South American heavy crude oil and San Joaquin Valley Heavy (“SJVH”), which continued to price at a discount to Brent during the second quarter of 2013.

Product Supply and Demand Factors

There are long-term factors, in addition to current market conditions, that may impact the supply and demand of refined products in the U.S. including:

• world crude oil prices;

• increased federal fuel efficiency standards for motor vehicles;

• increased volumes of renewable fuels, mandated by the Energy Independence and Security Act;

• various regulations of greenhouse gas emissions from stationary and mobile sources pursuant to the Federal Clean Air Act and California statute;

• potential enactment of federal climate change legislation; and

• possible promulgation of national regulations relative to gasoline composition and ozone standards under the Federal Clean Air Act.

42

RESULTS OF OPERATIONS

A discussion and analysis of the factors contributing to our results of operations is presented below. The accompanying condensed consolidated financial statements, together with the following information, are intended to provide investors with a reasonable basis for assessing our historical operations, but should not serve as the only criteria for predicting our future performance. Income generated by TLLP was not material to our consolidated results of operations.

Our results for the three and six months ended June 30, 2013 include results of operations of the assets acquired in the Carson Acquisition from June 1, 2013 through June 30, 2013. In addition, the refining segment and California region operating highlights for the three and six months ended June 30, 2013 include the results of the Carson refinery from the date of acquisition. We are integrating the operations of our existing Wilmington refinery with the recently acquired Carson refinery and refer to the combined facility as the Los Angeles refinery. Additionally, the retail segment results for the three and six months ended June 30, 2013 include the results of operations for the retail assets acquired as part of the Carson Acquisition from the date of acquisition.

On June 17, 2013, we entered into an agreement to sell all of our interest in Tesoro Hawaii, LLC, which owns and operates our Hawaii Business, to Par Petroleum. As a result, we have reflected its results of operations as discontinued operations in our consolidated statements of income for both periods presented, and, unless otherwise noted, we have excluded our Hawaii Business from the financial and operational data presented in the tables and discussion that follow.

Our management uses a variety of financial and operating metrics to analyze operating segment performance. To supplement our financial information presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), our management uses additional metrics that are known as “non-GAAP” financial metrics in its evaluation of past performance and prospects for the future. These metrics are significant factors in assessing our operating results and profitability and include adjusted earnings before interest, income taxes, depreciation and amortization expenses (“Adjusted EBITDA”). We define Adjusted EBITDA as consolidated earnings, including earnings attributable to noncontrolling interest, excluding net earnings (loss) from discontinued operations, before depreciation and amortization expense, net interest and financing costs, income taxes and interest income.

We present Adjusted EBITDA because we believe some investors and analysts use Adjusted EBITDA to help analyze our cash flows including our ability to satisfy principal and interest obligations with respect to our indebtedness and use cash for other purposes, including capital expenditures. Adjusted EBITDA is also used by some investors and analysts to analyze and compare companies on the basis of operating performance and by management for internal analysis. Adjusted EBITDA should not be considered as an alternative to U.S. GAAP net income or net cash from operating activities. Adjusted EBITDA has important limitations as an analytical tool, because it excludes some, but not all, items that affect net income and net cash from operating activities.

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Summary

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
	(In millions, except per share amounts)
Revenues	$	8,897		$	7,333		$	16,244		$	14,340
Costs and Expenses:
Cost of sales	7,909			6,194			14,472			12,571
Operating expenses	441			342			809			655
Selling, general and administrative expenses	64			45			175			104
Depreciation and amortization expense	111			102			216			198
Loss on asset disposals and impairments	8			6			15			12
Operating Income	364			644			557			800
Interest and financing costs, net	(33		)	(34		)	(63		)	(70		)
Interest income	—			—			1			1
Other income (expense), net	56			(19		)	55			(19		)
Earnings Before Income Taxes	387			591			550			712
Income tax expense	138			222			196			267
Net Earnings From Continuing Operations	249			369			354			445
Earnings (loss) from discontinued operations, net of tax	(11		)	24			(12		)	10
Net Earnings	238			393			342			455
Less: Net earnings from continuing operations attributable to noncontrolling interest	11			6			22			12
NET EARNINGS ATTRIBUTABLE TO TESORO CORPORATION	$	227		$	387		$	320		$	443
NET EARNINGS (LOSS) ATTRIBUTABLE TO TESORO CORPORATION
Continuing operations	$	238		$	363		$	332		$	433
Discontinued operations	(11		)	24			(12		)	10
Total	$	227		$	387		$	320		$	443
NET EARNINGS (LOSS) PER SHARE - BASIC:
Continuing operations	$	1.75		$	2.60		$	2.44		$	3.11
Discontinued operations	(0.08		)	0.17			(0.09		)	0.07
Total	$	1.67		$	2.77		$	2.35		$	3.18
Weighted average common shares outstanding - Basic	135.8			139.6			136.4			139.5
NET EARNINGS (LOSS) PER SHARE - DILUTED:
Continuing operations	$	1.72		$	2.58		$	2.39		$	3.07
Discontinued operations	(0.08		)	0.17			(0.09		)	0.07
Total	$	1.64		$	2.75		$	2.30		$	3.14
Weighted average common shares outstanding - Diluted	138.2			140.5			138.9			141.2

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	Three Months Ended June 30,			Six Months Ended June 30,
	2013			2013
	(In millions)
Reconciliation of Net Earnings to Adjusted EBITDA
Net earnings attributable to Tesoro Corporation	$	227		$	320
Net earnings attributable to noncontrolling interest	11			22
Net loss from discontinued operations	11			12
Depreciation and amortization expense	111			216
Income tax expense	138			196
Interest and financing costs, net	33			63
Interest income	—			(1		)
Adjusted EBITDA (a)	$	531		$	828
Reconciliation of Cash Flows from Operating Activities to Adjusted EBITDA
Net cash used in operating activities	$	(408	)	$	(161	)
Net cash from discontinued operations	(91		)	(192		)
Deferred charges	118			277
Other changes in assets and liabilities	771			744
Income tax expense	138			196
Stock-based compensation expense	4			(45		)
Interest and financing costs, net	33			63
Deferred income taxes	(28		)	(42		)
Loss on asset disposals and impairments	(8		)	(15		)
Other	2			3
Adjusted EBITDA (a)	$	531		$	828

________________

(a) For a definition of Adjusted EBITDA, see discussion above.

Our net earnings from continuing operations attributable to Tesoro Corporation were $238 million ($1.72 per diluted share) for the three months ended June 30, 2013 (“2013 Quarter”) compared to $363 million ($2.58 per diluted share) for the three months ended June 30, 2012 (“2012 Quarter”). The decrease in net earnings from continuing operations attributable to Tesoro Corporation of $125 million during the 2013 Quarter was primarily due to the following:

• a decrease in gross refining margins of $121 million as a result of declines in diesel and gasoline margins in the Mid-Continent and Pacific Northwest, lower discounts on advantaged crude oil and significant turnaround activity during the 2013 Quarter;

• a $99 million increase in operating expenses during the 2013 Quarter. The increase is primarily driven by higher throughput volumes at our North Dakota refinery due to the refinery expansion completed in the second half of 2012 and at our Los Angeles refinery due to the Carson Acquisition. In addition, there were increases in repairs and maintenance expenses and natural gas costs primarily at our California refineries; and

• transaction and integration costs of $19 million related to the Carson Acquisition and TLLP’s purchase of the Northwest Products System during the 2013 Quarter.

The decrease in net earnings from continuing operations attributable to Tesoro Corporation during the 2013 Quarter relative to the 2012 Quarter was partially offset by a refund from the settlement of a rate proceeding from the California Public Utilities Commission (“CPUC”) of $54 million.

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For the year-to-date periods, our net earnings from continuing operations attributable to Tesoro Corporation were $332 million ($2.39 per diluted share) for the six months ended June 30, 2013 (“2013 Period”), compared to $433 million ($3.07 per diluted share) for the six months ended June 30, 2012 (“2012 Period”). The decrease in net earnings from continuing operations attributable to Tesoro Corporation of $101 million during the 2013 Period was primarily due to the following:

• a decrease in gross refining margins of $8 million as a result of declines in gasoline margins in the Mid-Continent and lower discounts on advantaged crude oil;

• a $154 million increase in operating expenses during the 2013 Period. The increase is primarily driven by higher throughput volumes at our Los Angeles refinery through integrating assets from the Carson Acquisition and at our Martinez refinery due to a large turnaround in the first quarter of 2012. In addition, there were increases in repairs and maintenance expenses and natural gas costs primarily at our California refineries;

• an increase in selling, general and administrative expense as a result of higher incentive and stock-based compensation charges of $28 million primarily related to a significant increase in Tesoro’s stock price during the 2013 Period as compared to the 2012 Period; and

• transaction and integration costs of $33 million related to the Carson Acquisition and TLLP’s purchase of the Northwest Products System during the 2013 Period.

The decrease in net earnings from continuing operations attributable to Tesoro Corporation during the 2013 Period relative to the 2012 Period was partially offset by a refund from the settlement of a rate proceeding from the CPUC of $54 million.

46

Refining Segment

As we have an agreement to sell our Hawaii Business to Par Petroleum, we have reflected the results of operations of the Hawaii Business as discontinued operations for all periods presented and excluded our Hawaii Business from the financial and operational data presented in the tables and discussion below.

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
	(Dollars in millions, except per barrel amounts)
Revenues
Refined products (a)	$	8,146		$	7,026		$	14,890		$	13,791
Crude oil and other (b)	603			133			1,076			287
Total Revenues	$	8,749		$	7,159		$	15,966		$	14,078
Throughput (Mbpd)
Heavy crude (c)	188			164			187			152
Light crude	390			320			340			307
Other feedstocks	46			39			41			34
Total Throughput	624			523			568			493
% Heavy Crude Oil of Total Refining Throughput (c)	30		%	31		%	33		%	31		%
Yield (Mbpd)
Gasoline and gasoline blendstocks	318			281			287			258
Jet fuel	84			59			76			62
Diesel fuel	137			118			129			105
Heavy fuel oils, residual products, internally produced fuel and other	122			97			111			96
Total Yield	661			555			603			521
Gross refining margin ($/throughput barrel) (d)	$	15.42		$	20.96		$	15.18		$	17.51
Manufacturing Cost before Depreciation and Amortization Expense ($/throughput barrel) (d)	$	5.39		$	4.87		$	5.26		$	5.01

________________

(a) Refined products sales includes intersegment sales to our retail segment at prices which approximate market of $2.1 billion and $1.3 billion for the three months ended June 30, 2013 and 2012, respectively, and $3.6 billion and $2.6 billion for the six months ended June 30, 2013 and 2012, respectively.

(b) Crude oil and other includes third-party revenues earned by TLLP.

(c) We define heavy crude oil as crude oil with an American Petroleum Institute gravity of 24 degrees or less.

(d) Management uses various measures to evaluate performance and efficiency and to compare profitability to other companies in the industry, including gross refining margin per barrel, manufacturing costs before depreciation and amortization expense (“Manufacturing Costs”) per barrel and refined product sales margin per barrel.

• Management uses gross refining margin per barrel to evaluate performance and compare profitability to other companies in the industry. There are a variety of ways to calculate gross refining margin per barrel; different companies may calculate it in different ways. We calculate gross refining margin per barrel by dividing gross refining margin (revenues less costs of feedstocks, purchased refined products, transportation and distribution) by total refining throughput.

• Management uses Manufacturing Costs per barrel to evaluate the efficiency of refining operations. There are a variety of ways to calculate Manufacturing Costs per barrel; different companies may calculate it in different ways. We calculate Manufacturing Costs per barrel by dividing Manufacturing Costs by total refining throughput.

• Management uses refined product sales margin per barrel to evaluate the profitability of manufactured and purchased refined product sales. There are a variety of ways to calculate refined product sales margin per barrel; different companies may calculate it in different ways. We calculate refined product sales margin per barrel by calculating an average refined product sales price per barrel and an average refined product cost of sales per barrel, which are calculated by dividing refined product sales or refined product cost of sales by total refining throughput. The average refined product cost of sales per barrel is subtracted from the average refined product sales price per barrel.

Investors and analysts use these financial measures to help analyze and compare companies in the industry on the basis of operating performance. These financial measures should not be considered alternatives to segment operating income, revenues, costs of sales and operating expenses or any other measure of financial performance presented in accordance with U.S. GAAP.

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Refining Segment

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(Dollars in millions, except per barrel amounts)
Segment Operating Income
Gross refining margin (e) (f)	$	876	$	997	$	1,561	$	1,569
Expenses
Manufacturing costs	306		231		541		449
Other operating expenses	61		56		123		101
Selling, general and administrative expenses	10		9		20		17
Depreciation and amortization expense	97		87		189		172
Loss on asset disposals and impairments	7		4		10		7
Segment Operating Income (f)	$	395	$	610	$	678	$	823
Refined Product Sales (Mbpd) (g)
Gasoline and gasoline blendstocks	398		344		361		336
Jet fuel	101		72		89		74
Diesel fuel	167		141		151		129
Heavy fuel oils, residual products and other	82		64		79		66
Total Refined Product Sales	748		621		680		605
Refined Product Sales Margin ($/barrel) (d) (g)
Average sales price	$	115.93	$	124.54	$	117.02	$	125.51
Average costs of sales	104.55		110.01		105.66		113.19
Refined Product Sales Margin	$	11.38	$	14.53	$	11.36	$	12.32

________________

See page 47 for footnote (d) to this table.

(e) Consolidated gross refining margin combines gross refining margin for each of our regions adjusted for other amounts not directly attributable to a specific region. Other amounts resulted in an increase of $1 million and $3 million for the three months ended June 30, 2013 and 2012, respectively, and $3 million and $2 million for the six months ended June 30, 2013 and 2012, respectively. Gross refining margin includes the effect of intersegment sales to the retail segment at prices which approximate market. Gross refining margin approximates total refining throughput multiplied by the gross refining margin per barrel.

(f) Our refining segment uses RINs to satisfy its obligations under the Renewable Fuels Standard, in addition to physically blending required biofuels. Beginning in late 2012, we began to transfer the ownership of the biofuels to the retail segment prior to blending which resulted in a discount in the price paid by the retail segment for biofuels by the market value of RINs (“RINs Transfer Price Adjustment”).  During 2012, the market price of RINs resulted in an immaterial impact to the segments. Effective April 1, 2013, we changed our intersegment pricing methodology and no longer reduce the amount retail pays for the biofuels by the market value of the RINs which we believe more closely approximates market rates during the period.  As a result, we conformed our segment presentation and reclassified $15 million of the RINs Transfer Price Adjustment related to the first quarter of 2013 in the 2013 Quarter from our retail segment to our refining segment.  This resulted in an increase in gross refining margins and segment operating income for the 2013 Quarter. 

(g) Sources of total refined product sales include refined products manufactured at our refineries and refined products purchased from third parties. Total refined product sales margins include margins on sales of manufactured and purchased refined products.

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Refining Data by Region

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(Dollars in millions, except per barrel amounts)
Refining Data by Region
California (Martinez and Los Angeles) (h)
Refining throughput (Mbpd)	374		268		316		229
Gross refining margin	$	445	$	322	$	716	$	460
Gross refining margin ($/throughput barrel) (d)	$	13.05	$	13.20	$	12.51	$	11.04
Manufacturing cost before depreciation and amortization expense ($/throughput barrel) (d)	$	6.11	$	5.70	$	6.08	$	6.38
Pacific Northwest (Washington and Alaska)
Refining throughput (Mbpd)	146		143		138		149
Gross refining margin	$	172	$	280	$	327	$	463
Gross refining margin ($/throughput barrel) (d)	$	12.92	$	21.64	$	13.11	$	17.12
Manufacturing cost before depreciation and amortization expense ($/throughput barrel) (d)	$	4.30	$	4.02	$	4.50	$	3.92
Mid-Continent (North Dakota and Utah)
Refining throughput (Mbpd)	104		112		114		115
Gross refining margin	$	258	$	393	$	515	$	645
Gross refining margin ($/throughput barrel) (d)	$	27.32	$	38.54	$	24.82	$	30.83
Manufacturing cost before depreciation and amortization expense ($/throughput barrel) (d)	$	4.31	$	3.95	$	3.89	$	3.71

________________

See page 47 for footnote (d) to this table.

(h) We acquired the Carson refinery and related assets and retail stations on June 1, 2013. The information presented includes the results of operations from these assets from the date of its acquisition on June 1, 2013 through June 30, 2013. We are integrating the operations of our existing Wilmington refinery with the acquired Carson refinery and refer to the combined facility as the Los Angeles refinery.

Three Months EndedJune 30, 2013 Compared with Three Months EndedJune 30, 2012

Overview. Operating income for our refining segment decreased by $215 million, or 35%, to $395 million during the 2013 Quarter as compared to the 2012 Quarter as a result of lower gross margins, turnaround activity and higher manufacturing costs and other operating expenses during the 2013 Quarter. These decreases to operating income were partially offset by additional revenues associated with the throughput from the recent acquisition of the Carson refinery, which we operated for one month of the 2013 Quarter.

Gross Refining Margins. Our gross refining margin per barrel decreased by $5.54 per barrel, or 26%, to $15.42 per barrel in the 2013 Quarter as compared to the 2012 Quarter. This decrease is primarily a result of a year-over-year decline in Mid-Continent and Canadian crude oil discounts.

Total gross margin decreased$121 million, or 12%, to $876 million in the 2013 Quarter as compared to the 2012 Quarter. Gross margins in the Mid-Continent and Pacific Northwest region decreased by $135 million and $108 million, respectively and the California region increased by $123 million. The decrease is driven by weaker industry gasoline and diesel margins in the Mid-Continent and lower throughput as a result of a turnaround at our Washington refinery. Total refinery utilization at our refineries was 93% in the 2013 Quarter as compared to 92% in the 2012 Quarter. We were able to transport cost-advantaged Bakken crude oil, which continued to price at a significant discount to ANS during the 2013 Quarter, to our Washington refinery via TLLP’s Anacortes rail facility; however, these feedstock advantages were offset by lower gasoline and diesel margins in the region.

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Refining Throughput. Total refining throughput increased101 Mbpd, or 19%, to 624 Mbpd during the 2013 Quarter as compared to the 2012 Quarter. The increase is primarily a result of higher throughput in the California region following our June 1, 2013 acquisition of the Carson refinery. Additionally, we increased throughput at our North Dakota refinery in the 2013 Quarter resulting from the refinery expansion completed in 2012 and from volumes at our Alaska refinery in the 2013 Quarter due to a turnaround during the 2012 Quarter. The increase was partially offset by lower throughput at our Washington and Utah refineries during the 2013 Quarter as a result of turnarounds.

Refined Products Sales. Revenues from sales of refined products increased$1.1 billion to $8.1 billion in the 2013 Quarter as compared to the 2012 Quarter, primarily due to increased refined product sales volumes. Average product sales prices decreased $8.61 per barrel, or 7%, to $115.93 per barrel in the 2013 Quarter as compared to the 2012 Quarter. Total refined product sales increased by 127 Mbpd, or 20%, to 748 Mbpd in the 2013 Quarter as compared to the 2012 Quarter. Refined product sales volumes were supported by increased demand for diesel fuel and gasoline and benefited from an increase in refining and marketing integration driven by the Carson Acquisition and the transition of additional retail sites in the third quarter of 2012 and the second quarter of 2013.

Costs of Sales and Expenses. Our average costs of sales decreased by $5.46 per barrel, or 5%, to $104.55 per barrel during the 2013 Quarter compared to the 2012 Quarter, reflecting decreases in crude oil prices. Manufacturing and other operating expenses increased by $80 million to $367 million in the 2013 Quarter as compared to the 2012 Quarter primarily as a result of higher throughput during the 2013 Quarter. Additionally, manufacturing costs were negatively impacted by increases in repairs and maintenance expenses and higher natural gas costs primarily at our California refineries.

Six Months EndedJune 30, 2013 Compared with Six Months EndedJune 30, 2012

Overview. Operating income for our refining segment decreased by $145 million to $678 million during the 2013 Period as compared to the 2012 Period. The decrease is primarily due to lower gross refining margins driven by a reduction in feedstock advantages from narrowing crude oil discounts and a weaker margin environment during the 2013 Period.

Gross Refining Margins. Our gross refining margin per barrel decreased by $2.33 per barrel, or 13%, to $15.18 per barrel in the 2013 Period as compared to the 2012 Period, reflecting weaker industry gasoline and diesel margins in the Mid-Continent and Pacific Northwest markets.

Total gross margin decreased by $8 million, or 1%, to $1.6 billion in the 2013 Period as compared to the 2012 Period. The decrease is driven by lower industry margins during the 2013 Period. Gross margin in the Mid-Continent and Pacific Northwest region decreased by $130 million and $136 million, respectively, and in the California region increased by $256 million. The weaker margins and lower throughput at our Washington and Utah refineries as a result of turnarounds also contributed to the decrease in gross margin. Total refinery utilization at our refineries was 91% in the 2013 Period as compared to 86% in the 2012 Period. We were able to transport cost-advantaged Bakken crude oil, which continued to price at a significant discount to Brent during the 2013 Period, to our Washington refinery via TLLP’s Anacortes rail facility however, these feedstock advantages were offset by lower gasoline and diesel margins in the region as compared to the 2012 Period. The $256 millionincrease in gross refining margin at our California refineries was primarily attributable to additional revenues associated with the throughput from the recent acquisition of the Carson refinery and a turnaround at our Wilmington refinery in the 2012 Period.

Refining Throughput. Total refining throughput increased 75 Mbpd, or 15%, to 568 Mbpd during the 2013 Period as compared to the 2012 Period. The increase is primarily a result of higher throughput in the California region due to the June 1, 2013 acquisition of the Carson refinery. We also benefited from increased throughput at our North Dakota refinery in the 2013 Period as a result of the refinery expansion completed in 2012 and from higher utilization rates at our Alaska and Martinez refineries in the 2013 Period due to turnarounds during the 2012 Period. The increase was partially offset by lower throughput at our Washington and Utah refineries during the 2013 Period as a result of turnarounds.

Refined Products Sales. Revenues from sales of refined products increased $1.1 billion to $14.9 billion in the 2013 Period as compared to the 2012 Period, primarily due to higher refined product sales volumes in the 2013 period. Our average product sales price decreased $8.49 per barrel, or 7%, to $117.02 per barrel in the 2013 Period as compared to the 2012 Period, reflecting lower crude oil prices. Total refined product sales increased by 75 Mbpd, or 12%, to 680 Mbpd in the 2013 Period as compared to the 2012 Period. Refined product sales volumes were impacted by increased demand for diesel fuel and gasoline and benefited from an increase in refining and marketing integration driven by the Carson Acquisition and the transition of additional retail sites in the second quarter of 2012 and the second quarter of 2013.

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Costs of Sales and Expenses. Our average costs of sales decreased by $7.53 per barrel, or 7%, to $105.66 per barrel during the 2013 Period as compared to the 2012 Period, reflecting lower crude oil prices. Manufacturing and other operating expenses increased by $114 million, or 21%, to $664 million in the 2013 Period as compared to the 2012 Period due to higher throughput volumes at our Los Angeles refinery through integrating assets from the Carson Acquisition and at our Martinez refinery due to a large turnaround in the first quarter of 2012. In addition, there were increases in repairs and maintenance expenses and natural gas costs primarily at our California refineries.

Retail Segment

As we have an agreement to sell our Hawaii Business to Par Petroleum, we have reflected its results of operations as discontinued operations for all periods presented and excluded our Hawaii Business from the financial and operational data presented in the table and discussion below.

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
	(Dollars in millions, except per gallon amounts)
Revenues (a)
Fuel	$	2,218		$	1,457		$	3,725		$	2,713
Merchandise and other	59			54			107			100
Total Revenues	$	2,277		$	1,511		$	3,832		$	2,813
Fuel Sales (millions of gallons) (a)	656			407			1,093			773
Fuel Margin ($/gallon) (b)	$	0.14		$	0.30		$	0.16		$	0.21
Merchandise Margin	$	13		$	12		$	23		$	22
Merchandise Margin (percent of revenues)	27		%	26		%	26		%	26		%
Average Number of Stations (during the period) (a)
Company-operated	569			464			568			424
Branded jobber/dealer	1,014			789			911			790
Total Average Retail Stations	1,583			1,253			1,479			1,214
Segment Operating Income
Gross Margins
Fuel (a) (b) (c)	$	89		$	121		$	171		$	163
Merchandise and other non-fuel	23			20			40			37
Total Gross Margins	112			141			211			200
Expenses
Operating expenses	74			55			145			105
Selling, general and administrative expenses	3			3			7			6
Depreciation and amortization expense	9			9			17			18
Loss on asset disposals and impairments	1			2			2			4
Segment Operating Income (c)	$	25		$	72		$	40		$	67

________________

(a) Reflects the transition of retail stations from Thrifty Oil Co. during the third quarter of 2012 and the acquisition of 835 dealer operated retail stations from the Carson Acquisition on June 1, 2013.

(b) Management uses fuel margin per gallon to compare profitability to other companies in the industry. There are a variety of ways to calculate fuel margin per gallon; different companies may calculate it in different ways. We calculate fuel margin per gallon by dividing fuel gross margin by fuel sales volumes. Investors and analysts use fuel margin per gallon to help analyze and compare companies in the industry on the basis of operating performance.This financial measure should not be considered an alternative to revenues, segment operating income or any other measure of financial performance presented in accordance with U.S. GAAP. Fuel margin and fuel margin per gallon include the effect of intersegment purchases from the refining segment at prices which approximate market.

(c) Our refining segment uses RINs to satisfy its obligations under the Renewable Fuels Standard, in addition to physically blending required biofuels. Beginning in late 2012, we began to transfer the ownership of the biofuels to the retail segment prior to blending which resulted in a discount in the price paid by the retail segment for biofuels by the market value of RINs (“RINs Transfer Price Adjustment”).  During 2012, the market price of RINs resulted in an immaterial impact to the segments. Effective April 1, 2013, we changed our intersegment pricing methodology and no longer reduce the amount retail pays for the biofuels by the market value of the RINs which we believe more closely approximates market rates during the period.  As a result, we conformed our segment presentation and reclassified $15 million of the RINs Transfer Price Adjustment related to the first quarter of 2013 in the 2013 Quarter from our retail segment to our refining segment.  This resulted in a decrease in retail segment gross fuel margins and segment operating income for the 2013 Quarter. 

51

Three Months EndedJune 30, 2013 Compared with Three Months EndedJune 30, 2012

Operating Income. Operating income for our retail segment decreased$47 million to $25 million during the 2013 Quarter as compared to the 2012 Quarter as a result of lower total gross margins and an increase in operating expenses in the 2013 Quarter. Gross margin decreased$29 million, or 21%, to $112 million during the 2013 Quarter as compared to the 2012 Quarter. Retail fuel margin per gallon decreased by 53% to $0.14 per gallon during the 2013 Quarter primarily as a result of the RINs Transfer Price Adjustment, lower industry gasoline and diesel margins and the acquisition of ARCO^® retail stations in the 2013 Quarter. These ARCO^® retail stations generate lower margins than our other retail stations, which drove the fuel margin per gallon down in the 2013 Quarter. These decreases were partially offset by higher fuel sales volumes reflecting a higher average station count from the Carson Acquisition and transition of additional retail stations in the third quarter of 2012. Fuel sales volumes increased249 million gallons, or 61%, during the 2013 Quarter as compared to the 2012 Quarter. Merchandise and other non-fuel gross margin increased to $23 million during the 2013 Quarter compared to $20 million during the 2012 Quarter.

Fuel sales revenues increased$761 million, or 52%, to $2.2 billion in the 2013 Quarter as compared to $1.5 billion in the 2012 Quarter, reflecting increased fuel sales volumes primarily driven by a higher average station count during the 2013 Quarter. Operating expenses increased$19 million, or 35%, to $74 million in the 2013 Quarter as compared to $55 million in the 2012 Quarter. The increase is a result of expenses incurred to operate additional stations acquired and transitioned during the third quarter of 2012 and the second quarter of 2013. Our other expenses remained relatively consistent as compared to the 2012 Quarter.

Six Months EndedJune 30, 2013 Compared with Six Months EndedJune 30, 2012

Operating Income. Operating income for our retail segment decreased $27 million, or 40%, to $40 million during the 2013 Period as compared to the 2012 Period primarily as a result of higher operating expenses partially offset by an increase in total gross margin. Total gross margin increased $11 million, or 6%, to $211 million during the 2013 Period as compared to the 2012 Period. Fuel sales volumes increased 320 million gallons, or 41%, during the 2013 Period as compared to the 2012 Period reflecting higher average station count from the Carson Acquisition and transition of additional retail stations in second half of 2012. Retail fuel margin per gallon also decreased 24% to $0.16 per gallon during the 2013 Period primarily due to the acquisition of ARCO^® retail stations in the 2013 Quarter which generate lower margins than our other retail stations. Merchandise and other non-fuel gross margin also increased to $40 million during the 2013 Period compared to $37 million during the 2012 Period due to the higher average station count.

Fuel sales revenues increased $1.0 billion, or 37%, to $3.7 billion in the 2013 Period as compared to $2.7 billion in the 2012 Period, reflecting higher average sales prices and increased fuel sales volumes as a result of higher average station count during the 2013 Period. Operating expenses increased$40 million, or 38%, to $145 million in the 2013 Period as compared to $105 million in the 2012 Period. The increase is a result of expenses incurred to operate additional stations acquired and transitioned during the second half of 2012 and the second quarter of 2013. Our other expenses remained relatively consistent compared to the 2012 Period.

Consolidated Results of Operations

Selling, General and Administrative Expenses. Our selling, general and administrative expenses increased$19 million, or 42%, to $64 million in the 2013 Quarter from $45 million in the 2012 Quarter. We incurred transaction and integration costs of approximately $19 million during the 2013 Quarter related to the Carson Acquisition and TLLP’s acquisition of the Northwest Products System.

Our selling, general and administrative expenses increased$71 million, or 68% to $175 million in the 2013 Period from $104 million in the 2012 Period. The increase was primarily attributable to transaction and integration costs of $33 million during the 2013 Period related to the Carson Acquisition and TLLP’s acquisition of the Northwest Products System. We also had higher stock-based compensation expense recorded for our stock appreciation rights, which increased by $21 million during the 2013 Period, as compared to the 2012 Period. Our stock appreciation rights are adjusted to fair value at the end of each reporting period using a Black-Scholes model where stock price is a significant assumption. Our stock price increased 19% during the 2013 Period compared to 7% during the 2012 Period.

Interest and Financing Costs, Net. Interest and financing costs were approximately $33 million during both the 2013 Quarter and the 2012 Quarter. The increase in interest expense resulting from borrowings outstanding on the Tesoro Corporation revolving credit facility (the “Revolving Credit Facility”), the TLLP Revolving Credit Facility and our term loan credit facility agreement (the “Term Loan Facility”), which were used to finance the Carson Acquisition during the 2013 Quarter, was offset by a decrease in interest expense from lower rates as result of refinancing certain long-term debt in the third quarter of 2012.

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Interest and financing costs decreased $7 million, or 10%, to $63 million in the 2013 Period from $70 million during the 2012 Period. The decrease was primarily driven by a reduction in interest rates on our outstanding long-term debt that was refinanced in the third quarter of 2012. The decrease was partially offset by additional expenses and fees from borrowings on the Tesoro Corporation Revolving Credit Facility, the TLLP Revolving Credit Facility and the Term Loan Facility during the 2013 Period to finance the Carson Acquisition.

Income Tax Provision. Our income tax expense totaled $138 million in the 2013 Quarter versus $222 million in the 2012 Quarter. In the 2013 Period, the income tax expense totaled $196 million versus $267 million in the 2012 Period. The combined federal and state effective income tax rate was 36% and 38% during the 2013 Period and the 2012 Period, respectively. The 2013 rate benefited from an increased share of non-taxable minority interest income attributable to growth in TLLP income and capital investment-related depreciation benefits.  The 2013 rate also benefited from a one-time reduction in state tax rates associated with the Carson acquisition.

Earnings (Loss) from Discontinued Operations, Net of Income Tax. Losses from discontinued operations related to our Hawaii Business, net of tax, were $11 million and $12 million in the 2013 Quarter and Period, respectively, compared to earnings of $24 million and $10 million in the 2012 Quarter and Period, respectively. In April 2013, we ceased refining operations at our Hawaii refinery, which resulted in net losses for the 2013 Quarter and Period. The 2013 Quarter and Period losses include a gain from a downward asset retirement obligations (“AROs”) adjustment of $14 million. In the purchase agreement, Par Petroleum has agreed to assume any AROs upon close of the transaction; therefore, we no longer expect to incur any removal or other closure costs for the Hawaii Business.

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CAPITAL RESOURCES AND LIQUIDITY

Overview

We operate in an environment where our capital resources and liquidity are impacted by changes in the price of crude oil and refined products, availability of trade credit, market uncertainty and a variety of additional factors beyond our control. These factors include the level of consumer demand for transportation fuels, weather conditions, fluctuations in seasonal demand, governmental regulations, geo-political conditions and overall market and global economic conditions. See “Important Information Regarding Forward-Looking Statements” on pages 63-64 for further information related to risks and other factors. Future capital expenditures, as well as borrowings under our credit agreements and other sources of capital, may be affected by these conditions.

We closed the Carson Acquisition during the second quarter of 2013 and funded the purchase with a combination of cash and debt, including borrowings under the Revolving Credit Facility and $500 million Term Loan Facility. We amended our Revolving Credit Facility to allow for an increase in the capacity to $3.0 billion on May 21, 2013. The remaining $544 million was funded with cash received from TLLP to fund a portion of its acquisition of the Carson Terminal Assets that occurred directly after the Carson Acquisition. TLLP funded the acquisition with borrowings under its TLLP Revolving Credit Facility. We intend to offer TLLP the remaining logistics assets acquired in the Carson Acquisition within nine months.

Capitalization

Our capital structure at June 30, 2013, was comprised of the following (in millions):

Debt, including current maturities:	June 30, 2013
Tesoro Corporation Revolving Credit Facility	$	700
TLLP Revolving Credit Facility	544
Term Loan Credit Facility	499
4.250% Senior Notes due 2017	450
9.750% Senior Notes due 2019 (net of unamortized discount of $8 million)	292
5.875% TLLP Senior Notes due 2020	350
5.375% Senior Notes due 2022	475
Capital lease obligations and other	57
Total Debt	3,367
Stockholders’ Equity	5,320
Total Capitalization	$	8,687

At June 30, 2013, our debt to capitalization ratio, excluding capital leases associated with our discontinued operations, had increased to 39% as compared to 25% at December 31, 2012, primarily caused by an increase in debt as a result of the borrowings related to the Carson Acquisition as discussed above.

Our debt to capitalization ratio, excluding TLLP and capital leases associated with discontinued operations, was 36% and 22% at June 30, 2013 and December 31, 2012, respectively, which excludes TLLP total debt of $903 million and $354 million and noncontrolling interest of $878 million and $486 million at June 30, 2013 and December 31, 2012, respectively. TLLP’s debt is non-recourse to Tesoro, except for TLGP.

Our Revolving Credit Facility, senior notes and Term Loan Facility each limit our ability to pay cash dividends or buy back our stock. The limitation in each of our debt agreements is based on limits on restricted payments (as defined in our debt agreements), which include dividends, purchases of our stock or voluntary repayments of subordinate debt. The indentures for our senior notes also limit our subsidiaries ability to make certain payments and distributions. We do not believe that these limitations will restrict our ability to pay dividends or buy back stock under our current programs.

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6.125% TLLP Senior Notes due 2021

Effective August 1, 2013, TLLP completed a private offering of $550 million aggregate principal amount of 6.125% Senior Notes due 2021 (the “TLLP Notes”).  The proceeds of this offering were used to repay the amounts outstanding under the TLLP Revolving Credit Facility, which amounts were used to fund a portion of the Carson Terminal Assets Acquisition, and to pay a portion of the fees and expenses related to the offering of the TLLP Notes. The TLLP Notes have no sinking fund requirements. TLLP may redeem some or all of the TLLP Notes, prior to October 15, 2016, at a make-whole price plus accrued and unpaid interest and Special Interest, if any. On or after October 15, 2016, the TLLP Notes may be redeemed at premiums equal to 104.594% through October 15, 2017; 103.063% from October 15, 2017 through October 15, 2018; 101.531% from October 15, 2018 through October 15, 2019; and at par thereafter, plus accrued and unpaid interest in all circumstances. TLLP has the right to redeem up to 35% of the aggregate principal amount at 106.125% percent of face value with proceeds from certain equity issuances through October 15, 2016.

The TLLP Notes also contain customary terms, events of default and covenants for an issuance of non-investment debt grade securities. The TLLP Notes due 2021 are unsecured and guaranteed by all of TLLP’s domestic subsidiaries, except Tesoro Logistics Finance Corp., the co-issuer of the TLLP Notes, and are non-recourse to Tesoro, except for TLGP.

Credit Facilities Overview

Our primary sources of liquidity have been cash flows from operations and borrowing availability under revolving lines of credit. We ended the second quarter of 2013 with $428 million of cash and cash equivalents and borrowings of $700 million, $544 million and $499 million under the Tesoro Corporation Revolving Credit Facility, the TLLP Revolving Credit Facility and the Term Loan Facility, respectively. We believe available capital resources will be adequate to meet our capital expenditure, working capital and debt service requirements. We had available capacity under our credit agreements as follows at June 30, 2013 (in millions):

	Total Capacity		Amount Borrowed as of June 30, 2013		Outstanding Letters of Credit		Available Capacity		Expiration
Tesoro Corporation Revolving Credit Facility (a)	$	3,000	$	700	$	782	$	1,518	January 4, 2018
TLLP Revolving Credit Facility	575		544		—		31		December 31, 2017
Term Loan Credit Facility	500		499		—		—		May 30, 2016
Letter of Credit Facilities	1,362		—		336		1,026
Total credit agreements	$	5,437	$	1,743	$	1,118	$	2,575

________________

(a) Borrowing base is the lesser of the amount of the periodically adjusted borrowing base or the agreement’s total capacity.

As of June 30, 2013, our credit facilities were subject to the following expenses and fees:

Credit Facility	30 day Eurodollar (LIBOR) Rate	Eurodollar Margin	Base Rate	Base Rate Margin	Commitment Fee (unused portion)
Tesoro Corporation Revolving Credit Facility ($3.0 billion) (b)	0.19%	1.50%	3.25%	0.50%	0.375%
TLLP Revolving Credit Facility ($575 million) (c)	0.19%	2.00%	3.25%	1.00%	0.375%

________________

(b) We can elect the interest rate to apply to the Revolving Credit Facility between a base rate plus the base rate margin, or a Eurodollar rate, for the applicable term, plus, the Eurodollar margin at the time of the borrowing. The applicable margin varies based on the Revolving Credit Facility’s credit ratings. Letters of credit outstanding under the Revolving Credit Facility incur fees at the Eurodollar margin rate. We also incur commitment fees for the unused portion of the Revolving Credit Facility at an annual rate.

(c) TLLP can elect the interest rate to apply to the TLLP Revolving Credit Facility between a base rate plus the base rate margin, or a Eurodollar rate, for the applicable term, plus, the Eurodollar margin at the time of the borrowing. The applicable margin varies based upon a certain leverage ratio, as defined by the TLLP Revolving Credit Facility. TLLP incurs commitment fees for the unused portion of the TLLP Revolving Credit Facility at an annual rate.

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Tesoro Corporation Revolving Credit Facility

Effective January 4, 2013, we entered into the Sixth Amended and Restated Credit Agreement, which permitted us to increase the capacity of our Revolving Credit Facility to an aggregate of $3.0 billion, on May 21, 2013 (“Increase Effective Date”). Additionally, the agreement allows for us to request that the capacity be increased up to an aggregate of $4.0 billion, subject to receiving increased commitments from the lenders; however, we must offer to reduce the commitments by at least $500 million on or prior to the 18 month anniversary of the Increase Effective Date and by an additional $500 million on or prior to the two year anniversary of the Increase Effective Date. On May 30, 2013, we borrowed $700 million at an initial rate of 1.69%, per annum, under the Revolving Credit Facility to fund a portion of the Carson Acquisition.

There were no changes to the Revolving Credit Facility covenants during the six months ended June 30, 2013. We were in compliance with our debt covenants as of and for the six months ended June 30, 2013.

TLLP Revolving Credit Facility

Effective January 4, 2013, TLLP amended and restated the TLLP Revolving Credit Facility to increase commitments under the facility from $300 million to $500 million and to allow TLLP to request that the loan availability be increased up to an aggregate of $650 million, subject to receiving increased commitments from the lenders. Effective May 22, 2013, TLLP further amended (“May Amendment”) the TLLP Revolving Credit facility to increase commitments to $575 million. On May 30, 2013, TLLP borrowed $544 million at an initial rate of 2.19%, per annum, under the TLLP Revolving Credit Facility to partially fund its acquisition of the Carson Terminal Assets from Tesoro on June 1, 2013.

The TLLP Revolving Credit Facility is non-recourse to Tesoro, except for TLGP, and is guaranteed by all of TLLP’s subsidiaries and secured by substantially all of TLLP’s assets. Borrowings are available under the TLLP Revolving Credit Facility up to the total loan availability of the facility.

The May Amendment modified the definition of Consolidated EBITDA and the calculation of the Consolidated Leverage Ratio used for our financial covenant calculations under the TLLP Revolving Credit Facility covenants. TLLP was in compliance with all TLLP Revolving Credit Facility covenants and conditions as of and for the six months ended June 30, 2013. Additionally, we do not believe that the limitations imposed by the TLLP Revolving Credit Facility will restrict TLLP’s ability to pay distributions.

Term Loan Credit Facility

We borrowed $500 million under our Term Loan Facility on May 30, 2013, at an initial rate of 2.52%, which was used to fund a portion of the Carson Acquisition. The obligations under the Term Loan Facility are secured by all equity interests of Tesoro Refining & Marketing Company LLC and Tesoro Alaska Company, the Tesoro and USA Gasoline trademarks and those trademarks containing the name “ARCO” acquired in the Carson Acquisition and junior liens on certain assets. We repaid $1 million of the initial borrowing during the 2013 Quarter in accordance with the loan repayment provisions.

The Term Loan Facility matures three years from the initial borrowing. The Term Loan Facility is subject to equal quarterly payments in an amount equal to 1.00% per annum of the initial borrowing with the final payment of all amounts outstanding due on May 30, 2016, the maturity date.

Share Repurchase Programs

Under a $500 million share repurchase program authorized by our Board of Directors (the “Board”), management is permitted to purchase Tesoro common stock at its discretion in the open market. During the first half of 2013, we purchased approximately 3.8 million shares of our common stock for $200 million. We expect to purchase the remaining $200 million of the authorized shares under this program by the end of 2013. In addition, we spent $36 million during the first quarter to purchase over 0.6 million shares under the existing program designed to offset the dilutive effect of outstanding and future stock-based compensation awards.

Cash Dividends

On August 1, 2013, our Board declared a quarterly cash dividend on common stock of $0.25 per share, payable on September 13, 2013 to shareholders of record on August 30, 2013.

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Cash Flow Summary

Components of our cash flows are set forth below (in millions):

	Six Months Ended June 30,
	2013			2012
Cash Flows From (Used in):
Operating activities	$	(161	)	$	724
Investing activities	(2,916		)	(278		)
Financing activities	1,866			(24		)
Increase (Decrease) in Cash and Cash Equivalents	$	(1,211	)	$	422

Net cash used in operating activities during the 2013 Period totaled $161 million, as compared to net cash from operating activities of $724 million in the 2012 Period. The decrease in net cash used in operating activities of $885 million was primarily due to changes in working capital and lower earnings in the 2013 Period as compared to the 2012 Period.

Net cash used in investing activities increased$2.6 billion to $2.9 billion in the 2013 Period as compared to $278 million in the 2012 Period, primarily due to the Carson Acquisition, TLLP’s acquisition of the Northwest Products System and higher capital expenditures during the 2013 Period. Other cash used in investing activities included $37 million, primarily related to the acquisition of 49 retail stations, in the 2012 Period.

Net cash from financing activities during the 2013 Period totaled $1.9 billion as compared to net cash used in financing activities of $24 million in the 2012 Period. Proceeds from financing activities during the 2013 Period include $700 million and $544 million in proceeds from net borrowings under our Revolving Credit Facility and TLLP’s Revolving Credit Facility, respectively, and $500 million of proceeds from borrowings under the Term Loan Facility, all of which were used to fund the Carson Acquisition during the 2013 Period. Additional proceeds of approximately $392 million from the issuance of TLLP common units were subsequently used by TLLP to fund the acquisition of the Northwest Products System. Cash inflows were partially offset by a $210 million increase in purchases of common stock under our share repurchase programs during the 2013 Period as compared to the 2012 Period.

Working capital (excluding cash) increased$1.9 billion in the 2013 Period, primarily related to the acquisition of $1.1 billion of inventories and $290 million related to other net working capital in conjunction with the Carson Acquisition. In addition to increases as a result of the acquisition, prepayments increased due to contracts assigned to Tesoro from the Carson Acquisition that required $375 million in payments for in-transit inventory for which we did not have title at June 30, 2013.

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Capital Expenditures

The cost estimates for capital expenditures, including environmental projects and excluding the discontinued Hawaii Business, described below are subject to further review and analysis and permitting requirements. Our capital spending plans include the following major projects (in millions):

	Total Project Expected Capital Expenditures (a)		Actual 2013 Period Capital Expenditures (b)		Expected Capital Expenditures for Remainder of 2013 (a)		Expected In-service Date
OPERATING SEGMENTS
REFINING
Utah Refinery Expansion project (c)	$	275	$	69	$	52	2013-2014
Utah Refinery Power reliability improvement project (d)	40		12		6		2014
Martinez Refinery Avon marine wharf upgrades (e)	125		5		1		2016
North Dakota Refinery diesel desulfurizing unit (f)	35		24		1		Complete
RETAIL
Thrifty rebranding (g)	25		1		1		2013

________________

(a) The cost estimates for capital expenditures exclude estimates for capitalized interest and labor costs.

(b) 2013 Period actual capital expenditure disclosures include capitalized interest and labor costs associated with the project.

(c) The expansion project at the Utah refinery is designed to improve yields of gasoline and diesel, improve the flexibility of processing crude feedstocks and increase throughput capacity by 4 Mbpd. The first phase of this project was completed in the second quarter of 2013 and the second phase is expected to be completed in 2014. We have increased the expected expenditures to include accelerated delivery costs associated with Phase 1 and final Phase 2 design and materials estimates.

(d) The power reliability improvement project is designed to upgrade the Utah refinery’s electrical infrastructure. In addition, the upgrade will support the refinery expansion project.

(e) The capital improvements to our Avon marine wharf facility involve replacing the dock structures and fire protection equipment. The upgraded facility will allow us to increase our ability to move products from our Martinez refinery, thus supporting higher utilization of our refining assets.

(f) The expansion of the diesel desulfurization unit is expected to increase capacity of the unit from17 Mbpd to 22 Mbpd and improve diesel fuel yield at the North Dakota refinery.

(g) Involves the rebranding of retail stations in southern California leased from Thrifty Oil Co. and certain of its affiliates. We transitioned 174 of these stations during 2012. Certain sites that were expected to be transitioned in 2014 were included in the Carson Acquisition and will remain ARCO^® branded.

Capital expenditures during the 2013 Quarter and 2013 Period were $170 million and $289 million, respectively. Total 2013 expected capital expenditures are approximately $690 million, which increased from $530 million primarily due to new projects approved as a result of the recent Carson Acquisition, costs associated with the Utah refinery expansion project and additional TLLP growth projects. Our total 2013 expected capital expenditures include $110 million related to TLLP, of which approximately $75 million remains for project spending in 2013. Our 2013 Quarter, Period and full-year expected capital expenditure amounts are comprised of the following project categories:

	Percent of 2013 Quarter Capital Expenditures	Percent of 2013 Period Capital Spending	Percent of 2013 Expected Capital Expenditures
Project Category
Regulatory	15%	15%	20%
Sustaining	33%	33%	30%
Income Improvement	52%	52%	50%

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Turnarounds and other Deferred Expenditures

We spent $120 million and $254 million during the 2013 Quarter and 2013 Period, respectively, for turnarounds and other deferred expenditures. These amounts include $118 million and $250 million for turnarounds during the 2013 Quarter and 2013 Period, respectively. Spending during the 2013 Period was primarily related to turnarounds at our Washington, Los Angeles and Utah refineries. Total expected spending is $400 million, which increased from $310 million primarily due to additional turnaround work related to the acquisition of the Carson Assets and cost increases related to turnarounds at our Washington and Utah refineries. During the remainder of 2013, we expect to spend approximately $145 million.

Investment in Joint Ventures

We entered into a joint venture with Savage Companies to construct, own and operate a unit train unloading and marine loading terminal at the Port of Vancouver, Washington with an initial capacity of 120 Mbpd. The project will allow for the expedited delivery of cost-advantaged North American crude oil to the U.S. West Coast, and our contribution to the investment is expected to be between $37 million and $50 million. These amounts are considered contributions or investments in joint ventures and are presented in net cash from (used in) investing activities in our condensed statements of consolidated cash flows. We spent $2 million in the 2013 Period and do not expect further spending or contributions until 2014. The construction is expected to be completed in 2014.

Off-Balance Sheet Arrangements

We have not entered into any transactions, agreements or other contractual arrangements that would result in off-balance sheet liabilities.

Environmental and Tax Matters

We are a party to various litigation and contingent loss situations, including environmental and income tax matters, arising in the ordinary course of business. Although we cannot predict the ultimate outcomes of these matters with certainty, we have accrued for the estimated liabilities when appropriate. We believe that the outcome of these matters will not have a material impact on our liquidity or financial position, although the resolution of certain of these matters could have a material impact on our interim or annual results of operations. Additionally, if applicable, we accrue receivables for probable third-party recoveries.

We are subject to extensive federal, state and local environmental laws and regulations. These laws, which change frequently, regulate the discharge of materials into the environment and may require us to remove or mitigate the environmental effects of the disposal or release of petroleum or chemical substances at various sites, install additional controls or make other modifications to certain emission sources, equipment or facilities.

Future expenditures may be required to comply with the Clean Air Act and other federal, state and local requirements for our various sites, including our refineries, tank farms, pipelines and currently and previously owned or operated terminal and retail station properties. The impact of these legislative and regulatory developments, including any greenhouse gas cap-and-trade program or low carbon fuel standards, could result in increased compliance costs, additional operating restrictions on our business and an increase in the cost of the products we manufacture, which could have a material adverse impact on our consolidated financial position, results of operations or liquidity.

In 2009, the Environmental Protection Agency (“EPA”) proposed regulating greenhouse gas emissions under the Clean Air Act. The first of these regulations, finalized on April 1, 2010, set standards for the control of greenhouse gas emissions from light trucks and cars and could reduce the demand for our manufactured transportation fuels. In addition, other finalized regulations include permitting requirements for stationary sources that emit greenhouse gases above a certain threshold. The resulting permitting requirements could impose emission controls that increase required capital expenditures at our refineries. We cannot currently predict its impact on our financial position, results of operations or liquidity.

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In December 2007, the Energy Independence and Security Act was enacted into federal law, which created a second Renewable Fuels Standard (“RFS2”). This standard requires the total volume of renewable transportation fuels (including ethanol and advanced biofuels) sold or introduced in the U.S. to reach 16.6 billion gallons in 2013 and to increase to 36 billion gallons by 2022. The requirements could reduce future demand growth for petroleum products that we manufacture. In the near term, the RFS2 presents ethanol production and logistics challenges for the ethanol, alternative fuel and refining and marketing industries. We are currently meeting the RFS2 requirements through a combination of RINs that were carried over from prior periods, blending renewable fuels obtained from third parties and purchases of RINs in the open market.  The spending related to the purchases of  RINs for the remainder of 2013 is expected to be less than $100 million based on current market prices and expected refinery production through the end of 2013.  Actual cost related to RINs may differ from this estimate due to changes in the market price of RINs and the ultimate destinations of our products.  Additional expenditures could be required to logistically accommodate the increased use of renewable transportation fuels.  While we cannot currently estimate the ultimate impact of this legislation, and currently believe that the outcome will not have a material impact on our financial position or liquidity, the ultimate outcome could have a material impact on our results of operations.

In California, Assembly Bill 32 (“AB 32”), created a statewide cap on greenhouse gas emissions and requires that the state return to 1990 emission levels by 2020. AB 32 focuses on using market mechanisms, such as a cap-and-trade program and a low carbon fuel standard (“LCFS”), to achieve emissions reduction targets. The LCFS became effective in January 2010 and requires a 10% reduction in the carbon intensity of gasoline and diesel fuel by 2020. In 2011, the California Air Resources Board (“CARB”) approved cap-and-trade requirements, and all of AB 32 related regulations are to be fully implemented by 2020. In December 2011, a court ruled the LCFS unconstitutional. CARB has appealed the decision. In April 2012, the U.S. 9th Circuit Court of Appeals stayed the lower court’s preliminary injunction of CARB’s enforcement of the standard pending the appeal. We cannot predict the ultimate outcome of the court’s ruling on the LCFS, and the implementation and implications of AB 32 will take many years to realize. Consequently, we cannot currently predict its impact on our financial position, results of operations or liquidity.

We are subject to extensive federal, state and foreign tax laws and regulations. Newly enacted tax laws and regulations, and changes in existing tax laws and regulations, could result in increased expenditures in the future. We are also subject to audits by federal, state and foreign taxing authorities in the normal course of business. It is possible that tax audits could result in claims against us in excess of recorded liabilities. We believe that resolution of any such claim(s) would not have a material impact on our financial position, results of operations or liquidity. We do not expect our unrecognized tax benefits to change significantly over the next twelve months.

Environmental Liabilities

We are incurring and expect to continue to incur expenses for environmental liabilities at a number of currently and previously owned or operated refining, pipeline, terminal and retail station properties. We have accrued liabilities for these expenses and believe these accruals are adequate based on current information and projections that can be reasonably estimated. Our environmental accruals are based on estimates including engineering assessments, and it is possible that our projections will change and that additional costs will be recorded as more information becomes available. Changes in our environmental liabilities for the six months ended June 30, 2013, were as follows (in millions):

Balance at December 31, 2012	$	85
Additions, net	2
Liabilities assumed in the Carson Acquisition	169
Liabilities assumed in the Northwest Products System Acquisition	17
Expenditures	(4		)
Balance at June 30, 2013	$	269

The environmental remediation liabilities assumed in the Carson Acquisition include amounts estimated for site cleanup activities and monitoring activities arising from operations at the Carson refinery, certain terminals and pipelines, and retail stations prior to our acquisition on June 1, 2013. These estimates for environmental liabilities are based on third-party assessments and available information. It is possible these estimates will change as additional information becomes available.

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Our environmental liabilities also include $55 million at June 30, 2013 and $54 million at December 31, 2012, related to amounts estimated for site cleanup activities assumed from a prior owner, arising from operations at our Martinez refinery prior to August 2000. Of the $55 million accrued, approximately $46 million is subject to a cost-share agreement where we are responsible for 75% of the expenditures. We cannot reasonably determine the full extent of remedial activities that may be required at the Martinez refinery. Therefore, it is possible that we will identify additional investigation and remediation costs as more information becomes available. We have filed insurance claims under environmental insurance policies. These policies provide coverage up to $190 million for expenditures in excess of $50 million in self-insurance, but the insurer has challenged coverage and filed a declaratory relief action in federal court. We have not recognized possible insurance recoveries related to this matter.

We have investigated conditions at certain active wastewater treatment units at our Martinez refinery.  The investigation was driven by an order received in 2004 from the San Francisco Bay Regional Water Quality Control Board. The order named us as well as two previous owners of the Martinez refinery.  We cannot currently estimate the amount of the ultimate resolution of the order, but we believe it will not have a material adverse impact on our financial position, results of operations or liquidity.

Washington Refinery Fire

In April 2010, the naphtha hydrotreater unit at our Washington refinery was involved in a fire, which fatally injured seven employees and rendered the unit inoperable. Subsequent to the incident, refinery processing was temporarily shut down until November 2010 when the reconstruction was completed.

We maintain comprehensive property (including business interruption), workers’ compensation, and general liability insurance policies with significant loss limits. Our business interruption insurance deductible is satisfied after we have exceeded both 60 days of operational disruption and $25 million in losses primarily based on the operating plan that existed prior to the incident. Our property damage insurance has a $10 million deductible. We have filed business interruption insurance and property damage insurance claims under these policies related to down time from this incident. Certain business interruption claims remain open as of June 30, 2013, but expect this matter to be resolved by the end of 2013.

Other Matters

In the ordinary course of business, we become party to lawsuits, administrative proceedings and governmental investigations, including environmental, regulatory and other matters. Large, and sometimes unspecified, damages or penalties may be sought from us in some matters. We have not established accruals for these matters unless a loss is probable, and the amount of loss is currently estimable. On the basis of existing information, we believe that the resolution of these matters, individually or in the aggregate, will not have a material adverse impact on our liquidity or financial position, although the resolution of certain of these matters could have a material impact on our interim or annual results of operations.

Legal

In 2007, we obtained a ruling from the CPUC that an intrastate crude oil pipeline, which transports heated crude oil to our Martinez Refinery from the area around Bakersfield, California, was a common carrier subject to the jurisdiction of the CPUC.  Since that time, we have participated in rate proceedings to determine an appropriate rate structure for this pipeline.  In May 2013, the CPUC issued final orders establishing just and reasonable rates for the pipeline for the period between April 1, 2005 and June 30, 2011 and held that we were entitled to receive refunds, including interest.  In accordance with this ruling, we received a refund of $54 million in June 2013.

We are a defendant, along with other manufacturing, supply and marketing defendants, in two remaining lawsuits alleging methyl tertiary butyl ether (“MTBE”) contamination in groundwater. The defendants are being sued for having manufactured MTBE and having manufactured, supplied and distributed gasoline containing MTBE. The plaintiffs in the remaining cases, all in California, are municipalities and governmental authorities. The plaintiffs allege, in part, that the defendants are liable for manufacturing or distributing a defective product. The suits generally seek individual, unquantified compensatory and punitive damages and attorney’s fees. We intend to vigorously assert our defenses against these claims. While we cannot currently estimate the final amount or timing of the resolution of these matters, we have established an accrual for them and believe that the outcome will not have a material impact on our financial position, results of operations or liquidity.

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During 2009, Chevron filed a lawsuit against us claiming they are entitled to a share of the refunds we received in 2008 from the owners of the Trans-Alaska Pipeline System (“TAPS”). We received $50 million in 2008, net of contingent legal fees, for excessive intrastate rates charged by TAPS during 1997 through 2000 and the period of 2001 through June 2003. Chevron asserted that it is entitled to a share of its portion of the refunds for retroactive price adjustments under our previous crude oil contracts with them. The trial court judge granted Chevron’s motion for summary judgment and awarded them $16 million, including interest, in September 2010. We disagreed with the trial court and appealed the decision to the Alaska Supreme Court. In July 2013, the Alaska Supreme Court issued an order requiring the Superior Court to enter summary judgment in our favor. We had previously established an accrual for this matter, which will be reversed in the third quarter of 2013.

Environmental

In October 2012, certain non-governmental organizations filed a Request for Agency Action (the “Request”) with the Utah Department of Environmental Quality (“UDEQ”) concerning our Utah refinery.  The Request challenges the UDEQ’s permitting of our refinery conversion project alleging that the permits do not conform to the requirements of the Clean Air Act.  As the permittee, we are the “real party in interest” and will be defending the permits with UDEQ.  While we are still evaluating the Request and cannot estimate the timing or estimated amount, if any, associated with the outcome, we do not believe it will have a material adverse impact on our financial position, results of operations or liquidity.

The EPA has alleged that we have violated certain Clean Air Act regulations at our Alaska, Washington, Martinez, Hawaii and Utah refineries. We are continuing discussions of the EPA’s claims with the EPA and the U.S. Department of Justice (“DOJ”). We previously received a notice of violation (“NOV”) in March 2011 from the EPA alleging violations of Title V of the Clean Air Act at our Alaska refinery. The alleged violations in the NOV arise from a 2007 state of Alaska inspection and inspections by the EPA in 2008 and 2010. We also previously received NOVs in 2005 and 2008 alleging violations of the Clean Air Act at our Washington refinery. We are discussing all of these allegations with the EPA and DOJ. The ultimate resolution of these matters could require us to incur material capital expenditures and/or civil penalties. While we cannot currently estimate the amount or timing of the resolution of these matters and currently believe that the outcome will not have a material impact on our liquidity or financial position, the ultimate resolution could have a material impact on our interim or annual results of operations.

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IMPORTANT INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (including information incorporated by reference) includes and references “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to, among other things, expectations regarding refining margins, revenues, cash flows, capital expenditures, turnaround expenses and other financial items. These statements also relate to our business strategy, goals and expectations concerning our market position, future operations, margins and profitability. We have used the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will,” “would” and similar terms and phrases to identify forward-looking statements in this Quarterly Report on Form 10-Q, which speak only as of the date the statements were made.

Although we believe the assumptions upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect.

The matters discussed in these forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and trends to differ materially from those made, projected, or implied in or by the forward-looking statements depending on a variety of uncertainties or other factors including, but not limited to:

• the constantly changing margin between the price we pay for crude oil and other refinery feedstocks as well as RINs and carbon credits, and the prices at which we are able to sell refined products;

• the timing and extent of changes in commodity prices and underlying demand for our refined products;

• changes in the expected value of and benefits derived from the assets acquired in the acquisition of BP’s integrated Southern California refining, marketing and logistics business;

• changes in global economic conditions and the effects of the global economic downturn on our business, especially in California, and the business of our suppliers, customers, business partners and credit lenders;

• the availability and costs of crude oil, other refinery feedstocks and refined products;

• changes in fuel and utility costs for our facilities;

• changes in the cost or availability of third-party vessels, pipelines and other means of transporting crude oil feedstocks and refined products;

• actions of customers and competitors;

• state and federal environmental, economic, health and safety, energy and other policies and regulations, including those related to climate change and any changes therein, and any legal or regulatory investigations, delays or other factors beyond our control;

• adverse rulings, judgments, or settlements in litigation or other legal or tax matters, including unexpected environmental remediation costs in excess of any reserves;

• operational hazards inherent in refining operations and in transporting and storing crude oil and refined products;

• earthquakes or other natural disasters affecting operations;

• changes in our cash flow from operations;

• changes in capital requirements or in execution of planned capital projects;

• changes in the carrying costs of our inventory;

• disruptions due to equipment interruption or failure at our facilities or third-party facilities;

• direct or indirect effects on our business resulting from actual or threatened terrorist incidents or acts of war;

• weather conditions affecting our operations or the areas in which our refined products are marketed; 

• seasonal variations in demand for refined products;

• changes in the expected value of and benefits derived from the assets acquired in TLLP’s acquisition of Chevron’s Northwest Products System;

• risks related to labor relations and workplace safety; and

• political developments.

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Many of these factors, as well as other factors, are described in our filings with the Securities and Exchange Commission (“SEC”). All future written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the previous statements. The forward-looking statements in this Quarterly Report on Form 10-Q speak only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to update any information contained herein or to publicly release the results of any revisions to any forward-looking statements that may be made to reflect events or circumstances that occur, or that we become aware of, after the date of this Quarterly Report on Form 10-Q.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Risk Management

We have established a risk committee comprised of senior level leadership from our financial, strategic, governance, administrative and operational functions. The risk committee’s responsibilities include the performance of an annual review to assess and prioritize the Company’s risks. Our financial, strategic, governance and operational risks’ subject matter experts participate in this annual assessment. The risk committee and other groups in the organization assess the status and effectiveness of risk prevention and mitigation activities, identify emerging risks and facilitate management’s development of our risk assessment and management practices. In addition, the risk committee meets monthly to review priority risks, risk prevention and mitigation activities and the Company’s emerging risks. The risk committee presents a quarterly risk update to executive management. At least annually, the Board of Directors meets with the chair of our risk committee concerning the status and effectiveness of our risk prevention and mitigation activities, emerging risks and risk assessment and management practices.

The risk committee has a responsibility to assess and advise management on the system of controls the Company has put in place to ensure procedures are properly followed and accountability is present at the appropriate levels. The Company has put in place controls designed to:

• create and maintain a comprehensive risk management policy;

• provide for authorization by the appropriate levels of management;

• provide for segregation of duties;

• maintain an appropriate level of knowledge regarding the execution of and the accounting for derivative instruments; and

• have key performance indicators in place to adequately measure the performance of its hedging activities.

Commodity Price Risks

Our primary source of market risk is the difference between the prices we sell our refined products for and the prices we pay for crude oil and other feedstocks. We use derivative instruments to manage the risks from changes in the prices of crude oil and refined products, fluctuations in foreign currency exchange rates, or to capture market opportunities. We believe the governance structure that we have in place is adequate given the size and sophistication of our commodity optimization, inventory management and trading activity.

Our earnings and cash flows from operations depend on the margin, relative to fixed and variable expenses (including the costs of crude oil and other feedstocks), at which we are able to sell our refined products. The prices of crude oil and refined products fluctuate substantially and depend on many factors including the global supply and demand for crude oil and refined products. This demand is impacted by changes in the global economy, the level of foreign and domestic production of crude oil and refined products, geo-political conditions, the availability of imports of crude oil and refined products, the relative strength of the U.S. dollar, the marketing of alternative and competing fuels and the impact of government regulations. The prices we sell our refined products for are also affected by local factors such as local market conditions and the level of operations of other suppliers in our markets.

Prices for refined products are influenced by the price of crude oil. In most cases, an increase or decrease in the price of crude oil results in a corresponding increase or decrease in the price of gasoline and other refined products. The timing, direction and the overall change in refined product prices versus crude oil prices will impact profit margins and could have a significant impact on our earnings and cash flows. Assuming all other factors remained constant, a $1 per barrel change in average gross refining margins, based on our rolling 12-month average throughput of 554 thousand barrels per day, would change annualized pre-tax operating income by approximately $202 million.

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We maintain inventories of crude oil, intermediate products and refined products, the values of which are subject to fluctuations in market prices. Our inventories of refinery feedstocks and refined products totaled 37 million barrels and 25 million barrels at June 30, 2013 and December 31, 2012, respectively. The average cost of our refinery feedstocks and refined products at June 30, 2013, was approximately $61 per barrel compared to market prices of approximately $113 per barrel. If market prices decline to a level below the average cost of these inventories, we would be required to write down the carrying value of our inventory to market.

We use non-trading derivative instruments to manage exposure to commodity price risks associated with the purchase or sale of crude oil and finished products. We also use non-trading derivative instruments to manage price risks associated with inventories above or below our target levels and to hedge crude oil held in connection with arbitrage opportunities where the price of crude oil is higher in the future than the current spot price. These derivative instruments typically involve options, exchange-traded futures, over-the-counter swaps and options and physical commodity forward purchase and sale contracts (“Forward Contracts”), which had remaining durations of less than two years as of June 30, 2013. Our hedging strategies are monitored daily.

We mark our derivative instruments to market and recognize the changes in their fair value in our statements of consolidated operations.

Net earnings during the second quarters of 2013 and 2012 included net gains of $8 million and $56 million, respectively, on our commodity derivative positions comprised of the following (dollars in millions and volumes in millions of barrels):

	Three Months Ended June 30,
	2013				2012
	Contract  Volumes	Net Gain (Loss)			Contract Volumes	Net Gain  (Loss)
Unrealized gain (loss) carried on open derivative positions from prior period	1	$	9		3	$	(8	)
Realized gain (loss) on settled derivative positions	141	(25		)	121	68
Unrealized gain (loss) on open net derivative positions	1	24			3	(4		)
Net Gain		$	8			$	56

Our open positions at June 30, 2013, will expire at various times through 2015. We prepared a sensitivity analysis to estimate our exposure to market risk associated with our derivative instruments. This analysis may differ from actual results. Based on our open net positions of one million barrels at June 30, 2013, a $1.00 per-barrel change in quoted market prices of our derivative instruments, assuming all other factors remain constant, could change the fair value of our derivative instruments and pre-tax operating income by approximately $1 million.

Counterparty Credit Risk

We have exposure to concentrations of credit risk related to the ability of our counterparties to meet their contractual payment obligations, and the potential non-performance of counterparties to deliver contracted commodities or services at the contracted price. Concentrations of customers within the refining industry may affect our overall exposure to counterparty risk because these customers may be similarly impacted by changes in economic or other conditions.  In addition, financial services companies are the counterparties in certain of our price risk management activities, and such financial services companies could be adversely impacted by periods of uncertainty and illiquidity in the credit or capital markets. We have risk management policies in place, and continue to monitor closely the status of our counterparties. We perform ongoing credit evaluations of our customers’ financial condition, and in certain circumstances, require prepayments, letters of credit or other collateral.

Foreign Currency Risk

We are exposed to exchange rate fluctuations on our purchases of Canadian crude oil. We enter into Forward Contracts of Canadian dollars to manage monthly exchange rate fluctuations. We had a loss of $2 million related to these transactions for both the three months ended June 30, 2013 and 2012. At June 30, 2013, there were no open Forward Contracts to purchase Canadian dollars.

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Interest Rate Risk

We utilize fixed-rate long-term debt obligations and other borrowings, which are subject to market risk from changes in interest rates. Changes in interest rates affect the interest expense we incur on our variable-rate debt and the fair value of our fixed-rate debt. These changes also affect the rates used to discount liabilities, which could result in changes in our accretion expense related to our asset retirement obligations and pension and postretirement net periodic benefit expense over time.  The fair value of our debt was estimated primarily using quoted market prices.  The carrying value and fair value of our debt at June 30, 2013 were approximately $3.3 billion and $3.4 billion, respectively. The carrying value and fair value of our debt at December 31, 2012 were approximately $1.6 billion and $1.7 billion, respectively. We currently do not use interest rate swaps to manage our exposure to interest rate risk; however, we continue to monitor the market and our exposure, and in the future, we may enter into these transactions to mitigate risk. We believe in the short-term we have acceptable interest rate risk and continue to monitor the risk on our long-term obligations. With all other variables constant, a 0.25% change in the interest rate associated with the borrowings outstanding under our Revolving Credit Facility, TLLP Revolving Credit Facility and our Term Loan Facility at June 30, 2013 would change annual interest expense by approximately $4 million.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We carried out an evaluation required by the Securities Exchange Act of 1934, as amended (“the Exchange Act”), under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) under the Exchange Act as of the end of the period. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective. Our disclosure controls and procedures are designed to provide reasonable assurance that the information that we are required to disclose in reports we file under the Exchange Act is accumulated and communicated to management, as appropriate.

On June 1, 2013, we acquired BP’s integrated Southern California refining, marketing and logistics business and are integrating the acquired operations, internal controls and processes, as well as extending to the acquired business our Section 404 compliance program under the Sarbanes-Oxley Act of 2002.

There have been no significant changes in our internal controls over financial reporting (as defined by applicable SEC rules) during the quarter ended June 30, 2013 that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

In the ordinary course of business, we become party to lawsuits, administrative proceedings and governmental investigations, including environmental, regulatory and other matters. Large, and sometimes unspecified, damages or penalties may be sought from us in some matters and certain matters may require years to resolve. Although we cannot provide assurance, we believe that an adverse resolution of the matters described below will not have a material adverse impact on our consolidated financial position, results of operations or liquidity. The information below describes new proceedings or material developments in proceedings that we previously reported in our annual report on Form 10-K for the year ended December 31, 2012.

During 2009, Chevron filed a lawsuit against us claiming they are entitled to a share of the refunds we received in 2008 from the owners of the Trans-Alaska Pipeline System (“TAPS”). We received $50 million in 2008, net of contingent legal fees, for excessive intrastate rates charged by TAPS during 1997 through 2000 and the period of 2001 through June 2003. Chevron asserted that it is entitled to a share of its portion of the refunds for retroactive price adjustments under our previous crude oil contracts with them. The trial court judge granted Chevron’s motion for summary judgment and awarded them $16 million, including interest, in September 2010. We disagreed with the trial court and appealed the decision to the Alaska Supreme Court. In July 2013, the Alaska Supreme Court issued an order requiring the Superior Court to enter summary judgment in our favor. We had previously established an accrual for this matter, which will be reversed in the third quarter of 2013.

On January 28, 2013, we received a notice of violation (“NOV”) from the Northwest Clean Air Agency alleging a violation of air quality regulations at our Washington refinery.  The allegation concerns the modification of a refinery heater in August 2011. While we are evaluating the allegation and cannot currently estimate the amount or timing of the resolution of this matter, we believe that the outcome will not have a material impact on our financial position, results of operations or liquidity.

ITEM 1A.RISK FACTORS

There have been no significant changes from the risk factors previously disclosed in Item 1A of our 2012 Annual Report on Form 10-K.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The table below provides a summary of all purchases by Tesoro of its common stock during the three-month period ended June 30, 2013.

Period	Total Number of Shares Purchased (a)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b)	Approximate Dollar Value of Shares that May Yet Be Purchased Remaining at Period End Under the Plans or Programs (In Millions) (b)
April 2013	833,675	$	52.76	826,900	$	257
May 2013	556,104	$	59.04	466,567	$	230
June 2013	525,115	$	56.68	525,115	$	200
Total	1,914,894			1,818,582	$	200

________________

(a) Includes 96,312 shares acquired from employees during the second quarter of 2013 to satisfy tax withholding obligations in connection with the vesting of restricted stock issued to them.

(b) In August 2012, our Board of Directors authorized a $500 million share repurchase program. Under the program, management is permitted to purchase Tesoro common stock at its discretion in the open market. The authorization has no time limit and may be suspended or discontinued at any time.

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ITEM 6. EXHIBITS

(a) Exhibits

Exhibit Number	Description of Exhibit
*2.1	Amendment No. 1 to Purchase and Sale Agreement, dated August 8, 2012, among BP West Coast Products LLC, Atlantic Richfield Company, Arco Midcon LLC, Arco Terminal Services Corporation, Arco Material Supply Company, CH-Twenty, Inc., Products Cogeneration Company, Energy Global Investments (USA) Inc., and Tesoro Refining & Marketing Company LLC.
*2.2	Amendment No. 2 to Purchase and Sale Agreement, dated May 31, 2013, among BP West Coast Products LLC, Atlantic Richfield Company, Arco Midcon LLC, Arco Terminal Services Corporation, Arco Material Supply Company, CH-Twenty, Inc., Products Cogeneration Company, Energy Global Investments (USA) Inc., and Tesoro Refining & Marketing Company LLC.
*2.3	Amendment No. 3 to Purchase and Sale Agreement, dated May 31, 2013, among BP West Coast Products LLC, Atlantic Richfield Company, Arco Midcon LLC, Arco Terminal Services Corporation, Arco Material Supply Company, Products Cogeneration Company, Energy Global Investments (USA) Inc., and Tesoro Refining & Marketing Company LLC.
*2.4	Membership Interest Purchase Agreement, dated June 17, 2013, by and among Tesoro Corporation, Tesoro Hawaii, LLC, and Hawaii Pacific Energy, LLC. Pursuant to Item 601(b)(2) of Regulation S-K, certain schedules, exhibits and similar attachments to the Purchase Agreement have not been filed with this exhibit. The schedules contain various items relating to the assets to be acquired and the representations and warranties made by the parties to the agreement. The exhibits contain the forms of various agreements, certificates and other documents to be executed and delivered by the parties upon the closing of the transaction. The Company agrees to furnish supplementally any omitted schedule, exhibit or similar attachment to the SEC upon request.
4.1	Supplemental Indenture, dated as of February 27, 2013, among Tesoro Corporation, certain subsidiary guarantors and U.S. Bank National Association, as trustee, relating to the 4.250% Senior Notes due 2017 and 5.375% Senior Notes due 2022 (incorporated by reference herein to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2013, File No. 1-3473).
4.2	Supplemental Indenture, dated as of February 27, 2013, among Tesoro Corporation, certain subsidiary guarantors and U.S. Bank National Association, as trustee, relating to the 9.750% Senior Notes due 2019 (incorporated by reference herein to Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2013, File No. 1-3473).
10.1	Amended and Restated Master Terminalling Services Agreement, dated as of February 22, 2013, among Tesoro Refining & Marketing Company LLC, Tesoro Alaska Company and Tesoro Logistics Operations LLC (incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2013, File No. 1-3473).
10.2	Amended and Restated Tesoro Corporation Executive Severance and Change in Control Plan effective May 1, 2013 (incorporated by reference herein to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2013, File No. 1-3473).
10.3	Tesoro Corporation Amended and Restated 2011 Long-Term Incentive Plan (incorporated by reference herein to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 6, 2013, File No. 1-3473).
10.4	Contribution, Conveyance and Assumption Agreement, dated as of May 17, 2013, among Tesoro Logistics LP, Tesoro Logistics GP, LLC, Tesoro Logistics Operations LLC, Tesoro Corporation and Tesoro Refining & Marketing Company LLC (incorporated by reference herein to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on May 17, 2013, File No. 1-3473).
*10.5	Second Amended and Restated Master Terminalling Services Agreement, dated as of May 3, 2013, among Tesoro Refining & Marketing Company LLC, Tesoro Alaska Company and Tesoro Logistics Operations LLC.
10.6	Amendment No. 1 to Credit Agreement, dated as of May 22, 2013, among Tesoro Logistics LP, Bank of America, N.A., as administrative agent, letter of credit issuer and lender, the other lenders party thereto, and the subsidiaries of Tesoro Logistics LP party thereto (incorporated by reference herein to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 23, 2013, File No. 1-3473).
10.7	Amendment No. 1 to the Second Amended and Restated Omnibus Agreement, dated as of June 1, 2013, among Tesoro Corporation, Tesoro Refining & Marketing Company LLC, Tesoro Companies, Inc., Tesoro Alaska Company, Tesoro Logistics LP, and Tesoro Logistics GP, LLC (incorporated by reference herein to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 3, 2013, File No. 1-3473).

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Exhibit Number	Description of Exhibit
10.8	Amended and Restated Schedules to the Second Amended and Restated Omnibus Agreement, dated as of June 1, 2013, among Tesoro Corporation, Tesoro Refining & Marketing Company LLC, Tesoro Alaska Company, Tesoro Logistics LP, and Tesoro Logistics GP, LLC (incorporated by reference herein to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on June 3, 2013, File No. 1-3473).
10.9	Master Terminalling Services Agreement - Southern California, dated as of June 1, 2013, among Tesoro Logistics LP, Tesoro Logistics GP, LLC, Tesoro Refining & Marketing Company LLC and Tesoro Logistics Operations LLC (incorporated by reference herein to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on June 3, 2013, File No. 1-3473).
10.10	Carson Storage Services Agreement, dated as of June 1, 2013, among Tesoro Logistics LP, Tesoro Logistics GP, LLC, Tesoro Refining & Marketing Company LLC and Tesoro Logistics Operations LLC (incorporated by reference herein to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on June 3, 2013, File No. 1-3473).
*31.1	Certification by Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2	Certification by Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32.1	Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2	Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
**101.INS	XBRL Instance Document
**101.SCH	XBRL Taxonomy Extension Schema Document
**101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
**101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
**101.LAB	XBRL Taxonomy Extension Label Linkbase Document
**101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

________________

* Filed herewith.

** Submitted electronically herewith.

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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 thereunto duly authorized.

		TESORO CORPORATION
Date:	August 5, 2013	/s/ GREGORY J. GOFF
		Gregory J. Goff
		President and Chief Executive Officer
		(Principal Executive Officer)
Date:	August 5, 2013	/s/ G. SCOTT SPENDLOVE
		G. Scott Spendlove
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)

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EX-2.1

Exhibit 2.1

AMENDMENT NO. 1 TO PURCHASE AND SALE AGREEMENT

This Amendment No. 1 to that certain Purchase and Sale Agreement (this “Amendment”)is made on September 13, 2012 by and among BP WEST COAST PRODUCTS LLC, a limited liability company organized and existing under the laws of the State of Delaware (“BPWCP’’),ATLANTIC RICHFIELD COMPANY, a corporation organized and existing under the laws of the State of Delaware (“ARCO”), ARCO MIDCON LLC, a limited liability company organized and existing under the laws of the State of Delaware (“ARCO Midcon”), ARCO TERMINAL SERVICES CORPORATION, a corporation organized and existing under the laws of the State of Delaware (“ARCO Terminal”),ARCO MATERIAL SUPPLY COMPANY, a corporation organized and existing under the laws of the State of Delaware (“ARCO Material Supply”),CH-TWENTY, INC., a corporation organized and existing under the laws of the State of Delaware (“CH-Twenty”),PRODUCTS COGENERATION COMPANY, a corporation organized and existing under the laws of the State of Delaware (“Products Cogeneration Company”),and ENERGY GLOBAL INVESTMENTS (USA) INC., a corporation organized and existing under the laws of the State of Delaware (“Energy Global Investments”)(BPWCP, ARCO, ARCO Midcon, ARCO Terminal, ARCO Material Supply, CH-Twenty, Products Cogeneration Company and Energy Global Investments are each a “Seller” and collectively the “Sellers”) and TESORO REFINING AND MARKETING COMPANY, a corporation organized and existing under the laws of the State of Delaware (the “Buyer”).

WHEREAS, the Sellers and the Buyer entered into that certain Purchase and Sale Agreement, dated as of August 8, 2012 (the “PSA”);

WHEREAS, pursuant to Section 7.11 of the PSA, Buyer and Sellers must discuss and develop a plan for ensuring an orderly transition of the Purchased Assets on the Closing Date within thirty-six (36) days of the Execution Date. Such discussions shall include an identification of the scope of transition services that Sellers are to provide pursuant to the Transition Services Agreement; and

WHEREAS, as required under the PSA, the Buyer and Sellers have engaged in such discussions and as part of this process, the Buyer and Sellers have discussed and agreed certain changes and amendments to the Form of Transition Services Agreement, including its accompanying Term Sheets, attached to the PSA as Exhibit P.

NOW, THEREFORE, in consideration of the foregoing recitals and the agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound, do hereby agree as follows:

1. Definitions. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the PSA.

2. Amendments. The Parties hereby agree that Exhibit P attached to the PSA is deleted and replaced in its entirety by the Form of Transition Services Agreement attached to this Amendment as Schedule 1.

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3. Miscellaneous.

(a). The Parties agree that this Amendment is executed pursuant to Section 19.7 of the PSA.

(b). The Parties hereby ratify and confirm the terms of the PSA as expressly amended or supplemented hereby. Except to the extent this Amendment amends the terms of the PSA, this Amendment shall in all respects remain subject to the terms of the PSA which shall survive the delivery of this Amendment, including without limitation, Sections 19.6 and 19.10.

(c). Any term or provision of this Amendment that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.

(d). This Amendment may be executed in counterparts, each of which shall be deemed an original but which together will constitute one and the same instrument. The exchange of copies of this Amendment and of signature pages by facsimile transmission or e-mail of a scanned copy shall constitute effective execution and delivery of this Amendment as to the Parties and may be used in lieu of the original Amendment for all purposes. Signatures of the Parties transmitted by facsimile or e-mail shall be deemed to be their original signatures for all purposes.

[Signatures follow on next page]

2

SELLERS:
BP WEST COAST PRODUCTS LLC,
a Delaware limited liability company
By:	/s/ MARK E. FRENA
Name:	Mark E. Frena
Title:	Authorized Person
ATLANTIC RICHFIELD COMPANY,
a Delaware corporation
By:	/s/ MARK E. FRENA
Name:	Mark E. Frena
Title:	Authorized Person
ARCO MIDCON LLC,
a Delaware limited liability company
By:	/s/ MARK E. FRENA
Name:	Mark E. Frena
Title:	Authorized Person
ARCO TERMINAL SERVICES CORPORATION,
a Delaware corporation
By:	/s/ MARK E. FRENA
Name:	Mark E. Frena
Title:	Authorized Person

PSA Amendment No. 1 Signature Page (1 of 3)

ARCO MATERIAL SUPPLY COMPANY,
a Delaware corporation
By:	/s/ MARK E. FRENA
Name:	Mark E. Frena
Title:	Authorized Person
CH-TWENTY, INC.,
a Delaware corporation
By:	/s/ MARK E. FRENA
Name:	Mark E. Frena
Title:	Authorized Person
PRODUCTS COGENERATION COMPANY,
a Delaware corporation
By:	/s/ MARK E. FRENA
Name:	Mark E. Frena
Title:	Authorized Person
ENERGY GLOBAL INVESTMENTS (USA) INC.,
a Delaware corporation
By:	/s/ MARK E. FRENA
Name:	Mark E. Frena
Title:	Authorized Person

PSA Amendment No. 1 Signature Page (2 of 3)

BUYER:
TESORO REFINING AND MARKETING
COMPANY
By:	/s/ DAN ROMASKO
Name:	Dan Romasko
Title:	Executive Vice President, Operations

PSA Amendment No. 1 Signature Page (3 of 3)

SCHEDULE 1

Form of Transition Services Agreement

[see attached]

Schedule 1

TRANSITION SERVICES AGREEMENT

This Transition Services Agreement (this “Agreement”) is made and entered into as of this [__] day of [_________], 2012 (the “Effective Date”) by and between BP WEST COAST PRODUCTS LLC, a limited liability company organized and existing under the laws of the State of Delaware (“BPWCP”) and TESORO REFINING AND MARKETING COMPANY, a corporation organized and existing under the laws of the State of Delaware (the “Company”). BPWCP and the Company are each referred to individually as a “Party” and referred to collectively as the “Parties.”

BPWCP and certain of its Affiliates and the Company have entered into a Purchase and Sale Agreement, dated as of August 8, 2012 (the “PSA”), under which BPWCP and certain of its Affiliates have agreed to sell to the Company and the Company has agreed to purchase from them substantially all of the assets, and assume and acquire certain of the rights and liabilities of the Business.

The Parties agreed in the PSA to enter into a transition services agreement in which BPWCP would provide to the Company services with respect to the operation of certain portions of the Business for a limited time period after Closing.

The Parties therefore agree as follows:

ARTICLE 1

SERVICES

1.1 Services.

(a)During the term set forth in the Term Sheets, as provided in Article 2, BPWCP shall provide, or cause to be provided, services to the Company in relation to the operation of the Business, upon the terms and subject to the conditions of this Agreement (individually, each a “Service” and, collectively, the “Services”).

(b)The Services are comprised of each of the services and functions to be provided to the Business as enumerated in the term sheets appended to Schedule 1.1(b) (the “Term Sheets”) and any additional activities and functions that are reasonably required for the proper performance of the enumerated services and functions (other than any activities and functions that are expressly excluded), with the intent that the Services shall facilitate the uninterrupted operation of the Business after the Closing to a level and quality of service consistent with that achieved by BPWCP in the conduct of its own operations prior to the execution of the PSA (but subject to Section 7.5 therein).

(c)BPWCP shall provide consulting Services to the Company pursuant to this Agreement as required pursuant to Section 3.2 of the Technology Agreement for a Term of up to twelve (12) months in an amount agreed to by the Parties pursuant to Section 7.11 of the PSA for a fee equal to BP’s actual cost. In addition, BPWCP shall continue to operate, maintain and

support, for up to twelve months after the Closing and for the benefit of the Company, any IT System that is licensed to BPWCP or an Affiliate pursuant to a Consent Required License (as defined in the Technology Agreement) until the license is assigned or transferred to Company as provided in the Technology Agreement, or until alternative arrangements are made as provided in Section 7.2 or 7.11 of the PSA, but only to the extent that such Services are permitted under the terms of the Consent Required License and the Company pays BP’s actual costs incurred in providing such Services.

(d)The Services may be provided to the Company, or the Business, from BPWCP directly or through one or more of its Affiliates or Third Party Providers (as defined below). For purposes of this Agreement, (i) with respect to the provision of the Services, it is understood that the term “BPWCP” includes BPWCP, its Affiliates, and any Third Party providing Services to the Company or the Business on BPWCP’s behalf (provided that BPWCP shall remain liable for the performance of BPWCP’s obligations hereunder, whether such obligations are performed by BPWCP, an Affiliate or a Third Party), and (ii) with respect to the receipt of the Services, it is understood that the term “Company” includes the Company (or its permitted successor(s) and assign(s)) and the Business, as the case may be, with respect to any Service described in a Term Sheet.

(e)The Services are provided solely for the exclusive use and benefit of the Company.

(f)BPWCP and the Company may, by mutual written agreement, amend the Services to include other services in exchange for additional fees (“Additional Services”). Unless specifically stated to the contrary within a Term Sheet, and subject to Article 2, any such Additional Services will be deemed to be a “Service” for the remainder of the Term or, if applicable, the Extended Term.

(g)In this Agreement:

(i) “Existing” means existing on the Execution Date of the PSA.

(ii) “BP Indemnitees” means BP, each of BP’s Affiliates, and the officers, directors, independent contractors, partners, shareholders, members, managers, employees, agents, and successors and assigns of BP and BP’s Affiliates.

(iii) “Claim” means any action, suit, proceeding or demand brought against a Party by a third party that is not an Affiliate of a Party.

(iv) “Company Indemnitees” means Company, each of Company’s Affiliates, and the officers, directors, independent contractors, partners, shareholders, members, managers, employees, agents, and successors and assigns of Company and Company’s Affiliates.

(v) “Indemnified Losses” means (i) any and all damages, penalties, costs and fines that are finally awarded against a Party by a court of

competent jurisdiction or governmental authority in connection with a Claim and associated costs of defense (including court costs and reasonable attorneys’ fees and expenses), and (ii) any amounts paid in settlement of a Claim.

(vi) “Third Party IP” means any and all third party software and other Intellectual Property owned by third parties that is used by BPWCP, or provided to the Company by BPWCP, in the course of providing the Services.

1.2 Level of Services and Limitations.

(a)BPWCP will perform the Services with reasonable care and in the manner and at a relative level of service (including type, quality, quantity, and level of priority) (i) substantially similar to the Services provided in the ordinary course of business with respect to the Business in the six month period prior to execution of the PSA, and (ii) in accordance with the specific provisions of each Term Sheet, as applicable. Nothing in this Agreement will require BPWCP to favor the businesses of the Company over its own businesses or those of any of its divisions, business units, or Affiliates. The Company will not be entitled to any new service or to substantially increase its use of any of the Services above the level of use specified in this Agreement or in an applicable Term Sheet, without the prior written consent of BPWCP. To the extent any Services are being provided to the Business by a Third Party on the date of this Agreement, BPWCP will use Reasonable Efforts to provide or procure the provision of the Services to the Company by such Third Party for the applicable term of such Service.

(b)From the Effective Date and throughout the Term, BPWCP shall:

(i) With respect to Existing BPWCP personnel who have experience with the systems and processes that are included within the Services, use Reasonable Efforts to retain them in the positions they occupied on the Execution Date of the PSA;

(ii) ensure that its personnel whose decisions are necessary for the performance of the Services are available at reasonable times for consultation by the Company on any matter relating to the Services;

(iii) facilitate Company’s communication with Existing third party suppliers and vendors to enable Company to establish its own sources of supply of products and services used in the performance of the Services;

(iv) except as (i) expressly provided otherwise in a schedule to this Agreement or in a Term Sheet or (ii) authorized to do so in advance in writing by the Company, not use, access, attempt to

access, or interfere with any of the Company’s information technology systems or data;

(v) maintain Existing system controls, system and data backup and recovery procedures, and physical and logical security procedures, controls and safeguards to protect the confidentiality and integrity of Business data that is processed and/or stored by BPWCP as part of the Services; and

(vi) cooperate with the Company in implementing and observing security arrangements, requirements, or protocols that the Company considers reasonably appropriate to prevent BPWCP or any Third Party from using or accessing any of the Company’s information technology systems or data to the extent that such use or access is not in connection with the Services or is otherwise without authorization.

(c)In providing the Services, except as required pursuant to Section 2.6 or unless specifically set forth in the PSA or a Term Sheet, BPWCP is not obligated to:

(i) purchase, lease, or license any additional equipment or software; provided, however, that if requested by the Company in writing, BPWCP may, in its sole discretion, elect to purchase, lease, or license equipment or software if such equipment or software is reasonably necessary for the provision of Services hereunder, and the Company shall reimburse BPWCP for all costs associated with such purchases, leases, or licenses;

(ii) create or supply any documentation or information not existing as of the date of this Agreement or available through minimal efforts of BPWCP (as reasonably determined by BPWCP);

(iii) enter into additional contracts with Third Parties providing services to BPWCP or any of its Affiliates (“Third Party Providers”) or change the scope of current agreements with Third Party Providers. However, if requested by the Company in writing, BPWCP may, in its sole discretion, (A) elect to enter into additional contracts or change the scope of current agreements with Third Party Providers if BPWCP believes that such additional or changed agreements are reasonably necessary for the provision of the Services or (B) undertake such matters as Additional Services under this Agreement. In connection with the foregoing, the Company agrees to reimburse BPWCP for all charges payable to such Third Party Providers and actual incremental costs, if any, incurred by BPWCP and attributable to such additional or changed agreements.

(d)BPWCP’s obligation to provide the Services shall be conditioned upon and subject to any legal obligations, prohibitions or restrictions applicable to it, and this Agreement shall not obligate BPWCP to violate, modify or eliminate any such obligation, prohibition or restriction. For the avoidance of doubt, BPWCP is not obligated to provide any Service to the extent and for so long as the performance of such Service: (i) would require BPWCP to violate any applicable Laws; (ii) would result in the breach of any software license or other applicable contract, including any Third Party Provider agreement relevant to the provision of the Services; or (iii) requires information or assistance from the Company that the Company has failed to provide. This Agreement is a purely commercial transaction between the Parties and nothing stated in this Agreement shall operate to create any special or fiduciary duty between the Parties. Notwithstanding anything to the contrary, all matters pertaining to the employment, supervision, compensation, promotion and discharge of any personnel of BPWCP are the responsibility of BPWCP. All such employment arrangements are solely BPWCP’s obligation, and the Company shall have no liability with respect thereto.

(e)If any Service is performed by a Third Party Provider: (i) all charges from such Third Party Provider that are attributable to the Services provided to the Company are included in the fees payable to BPWCP unless expressly provided to the contrary in a Term Sheet; (ii) BPWCP shall be solely responsible for directing and supervising such Third Party Providers; and (iii) the Company shall not, in any circumstance, attempt to independently direct or instruct such Third Party Provider’s activities without BPWCP’s express, prior written authorization for such direction or instruction.

(f)Except as may be expressly contemplated by the PSA, BPWCP is not obligated to assign any licenses, rights, or contracts to the Company.

1.3 Assumption of Services; Partial Termination.

(a)The Company will assume performance of all of the Services described in this Agreement as soon as commercially practicable following the Effective Date, with the goal of conducting for itself the Services on or prior to the applicable Term Sheet Termination Date for each Service as set forth in the applicable Term Sheet. BPWCP has no obligation to perform any Services after the termination of such Service pursuant to the terms of the applicable Term Sheet. The Company shall, with BPWCP’s reasonable assistance, obtain all approvals, permits and licenses, complete any registrations, and implement any systems, in each case, as may be reasonably necessary for it to perform the Services independently as soon as commercially practicable following the Closing.

(b)The Company may terminate any Service by giving BPWCP not less than 20 Business Days’ prior written notice. The termination notice shall specify the effective date of termination, which shall be no more than 60 days after the date of the notice. If the Company terminates some but not all of the Services provided pursuant to a Term Sheet, the parties shall negotiate an equitable adjustment to the fees payable pursuant to that Term Sheet with the intent that any cost savings resulting from the cessation of the terminated Services shall be passed through to the Company. BPWCP shall use Reasonable Efforts to eliminate and/or reduce costs

as Services are terminated so as to minimize the ongoing fees payable by the Company. If the Company terminates a Term Sheet in its entirety, all of the fees payable for Services pursuant to that Term Sheet shall cease to accrue on and from the effective date of termination, and BPWCP shall refund the Company any prepaid Service fees that are attributable to periods of Service on and after the effective date of termination. The Company shall not be required to pay any early termination fees (including breakage fees, demobilization fees or similar early termination charges to Third Party Providers) except as expressly provided in a Term Sheet.

1.4 Records.

If charges for any Service to the Company are on an hourly time and/or materials basis, then BPWCP shall maintain or cause to be maintained at its offices time and/or cost of materials records as are customarily maintained by or for its own operations relating to the Services rendered under this Agreement. During the Term and, if applicable, the Extended Term, the Company will have the right to request and receive copies of such records of BPWCP no more than once in each two month period following the Effective Date.

1.5 Managers and Sponsors.

(a)During the Term, (i) BPWCP shall appoint one of its employees (the “BPWCP Manager”) who will have overall responsibility for managing and coordinating the delivery of the Services and will coordinate and consult with the Company Manager (as defined below) and (ii) BPWCP shall appoint one of its employees (the “BPWCP Sponsor”) who will have sole responsibility for receiving and responding to requests from the Company Sponsor (as defined below) for approved Company employees’ access to any BPWCP networks or other external connectivity systems provided by BPWCP as part of the Services. BPWCP may, at its reasonable discretion, following consultation with the Company Manager, select other individuals to serve in the capacity of the BPWCP Manager and/or BPWCP Sponsor during the Term or any Extended Term. The BPWCP Manager and the BPWCP Sponsor are designated in Schedule 1.5(a).

(b)During the Term, (i) the Company will appoint one of its employees (the “Company Manager”) who will have overall responsibility for managing and coordinating receipt of the Services and will coordinate and consult with the BPWCP Manager and (ii) the Company shall appoint one of its employees (the “Company Sponsor”) who will have sole responsibility for sending requests to the BPWCP Sponsor for approved Company employees’ access to any BPWCP networks or other external connectivity systems provided by BPWCP as part of the Services. The Company may, at its reasonable discretion, following consultation with the BPWCP Manager, select other individuals to serve in the capacity of the Company Manager and/or Company Sponsor during the Term or any Extended Term. The Company Manager and the Company Sponsor are designated in Schedule 1.5(b).

(c)The BPWCP Manager and the Company Manager will serve as the respective primary points of contact for BPWCP and the Company between the Parties, and will meet regularly to

(i) discuss and, as reasonably needed, jointly develop, monitor and oversee the implementation of appropriate plans for separating the Business from BPWCP’s businesses and operations, and for preparing the Business for standalone operation not later than the Agreement Termination Date; and

(ii) address issues and attempt to resolve disputes that may arise during the course of this Agreement.

(d)Any instruction, direction, or approval given by the Company Manager to the BPWCP Manager will be deemed to be given by the Company, and BPWCP will be entitled to act on such instruction, direction, or approval, provided it is not in conflict with the terms of this Agreement. Any instruction, direction, or approval given by the BPWCP Manager to the Company Manager will be deemed to be given by BPWCP, and the Company will be entitled to act on such instructions, direction, or approval.

1.6 Company Obligations.

From the Effective Date and throughout the Term and any Extended Term, the Company shall:

(a)at its own cost, promptly provide to BPWCP’s personnel and its contractors or agents engaged in providing Services all information (including copies of documents and data) and other assistance reasonably requested by such personnel, contractors, or agents as needed to provide or procure the provision of the Services to the Company;

(b)ensure that the Company’s personnel whose decisions are necessary for the performance of the Services are available at reasonable times for consultation on any matter relating to the Services;

(c)except as (i) expressly provided otherwise in a schedule to this Agreement or in a Term Sheet or (ii) authorized to do so in advance in writing by BPWCP, not use, access, attempt to access, or interfere with any of BPWCP’s information technology systems or data;

(d)cooperate with BPWCP in implementing and observing security arrangements, requirements, or protocols that BPWCP considers reasonably appropriate to prevent the Company or any Third Party from using or accessing any of BPWCP’s information technology systems or data without authorization; and

(e)provide BPWCP’s personnel and its contractors or agents engaged in providing Services with electronic and physical access to the Company’s premises and facilities as reasonably necessary to perform the Services. The extent of such access will be no less than the access formerly required to properly provide analogous or comparable services to the Business prior to execution of the PSA. All rights of access under this clause will at all times be subject to the Company’s applicable health, safety, security, and environmental policies; and

(f)perform all other obligations of the Company as specified in the Term Sheets.

1.7 Validity of Data and Information.

BPWCP is entitled to rely upon the genuineness, validity, and truthfulness of any data, document, instrument, or other writing furnished by the Company in connection with the performance of the Services unless such document, instrument, or other writing appears on its face to be erroneous, fraudulent, false, or forged.

1.8 Warranties.

BPWCP represents and warrants that:

(a)The performance of the Services will not result in the breach of any license with respect to IT Systems or other Third Party Intellectual Property, or any other applicable contract, including any Third Party Provider agreement relevant to the provision of the Services.

(b)The only Third Party Provider and Third Party licensor consents that must be obtained in order to permit BPWCP to fully perform the Services as contemplated by this Agreement are listed in Schedule 1.8(b).

ARTICLE 2TERM AND TERMINATION

2.1 Term of Services.

(a)The term of this Agreement will commence on the Effective Date and will continue until all Services rendered pursuant to any Term Sheet have been terminated pursuant to the terms of each such Term Sheet (the “Term”). Subject to Sections 2.2 and 2.3, this Agreement will terminate at the end of the Term or, if applicable, the Extended Term (the “Agreement Termination Date”).

(b)Some Services will not necessarily be provided by BPWCP at all times during the entire Term or, if applicable, the Extended Term. Each of the Term Sheets sets out the date on which the Service(s) provided pursuant to such Term Sheet will end (the “Term Sheet Termination Date”) during the Term. Unless the Term Sheet Termination Date for a particular Service provided hereunder is extended pursuant to the terms of this Agreement, such date shall be the termination date as to such Service and, for the avoidance of doubt, notwithstanding anything to the contrary contained herein, BPWCP shall have no obligation to provide any Service hereunder after the Term Sheet Termination Date for such Service. Notwithstanding the termination of the provision of any Service prior to the Agreement Termination Date, this Agreement will continue in effect until the Agreement Termination Date or the last date on which the Parties mutually agree that the last Service is to be delivered to the Company, whichever is earlier.

2.2 Extended Term.

(a)Company may elect, in its sole discretion, to extend the Term of a Term Sheet by up to 180 days by giving written notice of such extension to BPWCP at least 30 days before the applicable Term Sheet Termination Date. Any further extension of the Term for such Term Sheet is permitted only with the prior written agreement of BPWCP. The period of extension of the Term Sheet is referred to as the “Extended Term” and the Services provided during the Extended Term are referred to as the “Extended Services”. Company may exercise such extension rights independently for each Term Sheet.

(b)Other than as set forth in Section 2.2(a), there will be no extensions of any of the Term Sheet Termination Dates for any Services.

(c)The Fees for any Extended Services will be increased by ten percent (10%) of the Fees applicable to each such Service during the initial term associated with the provision of such Service. Alternatively, in lieu of such increase BPWCP has the right to pass through to the Company any increases in BPWCP’s own direct costs and the Third Party costs to provide such Extended Services relative to such costs during the initial term associated with the provision of such Service. BPWCP shall substantiate any such increase in costs to the Company’s reasonable satisfaction.

2.3 Early Termination.

(a) This Agreement and any Term Sheet may be terminated prior to the Agreement Termination Date or Term Sheet Termination Date, respectively, as follows:

(i) by mutual written consent of the Company and BPWCP;

(ii) by the Company, as to any particular Service, under Section 1.3(b);

(iii) by the Company, on the one hand, or BPWCP, on the other hand, if the other Party breaches any of its material covenants or other material obligations in this Agreement, and fails to cure such breach as promptly as commercially practicable but in any event within 20 Business Days after receipt of written notice from the non-breaching Party of such breach (which notice must specify, in commercially reasonable detail, the nature of such breach); at the expiration of such cure period, the non-breaching Party is entitled to immediately, by written notice to the breaching Party, terminate this Agreement, without penalty, liability, or further obligation (except for those obligations that have accrued prior to the termination of this Agreement);

(iv) by either Party upon the occurrence of an Insolvency Event in respect of a Party; or

(v) by either Party pursuant to Section 7.7(c).

(b)“Insolvency Event” means, in relation to any Party, that such Party:

(i) files a petition commencing a voluntary case under any chapter of the federal bankruptcy laws; or

(ii) files a petition or answer or consent seeking reorganization, arrangement, adjustment or composition under any similar applicable federal law, or consents to the filing of any such petition, answer or consent; or

(iii) appoints or consents to the appointment of a custodian, receiver, liquidator, trustee, assignee or other similar official in bankruptcy or insolvency with respect to such Party of any substantial part of its property; or

(iv) has an order for relief against such Party entered by a court having jurisdiction in the premises under any chapter of the federal bankruptcy laws, and such order remains in force undischarged or unstayed for 30 days; or

(v) has a decree or order of a court having jurisdiction in the premises for the appointment of a custodian, receiver, liquidator, trustee, assignee or other similar official in bankruptcy or insolvency of such Party or any substantial part of its property, or for the winding up or liquidation of its affairs, has been entered, and such decree or order has remained in force undischarged or unstayed for a period of 30 days; or

(vi) has admitted in writing its inability to pay its debts generally as they become due or has made an assignment for the benefit of its creditors; or

(vii) causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in (i) to (vi) inclusive.

For the avoidance of doubt, an Insolvency Event shall not occur in relation to a Party as a result of any proceeding, process or other administrative action taken which is vexatious, frivolous or an abuse of the process of the court.

(c)If a Party has the right to terminate this Agreement in its entirety (including all Term Sheets) pursuant to Section 2.3(a) then such Party may, in lieu of terminating this Agreement in its entirety, elect to terminate one or more Term Sheets without terminating this Agreement or the remaining Term Sheets.

(d)If this Agreement is terminated prior to the Agreement Termination Date pursuant to Section 2.3(a), then such earlier date of termination will be deemed to be the Agreement Termination Date.

2.4Suspension of Services for Non-Payment. If any undisputed amount exceeding US$250,000 due to BPWCP in respect of Services delivered by BPWCP to the Company is not the subject of a bona fide dispute and is not paid when due (or paid into escrow as provided in Section 3.3(b)), BPWCP may provide written notice to the Company that the amount is due and unpaid and, if the Company has not paid the unpaid amount in full by the date falling seven (7) Business Days from the date of receipt of BPWCP’s written notice, BPWCP may immediately suspend further deliveries of that Service and all dependent Services to which such non-payment relates until payment of such outstanding amount is received by BPWCP.

2.5 Survival.

Notwithstanding anything to the contrary in Sections 2.1, 2.2, or 2.3, (a) the Parties’ obligations in Sections 2.5 and 2.6, Article 5, Article 6, and Article 7 of this Agreement will survive any termination of this Agreement or any Term Sheet and (b) any termination of this Agreement is without prejudice to any rights or obligations arising out of or in connection with this Agreement which have vested, matured, or accrued prior to such termination.

2.6 Procedures Upon Termination of Services.

(a)Upon termination of a Service under this Agreement, to the maximum extent permitted by applicable Laws, the Parties shall comply with the following disengagement provisions:

(i) Not less than 90 days before the scheduled Termination Date the Parties shall develop a plan detailing each Party’s responsibilities with respect to the transfer of operational responsibility for the Services to the Company or its designee (the “Transition Plan”). The Transition Plan shall include a plan for the migration of any Company Business Information that is processed and/or stored in BPWCP systems to Company systems. BPWCP shall provide all information reasonably requested by the Company in connection with the development and execution of the Transition Plan, including (i) support for the design, planning and execution of a data migration for Company Business Information stored in BPWCP systems (it being understood that the Company shall be primarily responsible for the migration, and that BPWCP’s role shall be to support the migration); (ii) cooperating with the Company in the preparation for and conduct of migration testing; (iii) delivering Company-requested data files for Company Business Information, with content listings and control file information, in a file format reasonably acceptable to the Company; and (iv) providing parallel processing and support for testing as requested by the Company.

(ii) In accordance with the Transition Plan (or, in the absence of agreement on the timing for data migration, on the effective date of termination of a Service) BPWCP shall deliver to the Company all Business Information of the Company in BPWCP’s possession, including all books, records, contracts, receipts for deposits and all other papers or documents maintained by BPWCP that pertain exclusively to such Service, except that BPWCP may retain archival copies of materials provided to the Company under this Section 2.6;

(iii) In accordance with the Transition Plan (or, in the absence of agreement on the timing for data migration, on the effective date of termination of a Service) the Company shall deliver to BPWCP all Business Information of BPWCP in the Company’s possession that is no longer required in connection with the Company’s use of any continuing Services (excluding any Business Information of the Company that is to be delivered to the Company pursuant to paragraph (ii) and any other BPWCP Business Information that the Company is entitled to retain pursuant to the PSA, except that the Company may retain archival copies of materials provided to BPWCP under this Section 2.5; and

(iv) BPWCP shall provide the assistance and support described in this Section 2.6(a) as far as practicable utilizing existing personnel and resources, at no additional charge to the Company. If additional resources are reasonably required, BPWCP may pass through the actual cost of those resources to the Company without markup. BPWCP shall notify the Company in advance of any additional resources and charges that will be payable pursuant to this paragraph (iv).

(b)The Parties’ treatment of any of archival copies retained pursuant to Sections 2.6(a)(i) and 2.6(a)(ii) will continue to be governed by Article 6 of this Agreement, as applicable thereto.

(c)Upon the expiration or termination of the term for each Service, the Company shall certify to BPWCP in writing that all software for which consents were obtained for use by BPWCP or BPWCP’s Affiliates in connection with the provision of each such Service has either been de-installed or has been licensed by the Company from the applicable Third Party. BPWCP has the right to confirm, at the Company’s expense, that after the expiration or termination of the term for each Service the use by the Company of all such software has either ceased or continues only under license(s) the Company has acquired from the applicable Third Party.

ARTICLE 3COMPENSATION

3.1 Fees.

As consideration for the Services, the Company shall pay, or cause to be paid, to BPWCP the amount specified for each Service as set forth in the applicable Term Sheet (collectively, the “Fees”).

3.2 Invoices.

Within 20 Business Days after the end of each calendar month, BPWCP and each of its Affiliates providing Services will submit one invoice to the Company for all Services either provided during such calendar month under this Agreement or to be provided in future months and which are to be paid in advance pursuant to a Term Sheet. The invoices will include a reasonably detailed description of, and specify the amount for, each type of Service.

3.1 Time of Payment; Disputes; Interest; No Deductions.

(a)The Company shall pay, or cause to be paid, all amounts due under this Agreement within 20 Business Days after the proper delivery of each invoice (the “Payment Date”). Such payment shall be made in immediately available funds by bank wire transfer to an account designated by BPWCP.

(b)The Company shall promptly notify BPWCP, and in no event later than 10 Business Days following receipt of such invoice, of any objection of the Company with regard to such invoice. If requested by the Company in such notice of any objection, BPWCP shall promptly furnish to the Company reasonable documentation to substantiate the amounts billed including listings of the dates, times, and amounts of the Services in question, where applicable and practicable. Upon delivery of such documentation, the Company and BPWCP shall cooperate in good faith and use Reasonable Efforts to resolve any remaining dispute expeditiously. Upon the request of BPWCP, the Company shall escrow disputed amounts that exceed US$250,000. Neither Party shall place (or allow the placement) of any lien or encumbrances on or against any such escrowed amounts. In connection therewith, each Party hereby agrees to indemnify, defend and hold harmless the other Party against any and all Losses (as defined below) arising in connection with any such lien or encumbrance placed upon the escrowed amounts. Any adjustment payment required to be made in accordance with the resolution of a dispute shall be made within five (5) Business Days of the date of that resolution.

(c)If the Company has not paid any undisputed amounts of an invoice by its due date, such undisputed amounts will accrue interest at the maximum rate allowed by Law or a rate equal to the Interest Rate and the Company shall pay BPWCP such accrued interest.

(d)Any amount subsequently determined to have been wrongly withheld and any amount subsequently determined to have been overbilled, shall bear interest at the above rate from (and including) the date when the amount should have been paid if the dispute had not occurred until (but excluding) the date of actual payment in full of such amount and such interest.

(e)Any fees and charges that are paid by the Company (whether or not disputed) and that are subsequently determined to have been overbilled shall bear interest at the above rate from (and including) the date when the amount was paid until (but excluding) the date of actual payment in full of such amount and such interest.

(f)Subject to compliance with applicable Law, the Parties shall cooperate so as to minimize the requirement for any such withholding. If the Parties agree to the Payment Date, they may net invoices for all undisputed amounts that are due to each other on the same date pursuant to this Agreement. In that case, prior to the Payment Date, the Parties shall confirm in writing the invoice amounts and the amount remaining, if any, after net out to the Party owed the balance. Notwithstanding the above, payments for any quantity, quality, demurrage or other claims shall not be included in the netting of invoices.

3.2 Taxes.

BPWCP and the Company shall each be responsible for fifty percent (50%) of all state, county and local transfer, sales, use, stamp, registration or other similar Taxes resulting from the transactions contemplated by this Agreement.

3.3 Audit.

Either Party, upon at least thirty (30) days prior written notice to the other Party, shall have the right to audit such other Party's records pertaining to performance under this Agreement and the fees charged hereunder, in each case during the prior twelve (12) month period or any portion thereof. The Party conducting the audit shall do so at the offices of the other Party, unless otherwise agreed, during normal business hours, and shall make every reasonable effort to conduct the audit in a manner that will result in a minimum of inconvenience to the Party being audited. The Party audited shall provide reasonable cooperation and assistance in the conduct of the audit and shall reply in writing to an audit report within sixty (60) days after receipt of such report.

ARTICLE 4FORCE MAJEURE

(a)Subject to Paragraph (c) below, a Party will not be liable for any failure to perform its obligations under this Agreement, including any transaction, to the extent that such failure or delay may be due to any of the following events (each such event, a “Force Majeure” event):

(i) Compliance with any requirement of applicable Laws.

(ii) Restriction or cessation of provision of Services due to the imposition of conditions or requirements by any Government Authority that makes it necessary to cease or to reduce the provision of the Services.

(iii) Hostilities of war (declared or undeclared), embargoes, blockades, civil unrest, riots or disorders, terrorism, or sabotage.

(iv) Fires, explosions, lightning, maritime peril, collisions, storms, landslides, earthquakes, floods, and other acts of God.

(v) Strikes, lockouts, or other labor difficulties (whether or not involving employees of BPWCP or the Company); provided, however, that settlement of strikes and other labor difficulties shall be wholly within the discretion of the Party having difficulty.

(vi) Disruption or breakdown of production or transportation facilities, equipment, labor or materials, including, without limitation, the closing of harbors, railroads or pipelines.

(vii) Any other cause whether or not of the same class or kind, whether foreseeable or unforeseeable, that is reasonably beyond the control of either Party to the extent such event prevents or interferes with the performance of this Agreement, including any transaction, which, by the exercise of due diligence, such Party could not have been able to remedy, avoid or overcome.

(b)For purposes of this Agreement, the term “Force Majeure” expressly excludes (a) a failure of performance of any person other than the Parties, except to the extent that such failure was caused by an event that would otherwise satisfy the definition of a Force Majeure event as set forth in this Article 4, (b) any lack of a market or unfavorable market conditions for any good supplied hereunder, (c) any failure by a Party to apply for, obtain or maintain any permit, approval, or right of way necessary under applicable Law for the performance of any obligation hereunder, (d) a Party’s inability to economically perform its obligations under this Agreement, and (e) any failure of performance that could have been avoided through the use of commercially reasonable alternative sources and workarounds.

(c)Nothing in Paragraph (a) above shall relieve the Company of the obligation to pay in full any amount due for the Services actually provided hereunder.

(d)In the event that either Party believes a Force Majeure event has occurred that will require it to invoke the provisions in this Article 4, such Party shall give verbal notice to the other Party as soon as possible followed by written notice, within two (2) Business Days following the occurrence of such event, of the underlying circumstances of the particular causes of Force Majeure, the expected duration thereof and the Services affected. The Party claiming Force Majeure shall also use Reasonable Efforts to give the other Party notice of termination of the event of Force Majeure and the date when performance is expected to resume.

(e)If provision of the Services are suspended pursuant to this Article 4 and said suspension continues for a period of thirty (30) days or more, such Services may be cancelled at the option of the Party other than the Party claiming Force Majeure by giving written notice to the Party claiming Force Majeure and without further liability of either of the Parties

with respect to such Services (other than any obligations arising pursuant to this Agreement prior to the occurrence of such Force Majeure event).

ARTICLE 5INDEMNITY AND RELEASE

5.1 IP Indemnities.

(a)Subject to Section 5.1(b), Company agrees for itself, its successors and permitted assigns, to defend and hold the BP Indemnitees harmless from and against all Claims, and pay Indemnified Losses incurred by or imposed on any of them with respect to such Claims, that arise in connection with the Company, its successors, or permitted assigns’ use of any of the Third Party IP in a manner not authorized by this Agreement.

(b)BP agrees for itself, its successors and permitted assigns, to defend and hold the Company Indemnitees harmless from and against all Claims, and pay Indemnified Losses incurred by or imposed on any them with respect to such Claims, that (i) arise as a result of any breach of this Agreement by BP or any of its Affiliates, or (ii) (provided Company complies with its obligations under this Agreement) are based on an allegation that the possession or use of any Third Party IP by Company, its successors or permitted assigns infringes or constitutes a misappropriation of the Intellectual Property rights or contractual rights of any third party.

5.2 Indemnification Procedures; Determination of Losses; Limitation of Losses.

(a)A BPWCP Indemnitee or Company Indemnitee (each an “Indemnified Party”) may make a claim for indemnification hereunder by giving written notice (a “Claim Notice”) to the indemnifying party. Such notice shall briefly explain the nature of the claim and the parties known to be involved, and shall specify the amount thereof to the extent known by the Indemnified Party. The indemnifying party shall respond to any Indemnified Party that has given a Claim Notice (a “Claim Response”) within 20 Business Days (the “Response Period”) after the date that the Claim Notice is given. Any Claim Notice or Claim Response shall be given in accordance with the notice requirements hereunder, and any Claim Response shall specify whether or not the indemnifying party disputes the claim for indemnification described in the Claim Notice and whether the indemnifying party will defend the Claim specified in such Claim Notice at its own cost and expense. If the indemnifying party fails to give a Claim Response within the Response Period, the indemnifying party shall be deemed to have disputed the claim for indemnification described in the related Claim Notice and to have elected not to defend any Claim specified in such Claim Notice. The aforesaid election or deemed election by the indemnifying party not to assume the defense of Indemnified Party with respect to any Claim specified in such Claim Notice, however, shall, except as contemplated by the following proviso, be subject to the right of the indemnifying party to subsequently assume the defense of Indemnified Party with respect to any such Claim at any time prior to settlement or final determination thereof; provided that the indemnifying party shall not have the right to so assume the defense of Indemnified Party with respect to any Claim which the indemnifying party has (or is deemed to have) previously elected not to defend to the extent that Indemnified Party would be materially prejudiced as a result of such assumption.

(b)The Losses giving rise to any indemnification obligation hereunder shall be limited to the actual loss incurred by Indemnified Party (i.e., reduced by any Tax benefit afforded to Indemnified Party and insurance proceeds or other payment or recoupment payable to Indemnified Party as a result of the events giving rise to the claim for indemnification). Upon the request of the indemnifying party, Indemnified Party shall provide the indemnifying party with information sufficient to allow the indemnifying party to calculate the amount of the indemnity payment in accordance with this Section 5.2(b). An Indemnified Party shall take all reasonable steps to mitigate damages in respect of any claim for which it is seeking indemnification and shall use Reasonable Efforts to avoid any costs or expenses associated with such claim and, if such costs and expenses cannot be avoided, to minimize the amount thereof.

(c)NOTWITHSTANDING ANYTHING CONTAINED TO THE CONTRARY IN ANY OTHER PROVISION OF THIS AGREEMENT, NEITHER BPWCP NOR THE COMPANY SHALL BE LIABLE UNDER OR IN CONNECTION WITH THE AGREEMENT OR UNDER ANY OTHER THEORY OF LAW, WHETHER IN CONTRACT, TORT OR OTHERWISE, FOR ANY SPECIAL, INDIRECT, CONTINGENT, INCIDENTAL, EXEMPLARY, PUNITIVE, CONSEQUENTIAL OR OTHER SIMILAR DAMAGES (INCLUDING ANY DAMAGES ON ACCOUNT OF LOST PROFITS OR OPPORTUNITIES OR BUSINESS INTERRUPTION OR DIMINUTION IN VALUE).

5.3 Disclaimer and Release.

TO THE MAXIMUM EXTENT ALLOWED BY LAW, AND EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT OR IN THE PSA: THE BPWCP INDEMNIFIED PARTIES MAKE NO (AND DISCLAIM ANY AND ALL) REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE SERVICES AND THE PERFORMANCE THEREOF, INCLUDING ANY WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE OR MERCHANTABILITY.

5.4 Acknowledgement of the Parties; Conspicuousness.

Each Party agrees that it will not contest the validity or enforceability of any provisions of this agreement on the basis that the Party had no notice or knowledge of such provisions or that such provisions are not “conspicuous.” The Parties acknowledge and agree that the provisions contained in this Agreement that are set out in “ALL CAPS” satisfy the requirement of the “express negligence rule” and any requirement at law or in equity that provisions contained in a contract be conspicuously marked or highlighted.

ARTICLE 6

CONFIDENTIALITY

6.1 Confidential Information.

(a)For purposes of this Agreement, “Business Information” means all proprietary technical, business, and financial data, documents, plans, Intellectual Property, and other information, in whatever form, relating to the operations, businesses, suppliers, customers, personnel or assets of a Party or its Affiliates (the “Discloser”) that is disclosed to or received by

the other Party (the “Recipient”) in the course of or in connection with this Agreement. Each Recipient shall hold the Business Information of the Discloser, and will cause its Affiliates, directors, officers, employees, agents, representatives, successors, assigns, accountants, and advisors to hold, in confidence, and not use or disclose such Business Information, except as reasonably required for the purposes of this Agreement or otherwise expressly permitted hereunder. The restrictions of this Article 6 shall not apply to Business Information that

(i) is or becomes generally available to the public through no breach of this section by the Recipient;

(ii) was in the Recipient's possession free of any obligation of confidence prior to the time of receipt of it by the Recipient hereunder;

(iii) is developed by the Recipient without benefit of any of the Discloser's Business Information;

(iv) is rightfully obtained by the Recipient from third parties authorized at that time to make such disclosure without restriction; or

(v) is identified in writing by the Discloser as no longer proprietary or confidential.

(b)If a Recipient or any of its respective Affiliates, directors, officers, employees, or agents is requested pursuant to, or required by, Law to disclose any Business Information of the Discloser, such Recipient shall notify the Discloser promptly in writing of such requirement so that the Discloser may seek a protective order or other appropriate remedy or waive compliance with this Article 6, and if no such protective order or other remedy is obtained, or the Discloser waives compliance with this Article 6, the Recipient will disclose only that portion of such Business Information which it is advised in writing by its legal counsel is legally required to be disclosed and will use its Reasonable Efforts to obtain assurances that confidential treatment will be accorded such Business Information.

6.2Length of Confidentiality Obligation. Each Party agrees to maintain and protect the confidentiality of any Business Information that constitutes a trade secret for as long as such information remains a trade secret, and to protect all other Business Information of the other Party as set forth in this Article 6 for a period of [five]years from the Termination Date.

ARTICLE 7ADDITIONAL MATTERS

7.1Governing Law. The Agreement shall be governed by the internal laws of the State of Texas, without giving effect to its provisions relating to choice of law. The United Nations Convention on Contracts for the International Sale of Goods shall not apply to this Agreement.

7.2Arbitration. Any unresolved dispute arising out of or relating to this Agreement, or the breach, termination or validity thereof, shall be finally settled in accordance with the American Arbitration Association (“AAA”) rules for commercial arbitration in effect on the date of this Agreement. The arbitrators shall be independent and selected by AAA. If the total amount in dispute is less than One Million US Dollars ($1,000,000) there shall be a single (1) arbitrator. If the total amount in dispute is One Million US Dollars ($1,000,000) or greater, there shall be three (3) arbitrators. The award of the arbitrators shall be accompanied by a reasoned opinion. The United States Arbitration Act shall govern the interpretation, enforcement, and proceedings pursuant to the arbitration clause in this Agreement. Judgment upon the award rendered by the arbitrator(s) may be entered by any court having jurisdiction thereof. The place of arbitration shall be Houston, Texas, and the language of the arbitration shall be English. The arbitrators are not empowered to award consequential, indirect, special, punitive or exemplary damages, and each Party hereby irrevocably waives any damages in excess of actual damages. Either Party may apply to the arbitrators seeking injunctive relief until the arbitration award is rendered or the controversy is otherwise resolved. Either Party also may, without waiving any remedy under this Agreement, seek from any court having jurisdiction any interim or provisional relief that is necessary to protect the rights or property of that Party, pending the establishment of the arbitral tribunal (or pending the arbitral tribunal's determination of the merits of the controversy). The United States District Court for the Central District of California and the courts of the State of California located in Los Angeles County shall have jurisdiction to hear any action to compel arbitration or any other judicial proceedings with respect to this Agreement.

7.3Assignment.

(a)Neither of the Parties to this Agreement shall assign this Agreement or any rights or obligations hereunder without the previous consent in writing of the other Party, which shall not be unreasonably withheld or delayed. In the event of an assignment in accordance with the terms of this Section 7.3, the assignor shall nevertheless remain responsible for the proper performance of this Agreement. Notwithstanding the foregoing, either Party may assign this Agreement to any of its Affiliates.

(b)Any purported assignment other than in accordance with this Section 7.3 is null, void, and of no effect

7.4Incorporated Terms.

(a)The following provisions of the PSA are hereby incorporated by reference into this Agreement (except that references therein to the PSA will be deemed to be references to this Agreement, unless context clearly dictates otherwise): Schedule 1.1 (Definitions and Interpretations); Section 20.2 (No Third-Party Beneficiaries); Section 20.4 (Counterparts); Section 20.5 (Notices); and Section 20.8 (Severability); and, for purposes of convenience, copies of the foregoing are appended hereto as Exhibit A.

(b)Capitalized terms used but not defined in this Agreement have the meanings ascribed to such terms in the PSA.

7.5Amendment; Entire Agreement.

(a)No amendment of any provision of this Agreement (including the Term Sheets) will be valid unless the same is in writing and signed by the Company and BPWCP.

(b)This Agreement (including the Term Sheets and all schedules hereto) and the applicable Transaction Documents constitute the entire agreement between the Parties and supersede any prior understandings, agreements, or representations by or between the Parties, written or oral, to the extent they have related in any way to the subject matter of this Agreement.

7.6Conflict or Inconsistency. In the event of any inconsistency or conflict between provisions in the body of this Agreement and the provisions in a Term Sheet, the provisions in the relevant Term Sheet shall prevail.

7.7Anti-Corruption.

(a)The Company and BPWCP each warrant and undertake to the other that in connection with this Agreement and the performance thereof, they will each respectively comply with all applicable Laws, regulations, rules and requirements of the United States of America, the United Kingdom or any other relevant jurisdiction relating to anti-bribery or anti-money laundering and that they shall each respectively take no action which would subject the other to fines or penalties under such Laws, regulations, rules or requirements.

(b)The Company and BPWCP each represent, warrant and undertake to the other that they shall not, directly or indirectly pay, offer, give or promise to pay or authorize the payment of, any monies or other things of value to:

(i) a government official or an officer or employee of a government or any department, agency or instrumentality of any government;

(ii) an officer or employee of a public international organization;

(iii) any person acting in an official capacity for or on behalf of any government or department, agency, or instrumentality of such government or of any public international organization;

(iv) any political Party or official thereof, or any candidate for political office; or

(v) any other person, individual or entity at the suggestion, request or direction or for the benefit of any of the above-described persons and entities.

(c)The Company or BPWCP may terminate this Agreement forthwith upon written notice to the other at any time, if in their reasonable judgment the other is in breach of any of the above representations, warranties or undertakings.

7.8Compliance with Laws. In connection with the performance of their duties and obligations hereunder, and the Parties each agree to comply with all applicable Laws, including those related to antitrust and competition law matters; provided however, notwithstanding anything to the contrary in this Agreement, neither Party shall take any action that is prohibited by or penalized under the Laws of the United States.

7.9Independent Parties. Notwithstanding anything in this Agreement to the contrary, the Company and BPWCP are not and shall not be considered to be joint venturers, partners or agents (except as specified in this Agreement) of the other and neither shall have the power to bind or obligate the other.

The Parties have executed and delivered this Agreement as of the date first written above.

BP WEST COAST PRODUCTS LLC
By:
	Name:
	Title:
TESORO REFINING AND MARKETING COMPANY
By:
	Name:
	Title:

Schedule 1.1(b) Term Sheets

Schedule 1.1(b)(i) Base IT Services		2
	Base IT Services, Subpart 1 Base IT Service 1: I-Link Service	3
	Base IT Services, Subpart 2 Base IT Service 2: Extranet Service	5
	Base IT Services, Subpart 3 Base IT Service 3: IT Management Support Service	7
Schedule 1.1(b)(ii) Price Book Service		9
Schedule 1.1(b)(iii) Shared IT Systems Service		13
Schedule 1.1(b)(iv) Business Applications Services		19
	Business Applications Services, Subpart 1 Applications Service 1: Refining Applications Service	21
	Business Applications Services, Subpart 2 Applications Service 2: Supply and Optimization Applications Service	23
	Business Applications Services, Subpart 3 Applications Service 3: Pipelines and Transport Operations Applications Service	25
Schedule 1.1(b)(v) Payment Card Processing and Applications		32
Schedule 1.1(b)(vi) ABSC Service		1

1

Schedule 1.1(b)(i)

Base IT Services

OVERVIEW:

BPWCP will provide the following services that are considered “Base IT Services”:

• Base IT Service 1: I-Link Service

• Base IT Service 2: Extranet Service

• Base IT Service 3: IT Management Support Service

The following subparts of this Schedule 1.1(b)(i) (the “Subparts”) describe each of the Base IT Services in more detail.

2

Base IT Services, Subpart 1

Base IT Service 1: I-Link Service

1 SERVICE OVERVIEW

The Base IT Service 1 described herein shall be referred to as the “I-Link Service.” I-Link is a proprietary connectivity solution of BPWCP that provides secure remote user access to applications and services residing on BPWCP’s global network (the “Network”).

2 DELIVERABLES AND CONDITIONS

2.1A mutually agreed list of named employees and contractors of the Company will be provided with I-Link accounts and given a specific profile of access rights to the Network.

2.2Provide and manage I-Link account services.

2.3Provide, manage, support and maintain secure links to sites and applications that will be accessed via I-Link. The applications that will be accessed with I-Link are limited to those applications listed in Schedule 1.1(b)(i), Schedule 1.1(b)(ii), Schedule 1.1(b)(iii), Schedule 1.1(b)(iv), Schedule 1.1(b)(v), and Schedule 1.1(b)(vi).

2.4Access to the Network through the I-Link Protocol will be implemented in alignment with BPWCP’s applicable digital security policies.

Help desk support for the I-Link Service and applicable application servers will be provided. The Company shall be solely responsible for desktop support of its PC image.

3 CONTACT INFORMATION

Contact for this service will be through BPWCP’s Service Desk.

Issue escalation for issues with services described in this Subpart will be through the following contacts:

BPWCP Contact:

Name: David Skudlarek

Telephone: +1 (630) 836-4710

E-Mail: david.skudlarek@bp.com

3

Company Contact:

Name: Judy Howard

Telephone: (210) 626-6967

E-Mail: judy.p.howard@tsocorp.com

4 FEES

Starting July 1, 2012 or on Closing, whichever occurs later, the Company will pay BPWCP a US $150 per user per year. This amount includes no more than 30 days of work per month by the number of FTEs initially assigned to the Service by BPWCP. The Company shall make all such payments to BPWCP quarterly in advance. Should the support level required to perform the Service be more than such 30 days of work by such FTEs, then BPWCP will advise the Company of such requirement and request a project be developed and designed and billed in addition to the base payment as an Additional Service. BPWCP will have no obligation to perform such Additional Service unless and until the terms and price for such Additional Service are agreed to in writing by the Company.

Users**

**[Final number of users will be determined prior to Closing.]

The costs set forth in this section do not include Fees to migrate the Business Information and/or related systems of the Company from BPWCP’s systems to the Company’s.

5 TERM AND TERMINATION

The Term Sheet Termination Date of the Service to be provided pursuant to this Subpart shall be the earlier to occur of: (a) the day on which the 12 month anniversary of the Closing Date occurs; or (b) the effective date of early termination by the Company or BPWCP in accordance with Section 2.3 of the Agreement, with no early termination penalties, provided that such effective date is not earlier than 90 days after BPWCP’s receipt of the termination notice; and further provided however, that the term of this Service shall at all times be co-terminus with the term of the Business Applications Services in Schedule 1.1(b)(iv). Upon signing of the PSA, the Company reserves the right to accept or decline this Subpart. If the Company declines or terminates this Subpart, BP is released from any obligation to provide services under any of the other Subparts of this Schedule 1.1(b)(i).

4

Base IT Services, Subpart 2

Base IT Service 2: Extranet Service

6 SERVICE OVERVIEW

The Base IT Service 2 described herein shall be referred to as the “Extranet Service.” The Extranet Service is a proprietary connectivity solution of BPWCP that provides secure remote access between users and applications on the Company’s network and applications residing on the Network.

7 DELIVERABLES AND CONDITIONS

• Provide and manage Extranet Service.

• Provide, manage, support and maintain secure links to sites and applications that will be accessed via BPWCP’s extranet. The Service Provider applications that will be accessed via the Extranet are limited to applications listed in Schedule 1.1(b)(i), Schedule 1.1(b)(ii), Schedule 1.1(b)(iii), Schedule 1.1(b)(iv), Schedule 1.1(b)(v), and Schedule 1.1(b)(vi).

• Access to the Network through BPWCP’s extranet will be implemented in alignment with BPWCP’s applicable digital security policies.

• All costs associated with delivering this service are included in Section 4 of this Subpart.

Help desk support for the Extranet Service will be provided.

8 CONTACT INFORMATION

CONTACT FOR THIS SERVICE WILL BE THROUGH BPWCP’S SERVICE DESK. DETAILED CONTACT INFORMATION IS provided in the Base IT Services, Subpart 3, IT Management Support Service.

Issue escalation for issues with services described in this Subpart will be through the following contacts:

BPWCP Contact:

Name: David Skudlarek

Telephone: +1 (630) 836-4710

E-Mail: david.skudlarek@bp.com

Company Contact:

Name: Judy Howard

Telephone: (210) 626-6967

5

E-Mail: Judy.P.Howard@tsocorp.com

9 FEES

Starting July 1, 2012 or on Closing, whichever occurs later, the Company will pay BPWCP a lump sum payment of US $94,000 per month (US $282,000 per quarter). This amount includes no more than 30 days of work per month by the number of FTEs initially assigned to the Service by BPWCP. The Company shall make all such payments to BPWCP quarterly in advance. Should the support level required to perform the Service be more than such 30 days of work by such FTEs, then BPWCP will advise the Company of such requirement and request a project be developed and designed and billed in addition to the base payment as an Additional Service. BPWCP will have no obligation to perform such Additional Service unless and until the terms and price for such Additional Service are agreed to in writing by the Company. The costs set forth in this section do not include Fees to migrate the Business Information and/or related systems of the Company from BPWCP’s systems to the Company’s.

10 TERM AND TERMINATION

The Term Sheet Termination Date of the Service to be provided pursuant to this Subpart shall be the earlier to occur of: (a) the day on which the 12 month anniversary of the Closing Date occurs; or (b) the effective date of early termination by the Company or BPWCP in accordance with Section 2.3 of the, Agreement, with no early termination penalties, provided that such effective date is not earlier than 90 days after BPWCP’s receipt of the termination notice; and further provided however, that the term of this Service shall at all times be co-terminus with the term of the Business Applications Services in Schedule 1.1(b)(iv). Upon signing of the PSA, the Company reserves the right to accept or decline this Subpart. If the Company declines or terminates this Subpart, BP is released from any obligation to provide services under any of the other Subparts of this Schedule 1.1(b)(i).

6

Base IT Services, Subpart 3

Base IT Service 3: IT Management Support Service

11 SERVICE OVERVIEW

The Base IT Service 3 described herein shall be referred to as the “IT Management Support Service.” The IT Management Support Service relates to support services from BPWCP provided to the Company in connection with any BPWCP Term Sheets that require the Company’s use of software or IT systems.

12 DELIVERABLES AND CONDITIONS    

BPWCP will address and resolve requests from employees and contractors of the Company related to the software and IT systems included in the services in accordance with the level of services and limitations described in the Agreement. Such services can be obtained through BPWCP Contact David Skudlarek at (630) 836-4710 or david.skudlarek@bp.com, which is referred to in BPWCP Term Sheets as “BPWCP’s Service Desk.”

13 CONTACT INFORMATION

The individuals listed below will be the contacts for both the IT Management Support Service and issue escalation for all Base IT Services. These individuals will also be the authorized representatives of the BPWCP Manager and Company Manager, respectively, with regard to the Shared IT Systems Service, Business Applications Services, ABSC Service, and Base IT Services.

BPWCP IT Services Manager:

Name: David Skudlarek

Telephone: +1 (630) 836-4710

E-Mail: david.skudlarek@bp.com

Company IT Services Manager:

Name: Judy Howard

Telephone: (210) 626-6967

E-Mail: Judy.P.Howard@tsocorp.com

14 FEES

Starting July 1, 2012 or on Closing, whichever occurs later, the Company will pay BPWCP a lump sum payment of US $55,000 per month (US $165,000 per quarter). This amount includes no more than 30 days of work per month by the number of FTEs initially assigned to the Service by BPWCP. Should the support level required to perform the Service be more than such 30 days of work by such FTEs, then BPWCP will advise the Company of such requirement and request a project be developed and designed and billed in addition to the base payment as an Additional Service. BPWCP will have no obligation to perform such Additional Service unless and until the terms and price for such Additional Service are agreed to in writing by the Company. The costs

7

set forth in this section do not include Fees to migrate the Business Information and/or related systems of the Company from BPWCP’s systems to the Company’s.

15 TERM AND TERMINATION

The Term Sheet Termination Date of the Service to be provided pursuant to this Subpart shall be the earlier to occur of: (a) the day on which the 12 month anniversary of the Closing Date occurs; or (b) the effective date of early termination by the Company or BPWCP in accordance with Section 2.3 of the Agreement, with no early termination penalties, provided that such effective date is not earlier than 90 days after BPWCP’s receipt of the termination notice; and further provided however, that the term of this Service shall at all times be co-terminus with the term of the longest duration of any Term Sheet contained herein and agreed to by the Company. Upon signing of the PSA, the Company reserves the right to accept or decline this Subpart. If the Company declines or terminates this Subpart, BP is released from any obligation to provide services under any of the other Subparts of this Schedule 1.1(b)(i).

8

Schedule 1.1(b)(ii)

Price Book Service

16 SERVICE OVERVIEW

As specified in the Master Franchise Agreement between BPWCP and the Company, the Company (also referred to as the “Master Franchisee”) is responsible for providing price book support for ampm Mini Markets (as defined in the Master Franchise Agreement) in the Development Area (as defined in the Master Franchise Agreement). This Schedule 1.1(b)(ii) addresses the provision by BPWCP of certain support services relating to the price book (the “Price Book Service”) should the Company require these interim services.

17 DESCRIPTION OF SERVICE

2.1BPWCP will provide the following prior to the Company opening of new sites:

a.Initial download of active articles currently available in the ampm price book for set-up in back office software (BOS) at retail sites

b.Initial download of known area vendors

c.Current, active ampm promotions

d.Grand Opening promotions (if requested)

e.ampm proprietary coupons offers

f.Initial keyboard template for point of sale (POS)

g.Templates for site specific flex articles

2.2During the Term of this Term Sheet, the Price Book Service will be provided for Company ARCO Sites that continue to use the GSS Retalix POS/BOS/Pocket Office solution (BP POS System). Upon conversion by the Company from the BP POS System to the Company’s POS System at any Company ARCO Site, such Company ARCO Site shall be excluded from the scope of this Term Sheet and Price Book Services shall not be provided hereunder with respect to any such site.

2.3BPWCP will provide the following on-going maintenance services of price book to existing sites. This includes:

9

a.Periodic ampm price book downloads to the BOS at retail sites with updates to product, and area vendor information

b.Downloads of new articles including proprietary, and their associated attributes such as costs and suggested retail price, based on ampm planograms

c.    Monthly and ad-hoc promotional pricing downloads as needed

d.    ampm Proprietary Coupon offers

e.    Select Manufacturer Coupon set up

f.    Multi-Site Franchise (MSF) price book support including set-up and removal as requested

2.4BPWCP will provide the Price Book Service, during business regular hours, Monday through Friday, from 8:00 am to 5:00 pm PST.

2.5BPWCP will provide Company access to and use of the application software listed in Appendix A, attached to this Term Sheet, and certain services in support of the Company’s use of such application software in the Business:

a.Application License Management – the Company is restricted to use of only the available license numbers listed in this Term Sheet subject to license agreements with Third Parties, as applicable, during the term of the Price Book Service.

b.Application Access Administration – this service includes setting up access for new users and modifying access for existing users. The Company Sponsor will be solely responsible for approving or denying the access requests BPWCP receives from the Company related to this service and the Company Sponsor will have all accountability for any segregation of duties issues that are created as a result of such approvals.

c.Implementation of Critical Software Patches and Corrections – this service includes installation of software patches and corrections as required by the relevant licensor of the application software listed in each Subpart of this Term Sheet to address problems that surface due to normal use of the application software; provided, however, such patches and corrections will be provided according to BPWCP’s schedule. This service does not include implementation of new software versions or upgrades.

10

Sites will receive price book technical support through the Business Service Center (BSC) under Schedule 1.1(b)(viii) for an additional cost.

18 ACTIVITIES NOT COVERED BY THE SERVICES

The Parties agree and acknowledge that the following activities are expressly excluded from the Price Book Services:

• Maintaining franchisees’ price book including item costs, retail prices, taxability, keyboard set-up, and flex article management.

19 PRICING AND PAYMENT TERMS

Payment limited to the Price Book Service, excluding Business Service Center support, shall be a lump sum payment of $165,000 per month ($495,000 per quarter). The Company shall make all such payments to BPWCP quarterly in advance. Should the price book support level extend beyond business hours, the Company will be billed at $85/hr.

20 TERM

The Term Sheet Termination Date of the Price Book Service to be provided pursuant to this Term Sheet shall be the earlier to occur of: (a) the last day of the calendar month in which the 12 month anniversary of the Closing Date has occurred; or (b) the date set forth in a written notice from the Company stating its election to terminate this Term Sheet on such date, provided that such date is no earlier than 90 days from BPWCP’s receipt of such notice. After such termination, BPWCP’s obligation to retain responsibility for providing the ampm price book articles, promotions, and coupons to the Company shall be solely pursuant to the Master Franchise Agreement. At such time, BPWCP shall have no responsibility for providing price book support for ampm Mini Markets in the Development Area and Master Franchisee will be responsible for providing all such support.

21 CONTACT INFORMATION

BPWCP Contact:

Name: Donna Sanker

Telephone: (714) 670-5346

Email: donna.sanker@bp.com

Company Contact:

Name: Judy Howard

Telephone: (210) 626-6967

E-Mail: Judy.P.Howard@tsocorp.com

11

Appendix A

Software for use by the Company under the Price Book Service*

Application Software Name	Vendor Name	Note
MSF Portal	SAP
RemoteWare XcelleNet	Sybase
Retalix Pocket Office (RPO)	Retalix	Included in Retalix support within the Payment Cards Processing and Applications Term Sheet in Schedule 1.1(b)(v)
S2K (ampm)	Sigma Oil Company

This is a list of major applications that will be used by the Company, which are supported by additional software (e.g. middleware) that is included as part of the Services.

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Schedule 1.1(b)(iii)

Shared IT Systems Service

1 SERVICE OVERVIEW

This Shared IT Systems Service Term Sheet addresses BPWCP providing certain Administration, Master Data and Integration systems in support of the Company’s use of the application software described in the Business Applications Services Term Sheet, the Price Book Services Term Sheet and the Payment Card Processing and Applications Term Sheet.

2 DELIVERABLES AND CONDITIONS

BPWCP will provide the following services, which constitute the “Shared IT Systems Service”:

a.    Application License Management – subject to license agreements with Third Parties, as applicable, during the term of the applicable Service.

b.    Incident Management and Problem Resolution – specific to the role of these systems in support of the services described in the Business Applications Services Term Sheet, the Price Book Services Term Sheet and the Payment Card Processing and Applications Term Sheet.

c.    Implementation of Critical Software Patches and Corrections – this service includes installation of software patches and corrections as required by the relevant licensor of the application software listed in Section 4 of this Term Sheet to address problems that surface due to normal use of the application software; provided, however, such patches and corrections will be provided according to BPWCP’s schedule. This service does not include implementation of new software versions or upgrades.

d.    Monitoring of Production Environment – this service includes monitoring of production environments for the purpose of determining if such production environments are operating properly and to advise the Company of any planned maintenance or downtime that BPWCP believes is required to sustain the integrity of such production environments.

3 CONTACT INFORMATION

Issue escalation for issues with services described in this Term Sheet will be through the following contacts:

BPWCP contact for issue escalation:

Name: Eric Weck

Telephone: (630) 836-4618

E-Mail: Eric.weck@bp.com

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Company contact for issue escalation:

Name: Judy Howard

Telephone: (210) 626-6967

E-Mail: Judy.P.Howard@tsocorp.com

4 USE OF BPWCP'S SOFTWARE AND SOFTWARE LICENSES

The list of software that is anticipated to be used under this Service is as follows:

Software for use under Shared IT Systems Service
Software Name	Vendor Name
EDI Websphere Data Interchange	IBM
ETE	BP
IL3 / Tibco	BP
ISE – Informatica Shared Environment	Informatica
SAP Customer Master Data Management MR4 / ER4 / IR4	SAP
RS Master	BP
RSDB	BP
SAP Vendor/Materials Master Data Management IRV	SAP
SCDB	BP
Tivoli Access Manager – ITIM	IBM
Vitria	Vitria

This is a list of major applications that will be used by the Company, which are supported by additional software (e.g. middleware) that is included as part of the Services.

5 FEES

Starting on the Closing Date, the Company will pay BPWCP a lump sum payment of US $184,724 per month (US $554,173 per quarter). This amount includes no more than 30 days of work per month by the number of FTEs initially assigned to the Service by BPWCP. The Company shall make all such payments to BPWCP quarterly in advance. Should the support level required to perform the Service be more than such 30 days of work by such FTEs, then BPWCP will advise the Company of such requirement and request a project be developed and designed and billed in addition to the base payment as an Additional Service. BPWCP will have no obligation to perform such Additional Service unless and until the terms and price for such Additional Service are agreed to in writing by the Company.

The dollar amounts set forth in this Section 5 have been determined based on the software listed above; any changes in these items will result in a change in the cost for the Services provided pursuant to this Term Sheet. The costs set forth in this section do not include Fees to migrate the Business Information and/or related systems of the Company from BPWCP’s systems to the Company’s.

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6 TERM AND TERMINATION

The Term Sheet Termination Date of the Service to be provided pursuant to this Term Sheet shall be the earlier to occur of: (a) the day on which the 12 month anniversary of the Closing Date occurs; or (b) the effective date of early termination by the Company or BPWCP in accordance with Section 2.3 of the Agreement, with no early termination penalties, provided that such effective date is not earlier than 90 days after BPWCP’s receipt of the termination notice; and further provided however, that the term of this Service shall at all times be co-terminus with the term of the longest duration of any of the Business Applications Services Term Sheet, the Price Book Services Term Sheet and the Payment Card Processing and Applications Term Sheet. Upon signing of the PSA, the Company reserves the right to accept or decline this Term Sheet. If the Company declines or terminates this term sheet, BP is released from any obligation to provide services under any of the Business Applications Services Term Sheet, the Price Book Services Term Sheet and the Payment Card Processing and Applications Term Sheet.

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Schedule 1.1(b)(iv)

Business Applications Services

22 TERM SHEET OVERVIEW

1.1    This Business Applications Services Term Sheet addresses BPWCP (a) allowing the Company to access and use certain application software, and (b) providing certain services to the Company in support of the Company’s use of such application software in the Refinery Business, the Carson Logistics and Marketing Terminals Business and/or the Wilmington Calciner Business.

1.2    BPWCP will provide the following services that are considered the “BusinessApplications Services”:

a.Applications Service 1: Refining Applications Service

b.Applications Service 2: Supply and Optimization Applications Service

c.Applications Service 3: Pipelines and Transport Operations Applications Service

23 COMMON DELIVERABLES AND CONDITIONS

The following deliverables apply to all services described below in the Subparts of this Term Sheet:

a.Application License Management – the Company is restricted to use of only the available license numbers listed in each Subpart of this Term Sheet subject to license agreements with Third Parties, as applicable, during the term of the applicable Service.

b.First Level Helpdesk – this service is provided for authorized users of the application software listed in each Subpart of this Term Sheet and includes incident and problem identification and case assignment.

c.Application Access Administration – this service includes setting up access for new users and modifying access for existing users. The Company Sponsor will be solely responsible for approving or denying the access requests BPWCP receives from the Company related to this service and the Company Sponsor will have all accountability for any segregation of duties issues that are created as a result of such approvals.

d.Incident Management and Problem Resolution – this service includes helpdesk call tracking and case resolution.

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e.Implementation of Critical Software Patches and Corrections – this service includes installation of software patches and corrections as required by the relevant licensor of the application software listed in each Subpart of this Term Sheet to address problems that surface due to normal use of the application software; provided, however, such patches and corrections will be provided according to BPWCP’s schedule. This service does not include implementation of new software versions or upgrades.

f.Monitoring of Production Environment – this service includes monitoring of production environments for the purpose of determining if such production environments are operating properly and to advise the Company of any planned maintenance or downtime that BPWCP believes is required to sustain the integrity of such production environments.

24 CONTACT INFORMATION

3.1    Contact for these services in case of day to day activities will be through BPWCP’s Service Desk. Detailed contact information is provided in the Base IT Services Term Sheet, Subpart 3, IT Management Support Service.

3.2Issue escalation for issues with services described in this Term Sheet will be through the following contacts:

BPWCP contact for issue escalation:

Name: David Skudlarek

Telephone: +1 (630) 836-4710

E-Mail: david.skudlarek@bp.com

Company contact for issue escalation:

Name: Judy Howard

Telephone: (210) 626-6967

E-Mail: Judy.P.Howard@tsocorp.com

3.3    The following subparts of this Business Applications Services Term Sheet (the “Subparts”) describe each of the Business Applications Services in more detail.

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Business Applications Services, Subpart 1

Applications Service 1: Refining Applications Service

25 SERVICE OVERVIEW

This Service addresses BPWCP (a) allowing the Company to access and use certain application software, and (b) providing certain services to the Company in support of the Company’s use of such application software in the Refinery Business, the Carson Logistics and Marketing Terminals Business, the Watson Cogen Business, and/or the Wilmington Calciner Business.

26 ACCESS AND USE OF BPWCP'S SOFTWARE AND SOFTWARE LICENSES

The list of application software that is anticipated to be made available to the Company under this Service is as follows:

Software for use under Refining Applications Service
Application Software Name	Vendor Name	User License Numbers
AspenTech Advisor	Aspen Technology Inc.	Allocation based on EDC
BOSS Reporting – Maximo	SAP
CCTS	WorkTechnology Corporation	Site License
Maxavera	Pipeline Software Inc,	Site License
Maximo – Refining	IBM	1200 maximum
Meridium	Meridium Inc,	Site License
Primavera	Oracle	50 maximum
Syntempo	Pipeline Software Inc,	Site License

This is a list of major applications that will be used by the Company, which are supported by additional software (e.g. middleware) that is included as part of the Services.

27 FEES

Starting July 1, 2012 or on Closing, whichever occurs later, the Company will pay BPWCP a lump sum payment of US $73,288 per month (US $219,863 per quarter). This amount includes no more than 30 days of work per month by the number of FTEs initially assigned to the Service by BPWCP. The Company shall make all such payments to BPWCP quarterly in advance. Should the support level required to perform the Service be more than such 30 days of work by such FTEs, then BPWCP will advise the Company of such requirement and request a project be developed and designed and billed in addition to the base payment as an Additional Service. BPWCP will have no obligation to perform such Additional Service unless and until the terms and price for such Additional Service are agreed to in writing by the Company.

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The dollar amounts set forth in this Section 3 have been determined based on the user license numbers set forth above and the applications listed above; any changes in these items will result in a change in the cost for the Services provided pursuant to this Subpart. The costs set forth in this section do not include Fees to migrate the Business Information and/or related systems of the Company from BPWCP’s systems to the Company’s.

28 TERM AND TERMINATION

The Term Sheet Termination Date of the Service to be provided pursuant to this Subpart shall be the earlier to occur of: (a) the day on which the 12 month anniversary of the Closing Date occurs; or (b) the effective date of early termination by the Company or BPWCP in accordance with Section 2.3 of the Agreement, with no early termination penalties, provided that such effective date is not earlier than 90 days after BPWCP’s receipt of the termination notice. Upon signing of the PSA, the Company reserves the right to accept or decline this Subpart.

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Business Applications Services, Subpart 2

Applications Service 2: Supply and Optimization Applications Service

29 SERVICE OVERVIEW

This Service addresses BPWCP (a) allowing the Company to access and use certain application software, and (b) providing certain services to the Company in support of the Company’s use of such application software in the Refinery Business, the Carson Logistics and Marketing Terminals Business and/or the Wilmington Calciner Business.

30 ACCESS AND USE OF SERVICE PROVIDER'S SOFTWARE AND SOFTWARE LICENSES

The current list of application software that is anticipated to be made available to the Service Recipient under this Service is as follows:

Software for use under Supply and Optimization Applications Service
Application Software Name	Vendor Name	User License Numbers
BOSS Reporting – IMOS	SAP
IMOS	Aspen Technology Inc.	Site License

This is a list of major applications that will be used by the Company, which are supported by additional software (e.g. middleware) that is included as part of the Services.

31 FEES

Starting July 1, 2012 or on Closing, whichever occurs later, the Company will pay BPWCP a lump sum payment of US $57,553 per month (US $172,658 per quarter). This amount includes no more than 30 days of work per month by the number of FTEs initially assigned to the Service by BPWCP. The Company shall make all such payments to BPWCP quarterly in advance. Should the support level required to perform the Service be more than such 30 days of work by such FTEs, then BPWCP will advise the Company of such requirement and request a project be developed and designed and billed in addition to the base payment as an Additional Service. BPWCP will have no obligation to perform such Additional Service unless and until the terms and price for such Additional Service are agreed to in writing by the Company.

The dollar amounts set forth in this Section 3 have been determined based on the nature and quantity of the user license numbers set forth above and the applications listed above; any changes in these items will result in a change in the cost for the Services provided pursuant to this Subpart. The costs set forth in this section do not include Fees to migrate the Business Information and/or related systems of the Company from BPWCP’s systems to the Company’s.

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32 TERM AND TERMINATION

The Term Sheet Termination Date of the Service to be provided pursuant to this Subpart shall be the earlier to occur of: (a) the day on which the 12 month anniversary of the Closing Date occurs; or (b) the effective date of early termination by the Company or BPWCP in accordance with Section 2.3 of the Agreement, with no early termination penalties, provided that such effective date is not earlier than 90 days after BPWCP’s receipt of the termination notice. Upon signing of the PSA, the Company reserves the right to accept or decline this Subpart.

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Business Applications Services, Subpart 3

Applications Service 3: Pipelines and Transport Operations Applications Service

33 SERVICE OVERVIEW

This Service addresses BPWCP (a) allowing the Company to access and use certain application software, and (b) providing certain services to the Company in support of the Company’s use of such application software in the Refinery Business, the Carson Logistics and Marketing Terminals Business and/or the Wilmington Calciner Business.

34 ACCESS AND USE OF SERVICE PROVIDER'S SOFTWARE AND SOFTWARE LICENSES

The current list of application software that is anticipated to be made available to the Service Recipient under this Service is as follows*:

Software for use under Pipelines and Transport Operations Applications Service
Application Software Name	Vendor Name	User License Numbers
Aspen Fleet Optimizer Order Manager – Voice (IVR)	AspenTech
Aspen Fleet Optimizer (Retail)	AspenTech
BOSS Reporting – Aspen Fleet Optimizer and LoadTracker	SAP
Carrier Management System (CMS)	BP	N/A (BP Bespoke)
eMOC Pipelines	BP	N/A (BP Bespoke)
i-maintain	Monitor Management Control Systems Limited
LoadTracker	BP	N/A (BP Bespoke)
Maximo – Pipelines	IBM
Maximo Mobile	IBM	N/A
Meridium IRT	Meridium Inc	Site License
Primavera	Oracle	15 maximum
PRISM	BP	N/A (BP Bespoke)
TMS Host	TopTech

This is a list of major applications that will be used by the Company, which are supported by additional software (e.g. middleware) that is included as part of the Services.

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35 FEES

Starting July 1, 2012 or on Closing, whichever occurs later, the Company will pay BPWCP a lump sum payment of US $93,337 per month (US $280,010 per quarter). This amount includes no more than 30 days of work per month by the number of FTEs initially assigned to the Service by BPWCP. The Company shall make all such payments to BPWCP quarterly in advance. Should the support level required to perform the Service be more than such 30 days of work by such FTEs, then BPWCP will advise the Company of such requirement and request a project be developed and designed and billed in addition to the base payment as an Additional Service. BPWCP will have no obligation to perform such Additional Service unless and until the terms and price for such Additional Service are agreed to in writing by the Company.

The dollar amounts set forth in this Section 3 have been determined based on the nature and quantity of the user license numbers set forth above and the applications listed above; any changes in these items will result in a change in the cost for the Services provided pursuant to this Subpart. The costs set forth in this section do not include Fees to migrate the Business Information and/or related systems of the Company from BPWCP’s systems to the Company’s.

36 TERM AND TERMINATION

The Term Sheet Termination Date of the Service to be provided pursuant to this Subpart shall be the earlier to occur of: (a) the day on which the 12 month anniversary of the Closing Date occurs; or (b) the effective date of early termination by the Company or BPWCP in accordance with Section 2.3 of the Agreement, with no early termination penalties, provided that such effective date is not earlier than 90 days after BPWCP’s receipt of the termination notice. Upon signing of the PSA, the Company reserves the right to accept or decline this Subpart.

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Schedule 1.1(b)(v)

Payment Card Processing and Applications

1. Services Overview

Pursuant to this Transition Services Agreement (the “TSA”), BPWCP will provide the card payment processing and applications services (the “Card Processing Services”) described in this Payment Card Processing and Applications Term Sheet.

BPWCP will provide the Card Processing Services to (i) those ARCO branded retail sites which are parties to Contract Dealer Gasoline Agreements or functionally similar agreements (the “Dealer Agreements”) acquired by the Company pursuant to the PSA and (ii) sites which become ARCO branded marketers of the Company during the Term of this Term Sheet, not to exceed fifty additional sites (collectively, the “Company ARCO Sites”). Any additional sites beyond the Company ARCO Sites will be deemed outside the scope of this Term Sheet, and any services which BPWCP agrees to provide to such sites shall be “Additional Services” within the meaning of Section 1.1(e) of the TSA. Pricing for such Additional Services will be subject to the amendment process referred to in Section 1.1(e).

During the Term of this Term Sheet, the Company will negotiate new agreements with a provider(s) of the Company’s choosing to replace the Card Processing Services. Upon the termination of this Term Sheet, the Company will cease using BPWCP’s IT Systems and IT Equipment previously used in connection with the Card Processing Services. Upon the termination of this Term Sheet, Company will provide to BPWCP access to all card programs and card processing services developed by Company for fuel retail service stations that employ the ARCO Marks as set forth in the ARCO License Agreement.

2. BPWCP Services for the Company

2.1    BPWCP shall provide the following Services:

a.Authorize and settle all payment card transactions directly with the Company ARCO Sites and provide daily settlement reporting to Company ARCO Sites.

b.Process the consumer convenience fee for PIN Debit transactions at the Company ARCO Sites, to the extent that Visa continues to allow BPWCP to charge that fee. The foregoing sentence shall not be construed as a representation that BPWCP, the Company or any retail sites will be able to charge the consumer convenience fee in the future. Moreover, the Company specifically understands and hereby agrees that neither BPWCP nor any of its Affiliates can make and therefore neither does make any representations or warranties with respect to the Company’s or any entity’s ability to charge a convenience fee to the consumer after the Closing.

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c.Allow the Company to use the application software listed on Appendix A, attached hereto, for the number of users listed on Appendix A. Such use will be limited to the uses permitted by the applicable license agreements, as well as the restriction stated in Section 1.2 and elsewhere in the TSA.

d.Set up access for new users, modifying access for existing users, and coordination of site systems installation prior to opening of new Company ARCO Sites, to the extent allowed by Third Party agreements and BPWCP and its Affiliates’ security policies (per the ABSC Service Term Sheet). The Company Sponsor shall be solely responsible for approving or denying access requests BPWCP receives from the Company related to this service and the Company Sponsor will have all accountability for any segregation of duties issues that are created as a result of such approvals.

e.Implement critical software patches and corrections. This service includes installation of software patches and corrections as required by the relevant licensor of the application software listed on Appendix A to address problems that result from normal use of the application software; provided, however, that such patches and corrections will be provided according to BPWCP’s schedule. This service does not include implementation of new software versions or upgrades, unless such implementation of new software versions or upgrades is required by BPWCP. The Company will cause the Company ARCO Sites to allow BPWCP or Third Party Providers to access the sites (physically or remotely) as needed to perform any maintenance and upgrades which is to be provided by those parties.

f.Monthly financial reporting on card transactions to the Company based on the existing report formats as of the Effective Date.

g.Monitor the Production Environment. This service includes monitoring of production environments for the purpose of determining if such production environments are operating properly and to advise the Company of any planned maintenance or downtime that BPWCP believes is required to sustain the integrity of such production environments.

h.Support hardware for payment card services and site systems if there is an existing signed hardware maintenance agreement directly between the Company ARCO Site and BPWCP.

i.Payment Application Data Security Standards (“PA DSS”) compliance for software that is provided by BPWCP, or Payment Card Industry Data Security Standards

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(“PCI DSS”) compliance upgrades due to new rules and or regulations and/or applicable Laws; provided, however, that BPWCP’s actual costs necessary to perform the aforementioned compliance activities for software necessary to perform the Services hereunder, as determined by BPWCP in its commercially reasonable discretion, shall be paid by the Company in addition to the base payment as an Additional Service.

j.Compliance with any new applicable Laws (local, state, or federal - e.g., weights & measures); provided, however, that BPWCP’s actual costs necessary to perform the aforementioned compliance activities for software necessary to perform the Services hereunder, as determined by BPWCP in its commercially reasonable discretion, shall be paid by the Company in addition to the base payment as an Additional Service.

k.Provide 1099 Internal Revenue Service payment cards sales reporting to Company ARCO Sites.

l.BPWCP to ensure telecommunications service continuity at current service levels to Company ARCO Sites for card payment processing.

2.2    During the Term of this Term Sheet, Card Processing Services will be provided for Company ARCO Sites that continue to use the BP EPS to enable the Card Processing Services. Upon conversion by the Company from the BP EPS to the Company’s POS System at any Company ARCO Site, such Company ARCO Site shall be excluded from the scope of this Term Sheet and Services shall not be provided hereunder with respect to any such site.

2.3    As of April 2, 2012, BPWCP has received a Report on Compliance from a certified third-party auditor verifying that BPWCP, as a Level 1 service provider, is compliant with applicable PCI DSS requirements. Throughout the Term of this Term Sheet, BPWCP will continue to audit such sites in the ordinary course of business and seek an annual Report on Compliance from a certified third-party auditor selected by BPWCP with respect to PCI DSS compliance.

3. The Company’s Obligations

3.1    During the Term of this Term Sheet, the Company shall negotiate its own stand alone usage and support agreements with the appropriate third parties to replace the Card Processing Services and IT Systems and IT Equipment provided under this Term Sheet, including but not limited to the EPS system. The Company is not obligated to negotiate an agreement with BPWCP’s existing processor. The Company shall complete those negotiations no later than six months after Closing, and the Company shall cause the new agreements for its card processing services and its systems to become effective no later than the Term Sheet Termination Date.

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3.2    Beginning on the Term Sheet Termination Date, the Company shall, provide BPWCP and its ARCO branded marketers with access to card processing and applications services similar to terms offered to Company ARCO Sites, including all the Company’s existing and developed debit, credit, fleet and gift card programs. Such access will be offered only for POS systems mutually agreed to by both Company and BPWCP.

4. Activities NOT Covered by the Services

4.1    The Parties agree and acknowledge that, notwithstanding anything to the contrary in the TSA, the following activities are expressly excluded from the Services:

m.Data migration (or historical data reporting) on or after the Termination Date.

n.Sales program for fleet cards.

o.Execution of proprietary and Third Party card promotions at retail sites.

p.BPWCP support for credit acceptance and settlement in any market in which the Company or its affiliates operate.

q.Changes to BPWCP’s or BP’s proprietary network.

r.Changes to BPWCP’s existing site systems hardware configuration (e.g., PIC, CRIND, Allied, POS, EPS, PINpad).

s.Changes to card types as they are defined in the existing card base.

t.Adding new cards to the authorization/settlement process sites.

u.PA DSS compliance for software that is not provided by BPWCP.

v.Providing software maintenance to the Company ARCO Sites, except as stated in Section 1 or the ABSC Service Term Sheet. Without limiting the generality of the foregoing, neither BPWCP nor any of its Affiliates will provide software maintenance or helpdesk support for non-Retalix POS at the Company ARCO Sites.

w.Providing hardware support for payment card services, except as stated in Section 2 or the ABSC Services Term Sheet. Without limiting the generality of the foregoing, neither BPWCP nor any of its Affiliates will support VeriFone EPS hardware, except as stated in Section 2.1h above.

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5. Pricing and Payment Terms

5.1    Fixed Fees

Within 30 days after the end of each calendar month in which BPWCP has provided any Services, the Company shall pay BPWCP a fee of $383,075 for card operations, business support and application software support. The amount of the fixed fee shall be decreased if the third-party licensing fees paid by BPWCP with respect to Retalix are reduced below the levels assumed in setting the fixed fee. Any such reduction shall be on a direct pass-through basis of any cost savings by BPWCP.

5.2    Per Transaction / Item Fees

BPWCP shall true-up with the Company, within 30 days after the end of each calendar month, the net amount of the following fees:

x.Debit: direct pass-through of debit card related processing fees, interchange fees, network/association fees, chargebacks and the ARCO consumer convenience fee (to the extent it is charged).

y.Fleet: Fleet transactions, direct pass-through as invoiced by FleetCor.

z.Gift Card: direct pass-through of all gift card processing fees.

5.3    Additional Payment Terms

All fixed fees and per transaction/ item payments will be required regardless of the amount of services utilized during any period under this Term Sheet.

6. ABSC Services

Sites will receive payment card processing and applications support through the Americas Business Service Center (ABSC) under the ABSC Service Term Sheet for an additional cost.

7. Term

The Term Sheet Termination Date shall be the earlier to occur of:

a.the date set forth in a written notice from the Company stating its election to terminate this Term Sheet in accordance with Section 2.3 of the Agreement on such date, provided that such date is no earlier than 90 days from BPWCP’s receipt of such notice; or

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b.the last day of the calendar month in which the 12 month anniversary of the Closing has occurred.

c.no early termination penalties will apply.

d.Upon signing of the PSA, the Company reserves the right to accept or decline this Term Sheet.

8. Payment for ARCO Gift Card Plastics Issued Prior to the Closing.

The Company shall pay BPWCP an amount for the ARCO gift card plastics which have been issued prior to the Closing equal to the estimated breakage on the gift cards after the Closing (calculated as total estimated breakage minus breakage booked by BPWCP or its Affiliates as of the date of Closing). The appraisal will be made by Card Compliant. Card Compliant will be instructed to render its appraisal within 60 days after the Closing. Payment, if any is owed, shall be made by the Company within 30 days after Card Compliant determines the amount. Card Compliant’s decision will be final and non-appealable by either Party.

9. Procedure for ARCO Gift Cards during the Term Sheet Period

9.1    During the Term of this Term Sheet, the ARCO-branded gift card program will continue to function as it does on the Effective Date with BPWCP supplying both BP and ARCO proprietary gift cards (“Gift Cards”) to be sold at all ARCO retail sites and third party distribution outlets. During the Term Sheet Period, the Company will pay BPWCP an amount equal to the total costs of production, activations, and other expenses related to the issuance and operation of ARCO Gift Cards incurred during the Term of this Term Sheet. BPWCP will invoice the Company for the expenses of issuance and operation, and the Company will reimburse BPWCP for such invoiced expenses within 30 days after the end of each calendar quarter.

9.2    During the Term of this Term Sheet, both BP and ARCO Gift Cards will be accepted at ARCO branded sites and BP branded sites.

9.3    During the Term Sheet Period, BPWCP shall use best efforts to cause BPWCP’s current processor to continue its present practice of directly paying branded retail sites for redemptions of ARCO Gift Cards. Any such payments will be made from the funds paid by consumers for those ARCO Gift Cards.

9.4    Within 60 days after the Term Sheet Termination Date, BPWCP will transfer to the Company or to an issuer designated by the Company all funds paid by consumers for ARCO Gift Cards issued prior to Term Sheet Termination Date and not yet fully redeemed or expired as of such termination date. BPWCP shall provide to the Company all data that is available to BPWCP regarding the ARCO Gift Cards that is provided to Card Compliant as part of the appraisal activities set forth in Section 8 above; provided, that the Company shall first comply with all confidentiality restrictions regarding such

37

data, including entering into confidentiality agreements with the data providers, if required.

9.5    As of the day of the payment in full of the reconciliation amount described in Section 9.4 above, the Company is fully responsible for any applicable Laws now in effect of hereafter enacted which may impact the funds under Section 9.4, including but not limited to, escheatment laws or regulations. In addition, the Company hereby agrees and acknowledges that neither BPWCP nor any of its Affiliates will have any further liability for such funds after the Section 9.4 reconciliation payment is made. BPWCP shall exercise best efforts to provide the Company copies of all terms and conditions for any ARCO Gift Cards with a remaining balance that are in BPWCP’s possession; provided, however, that the Company acknowledges that due to the laws in the State of California that restrict gift cards from expiring, certain gift cards may have been in circulation for several years and as a result BPWCP may not possess copies of the terms and conditions for ARCO Gift Cards with a remaining balance that are more than five (5) years old.

10. ARCO Fleet Cards

BPWCP will use commercially reasonable efforts to transition its relationship with all active and inactive ARCO proprietary fleet accounts to the Company by the Term Sheet Termination Date.

At Company’s discretion, bounties (to acquire new fleet accounts) paid to the Company ARCO Sites as of the Effective Date will continue during the Term of this Term Sheet. BPWCP to provide 6 months of historical bounty payments to Company.

11. ARCO Premier Cards

Cards for the non-ARCO employees and cards which have not been used within the 90 day period prior to the Closing will be terminated upon the Closing, to the extent permitted by the relevant cardholder agreements.

The Company will have all responsibility (and neither BPWCP nor any of its Affiliates will have any responsibility) for activations and deletions of ARCO Premier Cards issued to the Company’s employees and all other administration and services relating to the ARCO Premier Cards.

12. Termination of Processing at Company ARCO Sites

BPWCP specifically reserves the right but not the obligation to terminate or temporarily disable any Company ARCO Site(s) ability to process payment cards during the Term of this Term Sheet if (i) such site(s) is(are) not operating in compliance with the PCI DSS, any payment card type rules, including but not limited to VISA, MasterCard or debit card network rule or regulations(s) or any applicable data security standard, or (ii) the Company ARCO Site fails to allow BPWCP to implement any patch, correction or new software version or upgrade required by BPWCP or a Third Party licensor.

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13. Additional Indemnification Provisions

13.1    Without limiting the generality of Section 5.1 of the TSA and notwithstanding anything to the contrary in the TSA or PSA:

aa.All losses including fees, assessments, forensic investigation and attorney fees and costs related to allegations, claims or investigations incurred by any BPWCP Indemnified Party arising in any way from: (i) the failure by any Company ARCO Site to comply with Section 12.3 of the Dealer Agreements during the Term of this Term Sheet; (ii) the violation or the alleged violation during the Term of this Term Sheet by any Company ARCO Site of the PCI DSS, as modified from time to time, including the failure to use software that is compliant with PA DSS, as modified from time to time, or any similar standards required by payment card associations or networks or the Payment Card Industry Security Standards Council, or any other data security, privacy, breach notification or confidentiality statute, rule, or regulation or any statute, rule or regulation limiting information that can be collected from a consumer, or (iii) the escheatment of any Gift Card during the Term of this Term Sheet, shall be considered “Losses caused by or arising out of or resulting from the provision of the services,” as that phrase is used in Section 5.1 of the TSA.

bb.If BPWCP or any of its Affiliates incurs any actual losses or damages under its Card Issuing and Operating Agreement with FleetCor dated December 20, 2004, as amended, either because the Company has terminated FleetCor’s services or reduced the number of branded marketers processing under that agreement, the Company will pay BPWCP or the applicable Affiliate the amount of such actual losses or damages pursuant to Section 5.1 of the TSA.

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Appendix A

Software for use by the Company under the Card Processing Service
Application Software Name	Vendor Name	User License Numbers (if applicable)
Allied Forecourt Controller	Allied Electronics
Altiris	Symantec
Card Processing Interface	BP
EPS / Viper	VeriFone
First Data RED Settlement	First Data
GSS POS/BOS Software	Retalix
Hughes Network	Hughes
Omni 1000SE Pinpad	VeriFone
Omni 7000 Pinpad	VeriFone
PayPoint Aqua Authorization	First Data
PIC Software	FMi
Solidcore	McAfee
SVS	Stored Value Systems

This is a list of major applications that will be used by the Company, which are supported by additional software (e.g., middleware) that is included as part of the Services.

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Schedule 1.1(b)(vi)ABSC Service

1 Service Overview

BPWCP through its Americas Business Service Center (“ABSC”) provides services to BPWCP’s and its Affiliates’ marketing businesses in the Americas. The ABSC also owns oversight to certain processes and activity sets that are executed by the Third Party Provider, Accenture LLP. BPWCP, through the ABSC, will provide the services described below to the Carson Logistics and Marketing Terminals Business and/or the Wilmington Calciner Business on the terms set forth below (collectively, the “ABSC Service”).

2 Description of Service

BP’s ABSC is organized by end-to-end process into 5 operational process towers as follows:

2.1    Maintenance and technical support includes site support and retail programs.

a.    POS/BOS – Provide support for the Retalix software on the POS and BOS devices. Peripheral support is included.

b.    Site Manager PC – Provide support for LAN 2 connectivity.

c.    Networking – Provide card processing support for pinpads, eps, satellite, and dsl.

d.    Go Live – Provide support for new installs, various site conversions and debrands.

e.    Project Support – Provide additional support for upgrades, new hardware installs or any project related work as required per the CRF process.

f.    User Acceptance Testing – Provide testing support for new Retalix software releases.

g.    Escalation – Provide escalation support via the escalation line.

The ABSC maintenance and technical support activities described above represent a portion of the entire site support model. Information technology (“IT”), payment card processing and applications, and price book support are provided under other Term Sheets and are not provided by the ABSC and are therefore not represented in the activity list above but are services required to support the sites. See the applicable IT Term Sheets, the Payment Card Processing and

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Applications Term Sheet and Price Book Service Term Sheet for processes and costs of such activities.

2.2    Master Data Maintenance

a.    Customer Master support – Add/Edits/Deletes of current master data based on current systems infrastructure and applications to enable Site Technical Support, Payment Card Processing and Applications, Price Book Services and associated Business Application Services Term Sheets

b.    Material Master – Add/Edits/Deletes of current material master based on current systems infrastructure to enable associated Business Application Services Term Sheets

c.    Plant Master – Add/Edits/Deletes of current plant master based on current systems infrastructure to enable associated Business Application Services Term Sheets

3 Support Level

If requested by the Company, support can be made available 24 hours a day, 7 days a week for urgent queries in the site technical support teams by the ABSC. Priority of service will be given with respect to relative urgency of the query and support will be provided pursuant to the terms of this Term Sheet and the Agreement.

Otherwise, services performed in support of Master Data Maintenance will follow the BP US operation hours, aligned with the BP holiday schedule and will be in the English language only, with exceptions to hours of operation during the month-end and year-end close process.     ABSC Applications Support

As part of ABSC services we will provide the following call centre systems infrastructure support to enable Site Technical Support activities to be performed including:

a.    Incident Management and Problem Resolution – this service includes helpdesk call tracking and case resolution as it directly relates to ABSC call center systems infrastructure.

b.    Implementation of Critical Software Patches and Corrections – this service includes installation of software patches and corrections as required by the relevant ABSC call center systems infrastructure to address problems that surface due to normal use of the application software; provided, however, such patches and corrections will be provided according to BPWCP’s schedule. This service does not include implementation of new hardware or software versions or upgrades except for compliance upgrades due to new rules and or regulations and/or applicable Laws; provided, however, that BPWCP’s actual costs necessary to perform the aforementioned compliance activities for software necessary to perform the Services

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hereunder, as determined by BPWCP in its commercially reasonable discretion, shall be paid by the Company in addition to the base payment as an Additional Service.

c.    Monitoring of Production Environment – this service includes monitoring of production environments as they relate to ABSC call center systems infrastructure for the purpose of determining if such production environments are operating properly and to advise the Company of any planned maintenance or downtime that BPWCP believes is required to sustain the integrity of such production environments.

4    Term Sheet Termination Date

This Term Sheet shall commence on the Closing Date and shall terminate on the earlier to occur of: (a) the date set forth in a written notice received by BPWCP from the Company pursuant to Section 2.3 of the Agreement, provided that such effective date is not earlier than 120 days after BPWPC’s receipt of the termination notice, or (b) the day on which the 12 month anniversary of the Closing Date occurs, with no early termination penalties; and further provided however, that the term of this Service shall at all times be co-terminus with the term of the longest duration of any of the Business Applications Services Term Sheet, the Price Book Services Term Sheet and the Payment Card Processing and Applications Term Sheet. Upon signing of the PSA, the Company reserves the right to accept or decline all or part of this Term Sheet. If the Company declines or terminates this term sheet, BP is released from any obligation to provide services under any of the related Term Sheets that are specifically set forth in the immediately preceding two sentences.

5    Pricing and Payment Terms

On the Effective Date, the Company shall make a payment to BPWCP of $1,325,000 to BPWCP and every 90 days thereafter the Company shall make a similar such quarterly payment for the provision of the Services (the “Base Price”).

The Base Price is reflective of BPWCP’s estimation of the resources required to provide the ABSC base services and includes many assumptions given the amount of unknowns that drive costs within the ABSC, including:

•    Pooled or dedicated resources

•    Demand-volume

•    Automated or manual process due to technology platform

•    Portfolio of service

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If the costs to BPWCP increase materially for any of the resources that are the subject of the assumptions made by BPWCP in calculating the Base Price, then BPWCP may increase the Base Price prospectively by providing the Company with written notice of such increase at least 14 days before the Company’s next quarterly payment is due.

6    Costs not included in the Base Price

6.1    Request for new project work shall be priced at reasonable cost per man day and invoiced to the Company by BPWCP every month for work undertaken in preceding month.

6.2    Requests for additional or change in services will be scoped and negotiated separately utilizing the ABSC change control process.

6.3    All commercially reasonable costs associated with termination or transitional services in support of transferring activity sets to the Company from the ABSC, including but not limited to cross-training, documentation, project management resources, travel, and support costs shall be billed to the Company as charges are incurred.

7.     License Costs

7.1    Cost of licenses required to provide the ABSC Service (MTS Service) to the Company are included in the fee set forth in Section 5 of this term sheet.

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EX-2.2

Exhibit 2.2

AMENDMENT NO. 2 TO PURCHASE AND SALE AGREEMENT

THIS AMENDMENT NO. 2 TO PURCHASE AND SALE AGREEMENT (this “Amendment”) is made and entered into as of the 31st day of May, 2013, by and among BP WEST COAST PRODUCTS LLC, a limited liability company organized and existing under the laws of the State of Delaware (“BPWCP”), ATLANTIC RICHFIELD COMPANY, a corporation organized and existing under the laws of the State of Delaware (“ARCO”), ARCO MIDCON LLC, a limited liability company organized and existing under the laws of the State of Delaware (“ARCO Midcon”), ARCO TERMINAL SERVICES CORPORATION, a corporation organized and existing under the laws of the State of Delaware (“ARCO Terminal”), ARCO MATERIAL SUPPLY COMPANY, a corporation organized and existing under the laws of the State of Delaware (“ARCO Material Supply”), CH-TWENTY, INC., a corporation organized and existing under the laws of the State of Delaware (“CH-Twenty”), PRODUCTS COGENERATION COMPANY, a corporation organized and existing under the laws of the State of Delaware (“Products Cogeneration Company”), and ENERGY GLOBAL INVESTMENTS (USA) INC., a corporation organized and existing under the laws of the State of Delaware (“Energy Global Investments”) (BPWCP, ARCO, ARCO Midcon, ARCO Terminal, ARCO Material Supply, CH-Twenty, Products Cogeneration Company and Energy Global Investments are each a “Seller” and collectively the “Sellers”) and TESORO REFINING & MARKETING COMPANY LLC, a limited liability company organized and existing under the laws of the State of Delaware (the “Buyer”). The Sellers and the Buyer are referred to individually as a “Party” and collectively as the “Parties.”

WHEREAS, the Sellers and the Buyer entered into that certain Purchase and Sale Agreement, dated as of August 8, 2012, as amended by that certain Amendment No. 1 to Purchase and Sale Agreement, dated September 13, 2012 (collectively, the “PSA”); and

WHEREAS, the Sellers and the Buyer wish to further amend the PSA as provided herein.

NOW, THEREFORE, in consideration of the foregoing recitals and the agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound, do hereby agree as follows:

1.Definitions. Capitalized terms used but not defined in this Amendment shall have the meanings ascribed to them in the PSA.

2.Transfer of Ownership of Carson Cogen Company. Prior to the Closing and the asset transfers referred to in Section 3 below, C-H Twenty shall transfer any and all of its right, title and interest in and to Carson Cogen Company, constituting the Carson Cogen Company Shares, to BPWCP. Except as set forth in this Amendment, all of the other provisions of the PSA shall continue to apply to the Carson Cogen Company Shares as if the Carson Cogen Company Shares had been transferred directly from C-H Twenty to the Buyer as originally contemplated by the PSA. Section 14.1.14.1 of the PSA is hereby amended and restated in its entirety as follows:

14.1.14.1    Carson Cogen Company.As of the Closing, BPWCP is the sole owner of the Carson Cogen Company and has good and valid title to, holds of record and owns beneficially all of the shares of the Carson Cogen Company, free and clear of any Encumbrances other than (i) transfer restrictions imposed thereon by applicable securities Laws and (ii) Permitted Encumbrances, which will be released or removed at or prior to Closing. There are no outstanding options, warrants, rights or other securities convertible into or exchangeable or exercisable for equity securities, any other commitments or agreements providing for the issuance of additional shares or the repurchase or

redemption of shares, and there are no agreements of any kind which may obligate the Carson Cogen Company to issue, purchase, redeem or otherwise acquire any of its shares. There are no voting agreements, proxies or other similar agreements or understandings with respect to the shares of the Carson Cogen Company. All of the shares of the Carson Cogen Company are duly authorized, validly issued and outstanding and fully paid, and were issued free of preemptive rights in compliance with applicable Laws. The Carson Cogen Company owns no material assets and has no Liabilities other than through or in respect of the Watson Cogen Company and other than those assets defined as “Transferred Assets” under that certain Amendment No. 2 to Purchase and Sale Agreement, dated as of May 31st, 2013, by and among the Parties.

3.Transfer of Certain Purchased Assets to Carson Cogen Company. Prior to the Closing Sellers shall transfer to Carson Cogen Company those Purchased Assets identified in Exhibit 1 to this Amendment (the “Transferred Assets”). All of the other provisions of the PSA shall continue to apply to the Transferred Assets as if the Transferred Assets had been transferred directly from the Sellers to the Buyer as originally contemplated by the PSA; provided, however, that notwithstanding anything contained herein or in the PSA to the contrary, Buyer acknowledges and agrees that the transfer of certain of the Transferred Assets to Carson Cogeneration Company is subject to the consent of the City of Long Beach, acting by and through its Board of Harbor Commissioners, which consent has not yet been obtained; and provided further, however, that notwithstanding such lack of consent, all Liabilities with respect to such Transferred Assets shall be treated as Assumed Liabilities at all times under the PSA.

4.Closing on June 1. If and only if the Closing Date is determined pursuant to Section 10.1 of the PSA to be June 1, 2013, then the following shall apply:

a. The Effective Time shall remain 12:01 a.m. Pacific Daylight Savings Time (i.e., local time in Carson, California) on June 1, 2013, and title to, ownership of, control over and risk of loss of the Purchased Assets shall transfer to Buyer as of the Effective Time.

b. Sections 10.2.2 and 10.2.3 shall be modified to provide that the Sellers and the Buyer shall duly execute and deliver the instruments identified in those Sections on May 31, 2013.

c. Section 10.2.1 shall be modified to provide that the Buyer shall pay the Closing Payment to Sellers on or before May 31, 2013.

5.Prepaid Sales Taxes. The following is hereby added to the PSA as a new Section 17.3.1:

17.3.1    Buyer and Sellers acknowledge that pursuant to §6480 through §6480.9 of the California Revenue & Tax Code, Sellers must collect from Buyer a prepayment of sales tax on motor vehicle fuels and jet aircraft fuel if such fuel is sold to Buyer at any point after removal from the terminal rack (e.g., at a retail site). Because Buyer may then claim a credit for the prepaid tax when Buyer files its sales tax returns for the resale of the fuel, Buyer and Sellers agree to exclude the prepayment of such sales taxes from the provisions of Section 17.3.

6.Waiver of Condition Precedent in Section 9.2.8. The Sellers hereby waive the following portion of Section 9.2.8 of the PSA as a condition to the obligation of Sellers to consummate the transactions under Section 9.2; provided, that Buyer shall reasonably cooperate with Sellers after the

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Closing to effectuate and achieve such condition including, without limitation, the execution by Buyer of any amendment to, or amended and restated, Consent Decree:

“… a motion to enter the Consent Decree Modification shall have been provided to the Department of Justice, and the Parties shall use Reasonable Efforts to seek filing and approval of such motion by the Consent Decree Court.”

7.Amendment of Cogen Tax Provisions. Sections 17.1.2 through 17.1.5 are hereby amended and restated in their entirety as follows:

17.1.2    Sellers and Buyer hereby acknowledge that, pursuant to Treasury Regulation § 1.1502‑76(b), the sale of shares of Carson Cogen Company from Sellers to Buyer will cause the tax year of Carson Cogen Company to end as of the Closing Date. Sellers and Buyer acknowledge further that the sale of shares of Carson Cogen Company from Sellers to Buyer is subject to the election under Code §338(h)(10) pursuant to Section 17.1.7 herein. Sellers and Buyer further acknowledge that the sale of the partnership interest in Watson Cogen Company from Products Cogeneration Company to Buyer coupled with the election under Code § 338(h)(10) with respect to the sale of shares of Carson Cogen Company will cause a technical termination of Watson Cogen Company under Code § 708(b)(1)(B) and the Treasury Regulations promulgated thereunder. Sellers and Buyer acknowledge that, pursuant to Treasury Regulation § 1.708‑1(b)(5), a Code § 754 election (including a Code § 754 election made by the terminated partnership on its final return) that is in effect for the taxable year of the terminated partnership in which the sale occurs applies with respect to the incoming partner. Sellers and Buyer agree not to take any position with regard to any Tax matter that is inconsistent with the acknowledgements in this Section 17.1.2.

17.1.3    Sellers shall include within Sellers’ consolidated or unitary US federal and state income tax returns all income, gain, loss, credits and other Tax items with respect to Carson Cogen Company attributable to any taxable period (or portion thereof) ending on or before the Closing Date. Buyer shall include within Buyer’s consolidated or unitary US federal and state income tax returns all income, gain, loss, credits and other Tax items with respect to Carson Cogen Company attributable to any taxable period (or portion thereof) beginning after the Closing Date.

17.1.4    [Stricken]

17.1.5    Sellers and Buyer hereby acknowledge that Products Cogeneration Company currently is the “tax matters partner” of Watson Cogen Company and further acknowledge further that Buyer shall become the “tax matters partner” of Watson Cogen Company as of the Effective Time. Production Cogeneration Company shall be responsible for filing the US federal and state income returns with respect to Watson Cogen Company for the short‑year ending as of the date of termination of Watson Cogen Company as a result of the technical termination under Code § 708(b)(1)(B) consistent with IRS Notice 2001‑5, 2001‑1 CB 327 (January 21, 2001) and shall ensure that a Code § 754 election is in effect for the short‑year return. Buyer shall be responsible for filing the US federal and state income returns with respect to Watson Cogen Company for any taxable period (or portion thereof) beginning on or after the Effective Time.

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8.Removal of C-H Twenty as Seller. C-H Twenty is hereby fully and completely released from any and all of its duties and obligations under the PSA, including without limitation, any and all of the representations, warranties and covenants of Sellers and/or C-H Twenty set forth in the PSA, and shall no longer be considered one of the “Sellers” for all purposes in the PSA.

9.Amendment and Restatement of Section 14.1.3.1.  Section 14.1.3.1 of the Agreement is hereby restated in its entirety to read as follows:

Solely with respect to the representations and warranties set forth in this Section 14.1.3.1, the Parties understand and agree that all of the Assigned Contracts are valid and binding agreements of each applicable Seller, and are in full force and effect, except where the failure to be valid, binding and in full force and effect would not have a Material Adverse Effect or where such Assigned Contracts terminated in the Ordinary Course of Business or otherwise expired in accordance with their terms prior to the Effective Time.  Except as set forth in Schedule 14.1.3.1, each Seller has performed all material obligations required to be performed by it to date under those Assigned Contracts that each entail a remaining contractual obligation or liability in excess of four million dollars ($4,000,000) from and after the Effective Time, and is not in Default under any obligation of any such Assigned Contracts, except where such failure to perform or Default would not have a Material Adverse Effect. To the Sellers’ Knowledge, no other party to any such Assigned Contract that entails a remaining contractual obligation or liability in excess of four million dollars ($4,000,000) from and after the Effective Time is in Default thereunder and no event or circumstance has occurred that, with notice or lapse of time or both, would constitute any event of Default thereunder that, in either case, would have a Material Adverse Effect. As of the Effective Time, each Assigned Contract that is between the Sellers (or any Seller) on the one hand, and an Affiliate of Sellers, on the other hand, which will survive the Closing and be transferred to Buyer hereunder (i) has been entered into in the Ordinary Course of Business and pursuant to an arm’s length negotiation or (ii) may be terminated by Buyer upon ninety (90) days or less notice without payment penalty.

10.Modification to Section 14.1.2.1(f). Reference in Section 14.1.2.1(f) in the PSA to “3.2.3.3(b)” is hereby changed to “2.1.2.2(b).”

11.Adjustment of Purchase Price. The Parties acknowledge and agree that the Purchase Price under the PSA shall be reduced by an amount equal to $312,000 (Three-Hundred and Twelve Thousand Dollars) (the “Condemnation Payment”) as a result of a condemnation award being paid to Sellers in connection with the partial condemnation at site 5999 and that such Condemnation Payment is not reflected on the Estimated Closing Statement. Following, the Parties acknowledge and agree that such Condemnation Payment will be treated as a deduction to the Purchase Price on the Closing Statement and in the calculation of any Closing Payment of Closing Payment Adjustment Amounts.

12.Miscellaneous.

a. Except as amended hereby the PSA remains in full force and effect and unmodified.

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b. This Amendment may be executed in counterparts, each of which shall be deemed an original but which together will constitute one and the same instrument. The exchange of copies of this Agreement and of signature pages by facsimile transmission or e-mail of a scanned copy shall constitute effective execution and delivery of this Agreement as to the Parties and may be used in lieu of the original Agreement for all purposes. Signatures of the Parties transmitted by facsimile or e-mail shall be deemed to be their original signatures for all purposes.

[The remainder of this page intentionally left blank.

Signature page immediately to follow.]

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IN WITNESS WHEREOF, the Parties hereto have executed this Amendment as of the date first above written.

SELLERS:
BP WEST COAST PRODUCTS LLC, a
Delaware limited liability company
By:	/s/ MARK E. FRENA
Name:	Mark E. Frena
Title:	Authorized Person
ATLANTIC RICHFIELD COMPANY, a
Delaware corporation
By:	/s/ MARK E. FRENA
Name:	Mark E. Frena
Title:	Authorized Person
ARCO MIDCON LLC,a Delaware limited
liability company
By:	/s/ MARK E. FRENA
Name:	Mark E. Frena
Title:	Authorized Person
ARCO TERMINAL SERVICES
CORPORATION, a Delaware corporation
By:	/s/ MARK E. FRENA
Name:	Mark E. Frena
Title:	Authorized Person

Signature Page to Amendment No. 2
Purchase and Sale Agreement
1 of 3

ARCO MATERIAL SUPPLY COMPANY, a
Delaware corporation
By:	/s/ MARK E. FRENA
Name:	Mark E. Frena
Title:	Authorized Person
CH-TWENTY, INC.,a Delaware corporation
By:	/s/ MARK E. FRENA
Name:	Mark E. Frena
Title:	Authorized Person
PRODUCTS COGENERATION COMPANY, a
Delaware corporation
By:	/s/ MARK E. FRENA
Name:	Mark E. Frena
Title:	Authorized Person
ENERGY GLOBAL INVESTMENTS (USA)
INC., a Delaware corporation
By:	/s/ MARK E. FRENA
Name:	Mark E. Frena
Title:	Authorized Person

Signature Page to Amendment No. 2

Purchase and Sale Agreement

2 of 3

BUYER:
TESORO REFINING & MARKETING
COMPANY LLC, a Delaware limited liability
company
By:	/s/ DANIEL R. ROMASKO
Name:	Daniel R. Romasko
Title:	Executive Vice President, Operations

Signature Page to Amendment No. 2
Purchase and Sale Agreement
3 of 3

Exhibit 1 to Amendment No. 2

To Purchase and Sale Agreement

List of Transferred Assets:

Berth 121:

• Pier E Tanker Terminal Agreement dated October 24, 1980 between the City of Long Beach, acting by and through its Board of Harbor Commissioners, and Atlantic Richfield Company, as the same has been amended.

• Consulting Agreement No. L16161 for Pipeline Modeling Project related to the Berth 121 Terminal and Pipeline System dated September 25, 2002 by and between BP Pipelines North America, Knowledge Systems Design, Inc., as amended by that certain Amendment #1 dated May 27, 2004 by and between BP Pipelines North America and BP West Coast Products LLC, as further amended by that certain Amendment #2

• Berth Assignment Agreement No. 86-1 dated December 1, 1986 from the City of Long Beach Harbor Department, as Assignor, and ARCO Terminal Services Corporation as successor to Atlantic Richfield Company, as Assignee.

• Amended and Restated Memorandum of Understanding dated May 25, 2006 between the City of Long Beach by and through its Board of Harbor Commissioners, and BP West Coast Products LLC.

• Agreement dated October 12, 1976 between the City of Long Beach and Atlantic Richfield Company, as the same has been amended.

• Letter Agreement dated April 26, 1988 from ARCO Transportation Company to the Director of Operations, Port of Long Beach re: terms for the Port’s use of Atlantic Richfield’s bollard at Berth 121.

Line 95:

• Agreement dated July 3, 1979 by and between ARCO Transportation Company and Shell Oil Company, as amended by that certain Amendment to Agreement dated  July 3, 1979

• Agreement for Use of Marine Terminal and Pipeline dated August 30, 1978 by and between Shell Oil Company, ARCO Transportation Company and Champlin Petroleum Company

• Letter Agreement regarding UPRC's request for ARCO's consent to assignment to Beacon Oil Co. dated November 29, 1988 by and between Union Pacific Resources Company and Atlantic Richfield Company.

• Consent, Assignment and Release dated October, 1988 by and between Union Pacific Resources Company and Atlantic Richfield Company

• Licensee Estoppel Certificate dated November 21, 1994 by and between City of Long Beach, Union Oil Company of Southern California and an unnamed BP Party

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• Obligations Upon Completion of Berth 121 Pier E Joint Facilities which is undated by and between Shell Oil Company and Atlantic Richfield Company

• Operating Agreement, Terminal 3, Long Beach dated June 1, 1981 by and among Four Corners Pipeline Company; ARCO Transportation Company, and Atlantic Richfield Company

• Summary of Shell/ARCO Agreement Berth 1212 and Shell Pipeline dated July 3, 1979 by and between Shell Oil Company and Atlantic Richfield Company

Line 88

• Sellers’ 50% ownership interest in Line 88 identified on Schedule 2.1.2.3(a) to the PSA

• Airport Pipeline Ownership Agreement and Airport Pipeline Operating Agreement both dated August 8, 1966 by and between Atlantic Richfield Company and Union Oil Company of California, as amended by that certain Amendment to Agreements dated January 17, 1989, as further amended by that certain Amendment to Agreements dated February 22, 1990.

The Contributed Assets include any and all other documents, instruments and other agreements ancillary thereto, including without limitation, any and all amendments to any of the aforementioned assets.

To the extent related to the foregoing Contributed Assets or located in or on any real property related to the foregoing Contributed Assets the following items of personal property shall also constitute Contributed Assets: all machinery and equipment, mobile or otherwise, systems and other tangible personal property owned and used by Transferor primarily in connection with the ownership or operation of the Contributed Assets, including (a) all production units, processing units and distillation systems, (b) all heating, lighting, and power systems, fire prevention and fire extinguishing systems, control systems, emergency warning and emergency preparedness systems and related assets, (c) all storage and other tanks, meters, pumps, engines, compressors, pipes, fittings, valves, connections, regulators, loading and unloading lines and racks, (d) related information technology equipment, (e) all tools, (f) all furniture and furnishings, (g) all vehicles and (h) all other tangible personal property, in each case presently owned by Transferor, but specifically excluding those items listed on Exhibit 1-A.

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EXHIBIT 1-A

Certain Excluded Assets

Air Cylinders:

Owner	Equipment Description	Equipment ID
Praxair Sevices Inc	Air Tanks	0080274938-00062105

Rentals:

Owner	Equipment Description	Equipment ID
HERTZ Rental	BOOM/120'/TELESCOPIC/ DSL	481928032
HERTZ Rental	FORKLIFT/constr/strmast/ 8000#/2wd/DSL	408087014
HERTZ Rental	FORKLIFT/whs strmast/8000	406086023
HERTZ Rental	PLATFORMLIFT/19'/EL/ see also 452-0790	452196267
HERTZ Rental	COMPRESSOR/185CFM/DSL/PORTABLE	6182262

Totes:

Owner	Equipment Description	Equipment ID
NALCO	Chemical Tank	n/a
NALCO	Chemical Tank	n/a

Porta Potties and Sinks:

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Owner	Equipment Description	PO# Number
United Site Service of CA	Portable Toilet W/Sink	L162493
United Site Service of CA	Portable Toilet W/Sink	L162493

Certain Line 88 Assets:

Any pump stations or meters used or operated in connection with Line 88.

1-4

EX-2.3

Exhibit 2.3

Amendment No. 3 to PURCHASE AND SALE AGREEMENT

THIS AMENDMENT NO. 3 TO PURCHASE AND SALE AGREEMENT (this “Amendment”) is made and entered into as of the 31st day of May, 2013, by and among BP WEST COAST PRODUCTS LLC, a limited liability company organized and existing under the laws of the State of Delaware (“BPWCP”), ATLANTIC RICHFIELD COMPANY, a corporation organized and existing under the laws of the State of Delaware (“ARCO”), ARCO MIDCON LLC, a limited liability company organized and existing under the laws of the State of Delaware (“ARCO Midcon”), ARCO TERMINAL SERVICES CORPORATION, a corporation organized and existing under the laws of the State of Delaware (“ARCO Terminal”), ARCO MATERIAL SUPPLY COMPANY, a corporation organized and existing under the laws of the State of Delaware (“ARCO Material Supply”), PRODUCTS COGENERATION COMPANY, a corporation organized and existing under the laws of the State of Delaware (“Products Cogeneration Company”), and ENERGY GLOBAL INVESTMENTS (USA) INC., a corporation organized and existing under the laws of the State of Delaware (“Energy Global Investments”) (BPWCP, ARCO, ARCO Midcon, ARCO Terminal, ARCO Material Supply, CH-Twenty, Products Cogeneration Company and Energy Global Investments are each a “Seller” and collectively the “Sellers”) and TESORO REFINING & MARKETING COMPANY LLC, a limited liability company organized and existing under the laws of the State of Delaware (the “Buyer”). The Sellers and the Buyer are referred to individually as a “Party” and collectively as the “Parties.”

WHEREAS, the Sellers and the Buyer entered into that certain Purchase and Sale Agreement, dated as of August 8, 2012, as amended by that certain Amendment No. 1 to Purchase and Sale Agreement, dated September 13, 2012, and that certain Amendment No. 2 to Purchase and Sale Agreement, dated May 31, 2013 (collectively, the “PSA”);

WHEREAS, the Sellers and the Buyer wish to further amend the PSA as provided herein.

NOW, THEREFORE, in consideration of the foregoing recitals and the agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound, do hereby agree as follows:

1.Definitions. Capitalized terms used but not defined in this Amendment shall have the meanings ascribed to them in the PSA.

2.Delivery of Tesoro Corporation Guaranty. At Closing Buyer shall deliver to Sellers a fully-executed guaranty from Buyer's parent company, Tesoro Corporation, a Delaware corporation, in the form attached hereto as Exhibit 1 (the “Tesoro Corporation Guaranty”). Except for the indemnity obligation of Buyer set forth in Section 7.8.1 of the PSA, Sellers acknowledge and agree that the execution and delivery of the Tesoro Corporation Guaranty at Closing shall satisfy all obligations of Buyer under Section 7.8 and Schedule 7.8 of the PSA solely in connection with the guaranty of BP Corporation North America Inc. attached as Exhibit A to the Tesoro Corporation Guaranty (the “BP Guaranty”). Notwithstanding anything contained herein or in the PSA to the contrary, Sellers shall not be obligated to maintain or provide the BP Guaranty for any period of time.

3.Miscellaneous.

a. Except as amended hereby the PSA remains in full force and effect and unmodified.

b. This Amendment may be executed in counterparts, each of which shall be deemed an original but which together will constitute one and the same instrument. The exchange of copies of this Amendment and of signature pages by facsimile

transmission or e-mail of a scanned copy shall constitute effective execution and delivery of this Amendment as to the Parties and may be used in lieu of the original Agreement for all purposes. Signatures of the Parties transmitted by facsimile or e-mail shall be deemed to be their original signatures for all purposes.

[The remainder of this page intentionally left blank.

Signature page immediately to follow.]

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IN WITNESS WHEREOF, the Parties hereto have executed this Amendment as of the date first above written.

SELLERS:
BP WEST COAST PRODUCTS LLC,a
Delaware limited liability company
By:	/s/ MARK E. FRENA
Name:	Mark E. Frena
Title:	Authorized Person
ATLANTIC RICHFIELD COMPANY, a
Delaware corporation
By:	/s/ MARK E. FRENA
Name:	Mark E. Frena
Title:	Authorized Person
ARCO MIDCON LLC,a Delaware limited
liability company
By:	/s/ MARK E. FRENA
Name:	Mark E. Frena
Title:	Authorized Person
ARCO TERMINAL SERVICES
CORPORATION, a Delaware corporation
By:	/s/ MARK E. FRENA
Name:	Mark E. Frena
Title:	Authorized Person

Signature Page to Amendment No. 3

Purchase and Sale Agreement

1 of 3

ARCO MATERIAL SUPPLY COMPANY,a
Delaware corporation
By:	/s/ MARK E. FRENA
Name:	Mark E. Frena
Title:	Authorized Person
PRODUCTS COGENERATION COMPANY,a
Delaware corporation
By:	/s/ MARK E. FRENA
Name:	Mark E. Frena
Title:	Authorized Person
ENERGY GLOBAL INVESTMENTS (USA)
INC., a Delaware corporation
By:	/s/ MARK E. FRENA
Name:	Mark E. Frena
Title:	Authorized Person

Signature Page to Amendment No. 3

Purchase and Sale Agreement

2 of 3

BUYER:
TESORO REFINING & MARKETING
COMPANY LLC, a Delaware limited liability
company
By:	/s/ DANIEL R. ROMASKO
Name:	Daniel R. Romasko
Title:	Executive Vice President, Operations

Signature Page to Amendment No. 3

Purchase and Sale Agreement

3 of 3

EXHIBIT 1

GUARANTY

This Guaranty (the “Guaranty”) is executed by TESORO CORPORATION, a Delaware corporation (“Guarantor”), whose address is 19100 Ridgewood Parkway, San Antonio, Texas 78259. For good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, Guarantor hereby unconditionally guarantees to BP CORPORATION NORTH AMERICA INC., an Indiana corporation (“BP”) the full, prompt and faithful payment, performance and discharge of each of the obligations of BP arising on or after June 1, 2013, under that certain Guaranty dated as of December 13, 2001 by and between BP and the CITY OF LONG BEACH, a municipal corporation, acting by and through its Board of Harbor Commissioners, its successors and assigns (“City”), attached hereto as Exhibit A (the “BP Guaranty”), without deduction, offset or excuse of any nature. This Guaranty shall automatically terminate upon expiration or sooner termination of the BP Guaranty by the City.

The Guarantor waives any defense by reason of any disability or other defense of BP and waives any other defense based on the termination of BP's liability from any cause. Until all of BP's obligations to the City have been paid or performed in full, through the existing expiration date of the BP Guaranty, the Guarantor waives any right of subrogation against BP. The Guarantor waives all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, and notices of acceptance of this Guaranty.

The Guarantor further waives (i) any defense arising out of the absence, impairment or loss of any right of reimbursement or subrogation of Guarantor against BP or any security, whether resulting from an election by BP, or otherwise, (ii) any defense based on any statute or rule of law that provides that the obligation of a surety must be neither larger in amount nor in any other respects more burdensome than that of a principal, (iii) all benefits that might otherwise be available to the Guarantor under California Civil Code Sections 2809, 2810, 2819, 2839, 2845, 2849, 2850, 2899 and 3433, and (iv) the benefit of any statute of limitations affecting the liability of the Guarantor or the enforcement of this Guaranty. The Guarantor agrees that the payment of all sums payable by BP under the BP Guaranty or any other act that tolls any statute of limitations applicable to BP under the BP Guaranty will similarly operate to toll the statute of limitations applicable to the Guarantor's liability.

City may perform any of the following acts at any time during the term of the existing BP Guaranty, without notice to or assent of Guarantor and without in any way releasing, affecting or impairing any of Guarantor's obligations or liabilities under this Guaranty: (a) alter, modify or amend the BP Guaranty by agreement or course of conduct, (b) assign or otherwise transfer its interest in the BP Guaranty, (c) consent to any transfer or assignments of BP's or any successor's interest under the BP Guaranty, (d) release one or more guarantors, or amend or modify the guaranty of any guarantor, without releasing or discharging any other guarantor from any of such guarantor's obligations, (e) hold any agreed security for the payment of the BP Guaranty and exchange, enforce, waive and release any such security, (f) apply such security and direct the order or manner of sale thereof as City, in its sole discretion, deems appropriate, and (g) foreclose upon any such security by judicial or non-judicial sale, without affecting or impairing

in any way the liability of Guarantor under this Guaranty, except to the extent the indebtedness has been paid.

Guarantor is not an entity qualified to do business in California. To the extent that Guarantor is required to perform any obligation hereunder other than the payment of money, then Guarantor shall appoint a subsidiary qualified to do business in California to perform such obligations. No such appointment shall lessen or otherwise reduce Guarantor's obligations or liabilities pursuant to this Guaranty.

If BP is required to enforce the undersigned's obligations by legal proceedings, the undersigned agrees that any such action may be brought in the Superior Court of the State of California for the County of Los Angeles, submits to the exclusive jurisdiction of such court and waives any objection which it may have now or hereafter to the laying of venue of any such action in said court and any claim that any such proceeding is brought in an inconvenient forum, except that BP may enforce any judgment obtained in favor of BP in any jurisdiction that BP chooses to seek such enforcement.

[Signature Page Follows]

This Guaranty shall be governed by and construed in all respects in accordance with the laws of the State of California.

TESORO CORPORATION,
a Delaware Corporation
By:
	Daniel R. Romasko
	Executive Vice President, Operations
Dated:

[Signature Page to Guaranty]

EXHIBIT A

BP Guaranty

[See attached]

GUARANTY

This Guaranty of Agreement (“Guaranty”) dated as of December 13, 2001 and effective January 1, 2001 is executed by BP corporation North America Inc., a Delaware corporation (“Guarantor”), in favor of the CITY OF LONG BEACH, a municipal corporation, acting by and through its Board of Harbor Commissioners (“City”).

Recitals.

A.City and Atlantic Richfield Company, a Delaware corporation (“ARCO”) entered into the Pier E Tanker Terminal Agreement on October 24, 1980 (Harbor Department Document No. HD-3253 and Federal Maritime Commission Agreement No. T-3928). That Agreement was amended on May 5, 1983 (Doc. No. HD-3658); on February 9, 1989 (Doc. No. HD-4540); on April 5, 1990 (Doc. No. HD-4736); on September 12, 1994 (Doc. No. HD-5404); and on April 9, 1999 (Doc. No. HD-6173). The Pier E Tanker Terminal Agreement, as amended, is referred to in this Guaranty as “the Agreement.”

A.ARCO desires to assign its rights and obligations arising from the Agreement to BP West Coast Products LLC, a Delaware limited liability company (“WEST COAST”), a direct subsidiary of Guarantor, and WEST COAST desires to assume such rights and obligations.

B.ARCO and WEST COAST are both affiliates of Guarantor.

C.As a condition to consenting to ARCO's assignment of its rights and obligations in the Agreement to WEST COAST, City has required that Guarantor execute and deliver the Guaranty to City.

In consideration of City consenting to ARCO's assignment of its rights and obligations arising from the Agreement to WEST COAST, Guarantor covenants and agrees as follows:

Section 1. Guaranty.

Guarantor absolutely and unconditionally guarantees to City the timely payment of all amounts that ARCO and/or WEST COAST may at any time owe under the Agreement, or any extensions, renewals, or modifications of the Agreement. Guarantor further guarantees to City the full, faithful, and timely performance by ARCO and/or WEST COAST of the Agreement, or any extensions, renewals, or modifications of the Agreement. If ARCO and/or WEST COAST shall default at any time in the payment of any monies or any other sums, costs, or charges, or in the performance of any covenant or obligation under this Agreement, then Guarantor, at Guarantor's expense, shall on demand by City fully and promptly pay all monies, sums, costs, and charges to be paid and perform all other covenants and obligations to be performed by ARCO and/or WEST COAST pursuant to the Agreement. In addition, Guarantor shall on demand by City pay to City all sums due to City, including, without limitation, all interest on past due

obligations of ARCO and/or WEST COAST, costs advance by City, damages, and all expenses (including, without limitation, court costs and reasonable attorney fees) that may arise in consequence of the default of ARCO and/or WEST COAST.

Section 2. Waivers.

Guarantor authorizes City, without notice or demand and without affecting Guarantor's liability under this Guaranty, to:

(a)consent to any extensions, accelerations, or other changes in the time for any payment provided for in the Agreement, or consent to any other alteration of any covenant, term, or condition of the Agreement in any respect, and to consent to any assignment subletting, or reassignment of the Agreement;

(b)take and hold security for any payment provided for in the Agreement or for the performance of any covenant, term, or condition of the Agreement, or exchange, waive, or release any security; and

(c)apply this security and direct the order or manner of its sale as City may determine, Notwithstanding any termination, renewal, extension or holding over of the Agreement, this Guaranty of Agreement shall continue until all of the covenants and obligations on the part of ARCO and/or WEST COAST and Guarantor shall not be released of any obligation or liability under this Guaranty so long as there is any claim against ARCO and/or WEST COAST arising out of the Agreement that has not been settled or discharged in full.

Section 3. Independent Obligations.

The obligations of Guarantor under this Guaranty are independent of, and may exceed, the obligations of ARCO and/or WEST COAST. A separate action may, at City's option, be brought and prosecuted against Guarantor, whether or not any action is first or subsequently brought against ARCO and/or WEST COAST, or whether or not ARCO and/or WEST COAST is joined in any action, and Guarantor may be joined in any action or proceeding commenced by City against ARCO and/or WEST COAST arising out of, in connection with, or based upon the Agreement. Guarantor waives any right to

(a)require the City to proceed against ARCO and/or WEST COAST or any other person or entity or pursue any other remedy in City's power;

(b)complain of delay in the enforcement of City's rights under the Agreement; and

(c)require City to proceed against or exhaust any security held from ARCO and/or WEST COAST or Guarantor. Guarantor waives any defense arising by reason of any disability or other defense of ARCO and/or WEST COAST or by reason of the cessation from any cause of the liability of ARCO and/or WEST COAST. Guarantor waives all

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demands upon and notices to ARCO and/or WEST COAST and to Guarantor, including, without limitation, demands for performance, notices of nonperformance, notices of nonpayment, and notices of acceptance of this Guaranty of Agreement.

Section 4. Definition of ARCO and/or WEST COAST.

For purposes of this Guaranty of Agreement and the obligations and liabilities of, Guarantor, the term “ARCO and/or WEST COAST” shall be deemed to include any and all concessionaires, licensees, franchisees, department operators, assignees, subtenants, or others directly or indirectly leasing or occupying the Premises existing from or relating to the Agreement.

Section 5. No. Reporting Duty.

Guarantor assumes full responsibility for keeping fully informed of the financial condition of ARCO and/or WEST COAST and all other circumstances affecting the ability of ARCO and/or WEST COAST to perform the obligations of ARCO and/or WEST COAST's obligations under the Agreement, and agrees that City will have no duty to report to Guarantor any information that City receives about the financial condition of ARCO and/or WEST COAST to perform such obligations.

Section 6. Continuing Guaranty.

This Guaranty shall remain in full force notwithstanding the appointment of a receiver to take possession of all or substantially all of the assets of ARCO and/or WEST COAST, or an assignment by ARCO and/or WEST COAST for the benefit of creditors, or any action taken or suffered by ARCO and/or WEST COAST under any insolvency, bankruptcy, reorganization, moratorium, or other debtor relief act or statute, whether now existing or later amended or enacted, or the disaffirmance of the Agreement in any action or otherwise.

Section 7. Successors and Assigns.

This Guaranty of Agreement shall be binding upon Guarantor and Guarantor's successors, and assigns and shall incur to the benefit of the City and City's successors and assigns, City may, without notice, assign this Guaranty of Agreement, the Agreement, or the monies and other sums payable under the Agreement, in whole or in part.

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Section 8. Guaranty of Costs and Fees.

In addition to the amounts guaranteed, Guarantor agrees to pay reasonable attorney fees and all other costs and expenses incurred by City in enforcing this Guaranty of Agreement or in any action or proceeding arising out of, or relating to, this Guaranty of Agreement.

Section 9. Governing Law.

This Guaranty of Agreement shall be deemed to be made under and shall be governed by California law in all respects, including matters of construction, validity, and performance, and the terms and provisions of this Guaranty may not be waived, altered, modified, or amended except in a writing signed by persons authorized by City and by Guarantor.

Section 10. Severance.

If any of the provisions of this Guaranty of Agreement shall contravene or be held invalid under the laws of any jurisdiction, this Guaranty of Agreement shall be construed as if it did not contain those provisions, and the rights and obligations of the parties shall be construed and enforced accordingly.

Section 11. Jurisdiction.

Guarantor hereby covenants and agrees to submit to the personal jurisdiction of any competent state court in the State of California for resolution of any dispute, claim or matter arising out of or related to this Guarantee.

Guarantor has executed this Guaranty as of the date first written above.

BP Corporation North America Inc.
a Delaware corporation
By:	/s/ STEPHEN R. WINTERS
Name:		Stephen R. Winters
Title:		Vice President
By:	/s/ DANIEL B. PINKERT
Name:		Daniel B. Pinkert
Title:		Corporate Secretary

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EX-2.4

Exhibit 2.4

MEMBERSHIP INTEREST PURCHASE AGREEMENT
by and among
TESORO CORPORATION

TESORO HAWAII, LLC
andHAWAII PACIFIC ENERGY, LLC

June 17, 2013

TABLE OF CONTENTS

			Page
ARTICLE I DEFINITIONS			1
	Section 1.1	Definitions	1
	Section 1.2	Construction	18
ARTICLE II PURCHASE AND SALE			18
	Section 2.1	Transfer of TH Interest	18
	Section 2.2	Deposit	18
	Section 2.3	Purchase Price	19
	Section 2.4	Closing; Closing Date	19
	Section 2.5	Deliveries at the Closing	19
	Section 2.6	Net Working Capital	22
	Section 2.7	Inventories	23
	Section 2.8	Earnout Payments	26
	Section 2.9	Company Assumed Liabilities; Seller Retained Liabilities	31
	Section 2.10	Excluded Assets	32
	Section 2.11	Undelivered Refinery Inventory	32
	Section 2.12	Committed Refinery Inventory	33
ARTICLE III REPRESENTATIONS AND WARRANTIES REGARDING SELLER			33
	Section 3.1	Organization and Qualification	33
	Section 3.2	Authority; Enforceability	34
	Section 3.3	Conflicts and Approvals	34
	Section 3.4	Proceedings	34
	Section 3.5	Ownership of the TH Interest	34
	Section 3.6	Brokers	35
ARTICLE IV REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANIES			35
	Section 4.1	Organization and Qualification	35
	Section 4.2	Authority; Enforceability	35

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TABLE OF CONTENTS

(continued)

			Page
	Section 4.3	Conflicts and Approvals	36
	Section 4.4	Capitalization of the Company	36
	Section 4.5	Capitalization of the Acquired Subsidiary	36
	Section 4.6	Financial Statements	37
	Section 4.7	Assets	38
	Section 4.8	Material Contracts	39
	Section 4.9	Authorizations	41
	Section 4.10	Compliance With Law	41
	Section 4.11	Proceedings and Orders	41
	Section 4.12	Employee Matters	42
	Section 4.13	Company Plans	42
	Section 4.14	Labor Matters	43
	Section 4.15	Taxes	44
	Section 4.16	Intellectual Property	45
	Section 4.17	Absence of Certain Changes	45
	Section 4.18	Bank Accounts	46
	Section 4.19	Insurance	46
	Section 4.20	Customers and Suppliers	46
ARTICLE V REPRESENTATIONS AND WARRANTIES REGARDING BUYER			47
	Section 5.1	Organization and Qualification	47
	Section 5.2	Authority; Enforceability	47
	Section 5.3	Conflicts and Approvals	47
	Section 5.4	Proceedings	48
	Section 5.5	Brokers	48
	Section 5.6	Purchase the TH Interest for Investment	48

ii

TABLE OF CONTENTS

(continued)

			Page
	Section 5.7	Financing	49
	Section 5.8	Solvency	49
	Section 5.9	Personnel Credentials	49
ARTICLE VI PRE-CLOSING COVENANTS			50
	Section 6.1	Refinery Shutdown, Turnaround and Startup Activities	50
	Section 6.2	Operation of the Business	53
	Section 6.3	Appropriate Action; Consents; Filings	55
	Section 6.4	Breach Notice	57
	Section 6.5	Exclusive Dealing	57
	Section 6.6	Right of Entry	57
	Section 6.7	Condition of the Assets	58
	Section 6.8	Independent Investigation	59
	Section 6.9	Supplement to Disclosure Schedules	60
	Section 6.10	Financing Matters	61
	Section 6.11	Company Monthly Financial Statements	61
	Section 6.12	Title Insurance and Surveys	61
	Section 6.13	Cooperation with respect to Financial Statements	62
	Section 6.14	Closing Date Feedstock Inventory	62
	Section 6.15	Hawaii Consent Decree	63
	Section 6.16	Personnel Credentials	63
	Section 6.17	Data Room Documentation	63
ARTICLE VII POST-CLOSING COVENANTS; TAX AND EMPLOYEE MATTERS			63
	Section 7.1	Retention of Employees	63
	Section 7.2	Service Recognition for Post-closing Employees	64
	Section 7.3	Pension Plan Coverage	64
	Section 7.4	Welfare Plan Coverage	65

iii

TABLE OF CONTENTS

(continued)

			Page
	Section 7.5	Post-Retirement Welfare Benefits	65
	Section 7.6	Other Benefits	66
	Section 7.7	Liabilities and Indemnities	66
	Section 7.8	No Third Party Beneficiaries	67
	Section 7.9	Insurance	67
	Section 7.10	Tax Matters	68
	Section 7.11	No Solicitation/Non-Competition	74
	Section 7.12	Third Person Consents Not Obtained Prior to Closing	75
	Section 7.13	Multi-Site Contracts	76
	Section 7.14	Operation of Business	76
	Section 7.15	Seller's Names; Removal of Logos and Signs	76
	Section 7.16	Further Assurances	77
	Section 7.17	Retention of and Access to Books and Records	77
	Section 7.18	Intellectual Property	78
	Section 7.19	Releases	79
ARTIVLE VIII CLOSING CONDITIONS			80
	Section 8.1	Conditions to Obligations of Each Party Under the Agreement	80
	Section 8.2	Additional Conditions to Seller's Obligations	80
	Section 8.3	Additional Conditions to Buyer's Obligations	81
ARTICLE IX CASUALTY OR CONDEMNATION			82
	Section 9.1	Notice	82
	Section 9.2	Repair or Replacement	82
	Section 9.3	Condemnation Awards	83
	Section 9.4	Purchase Price Adjustment	83
	Section 9.5	Deferral of Closing Date and Termination Date	83
ARTICLE X TERMINATION			83

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TABLE OF CONTENTS

(continued)

			Page
	Section 10.1	Termination	83
	Section 10.2	Deferral of Closing Date and Termination Date	84
	Section 10.3	Effect of Termination	84
ARTICLE XI INDEMNIFICATION AND REMEDIES			84
	Section 11.1	Survival	84
	Section 11.2	Indemnification Provisions for the Benefit of Buyer	85
	Section 11.3	Indemnification Provisions for the Benefit of Seller	87
	Section 11.4	Indemnification Procedures; Matters Involving Third Parties	88
	Section 11.5	Determination of Losses	90
	Section 11.6	No Multiple Recoveries	90
	Section 11.7	Limitations on Liability/ Exclusive Remedies	90
	Section 11.8	Governing Law	91
	Section 11.9	Jurisdiction; Consent to Service of Process; Waiver	91
ARTICLE XII MISCELLANEOUS			92
	Section 12.1	Amendment	92
	Section 12.2	Notices	92
	Section 12.3	Public Announcements	93
	Section 12.4	Expenses	93
	Section 12.5	Headings	93
	Section 12.6	No Strict Construction	93
	Section 12.7	Severability	94
	Section 12.8	Assignment	94
	Section 12.9	Parties in Interest	94
	Section 12.10	Failure or Indulgence Not Waiver	94
	Section 12.11	Disclosure Schedules	94
	Section 12.12	Time of the Essence	94

v

TABLE OF CONTENTS

(continued)

		Page
Section 12.13	Entire Agreement	94
Section 12.14	Confidentiality	95
Section 12.15	Specific Performance	95
Section 12.16	Counterparts	95

vi

TABLE OF CONTENTS

(continued)

EXHIBITS
Exhibit A	Assignment of Contracts
Exhibit B	Buyer Guaranty
Exhibit C	Environmental Agreement
Exhibit D	Knowledge Individuals
Exhibit E	Transition Services Agreement
Exhibit F	Retail Assets
Exhibit G-1	Hydrocarbon Inventory Measurement Procedures
Exhibit G-2	Hydrocarbon Inventory Valuation Procedures
Exhibit H	Merchandise Inventory Measurement and Valuation Procedures
Exhibit I	Parts and Supplies Inventory Measurement and Valuation Procedures
Exhibit J	Assignment of Membership Interest
Exhibit K	License Agreement
Exhibit L	Pre-Closing Transition Services Agreement

SELLER'S DISCLOSURE SCHEDULES
Section	Description
1.1(a)	Excluded Intellectual Property
1.1(b)	Permitted Liens
1.1(c)	Sellers Officers and Directors
2.5(a)(i)	Wire Transfer Instructions
3.3(a)	Seller Third Person Consents
3.3(b)	Seller's Authorizations from Governmental Authorities
3.5	Ownership of the TH Interest
4.6	Financial Statements
4.7(d)	Fixed Assets
4.7(e)	Owned Real Property
4.7(f)	Leased Real Property
4.8(b)	Material Company Contracts
4.8(c)	Seller Contracts
4.8(d)	Excluded Contracts

vii

TABLE OF CONTENTS

(continued)

4.8(e)	Material Company Contract Defaults
4.9(a)	Authorizations
4.10	Compliance with Law
4.11	Proceedings and Orders
4.12(a)	Employees
4.13(b)	Company Plans and Company Benefit Obligations and Consents
4.14(a)	CBA's
4.14(b)	Labor Related Administrative Proceedings
4.15	Taxes
4.16(a)	Company Intellectual Property
4.16(b)	Process Licenses
4.18	Bank Accounts/Safety Deposit Boxes
4.20(a)	Top Customers and Suppliers
4.20(b)	Customer and Supplier Terminations

BUYER'S DISCLOSURE SCHEDULES
Section	Description
5.3(a)	Buyer Third Person Consents
5.3(b)	Buyer's Authorization from Governmental Authorities

OTHER DISCLOSURE SCHEDULES
Section	Description
2.8(a)(ii)	Annual Gross Margin Calculation
2.8(k)	Earnout Dispositions
6.1(b)(ii)	Refinery Startup Criteria
6.2	Operation of the Business
6.3(g)	Credit Support Arrangements
7.7(a)	Description of Severance Plan
7.13	Multi-Site Contracts
8.2(c)	Closing Consents

viii

MEMBERSHIP INTEREST PURCHASE AGREEMENT

This MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “Agreement”) is entered into effective as of June 17, 2013 (the “Execution Date”), by and among TESORO CORPORATION, a Delaware corporation (“Seller”), HAWAII PACIFIC ENERGY, LLC, a Delaware limited liability company (“Buyer”), and, for the limited purposes set forth herein, TESORO HAWAII, LLC, a Hawaii limited liability company (the “Company”). Seller, Buyer and the Company may be referred to herein individually as a “Party,” and collectively as the “Parties.”

RECITALS

A.    Seller is the sole record and beneficial owner of all of the issued and outstanding units representing membership interests in the Company (the “TH Interest”);

B.    The Company is the record and beneficial owner of all of the issued and outstanding capital stock of Smiley’s Super Service, Inc., a Hawaii corporation (the “Acquired Subsidiary”);

C.    Seller desires to sell and convey the TH Interest to Buyer and Buyer desires to purchase and acquire the TH Interest; and

D.    In order to induce Seller to enter into this Agreement, Buyer Guarantor is willing to execute and deliver the Buyer Guaranty simultaneously with the execution of this Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and the representations, warranties and covenants contained herein, the Parties agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Definitions. As used in this Agreement (including in the Recitals), the following terms shall have the following meanings:

“Acquired Subsidiary” has the meaning given such term in the Recitals of this Agreement.

“Adjusted Net Worth” means as to any Person, at any time, in accordance with GAAP (except as otherwise specifically set forth below), on a consolidated basis for such Person and its wholly-owned subsidiaries (if any), the amount equal to the difference between: (a) the aggregate net book value of all assets of such Person and its wholly-owned subsidiaries (excluding the value of patents, trademarks, tradenames, copyrights, licenses, goodwill, leasehold improvements, prepaid assets and other intangible assets), calculating the book value of inventory for this purpose on a first-in-first-out basis, after deducting from such book values all appropriate reserves in accordance with GAAP (including all reserves for doubtful receivables, obsolescence, depreciation and amortization) and (b) the aggregate amount of the indebtedness and other liabilities of such Person and its wholly-owned subsidiaries (including tax and other proper accruals).

“Affiliate” means, as to any specified Person, any other Person that directly, or indirectly through one or more intermediaries or otherwise, controls, is controlled by or is under common control with the specified Person. For purposes of this definition, control of a Person means the power, direct or indirect, to direct or cause the direction of the management or policies of such Person whether by contract or otherwise, and ownership of 50% or more of the voting securities of another Person shall create a rebuttable presumption that such Person controls such other Person.

1

“Affiliated Group” means any affiliated group within the meaning of Section 1504(a) of the Code, or any similar group defined under a corresponding or similar provision of state, local or foreign Tax Law.

“Agreement” has the meaning given such term in the preamble of this Agreement and includes all Exhibits and Schedules attached hereto or delivered pursuant hereto.

“Allocation Schedule” has the meaning given such term in Section 7.10(j)(iii).

“Allocation Schedule Notice of Disagreement” has the meaning given such term in Section 7.10(j)(iii).

“Applicable Rate” means a rate per annum which shall be equal to the sum of LIBOR plus 2.0%, but in no event shall the Applicable Rate be less than an amount equal to 6.5%.

“Arbiter” has the meaning given such term in Section 2.6(e).

“Asset Purchase Allocation Schedule” has the meaning given such term in Section 7.10(j)(i).

“Assets” means the Refinery, the Logistics Assets, the Retail Assets, the Real Property Interests, improvements owned by the Company and the Acquired Subsidiary (except for assets and properties sold, consumed or otherwise disposed of in the ordinary course of business during the period from the Balance Sheet Date until the date of this Agreement) and located on or attached or affixed to the Real Property Interests, and all fixed assets, equipment and all other assets and rights owned or leased by, or licensed to or used by the Company and the Acquired Subsidiary, in each case, used in the day-to-day operation of the Business as it is currently operated, together with any and all rights of the Company and the Acquired Subsidiary under the contracts and agreements to which the Company or the Acquired Subsidiary is a party, and the rights to be assigned to the Company under Seller Contracts pursuant to this Agreement; but in all cases excluding the Excluded Assets.

“Assignment of Contracts” means an assignment and assumption of contracts with respect to the Seller Contracts in the form of Exhibit A attached hereto.

“Authorization” means any franchise, permit, license, authorization, certificate, registration, exemption, concession, approval, variance, waiver, right, settlement, compliance plan or other consent or approval granted or issued by any Governmental Authority (i) under any Law, including any Environmental Law, or (ii) under or pursuant to any Order or Material Contract with any such Governmental Authority; provided, however, “Authorizations” shall not include any license or permit issued by a Governmental Authority that grants or authorizes any interest in a right-of-way or easement or similar rights including the Pipeline ROW Interests.

“Balance Sheet” means the unaudited consolidated balance sheet of the Companies as of the Balance Sheet Date.

“Balance Sheet Date” means March 31, 2013.

“Base Amount” has the meaning given such term in Section 2.3.

“Books and Records” means all files, documents, instruments, papers, plans, drawings, manuals, books and records (including electronically stored information, to the extent reasonably practicable) owned and used by or for Seller or the Companies and relating exclusively to the ownership of the Assets

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or the conduct of the Business, excluding in each case any such items (i) included in or relating to the Excluded Assets or Retained Liabilities, (ii) to the extent comprising personnel medical and other records relating to employees which are prohibited by Laws or by Seller’s or its Affiliates’ internal policies from being transferred to Buyer or the Company without consent of the relevant employee, (iii) with respect to all corporate, financial, Tax and legal files, documents, instruments, papers, plans, drawings, manuals, books and records related to the ownership of the Assets or conduct of the Business prior to the Closing Date, (iv) to the extent disclosure or transfer is prohibited or subject to payment of fee or consideration by any license or other agreement with a Person other than Affiliates of Seller (other than the Companies), or by Law, and for which no consent to transfer has been received, until such time as consent has been obtained (at which time such item shall be deemed to be part of the Books and Records) (v) work product and attorney-client communications with any of Seller’s or its Affiliates’ legal counsel (other than the Companies’ legal counsel), (vi) prepared in connection with or relating in any way to the transactions contemplated by this Agreement, including bids received from other parties and analyses relating in any way to the Assets or Business, (vii) whose delivery or transfer would violate any confidentiality agreements or cause a waiver of any attorney-client or work-product privilege available to Seller or its Affiliates (other than the Companies), (viii) relating to Seller’s or its Affiliates’ inter-company or intra-company feedstock and product pricing information, internal transfer prices, hedging activity records and Hydrocarbon Inventory valuation procedures and records, (ix) to the extent that the disclosure of the particular terms of a contract, in the reasonable judgment of Seller, would violate any antitrust or similar Law, (x) containing financial or other data or information that is co-mingled or otherwise integrated with the data or information of Seller and its Affiliates (other than the Companies) and cannot be segregated with Commercially Reasonable Efforts by Seller or its Affiliates (other than the Companies), and (xi) that (a) are archived at locations controlled or managed by third parties and (b) are not clearly, solely, and exclusively related to the Assets or the Business and cannot be readily identified as such through the exercise of Commercially Reasonable Efforts.

“Breach Notice” has the meaning given such term in Section 6.4.

“Business” means the business conducted by the Company and the Acquired Subsidiary in accordance with recent past practices, including the ownership, operation and use of the Refinery, the Logistics Assets, the Retail Assets and other Assets.

“Business Day” means a day other than Saturday, Sunday or any day on which commercial banks located in the State of New York are authorized or obligated to close.

“Buyer” has the meaning given such term in the preamble of this Agreement.

“Buyer Guarantor” means Par Petroleum Corporation, a Delaware corporation.

“Buyer Guaranty” means the Guaranty to be executed and delivered simultaneously with the execution of this Agreement from Buyer Guarantor to Seller, in the form of Exhibit B attached hereto.

“Buyer Indemnitees” means Buyer, its Affiliates (including the Companies post-Closing) and their respective officers, directors, managers, employees, agents, representatives (including any officers, directors, managers, employees, agents or representatives of the Companies appointed or retained by Buyer or the Companies after the Closing or otherwise acting at the direction of Buyer, the Companies or Buyer’s Affiliates after the Closing) and their permitted successors or assigns.

“Buyer Third Person Consent” means any Third Person Consent required under (i) any Governing Document of Buyer, or (ii) any contract to which Buyer is a party or by which it or its assets is bound.

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“Buyer’s FSP” has the meaning given such term in Section 7.4(b).

“Buyer’s Pension Plan” has the meaning given such term in Section 7.3(a).

“Buyer’s Plans” has the meaning given such term in Section 7.1(d).

“Buyer’s Savings Plan” has the meaning given such term in Section 7.3(b).

“Casualty” has the meaning given such term in Section 9.1.

“CBAs” means, collectively, all collective bargaining agreements between the Company and any collective bargaining unit of any employee union and all existing contract extension agreements, memoranda of agreement, letters of understanding and similar agreements and instruments with any such collective bargaining unit.

“Claim” means any demand, claim, complaint, notice of violation or any other assertion of an Obligation, whether written or oral, for any Loss, specific performance, injunctive relief, remediation or other equitable relief whether or not ultimately determined to be valid.

“Claiming Employee” has the meaning given such term in Section 7.7(b).

“Closing” has the meaning given such term in Section 2.4.

“Closing Date” has the meaning given such term in Section 2.4.

“Closing Date Payment” has the meaning given such term in Section 2.5(a)(i).

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

“Commercially Reasonable Efforts” means efforts which are commercially reasonable to enable a Person, directly or indirectly, to satisfy a condition to or otherwise assist in the consummation of a desired result and which do not require the performing Person to sell any assets, pursue any litigation or pay, incur, convey, endure or deliver any material monetary payments or other form of consideration, whether tangible or intangible, including any property, detriment, debt, right, license, obligation, waiver or release.

“Commitment Letters” has the meaning given such term in Section 5.7.

“Committed Refinery Inventory” means crude oil, feedstocks, intermediates and blendstocks that Seller and its Affiliates (excluding the Companies) have legally committed to purchase for delivery to the Refinery after the Closing but where title has not yet passed to Seller or its Affiliates (excluding the Companies) as of the Measurement Time.

“Companies”means the Company and the Acquired Subsidiary.

“Company” has the meaning given such term in the preamble of this Agreement.

“Company Assumed Liabilities” has the meaning given such term in Section 2.9(a).

“Company Benefit Obligations” means all Obligations, arrangements, policies, or customary practices (other than those contained in or provided under the Company Plans), whether or not legally enforceable and whether written or oral, to provide benefits (other than salary or wages) to present or

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former directors, managers, officers, employees or consultants of the Company, the Acquired Subsidiary or their ERISA Affiliates. Company Benefit Obligations also include consulting agreements under which the compensation paid does not depend upon the amount of the service rendered, sabbatical policies, severance payment policies, fringe benefits within the meaning of Code Section 132, workers’ compensation plans, cafeteria plans, change-in-control benefits, disability benefits, retirement benefits, post-retirement benefits, supplemental unemployment benefits, vacation benefits, deferred compensation, loan, retention, bonus or other incentive compensation, and equity-based rights or compensation.

“Company Environmental Liabilities” means any and all Orders, Claims, Losses or Obligations, including required capital expenditures, arising from or related to Environmental Laws or the Hawaii Consent Decree to the extent related to the Company, the Assets or the Business, whether known or unknown, of the Companies or the Business, whether arising before or after the Closing, including those related to Third Party Claims, actual or threatened releases of Hazardous Materials, off-site treatment, storage, recycling, or disposal and off-site migrations of Hazardous Materials or any fine, penalty or other cost assessed in connection with any alleged or actual violation(s) of Environmental Laws.

“Company Monthly Financial Statements” has the meaning given such term in Section 6.11.

“Company Plans” means all pension plans, as defined in Section 3(2) of ERISA (“Pension Plans”) and welfare plans, as defined in Section 3(1) of ERISA (“Welfare Plans”), which the Company or an ERISA Affiliate maintains, administers, or contributes to, or is required to contribute to, or within the five (5) years prior to the Closing Date, maintained, administered, contributed to or was required to contribute to, or under which the Company or an ERISA Affiliate may incur any liability and which cover any employee or former employee of the Company or any ERISA Affiliate.

“Compensation Claims” has the meaning given such term in Section 7.7(b).

“Confidentiality Agreement” means the Confidentiality Agreement, dated March 4, 2013 by and between Seller and Buyer Guarantor.

“Consulting Work” means the design and planning services, engineering services, and procurement consulting and assistance performed by Seller reasonably necessary to complete the Scope of Work.

“Credit Support Arrangements” has the meaning given such term in Section 6.3(g).

“Current Assets”means the current assets of the Companies, on a consolidated basis, determined in accordance with GAAP and the Companies’ past practices (to the extent not inconsistent with GAAP), consistently applied, as of the Measurement Time including, without duplication: (i) accounts receivable, (ii) deposits (regardless of classification) and (iii) assets accounted for as other current assets of the Companies, but excluding (A) book values for Feedstock Inventory, Product Inventory, Merchandise Inventory and Parts and Supplies Inventory to the extent such assets are measured and valued pursuant to Section 2.7 and (B) any Tax assets. For the avoidance of doubt, Current Assets shall include current assets generated by the operation of the Business prior to the Measurement Time, including credit card receipts, fuel card receipts and fleet sales. Notwithstanding the foregoing, “Current Assets” shall not include any Excluded Assets.

“Current Liabilities” means the current liabilities of the Companies, on a consolidated basis, determined in accordance with GAAP and the Companies’ past practices (to the extent not inconsistent with GAAP), consistently applied, as of the Measurement Time, including, without duplication: (i) accounts payable and (ii) liabilities accounted for as other current liabilities of the Companies. For the

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avoidance of doubt, Current Liabilities shall include current liabilities generated by the operation of the Business prior to the Measurement Time. Notwithstanding the foregoing, “Current Liabilities” shall not include the current portion of any capital lease obligations to the extent such capital lease obligations are not then due and payable, any Retained Liabilities, Company Environmental Liabilities or any Tax liabilities.

“Data Room” means the electronic data room maintained by Intralinks, Inc. on behalf of Seller for the posting of documents for review by Buyer in connection with the transactions contemplated hereby.

“De Minimis Amount” has the meaning given such term in Section 11.2(c).

“Deposit” has the meaning given such term in Section 2.2.

“Deposit Return Event” means the occurrence of any of the following: (a) this Agreement is terminated pursuant to Section 10.1(a); (b) this Agreement is terminated by Buyer pursuant to Section 10.1(c) and the failure to Close in such circumstance is solely due to a failure to satisfy the Closing conditions set forth in Section 8.3(a) or Section 8.3(b) (other than the execution and delivery of the Closing certificate from an executive officer of Seller); or (c) this Agreement is terminated pursuant to Section 10.1(e).

“Diligence Representative” has the meaning given such term in Section 6.6(a).

“Direct Claim” has the meaning given such term in Section 11.4(g).

“Disclosure Schedules” means the disclosure schedule letters delivered by Seller to Buyer or Buyer to Seller, as the case may be, on the Execution Date. The Disclosure Schedules have been arranged in sections corresponding to the numbered sections of this Agreement.

“Dollars” and the symbol “$” mean the lawful currency of the United States of America.

“Effective Time” means 12:01 a.m. Hawaii-Aleutian Standard Time on the Closing Date.

“Employees” has the meaning given such term in Section 4.12(a)(i).

“Environmental Agreement” means the Environmental Agreement to be entered into by and among Seller, Buyer and the Company on the Closing Date, substantially in the form attached hereto as Exhibit C.

“Environmental Condition” means any condition at, on, under, within or migrating from any tangible Assets, in each case arising out of the presence or release of any Hazardous Materials on, at or underlying the Real Property Interests or the Pipeline ROW Interests.

“Environmental Law” means any Law or Authorization pertaining to public or employee exposure to Hazardous Materials, pollution, the environment or the protection of fish, wildlife or natural resources. For the avoidance of doubt, due to the inclusion of the word “applicable” in the definition of “Law” incorporated into this definition, any references in this Agreement to “any Environmental Law” or “any applicable Environmental Law” shall have the same meaning.

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“Equity Interests” means capital stock, partnership or membership interests or units (whether general or limited), other equity interests, and any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distribution of assets of, the issuing entity.

“Equity Securities” means (i) Equity Interests, (ii) subscriptions, calls, warrants, options or commitments of any kind or character relating to, or entitling any Person to acquire, any Equity Interests and (iii) securities convertible into or exercisable or exchangeable for shares of Equity Interests.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” means any entity which is (or at any relevant time was) a member of a “controlled group of corporations” with, under “common control” with, or a member of an “affiliated service group” with, the Company as defined in Section 414(b), (c), (m) or (o) of the Code, or under “common control” with the Company within the meaning of Section 4001(b)(l) of ERISA.

“Estimated Hydrocarbon Inventory Value” has the meaning given such term in Section 2.7(a)(iii).

“Estimated Merchandise Inventory Value” has the meaning given such term in Section 2.7(b)(iii).

“Estimated Net Working Capital” has the meaning given such term in Section 2.6(c).

“Estimated Parts and Supplies Inventory Value” has the meaning given such term in Section 2.7(c)(iii).

“EstimatedRefinery Startup Reimbursement” has the meaning given such term in Section 6.1(d)(v).

“Excluded Assets” has the meaning given such term in Section 2.10.

“Excluded Asset Transfer” has the meaning given such term in Section 2.10.

“Excluded Contract(s)” has the meaning given such term in Section 4.8(d).

“Excluded Intellectual Property” means the intellectual property and intellectual technology systems set forth in Section 1.1(a) of the Disclosure Schedules.

“Execution Date” has the meaning given such term in the preamble of this Agreement.

“Feedstock Inventory” means all crude oil, feedstock, intermediates and blendstocks owned by the Companies as of the Measurement Time, whether located at or in the Refinery, the Terminals or the Pipelines, in transit by pipeline or vessel or located elsewhere, whether in the possession of the Companies or any other Person, and regardless of whether such inventory represents wholesale exchange imbalances. For the avoidance of doubt, Feedstock Inventory includes all hydrocarbons located at the Refinery in processing units and interconnecting pipes and hydrocarbons serving as tank bottoms and heels but excluding sludge and bs&w. Additionally, Feedstock Inventory shall include Undelivered Refinery Inventory, if any.

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“Feedstock Inventory Value” means an aggregate amount equal to the market values for each constituent component of the Feedstock Inventory, calculated as of the Measurement Time in accordance with the provisions of Section 2.7(a)(ii).

“Final Inventory Value” has the meaning given such term in Section 2.7(d)(i).

“Final Net Working Capital” has the meaning given such term in Section 2.6(d).

“Final Refinery Startup Reimbursement” has the meaning given such term in Section 6.1(d)(viii).

“Financial Statements” has the meaning given such term in Section 4.6(a).

“Financing” has the meaning given such term in Section 5.7.

“Food Supplies” means all food products, ingredients and miscellaneous items that are intended to undergo further processing, packaging or preparation prior to their sale to customers at the retail sites of the Retail Assets or that are provided to customers at the Retail Assets at no additional charge, including soft drink syrups, coffee, hot chocolate, condiments, cups, lids, straws and napkins.

“Fuel Credits” means all credits, allotments, renewable identification numbers (“RINs”), certificates or other authorizations relating to any applicable fuel quality standards or renewable fuel standards.

“Fundamental Representations” has the meaning given such term in Section 11.1.

“GAAP” means generally accepted accounting principles in the United States.

“Governmental Authority” means any national, federal, regional, state, local or other governmental agency, authority, administrative agency, regulatory body, commission, board, bureau, instrumentality, court or arbitral tribunal having governmental or quasi-governmental powers.

“Governing Documents” means the articles of incorporation, certificate of incorporation, charter, bylaws, articles or certificate of formation, regulations, limited liability company agreement, operating agreement, certificate of limited partnership, partnership agreement, and all other similar documents, instruments or certificates executed, adopted, or filed in connection with the formation, organization or governance of a Person, including any amendments thereto.

“Hawaii Consent Decree” has the meaning given such term in Section 6.15.

“Hazardous Materials” means (i) any chemicals, materials or substances in any form, whether solid, liquid, gaseous, semisolid, or any combination thereof, whether waste materials, raw materials, chemicals, finished products, by-products, degradation products or any other materials or articles, which are listed, defined or otherwise designated as hazardous, toxic or dangerous and as such are regulated under any Environmental Law, including asbestos, and lead-containing paints or coatings, (ii) any petroleum (including crude oil), petroleum derivatives, petroleum products or by-products of petroleum refining or any oxygenate (including degradation products) in any fuel, and (iii) any other chemical, substance or waste that is regulated by any Environmental Law.

“Honolulu Pipeline” means that certain refined products pipeline running approximately 21.2 miles connecting the Refinery to terminals located at the Honolulu International Airport, terminals located

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at certain military facilities, the Tesoro Sand Island Terminal, the Aloha Honolulu terminal and the Chevron terminal.

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

“Hydrocarbon Inventory” has the meaning given such term in Section 2.7(a)(ii).

“Hydrocarbon Inventory Value” has the meaning given such term in Section 2.7(a)(i).

“Indemnification Cap” has the meaning given such term in Section 11.2(e).

“Indemnification Deductible” has the meaning given such term in Section 11.2(d).

“Indemnified Party” has the meaning given such term in Section 11.4(a).

“Indemnifying Party” has the meaning given such term in Section 11.4(a).

“Intellectual Property” has the meaning given such term in Section 4.16(a).

“Interim Period” means the period of time from the Execution Date until the earlier of the Closing or the termination of this Agreement pursuant to Article X.

“Inventory Challenged Amount” has the meaning given such term in Section 2.7(d)(i).

“Inventory Protest Letter” has the meaning given such term in Section 2.7(d)(i).

“Inventory Statement” has the meaning given such term in Section 2.7(d)(i).

“Kalaeloa Pipelines” means, collectively, the four (4) refined products pipelines running approximately 2.2 miles and connecting the Refinery to the loading facility at the Kalaeloa Barbers Point Harbor, the Chevron refinery, Aloha Barbers Point Terminal and HECO.

“Knowledge” and “Known” mean, in the case of Seller, the actual knowledge of the individuals listed in Part I of Exhibit D, obtained in the normal course of their respective duties as officers, employees or consultants of Seller or any of its Affiliates, without independent investigation or inquiry and, in the case of Buyer, the actual knowledge of the individuals listed on Part II of Exhibit D, obtained in the normal course of their respective duties as officers, employees or consultants of Buyer or any of its Affiliates, without independent investigation or inquiry.

“Law” means any applicable law (including common law), statute or ordinance of any nation or state, including the United States of America, and any political subdivision thereof, including any state of the United States of America, any regulation, policy, protocol, proclamation or executive order promulgated by any Governmental Authority, any rule or regulation of any self-regulatory organization such as a securities exchange, or any applicable Order of any court or other Governmental Authority having the effect of law in any such jurisdiction. For the avoidance of doubt, any references herein to “any Law” shall, as indicated by this definition, be deemed to refer only to such Law as is applicable in the circumstances.

“Leased Real Property” has the meaning given such term in Section 4.7(f).

“LIBOR” means for each applicable day, the rate stated in the “Money Rates” section of The Wall Street Journal published on such day as the one (1) month London Interbank Offered Rate; and if

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The Wall Street Journal is not published on such day, then the aforesaid rate in the most recent edition of The Wall Street Journal preceding such day shall be utilized for such day.

“License Agreement” means the License Agreement to be entered into by and among Seller, Buyer and the Company on the Closing Date, substantially in the form attached hereto as Exhibit K.

“Licensed Technology Rights” has the meaning given such term in Section 7.18(c).

“Lien” means any mortgage, pledge, security interest, hen, deed of charge, right of first refusal or first offer, floating charge or other charge of any kind (including any agreement to give any of the foregoing), any conditional sale or other title retention agreement, or the filing of or agreement to give any security interest, charge or financing statement under the Laws of any jurisdiction.

“Logistics Assets” means, collectively, the Pipeline Assets, the SPM and the Terminals along with two (2) time chartered tug/barge units and one (1) leased tug boat.

“Long-Term Inactive Employee” has the meaning given such term in Section 4.12(a)(ii).

“Loss” means, subject to Section 11.5 and Section 11.7, any and all damages, penalties, fines, assessments, charges, costs, Obligations, losses, expenses and fees, including costs of investigation, court costs, costs of defense and reasonable fees of attorneys, accountants and other professional advisors and expert witnesses in connection therewith.

“Management Work” means the turnaround management, pre-start up and start-up management, operations management, and training services performed by Seller reasonably necessary to complete the Scope of Work.

“Material Adverse Effect”means an effect, event, fact, circumstance or development (“Effects”) that, individually or in the aggregate, has had, or would reasonably be expected to have a material adverse effect on the business, properties, financial condition or results of operations of the Companies, taken as a whole; provided, however, that in no event shall any Effect that results from any of the following be deemed to constitute a Material Adverse Effect: (a) this Agreement or any actions required to be taken in compliance with this Agreement, the transactions contemplated hereby, or the pendency or announcement thereof, (b) changes or conditions generally affecting the petroleum refining, marketing and transportation industry (including feedstock pricing, refining, marketing, transportation, terminalling and trading, generally or regionally), (c) changes in general economic, capital market, regulatory or political conditions in the United States or elsewhere (including interest rate and currency fluctuations), (d) changes or proposed changes in Law occurring after the Execution Date, (e) changes or proposed changes in accounting principles or GAAP occurring after the Execution Date, (f) acts of war, insurrection, sabotage or terrorism occurring after the Execution Date, other than such acts that are specifically directed towards the Companies or the Assets, or (g) the Company’s or the Acquired Subsidiary’s failure, in and of itself, to meet operational or financial expectations or projections other than as a result of a breach of this Agreement by the Company or Seller; except, in the cases of clauses (b) and (c), to the extent that such Effects have a disproportionate impact on the Company or the Assets, as a whole, relative to other participants in the industry and in the locations in which the Company operates the Business.

“Material Company Contract” has the meaning given such term in Section 4.8(b).

“Material Contract”has the meaning given such term in Section 4.8(a).

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“Measurement Time” means 11:59 p.m. Hawaii-Aleutian Standard Time on the Closing Date.

“Merchandise Inventory”means all merchandise (excluding any Product Inventory) owned by the Companies as of the Measurement Time and acquired for resale or use in the Retail Assets (including Food Supplies), whether in transit or located elsewhere, whether in the possession of the Companies or any other Person.

“Merchandise Inventory Value” means the amount to be paid for the Merchandise Inventory, calculated in accordance with the provisions of Section 2.7(b)(ii).

“Multi-Site Contract”has the meaning given such term in Section 7.13.

“Multi-Site License” has the meaning given such term in Section 7.18(c).

“Net Working Capital” means the sum of (a) the Current Assets; less (b) the Current Liabilities.

“Net Working Capital Statement” has the meaning given such term in Section 2.6(d).

“New Seller Information” has the meaning given such term in Section 6.9(a).

“NWC Challenged Amount” has the meaning given such term in Section 2.6(d).

“NWC Protest Letter” has the meaning given such term in Section 2.6(d).

“Obligations” means, with respect to any Person, any duties, liabilities, covenants and obligations of such Person, whether vested or unvested, absolute or contingent, conditional or unconditional, primary or secondary, direct or indirect, known or unknown, asserted or unasserted, disputed or undisputed, matured or unmatured, accrued or unaccrued, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, and whether contractual, statutory or otherwise.

“Order” means any order, writ, ruling, decision, verdict, decree, assessment, award (including arbitration awards), judgment, stipulation, injunction, or other determination, decision or finding by, before, or under the supervision of any Governmental Authority.

“Other Tax Contest” has the meaning given such term in Section 7.10(d)(iii).

“Owned Real Property” has the meaning given such term in Section 4.7(e).

“Parts and Supplies Inventory” means the warehouse and stores inventory (including tools, spare parts, catalysts, chemicals, precious metals, sulphur and other similar items) owned by the Companies as of the Measurement Time.

“Parts and Supplies Inventory Value” means the amount to be paid for the Parts and Supplies Inventory, calculated in accordance with the provisions of Section 2.7(c)(ii).

“Party” has the meaning given such term in the preamble of this Agreement.

“Pension Plan” has the meaning given in the definition of Company Plan.

“PermittedLien” means:

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(i)    inchoate Liens and charges imposed by Law and incidental to the construction, maintenance, development or operation of the Company’s or the Acquired Subsidiary’s properties or the operation of the Business, if payment of the obligation secured thereby is not yet due or if the validity or amount of which is being contested in good faith by the Company or the Acquired Subsidiary by appropriate action, as applicable;

(ii)    Liens for Taxes, assessments, Obligations under workers’ compensation or other social welfare legislation or other requirements, charges or levies of any Governmental Authority, in each case not yet delinquent or which are being contested in good faith by the Company or the Acquired Subsidiary by appropriate actions:

(iii)    easements, servitudes, rights-of-way and other rights, exceptions, reservations, conditions, limitations, covenants and other restrictions on the Real Property Interests (A) described in the Title Commitments, (B) to the extent related to a Real Property Interest not covered by the Title Commitments, of record or contained in any lease of such Real Property Interest or portion thereof, or (C) that do not materially interfere with, materially impair or materially impede the operation, value or use of the Assets affected thereby;

(iv)    pledges and deposits to secure the performance of bids, tenders, trade or government contracts (other than for repayment of borrowed money), leases, licenses, statutory Obligations, surety bonds, performance bonds, completion bonds and other Obligations of a like kind as set forth in Section 1.1(b) of the Disclosure Schedules or as otherwise incurred in the ordinary course of business that do not materially interfere with, impair or impede the Business as currently conducted by the Company or the Acquired Subsidiary;

(v)    any Liens consisting of (A) rights reserved to or vested in any Governmental Authority to control or regulate any property of the Company or the Acquired Subsidiary, or to limit the use of such property in any manner which does not materially impair the use of such property for the purposes for which it is held by the Company or the Acquired Subsidiary, (B) Obligations to any Governmental Authority with respect to any Authorization and the rights reserved or vested in any Governmental Authority to terminate any such Authorization or to condemn or expropriate any property, or (C) zoning or other land use or environmental laws and ordinances of any Governmental Authority, in each case that do not materially detract from the value or marketability of the property affected or interfere with, impede or impair the Business as currently conducted by the Company or the Acquired Subsidiary;

(vi)    mechanics’ and materialmen’s Liens and similar charges not filed of record and not delinquent;

(vii)    mechanics’ and materialmen’s Liens and similar charges filed of record but (A) are being contested in good faith by appropriate action, (B) for which the Company or the Acquired Subsidiary is the beneficiary of a contractual indemnity from another Person, or (C) for which the applicable statutory foreclosure period or other enforcement rights have lapsed;

(viii)    mechanics’ and materialmen’s Liens and similar charges filed of record and not included in clause (vii) above for which Seller has bonded around on or before the Closing;

(ix)    Liens in respect of Orders with respect to which an appeal or other proceeding for review is being prosecuted and with respect to which a stay of execution pending such appeal or such proceeding for review has been obtained;

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(x)    any Lien or title imperfection with respect to the Assets created by or resulting from any act or omission by, at the direction of or on behalf of Buyer; and

(xi)    Liens that will be paid in full or released on or prior to the Closing Date.

“Person”means an individual, partnership, limited liability company, corporation, joint stock company, trust, estate, joint venture, association or unincorporated organization, or any other form of business or professional entity.

“Pipeline Assets” means, collectively, the (i) SPM Pipelines; (ii) the Honolulu Pipeline; and (iii) the Kalaeoloa Pipelines, and all current appurtenances, facilities, fixtures, pumps, valves, meters and other equipment related thereto.

“Pipeline ROW Interests”means the parcels of land and waterways which the Company or the Acquired Subsidiary has the right to use, traverse or occupy under easements, rights-of-way, franchises, permits, licenses and other rights to or interests in relating to the installation, construction, ownership, maintenance and repair of the Pipeline Assets.

“Post-Closing Employee” has the meaning given such term in Section 7.1(c).

“Pre-Closing Tax Contest” has the meaning given such term in Section 7.10(d)(ii).

“Pre-Closing Tax Period” means all taxable periods ending on or prior to the Closing Date and the portion of any Straddle Period through the end of the Closing Date.

“Pre-Closing Tax Return” has the meaning given such term in Section 7.10(b)(i).

“Pre-Closing Transition Services Agreement” means that certain Pre-Closing Transition Services Agreement to be executed and delivered simultaneously with the execution of this Agreement by and between Tesoro Companies, Inc., a Delaware corporation, and Buyer, substantially in the form attached hereto as Exhibit L.

“Pre-Transaction Claims” has the meaning given such term in Section 7.19(a).

“Pre-Transaction Matters” has the meaning given such term in Section 7.19(a).

“Proceeding” means any action, case, lawsuit, arbitration, mediation, investigation, hearing, audit, examination or other proceeding (including regulatory or administrative proceedings) at law or in equity, commenced, brought, conducted or heard by or before, any Governmental Authority, or any mediator, arbitrator or board of arbitration.

“Process Licenses” has the meaning given such term in Section 4.16(b).

“Product Inventory” means all refined products owned by the Companies as of the Measurement Time, whether located at or in the Refinery, the Pipelines, the Terminals or the Retail Assets, whether in transit by pipeline, rail car, vehicle or vessel or located elsewhere, whether in the possession of the Companies or any other Person, and regardless of whether such inventory represents wholesale exchange imbalances. For the avoidance of doubt, Product Inventory includes all hydrocarbons in interconnecting pipes and hydrocarbons serving as tank bottoms and heels.

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“Product Inventory Value” means an aggregate amount equal to the market values for each constituent component of the Product Inventory, calculated as of the Measurement Time in accordance with the provisions of Section 2.7(a)(ii).

“Property, Motor Fuels, and Sales Taxes” has the meaning given such term in Section 7.10(a).

“Purchase Price” has the meaning given such term in Section 2.3.

“Real Property Interests” means the real property interests owned or leased by the Company or the Acquired Subsidiary, together with all fixtures, buildings and other structures, facilities or improvements currently or hereafter located thereon prior to the Closing and all easements, licenses, rights, appurtenances, right-of-way agreements, option agreements, use agreements and similar land-related agreements or interests relating to the foregoing but excluding the Pipeline ROW Interests.

“Refinery” means the Company’s petroleum refinery located at the Campbell Industrial Park in Kapolei, Hawaii, with a throughput capacity of 94,000 barrels per day.

“Refinery Operational Plan” has the meaning given such term in Section 6.14(a).

“Refinery Shutdown Activities” has the meaning given such term in Section 6.1(a).

“Refinery Startup Completion” has the meaning given such term in Section 6.1(b)(i).

“Refinery Startup Deposit” has the meaning given such term in Section 6.1(d)(i).

“Refinery Startup Dispute” has the meaning given such term in Section 6.1(c).

“RefineryStartup Expenses” means any and all expenses incurred by Seller or its Affiliates directly relating to the Refinery Turnaround and Startup Activities, including expenses relating to (i) salary, payroll expenses and benefits for employees of Seller (but excluding salary expenses of employees of the Company), (ii) engineers, (iii) contractors, (iv) third party expenses, (v) materials (including catalysts) and (vi) leased or purchased equipment incorporated into or used in the Refinery Turnaround and Startup Activities.

“Refinery Turnaround and Startup Activities” has the meaning given such term in Section 6.1(b).

“Refund Conditions” has the meaning given such term in Section 2.2.

“Related Agreements” means the agreements, documents and instruments listed in Section 2.5 and any other agreements, documents and instruments executed and delivered pursuant to this Agreement including the Buyer Guaranty and the Pre-Closing Transition Services Agreement.

“Repair Costs” has the meaning given such term in Section 9.2(a).

“Repair Cost Dispute” has the meaning given such term in Section 9.2(c).

“Repair Negotiation Period” has the meaning given such term in Section 9.2(b).

“Represented Employee” has the meaning given such term in Section 4.12(b).

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“Retail Assets” means the retail assets owned by the Company located on the islands of Oahu, Maui and Hawaii at which fuel products and merchandise are marketed and sold to retail customers, and related assets, as set forth in Exhibit F to this Agreement.

“Retained Liabilities” has the meaning given such term in Section 2.9(b).

“Retiree Welfare Benefit” has the meaning given such term in Section 7.5.

“Scope of Work” means the scope of work set forth in the electronic folder titled “Refinery Turnaround Scope of Work” located in the Data Room as of the Execution Date.

“Section 338 Allocation Schedule” has the meaning given such term in Section 7.10(j)(ii).

“Section 338(h)(10) Election Forms” has the meaning given such term in Section 7.10(i)(ii).

“Section 338(h)(10) Elections” has the meaning given such term in Section 7.10(i)(i).

“Securities Act” has the meaning given such term in Section 3.5.

“Seller” has the meaning given such term in the preamble of this Agreement.

“Seller Affiliated Group” means an Affiliated Group which includes the Seller.

“Seller Captive Insurers” has the meaning given such term in Section 7.9(a).

“Seller Contracts” has the meaning given such term in Section 4.8(c).

“Seller Indemnitees” means Seller, its Affiliates (excluding the Companies post-Closing) and their respective officers, directors, employees, agents, representatives (including any officers, directors, managers, employees, agents or representatives of the Companies to the extent acting at the direction of Seller or its Affiliates prior to the Closing), and their permitted successors or assigns.

“Seller IP” has the meaning given such term in Section 7.18(a).

“Seller Officers and Directors” means those individuals identified as “Seller Officers and Directors” in Section 1.1(c) of the Disclosure Schedules, being all individuals holding positions with the Companies.

“Seller Policies” has the meaning given such term in Section 7.9(a).

“Seller Third Person Consent” means any Third Person Consent required under (i) any Governing Document of Seller, the Company or the Acquired Subsidiary, or (ii) any Material Contract to which Seller, the Company or the Acquired Subsidiary is a party or by which Seller or any of its assets is bound.

“Seller Transaction Expenses” means the aggregate amount of all out-of-pocket fees and expenses, incurred by, or to be paid by, the Companies relating to the negotiation, preparation or execution of this Agreement or any documents or agreements contemplated hereby or the performance or consummation of the pre-Closing transactions contemplated hereby and thereby, which shall include (a) any fees and expenses associated with obtaining necessary or appropriate waivers, consents or approvals of any Governmental Authority or third parties on behalf of Seller or the Companies, (b) any fees or expenses associated with obtaining the release and termination of any Liens (other than Permitted

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Liens), (c) all brokers’ or finders’ fees, and (d) fees and expenses of counsel, advisors, consultants, investment bankers, accountants, auditors and experts, in all cases, whether payable prior to or on the Closing Date or thereafter. For avoidance of doubt, Seller Transaction Expenses shall not include any expenses incurred by the Companies on or after the Closing at the direction or request of Buyer or its Affiliates (including the Companies beginning after the Closing Date).

“Seller’s Pension Plans” has the meaning given such term in Section 7.3(a).

“Seller’s Savings Plans” has the meaning given such term in Section 7.3(b).

“Short-Term Inactive Employee” has the meaning given such term in Section 4.12(a)(ii).

“SPM” means that certain floating single point mooring used for petroleum product and crude oil loading and off-loading equipment owned by the Company and located approximately 1.7 miles off the coast of the Kalaeloa Barbers Point Harbor.

“SPM Pipelines” means, collectively, the three (3) subsea pipelines running approximately 2.0 miles and connecting the Refinery to the SPM.

“Startup Criteria” shall mean the criteria set forth in Section 6.1(b)(ii) of the Disclosure Schedules.

“Startup Deposit Drawn Amount” means, at a given point in time, the total amount transferred by Seller to its own account pursuant to Section 6.1(d)(iv) as of such time.

“Straddle Period” has the meaning given such term in Section 7.10(a).

“Straddle Tax Return” has the meaning given such term in Section 7.10(b)(ii).

“Subsidiary Shares” has the meaning given such term in Section 4.5.

“Taking” has the meaning given such term in Section 9.1.

“Tax” means all United States federal, state, provincial, local or foreign income, profits, accumulated earnings, personal holding company, estimated, gross receipts, windfall profits, sales, use, transfer, value added, severance, franchise, capital gains, capital stock, withholding, ad valorem, employment, unemployment, workers’ compensation, occupation, occupancy, production, social security, disability, wage, payroll, stamp, registration, premium, goods and services, real property, personal property, intangible property, severance, excise, general excise, alternative or add-on minimum, customs, or environmental taxes, or any other taxes, charges, fees, imposts, duties, levies, withholdings, escheat payments, or other assessments, imposed by any Taxing Authority, whether or not shown on a Tax Return, together with any interest, fines, penalties, or additions to tax attributable to or imposed with respect thereto, imposed by, or on behalf of any Taxing Authority, whether or not disputed.

“Tax Contest” has the meaning given such term in Section 7.10(d)(i).

“Tax Return” means any return, declaration, report, claim for refund or information return or statement or similar statement relating to Taxes, including any schedule or attachment thereto.

“Taxing Authority” means, with respect to any Tax, the Governmental Authority that imposes such Tax and the Governmental Authority charged with the collection of such Tax, including any

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Governmental Authority that imposes, or is charged with collecting, social security or similar charges or premiums.

“Terminals” means, collectively, (i) the two (2) refined products terminals leased and operated by the Company located on the island of Hawaii in Hilo, Hawaii; (ii) the one (1) refined products terminal leased and operated by the Company located on the island of Maui in Kahului, Hawaii; (iii) the one (1) refined products terminal leased and operated by the Company located on the island of Oahu in Hawaii; and (iv) the one (1) refined products terminal leased and operated by the Company located on the island of Kauai at the Lihue Airport in Hawaii.

“Termination Date” has the meaning given such term in Section 10.1(d).

“Tesoro Marks” means any name incorporating “Tesoro” or any derivation thereof that would reasonably be expected to be confused therewith, or any trademarks, service marks, trade dress, trade names, logos, corporate names and domain names, insignia, imprints, brand identifications, and advertising of Seller or its Affiliates (including “2 Go Tesoro”) and other similar indicia of origin, and all goodwill associated therewith, and registrations of and applications to register the foregoing, together with all other legal rights that arise in any of the foregoing under Law.

“TH Interest” has the meaning given such term in the Recitals of this Agreement.

“Third-Party Claim” has the meaning given such term in Section 11.4(b).

“Third-Party Estimate” has the meaning given such term in Section 9.2(c).

“Third Person Consent” means any approval, consent, amendment or waiver of a Person that is required in order to effect the transactions contemplated hereby or any of the Related Agreements or any part hereof or thereof, including waivers and consents by lenders and waivers of transfer or change of control restrictions; provided that Third Person Consents shall not include Authorizations.

“Title Commitments” means those certain Preliminary Reports obtained by Seller issued by the Title Company under Order Nos. 6707000738 for Lot 12765, 6707000740 for Lot 3167-A, and 6707000739 for Lot 3167-B.

“Title Company” means Old Republic Title & Escrow of Hawaii.

“Title Policies” has the meaning given such term in Section 6.12.

“Transition Services Agreement” means the Transition Services Agreement to be entered into by and among Tesoro Companies, Inc., a Delaware corporation, Buyer and the Company on the Closing Date, substantially in the form attached hereto as Exhibit E.

“Treasury Regulation” means the regulations promulgated under the Code by the United States Department of Treasury.

“Undelivered Refinery Inventory” means all crude oil, feedstock, intermediates, blendstocks and refined products owned by Seller and its Affiliates (excluding the Companies) as of the Measurement Time that is designated for use at and is in transit by vessel to the Refinery, whether in the possession of Seller, its Affiliates (excluding the Companies) or any other Person.

“Union” has the meaning given such term in Section 4.12(b).

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“WARN Act” has the meaning given such term in Section 7.7(a).

“Welfare Plan” has the meaning given in the definition of Company Plan.

Section 1.2 Construction. Whenever the context requires, the gender of all words used in this Agreement includes the masculine, feminine and neuter and terms defined in the singular have the corresponding meanings in the plural, and vice versa. All references to Articles and Sections refer to articles and sections of this Agreement, all references to Exhibits refer to exhibits to this Agreement and all references to Schedules refer to Schedules to this Agreement, which Exhibits and Schedules are attached hereto or delivered pursuant hereto and made a part of this Agreement for all purposes. Except as this Agreement otherwise specifies, all references herein to any Law defined or referred to herein are references to that Law (and any rules and regulations promulgated thereunder), as the same may have been (or may hereafter be) amended from time to time; provided, however, that any references to any Law in Article III, Article IV or Article V (or, as used in any Section in any such Article, any references to any Law included in any defined term used in Article III, Article IV or Article V) are references to that Law (and any rules and regulations promulgated thereunder), as the same may have been amended, interpreted and applied through the Closing Date. In the event of any conflict between the main body of this Agreement and the Exhibits and Schedules hereto, the provisions of the main body of this Agreement shall prevail, but only with respect to the application of the provisions hereof or the interpretation of any of the provisions hereof. The word “includes” or “including” means “including, but not limited to,” unless the context otherwise requires. The words “shall” and “will” are used interchangeably and have the same meaning. The words “this Agreement,” “hereof,” “hereby,” “herein,” “hereunder” and similar terms in this Agreement shall refer to this Agreement as a whole and not to any particular Section or Article in which such words appear. If a word or phrase is defined, its other grammatical forms have a corresponding meaning. Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified. The language used in this Agreement will be deemed to be the language the Parties have chosen to express their mutual intent, and no rule of strict construction will be applied against any Party. A defined term has its defined meaning throughout this Agreement and each Exhibit and Schedule to this Agreement, regardless of whether it appears before or after the place where it is defined. The term “cost” includes expense, and the term “expense” includes cost. All references to a specific time of day in this Agreement shall be based upon Central Standard Time or Central Daylight Savings Time, as applicable, on the date in question unless otherwise specified. The word “or” will have the inclusive meaning represented by the phrase “and/or” unless the context requires otherwise. Time periods within or following which any payment is to be made or an act is to be done shall be calculated by excluding the day on which the time period commences and including the day on which the time period ends and by extending the period to the next Business Day following if the last day of the time period is not a Business Day. For purposes of Article III or Article IV, the words “delivered to,” “provided to,” “made available to” or words of similar import mean posted to the Data Room or physically delivered to Buyer, in each case, as of the Execution Date.

ARTICLE II

PURCHASE AND SALE

Section 2.1 Transfer of TH Interest. Subject to and in accordance with the terms of this Agreement, Seller agrees to sell, assign, transfer, convey and deliver the TH Interest to Buyer, and Buyer agrees to purchase and accept the TH Interest from Seller, for and in consideration of the Purchase Price and the other covenants and agreements of the Parties herein.

Section 2.2 Deposit. On the Execution Date, Buyer shall pay Seller, by wire transfer or delivery of other immediately available funds to an account, or accounts, designated by Seller, a deposit against the Purchase Price of the TH Interest in an amount equal to $25,000,000 (the “Deposit”), as consideration

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for Seller’s entry into this Agreement. This Agreement will not become a legally binding and enforceable obligation of Seller unless and until the Deposit is received by Seller. As soon as practicable after the Execution Date, but in any event within ten (10) days after Seller receives the Deposit, Seller shall transfer the Deposit into a segregated investment account. Unless Seller and Buyer otherwise agree in writing, Seller shall use Commercially Reasonable Efforts to invest such funds in U.S. Treasury obligations with a maturity of six (6) months or less, or money market funds that invest exclusively in U.S. Treasury obligations. The Deposit shall be non-refundable in that it shall not be returned to Buyer unless all of the following events (the “Refund Conditions”) occur: (a) this Agreement is terminated by Buyer or by Seller as permitted herein, and (b) a Deposit Return Event shall have occurred. Within ten (10) days following the occurrence of the Refund Conditions, Seller shall transfer to Buyer, by wire transfer or delivery of other immediately available funds to an account designated by Buyer, a cash amount equal to the Deposit. If the Closing occurs, an amount equal to the Deposit will be applied to the Purchase Price. Seller shall retain all interest or earnings received on the Deposit unless the Parties otherwise agree. Notwithstanding the preceding sentences to the contrary, in the event this Agreement is terminated pursuant to Section 10.1(e) then the amount of the Deposit that is to be refunded to Buyer shall be reduced, but not below zero, by the amount of Losses incurred by Seller and its Affiliates related to or arising from the Refinery Turnaround and Startup Activities including Losses related to the disposition of Feedstock Inventory, Undelivered Refinery Inventory and Committed Refinery Inventory.

Section 2.3 Purchase Price. As consideration for the sale and transfer of the TH Interest, Buyer shall pay to Seller at the Closing SEVENTY FIVE MILLION ($75,000,000) (the “Base Amount”), plus or minus the adjustment set forth in Section 2.6 (Net Working Capital), plus the adjustments set forth in Section 2.7 (Inventories), and plus the Earnout Payments, if any, payable pursuant to Section 2.8 (such Base Amount, as finally adjusted, the “Purchase Price”).

Section 2.4 Closing; Closing Date. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Seller in San Antonio, Texas, or at such other place as Buyer and Seller may mutually agree, at 10:00 a.m. at the site of the Closing on the second (2^nd) Business Day after the satisfaction or waiver of the conditions contained in Article VIII (other than those conditions that by their nature are to be fulfilled at Closing), or on such other date as Seller and Buyer may mutually agree (the “Closing Date”); provided, however, the Closing shall be deemed for all purposes of this Agreement to occur as of the Effective Time on the Closing Date. Buyer shall assume operational control of the Company and the Business on the Closing Date upon Seller’s receipt of the Closing Date Payment by wire transfer of immediately available funds as provided below.

Section 2.5 Deliveries at the Closing. At the Closing, the following events shall occur:

(a)Buyer shall deliver, or cause to be delivered, to Seller:

(i)An amount (the “Closing Date Payment”) equal to the Base Amount,

(1) less the Deposit,

(2) plus or minus, as applicable, an amount equal to the Estimated Net Working Capital pursuant to Section 2.6(c),

(3) plus an amount equal to the Estimated Hydrocarbon Inventory Value pursuant to Section 2.7(a)(iii),

(4) plus an amount equal to the Estimated Merchandise Inventory Value pursuant to Section 2.7(b)(iii),

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(5) plus an amount equal to the Estimated Parts and Supplies Inventory Value pursuant to Section 2.7(c)(iii),

(6) plus an amount equal to the Estimated Refinery Startup Reimbursement pursuant to Section 6.1(d)(v), and

(7) less an amount to be agreed upon, in good faith, by Seller and Buyer prior to the Closing Date for any Taxes required under applicable Law to be deducted or withheld by Buyer which amount deducted or withheld shall be subject to Section 7.10(n),

such Closing Date Payment to be paid by wire transfer of immediately available funds to the account of Seller set forth in Section 2.5(a)(i) of the Disclosure Schedules;

(ii)resolutions of Buyer authorizing the execution of this Agreement and the Related Agreements to which Buyer is a party and the consummation of the transactions contemplated under this Agreement and the Related Agreements to which Buyer is a party (to the extent required by Buyer’s organizational documents), in each case certified by the Secretary or other executive officer of Buyer as being complete and correct and then in full force and effect;

(iii)a certificate of incumbency of the signatory officers of Buyer;

(iv)a certificate as to the good standing of Buyer issued by the Secretary of State of Delaware;    

(v)the certificates referred to in Section 8.2(a) and Section 8.2(b);

(vi)copies of all Buyer Third Person Consents and Authorizations obtained pursuant to Section 6.3;

(vii)the Environmental Agreement in the form attached hereto as Exhibit C, duly executed by Buyer on behalf of itself and the Company;

(viii)the Transition Services Agreement in the form attached hereto as Exhibit E, duly executed by Buyer on behalf of itself and the Company; and

(ix)the License Agreement in the form attached hereto as Exhibit K, duly executed by Buyer on behalf of itself and the Company.

In addition, Buyer shall accept the TH Interest from Seller, and duly execute and deliver the Related Agreements to which Buyer is a party.

(b)Seller shall deliver, or cause to be delivered, to Buyer:

(i)an Assignment of Membership Interest in the form attached hereto as Exhibit J with regard to the transfer of the TH Interest to Buyer and the admission of Buyer as the sole member of the Company;

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(ii)the minute books and any membership records and company seals of the Company and the minute books and any stock records and company seals of the Acquired Subsidiary;

(iii)executed resignation letters of (or resolutions removing) the Seller Officers and Directors from their respective positions with the Company and the Acquired Subsidiary;

(iv)resolutions of Seller and the Company authorizing the execution of this Agreement and the Related Agreements to which Seller or the Company, as applicable, is a party and the consummation of the transactions contemplated under this Agreement and the Related Agreements to which Seller or the Company, as applicable, is a party (to the extent required by Seller’s or the Company’s organizational documents), in each case certified by the Secretary or other executive officer of Seller or the Company, as applicable, as being complete and correct and then in full force and effect;

(v)Governing Documents of the Company, in each case certified by the Secretary or Assistant Secretary of the Company as being complete and correct and then in full force and effect;

(vi)Governing Documents of the Acquired Subsidiary, in each case certified by the Secretary or Assistant Secretary of the Acquired Subsidiary as being complete and correct and then in full force and effect;

(vii)certificates of incumbency of the signatory officers of Seller and the Company, as applicable;

(viii)short form certificates as to the good standing of Seller, the Company and the Acquired Subsidiary issued by the Secretary of State or other applicable Governmental Authority of the state of formation of Seller, the Company and the Acquired Subsidiary;

(ix)the certificates referred to in Section 8.3(a) and Section 8.3(b);

(x)a certificate from Seller conforming to the requirements of Treasury Regulations Section 1.1445-2(b)(2) stating that Seller is not a “foreign person” within the meaning of Section 1445 of the Code, duly executed by Seller;

(xi)the Section 338(h)(10) Election Forms referred to Section 7.10(i)(ii).

(xii)copies of all Seller Third Person Consents and Authorizations obtained pursuant to Section 6.3;

(xiii)Assignment of Contracts for those Seller Contracts for which Third Person Consents have either been obtained as of or prior to Closing or for which no Third Person Consent is required, duly executed by the Company or the Acquired Subsidiary, as applicable, and the applicable Affiliate of Seller;

(xiv)the Environmental Agreement in the form attached hereto as Exhibit C;

(xv)the Transition Services Agreement in the form attached hereto as Exhibit E;

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(xvi)the License Agreement in the form attached hereto as Exhibit K;

(xvii)Certificates of resident status certifying that the Acquired Subsidiary is a “resident person” as such term is used in, and otherwise complying with, Hawaii Revised Statutes Section 235-68; and

(xviii)A tax clearance certificate (Form A-6) for each of the Company and the Acquired Subsidiary issued by the State of Hawaii Department of Taxation not more than fifteen (15) Business Days before the Closing Date.

Additionally, Seller shall duly execute and deliver (or cause to be executed and delivered) the Related Agreements to which Seller or any of its Affiliates are a party.

Section 2.6 Net Working Capital.

(a)If the Net Working Capital as of the Measurement Time is a positive amount, then the Purchase Price shall be increased in an amount equal to the Net Working Capital, and if the Net Working Capital as of the Measurement Time is a negative amount, then the Purchase Price shall be reduced in an amount equal to the Net Working Capital, in each case as calculated in accordance with this Section 2.6.

(b)Except as otherwise provided in this Section 2.6, or in the definitions of Current Assets and Current Liabilities, the items included in the components of Current Assets and Current Liabilities shall be determined, and the amounts of such items shall be calculated, in the same manner as the corresponding line items were determined and calculated, and using the same policies, practices, assumptions, procedures, classifications, methods, estimates and judgments as were used in preparing the Balance Sheet.

(c)At least three (3) Business Days prior to the Closing Date, Seller shall submit in writing to Buyer its good faith estimate of the Net Working Capital as of the Measurement Time (the “Estimated Net Working Capital”) along with documentation supporting its good faith calculation of the Estimated Net Working Capital and shall reasonably respond to questions and comments from Buyer regarding such submission prior to the Closing Date. The Base Amount payable by Buyer on the Closing Date shall be increased or decreased, as applicable, by the amount of the Estimated Net Working Capital.

(d)Within sixty (60) days after the Closing Date, Seller shall submit to Buyer its written calculation (the “Net Working Capital Statement”) of the actual Net Working Capital as of the Measurement Time (the “Final Net Working Capital”) accompanied by the consolidated balance sheet of the Companies as of the Measurement Time. From the Closing Date through the final determination of the Final Net Working Capital in accordance with this Section 2.6(d),Buyer shall cause the Companies and their employees to provide Seller and its advisors reasonable access during normal business times to the personnel, properties and books and records of the Companies for the purpose of determining the Final Net Working Capital. Unless Buyer gives notice to Seller (a “NWC Protest Letter”) on or before the thirtieth (30^th) day after Buyer’s receiptof the Net Working Capital Statement that Buyer disputes the Final Net Working Capital specified in the Net Working Capital Statement and setting forth in reasonable detail the amounts in dispute and the reasons therefor, then the Final Net Working Capital as specified in the Net Working Capital Statement shall become final and binding on the Parties. Except for the matters specifically set out in the NWC Protest Letter, Buyer shall be deemed to have agreed to the Net Working Capital Statement in full. If Buyer gives a NWC Protest Letter to Seller on or before such thirtieth (30^th) day that it disputes the Final Net Working Capital specified in the Net Working Capital Statement, then Seller and Buyer shall meet by telephone, or at a mutually agreeable location, to discuss in good faith and

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attempt to reconcile their differences with respect to the amount of the Final Net Working Capital that is being challenged by Buyer (the “NWC Challenged Amount”).

(e)If the Parties are unable to mutually resolve the NWC Challenged Amount within twenty (20) days after receipt of the NWC Protest Letter by Seller, then PricewaterhouseCoopers, LLP or another mutually acceptable independent accounting firm (the “Arbiter”) will be engaged by the Parties to determine the NWC Challenged Amount. The Arbiter: (1) will be jointly engaged by Seller and Buyer; (2) will be provided, within the (10) Business Days of accepting the engagement, with a definitive written statement from Seller and Buyer of their respective positions and a copy of the Net Working Capital Statement and the NWC Protest Letter; (3) will be advised in the engagement letter that the Parties accept the Arbiter as the appropriate Person to interpret this Agreement for all purposes relevant to the resolution of the NWC Challenged Amount; (4) will be granted access to all records and personnel of the Companies and (5) will have forty-five (45) days to carry out a review and prepare a written statement of its decision regarding the NWC Challenged Amount, which shall be binding and final upon Seller and Buyer. In no event shall the Arbiter’s determination be outside of the range of amounts claimed by the respective Parties with respect to those items in dispute. Each Party will be afforded the opportunity to present to the Arbiter any material such Party deems relevant to the determination. The decision of the Arbiter shall be final and binding upon the Parties except in the event of manifest error (when the relevant part of their determination shall be void and the matter shall be remitted to the Arbiter for correction) and shall be in substitution for and precludes the bringing of any Proceedings, including in any court, in connection with any dispute under this Section 2.6. The fees and expenses of the Arbiter incurred in resolving the disputed matter shall be shared equally by Seller, on the one hand, and Buyer, on the other hand.

(f)Not later than the fifth (5^th) Business Day after the final determination of the Final Net Working Capital is made pursuant to this Section 2.6:

(i)if the Final Net Working Capital is less than the Estimated Working Capital, then Seller shall pay to Buyer, by wire transfer of immediately available funds to the account or accounts designated in writing by Buyer prior to such fifth (5^th) Business Day, the amount of such difference together with interest thereon at the Applicable Rate from and including the Closing Date to but excluding the date of payment; or

(ii)if the Final Net Working Capital is greater than the Estimated Net Working Capital, then Buyer shall pay to Seller by wire transfer of immediately available funds to the account or accounts designated in writing by Seller prior to such fifth (5^th) Business Day, the amount of such difference together with interest thereon at the Applicable Rate from and including the Closing Date to but excluding the date of payment.

Section 2.7 Inventories.

(a)Feedstock Inventory and Product Inventory:

(i)The Purchase Price shall be increased in an amount equal to the Feedstock Inventory Value plus the Product Inventory Value (collectively, the “Hydrocarbon Inventory Value”), in each case as calculated in accordance with this Section 2.7.

(ii)The Feedstock Inventory and the Product Inventory (collectively, the “Hydrocarbon Inventory”) shall be measured as of the Measurement Time in accordance with the measurement procedures set forth in Exhibit G-1 and shall be valued in accordance with the

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valuation formulas set forth in Exhibit G-2. Each Party shall be permitted to have representatives present to observe any measurements taken of Hydrocarbon Inventories.

(iii)At least three (3) Business Days prior to the Closing Date, Seller shall submit in writing to Buyer its good faith estimate of the Hydrocarbon Inventory and the Hydrocarbon Inventory Value as of the Measurement Time (the “Estimated Hydrocarbon Inventory Value”) setting forth the types, characteristics and volumes, on a tank, truck, pipeline, vessel or other location basis along with documentation supporting its good faith calculation of the Estimated Hydrocarbon Inventory Value and shall reasonably respond to questions and comments from Buyer regarding such submission prior to the Closing Date. The Base Amount payable by Buyer on the Closing Date shall be increased by the amount of the Estimated Hydrocarbon Inventory Value.

(b)Merchandise Inventory:

(i)The Purchase Price shall be increased in an amount equal to the Merchandise Inventory Value as calculated in accordance with this Section 2.7.

(ii)The Merchandise Inventory shall be measured as of the Measurement Time in accordance with the measurement procedures and valued in accordance with the valuation formulas all as set forth in Exhibit H. Each Party shall be permitted to have representatives present to observe any measurements taken of Merchandise Inventory.

(iii)At least three (3) Business Days prior to the Closing Date, Seller shall submit in writing to Buyer its good faith estimate of the Merchandise Inventory and the Merchandise Inventory Value as of the Measurement Time (the “Estimated Merchandise Inventory Value”) setting forth the types, quantities and volumes of Merchandise Inventory on a location by location basis along with documentation supporting its good faith calculation of the Estimated Merchandise Inventory Value and shall reasonably respond to questions and comments from Buyer regarding such submission prior to the Closing Date. The Base Amount payable by Buyer on the Closing Date shall be increased by the amount of the Estimated Merchandise Inventory Value.

(c)Parts and Supplies Inventory:

(i)The Purchase Price shall be increased in an amount equal to the Parts and Supplies Inventory Value as calculated in accordance with this Section 2.7.

(ii)The Parts and Supplies Inventory shall be measured as of the Measurement Time in accordance with the measurement procedures and valued in accordance with the valuation formulas all as set forth in Exhibit I. Each Party shall be permitted to have representatives present to observe any measurements taken of Parts and Supplies Inventory.

(iii)At least three (3) Business Days prior to the Closing Date, Seller shall submit in writing to Buyer its good faith estimate of Parts and Supplies Inventory and the Parts and Supplies Inventory Value as of the Measurement Time (the “Estimated Parts and Supplies Inventory Value”) setting forth the types, quantities and volumes of Parts and Supplies Inventory on a location by location basis along with documentation supporting its good faith calculation of the Estimated Parts and Supplies Inventory Value and shall reasonably respond to questions and comments from Buyer regarding such submission prior to the Closing Date. The Base Amount

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payable by Buyer on the Closing Date shall be increased by the amount of the Estimated Parts and Supplies Inventory Value.

(d)Post-Closing Inventory Adjustments:

(i)Within sixty (60) days after the Closing Date, Seller shall submit to Buyer its written calculation (the “Inventory Statement”) of the actual Hydrocarbon Inventory Value, the Merchandise Inventory Value and the Parts and Supplies Inventory Value all as of the Measurement Time (the “Final Inventory Value”). From the Closing Date through the final determination of the Final Inventory Value in accordance with this Section 2.7(d), Buyer shall cause the Companies and their employees to provide Seller and its advisors reasonable access during normal business times to the personnel, properties and books and records of the Companies for the purpose of determining the Final Inventory Value. Unless Buyer gives notice to Seller (an “Inventory Protest Letter”) on or before the thirtieth (30^th) day after Buyer’s receiptof the Inventory Statement that Buyer disputes the Final Inventory Value specified in the Inventory Statement and setting forth in reasonable detail the amounts in dispute and the reasons therefor, then the Final Inventory Value as specified in the Inventory Statement shall become final and binding on the Parties. Except for the matters specifically set out in the Inventory Protest Letter, Buyer shall be deemed to have agreed to the Inventory Statement in full. If Buyer gives an Inventory Protest Letter to Seller on or before such thirtieth (30^th) day that it disputes the Final Inventory Value specified in the Inventory Statement, then Seller and Buyer shall meet by telephone, or at a mutually agreeable location, to discuss in good faith and attempt to reconcile their differences with respect to the amount of the Final Inventory Value that is being challenged by Buyer (the “Inventory Challenged Amount”).

(ii)If the Parties are unable to mutually resolve the Inventory Challenged Amount within twenty (20) days after receipt of the Inventory Protest Letter by Seller, then the Arbiter will be engaged by the Parties to determine the Inventory Challenged Amount. The Arbiter: (1) will be jointly engaged by Seller and Buyer; (2) will be provided, within the (10) Business Days of accepting the engagement, with a definitive written statement from Seller and Buyer of their respective positions and a copy of the Inventory Statement and the Inventory Protest Letter; (3) will be advised in the engagement letter that the Parties accept the Arbiter as the appropriate Person to interpret this Agreement for all purposes relevant to the resolution of the Inventory Challenged Amount; (4) will be granted access to all records and personnel of the Companies and (5) will have forty-five (45) days to carry out a review and prepare a written statement of its decision regarding the Inventory Challenged Amount, which shall be binding and final upon Seller and Buyer. In no event shall the Arbiter’s determination be outside of the range of amounts claimed by the respective Parties with respect to those items in dispute. Each Party will be afforded the opportunity to present to the Arbiter any material such Party deems relevant to the determination. The decision of the Arbiter shall be final and binding upon the Parties except in the event of manifest error (when the relevant part of their determination shall be void and the matter shall be remitted to the Arbiter for correction) and shall be in substitution for and precludes the bringing of any Proceedings, including in any court, in connection with any dispute under this Section 2.7. The fees and expenses of the Arbiter incurred in resolving the disputed matter shall be shared equally by Seller, on the one hand, and Buyer, on the other hand.

(iii)Not later than the fifth (5^th) Business Day after the final determination of the Final Inventory Value is made pursuant to this Section 2.7:

(1) if the Final Inventory Value is less than the sum of the Estimated Hydrocarbon Inventory Value, the Estimated Merchandise Inventory

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Value and the Estimated Parts and Supplies Inventory Value, then Seller shall pay to Buyer, by wire transfer of immediately available funds to the account or accounts designated in writing by Buyer prior to such fifth (5th) Business Day, the amount of such difference together with interest thereon at the Applicable Rate from and including the Closing Date to but excluding the date of payment; or

(2) if the Final Inventory is greater than the sum of the Estimated Hydrocarbon Inventory Value, the Estimated Merchandise Inventory Value and the Estimated Parts and Supplies Inventory Value, then Buyer shall pay to Seller by wire transfer of immediately available funds to the account or accounts designated in writing by Seller prior to such fifth (5th) Business Day, the amount of such difference together with interest thereon at the Applicable Rate from and including the Closing Date to but excluding the date of payment.

Section 2.8 Earnout Payments.

(a)Definitions. This Section 2.8 uses the following terms with the meanings assigned to them below:

(i)“Annual Earnout Cap” means $20,000,000.

(ii)“Annual Gross Margin” means, for any Earnout Measurement Period, the excess, if any, of (A) the consolidated revenues of the Company and its subsidiaries over (B) the consolidated cost of sales of the Company and its subsidiaries, each as determined pursuant to the Consolidated Income Statement for such Earnout Measurement Period. For the avoidance of doubt, Section 2.8(a)(ii) of the Disclosure Schedules sets forth a sample calculation of the Annual Gross Margin.

(iii)“Computed Amounts” means, for each Earnout Measurement Period, each of the following: (A) the consolidated revenues of the Company and its subsidiaries determined pursuant to the Consolidated Income Statement for such Earnout Measurement Period, (B) the consolidated cost of sales of the Company and its subsidiaries determined pursuant to the Consolidated Income Statement for such Earnout Measurement Period, (C) the Annual Gross Margin for such Earnout Measurement Period; and (D) the Earnout Amount, if any, for such Earnout Measurement Period.

(iv)“Consolidated Income Statement” means, with respect to any Earnout Measurement Period, the audited consolidated statement of operations of the Company and its subsidiaries which is prepared (A) from the records of the Company, (B) on the same consolidated basis as and consistent with the financial statements for the year ended December 31, 2011 set forth in Section 4.6 of the Disclosure Schedules and (C) in accordance with GAAP applied in a consistent basis during the periods set forth therein; provided, however, that such consolidated statement of operations will exclude the effects of each item of income, gain or loss, or any revenue, charge or expense, that is: (i) extraordinary or nonrecurring (in either case, as such term is used under GAAP); (ii) not related to the ordinary course of operations of the Business; (iii) in the nature of general corporate overhead of Buyer or its Affiliates; (iv) incurred by the Company or any of its Affiliates before or after the Closing Date in connection with or related to this Agreement or the transactions contemplated by this Agreement or any financing related thereto, including transaction fees, legal, accounting or other professional fees and

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expenses; (v) incurred for restructuring or arising out of the voluntary shutdown or closure of any plant or facility, including severance, relocation or facility closure expenses; (vi) incurred for restructuring or arising out of the integration or consolidation of services or facilities subsequent to any acquisition, including severance, relocation or facility closure expenses; (vii) in the nature of a management fee or similar arrangement involving any Obligations to Buyer or any of its other Affiliates; or (viii) associated with the executive compensation arrangements of Buyer or any of its Affiliates or the grant, issuance or exercise of any shares of stock or other Equity Securities of Buyer or any of its Affiliates.

(v)“Earnout Amount” means, with respect to any Earnout Measurement Period, a dollar amount equal to the result of (A) 0.20 multiplied by (B) the positive amount, if any, by which the Annual Gross Margin for such Earnout Measurement Period exceeds the Earnout Threshold.

(vi)“Earnout Measurement Periods” (each an “Earnout Measurement Period”) means each of the three (3) calendar years beginning January 1, 2014 through the year ending December 31, 2016.

(vii)“Earnout Payment” means any payment made to Seller in accordance with the provisions of Section 2.8(b).

(viii)“Earnout Statement” has the meaning specified in Section 2.8(c).

(ix)“Earnout Threshold” means, with respect to any Earnout Measurement Period an amount equal to $165,000,000.

(x)“Prior Earnout Payments” means, as of the time of any determination pursuant to this Section 2.8, the aggregate amount of all Earnout Payments that have been previously paid by Buyer to Seller in accordance with this Section 2.8.

(xi)“Post-Closing Earnout Period” means the period from (but not including) the Closing Date through (and including) the first to occur of (A) December 31, 2016, (B) the date that Buyer indefeasibly makes the payment contemplated by Section 2.8(f), (C) the date that Buyer indefeasibly makes the final Acceleration Payment contemplated by Section 2.8(j), and (D) the date that Buyer pays Earnout Payments that equal, in the aggregate, the Total Earnout Cap.

(xii)“Total Earnout Cap” means an amount equal to $40,000,000.

(b)Payment Obligation. With respect to each Earnout Measurement Period, Buyer shall pay (or cause the Company to pay) to Seller an amount equal to the Earnout Amount, if any; provided, however, that with respect to any payment pursuant to this Section 2.8(b) in no event (i) shall the Earnout Amount exceed the Annual Earnout Cap for any of the Earnout Measurement Periods or (ii) shall the aggregate of all Earnout Payments paid to Seller exceed the Total Earnout Cap. For the avoidance of doubt, in the event the Annual Gross Margin for any Earnout Measurement Period does not exceed the Earnout Threshold then such deficit shall not be carried over to any subsequent Earnout Measurement Period. In the event the Earnout Amount due to Seller with respect to an Earnout Measurement Period, when added to the Prior Earnout Payments, would cause the total of all Earnout Payments paid to and received by Seller to exceed the Total Earnout Cap, then the Earnout Amount due from Buyer to Seller with respect to such Earnout Measurement Period shall be that amount which, when added to the Prior Earnout Payments, causes the total of all Earnout Payments paid to and received by

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Seller to equal the Total Earnout Cap. Upon receipt by Seller of Earnout Payments that equal, in the aggregate, the Total Earnout Cap, then Buyer shall have no further Obligation to Seller for additional Earnout Amounts hereunder or otherwise under this Section 2.8.

(c)Earnout Statements. As soon as practicable after the end of each Earnout Measurement Period, and in any event prior to ninety (90) days after the end of each Earnout Measurement Period, Buyer will cause to be prepared in writing and delivered to Seller (i) the Consolidated Income Statement for such Earnout Measurement Period and (ii) a statement (the “Earnout Statement”) setting forth each Computed Amount for such Earnout Measurement Period. Buyer shall provide (or cause the Companies to provided) to Seller and its designees reasonable access during normal business times to all materials, records and personnel of the Companies and the Business necessary for Seller to verify the correctness of each such Consolidated Income Statement and each such Computed Amount and compliance by Buyer with this Section 2.8. Subject to Section 2.8(i), each Consolidated Income Statement and each Earnout Statement will be final and binding on Buyer and Seller to the extent of information disclosed to Seller at such time unless, within thirty (30) days following the delivery of the Earnout Statement, Seller notifies Buyer in writing that Seller does not accept as correct any one or more of the Computed Amounts set forth in the Earnout Statement (the “Earnout Protest Letter”) and setting forth in reasonable detail the amounts in dispute and the reasons therefor. Except for the matters specifically set out in the Earnout Protest Letter, Seller shall be deemed to have agreed to the Earnout Statement to the extent of information disclosed to Seller at such time. If Seller timely delivers an Earnout Protest Letter, then Seller and Buyer shall meet by telephone, or at a mutually agreeable location, to discuss in good faith and attempt to reconcile their differences with respect to the amount of the Computed Amounts that are being challenged by Seller. Buyer shall pay to Seller any amounts that are not in dispute.

(d)Disputes. Subject to Section 2.8(i), if Seller and Buyer are unable to mutually agree upon the Computed Amounts within twenty (20) days after receipt of an Earnout Protest Letter by Buyer, the Arbiter will be engaged by Seller and Buyer to determine the Computed Amounts. The Arbiter: (i) will be jointly engaged by Seller and Buyer; (ii) will be provided, within the ten (10) Business Days of accepting the engagement, with a definitive written statement from Seller and Buyer of their respective positions and a copy of the Earnout Statement and the Earnout Protest Letter; (iii) will be advised in the engagement letter that Seller and Buyer accept the Arbiter as the appropriate Person to interpret this Agreement for all purposes relevant to the resolution of the Computed Amounts; (iv) will be granted access to all records and personnel of the Companies and (v) will have forty (45) days to carry out a review and prepare a written statement of its decision regarding the Computed Amounts, which shall be binding and final upon Seller and Buyer. Seller and Buyer shall each submit their proposed Computed Amounts to the Arbiter. In no event shall the Arbiter’s determination be outside of the range of amounts claimed by the respective Parties with respect to those items in dispute. Each Party will be afforded the opportunity to present to the Arbiter any material such Party deems relevant to the determination. For the avoidance of doubt, the Arbiter shall have no authority to interpret the legal provisions of this Agreement except for the calculation of the Computed Amounts and definitions contained (whether directly or indirectly) therein. The decision of the Arbiter shall be final and binding upon the Parties except in the event of manifest error (in which case the relevant part of the Arbiter’s determination shall be void and the matter shall be remitted to the Arbiter for correction) and shall be in substitution for and precludes the bringing of any Proceedings by either Party, including in any court, in connection with any dispute under this Section 2.8. The fees and expenses of the Arbiter incurred in resolving the disputed matter shall be shared equally by Seller, on the one hand, and Buyer, on the other hand.

(e)Payment. Subject to Section 2.8(f), any Earnout Payment that Buyer is required to pay pursuant to Section 2.8(b) shall be paid in full (to the extent not previously paid) no later than five (5) Business Days following the date upon which the determination of the Earnout Payment becomes

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final and binding upon the Parties to the extent as provided in Section 2.8(c) or Section 2.8(d), by wire transfer of immediately available funds to the account or accounts designated in writing by Seller.

(f)Early Termination Payment. Buyer shall have the option at any time to discharge in full its continuing obligation to make the Earnout Payments pursuant to this Section 2.8 by paying to Seller an amount equal to the positive amount by which the Total Earnout Cap exceeds the aggregate of all Prior Earnout Payments (such amount, as of any applicable date of determination, being the “Earnout Termination Payment Amount”). Any such payment shall be made by Buyer, by wire transfer of immediately available funds to an account designated in writing by Seller. Notwithstanding the foregoing provisions of this Section 2.8(f), if any petition or other action is filed by or against Buyer or the Companies under the U.S. Bankruptcy Code, Title 11 of the U.S.C., or any other Law relating to liquidation, insolvency or reorganization of debtors, or any other proceeding involving the estate or assets of Buyer or the Companies, the obligation of Buyer to make the Earnout Payments hereunder will remain effective or be reinstated, as the case may be (even if the payment contemplated by the first sentence of this Section 2.8(f) has been made), to the extent such payment is or may be voidable or otherwise subject to rescission or return as a preferential transfer, fraudulent conveyance or otherwise.

(g)Conduct of the Business.During the Post-Closing Earnout Period, Buyer shall (and shall cause the Companies to), in good faith, conduct the Business in the ordinary course and not in a manner intended or reasonably likely to reduce or avoid the payment of any Earnout Payments. Without limiting the foregoing, during the Post-Closing Earnout Period, without the prior written consent of Seller:

(i)Buyer shall (and shall cause the Companies to) use Commercially Reasonable Efforts to (A) retain and keep available the services of their respective officers and employees and (B) preserve the goodwill of their respective customers, suppliers and others having business relations with them;

(ii)Buyer shall not (and shall not permit the Companies to) enter into any contracts, agreements or arrangements relating to the Business with any of Buyer’s Affiliates, other than contracts, agreements or arrangements on terms and conditions that are equal to or more favorable than terms and conditions which could be obtained from independent parties in arm’s-length transactions; and

(iii)In the event Buyer or any of its Affiliates acquire, directly or indirectly, any additional assets, businesses or properties in the State of Hawaii then such assets, businesses and properties shall be owned by the Company or its wholly owned subsidiaries and results of operations of such assets, business and properties shall be included in the Annual Gross Margin calculation.

(h)No Equity Interest.The Parties understand and agree that (i) the contingent rights to receive the Earnout Payments shall not be represented by any form of certificate or other instrument, is not transferable, and does not constitute an equity or ownership interest in Buyer or the Companies, (ii) Seller shall not have any rights as a security holder of Buyer or the Companies as a result of Seller’s contingent right to receive the Earnout Payments hereunder, and (iii) no interest is payable with respect to Earnout Payments made on a timely basis. Seller acknowledges that (A) there is no assurance that Seller will be entitled to receive Earnout Payments and Buyer has not promised or projected the Earnout Payments and (B) the Parties solely intend the express provisions of this Agreement to govern their contractual relationship with regards to the Earnout Payments.

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(i)Separate Records. Buyer shall (or shall cause the Companies to) maintain separate books and records for the Business in accordance with GAAP and in such detail as to enable Seller to adequately audit the Companies’ performance under the provisions of this Section 2.8 and the calculations required hereunder. Buyer shall (and shall cause the Companies to) permit Seller to conduct an audit on an annual basis in connection with Seller’s review of the Earnout Statement, at Seller’s cost and expense; provided that Seller shall provide notice to the Company of any such audit (such notice to be provided within thirty (30) days following receipt by Seller of the Earnout Statement for such year) and Seller’s audit activities shall not unreasonably interfere with the operations of the Business. Buyer will promptly deliver (or shall cause the Companies to deliver) to Seller copies of the annual audited consolidated financial statements and the quarterly unaudited consolidated financial statements of the Companies delivered to any lender or any representative of any lender pursuant to the terms and provisions of any agreement or instrument governing or creating any material indebtedness of Buyer or any of its Affiliates. Notwithstanding the provisions of Section 2.8(c) and Section 2.8(d) to the contrary, in the event Seller elects to conduct an audit as provided above in any year, then delivery of the Earnout Protest Letter and the provisions of Section 2.8(d) for such year shall be deferred until such audit is completed.

(j)Acceleration Event. In the event the Refinery ceases operations (an “Acceleration Event”), Buyer shall notify Seller promptly of such Acceleration Event and Buyer shall, in lieu of Buyer’s obligation to make any other Earnout Payments under this Section 2.8, make three (3) additional payments to Seller (collectively, the “Acceleration Payments”), each in an amount equal to one-sixth of the positive amount by which the Total Earnout Cap exceeds the Prior Earnout Payments at the time of the Acceleration Event. Any payment by Buyer pursuant to this Section 2.8(j) shall be made notwithstanding the Annual Earnout Cap. Such Acceleration Payments shall be made by Buyer with the first payment being due and payable six (6) months after the Acceleration Event and the remaining two (2) payments being due and payable eighteen (18) months and thirty (30) months, respectively, after the Acceleration Event. Each Acceleration Payment shall be by wire transfer of immediately available funds to an account designated in writing by Seller. Upon payment of the final Acceleration Payment by Buyer, Buyer’s obligation to make any payments under this Section 2.8 will terminate. Notwithstanding the provisions above, Seller shall have the right to elect not to accept the Acceleration Payments in lieu of Buyer’s obligation to make Earnout Payments (such election to be provided within thirty (30) days following receipt by Seller of the notification of the Acceleration Event) in which event Buyer’s obligation to make Earnout Payments shall continue pursuant to this Section 2.8 during the Post-Closing Earnout Period.

(k)Dispositions. If Buyer or the Companies shall (i) dispose, directly or indirectly, of any facility used in the Business or any portion thereof, whether by sale, merger, consolidation, operation of law, lease or otherwise, or (ii) divest, sell, convey, transfer or assign any capital equipment used in the Business (regardless, in any case, of whether such divestiture, sale, conveyance, transfer or assignment is to an unaffiliated third party or to an Affiliate of Buyer), then Buyer shall, in each such case, make an additional Earnout Payment (regardless of the Annual Earnout Cap) in an amount equal to the result of 0.20 multiplied by an amount equal to (a) the original purchase price of such asset or assets as set forth in Section 2.8(k) of the Disclosure Schedules minus (b) the sales price of such asset. Any payment by Buyer pursuant to this Section 2.8(k) shall be made notwithstanding the Annual Earnout Cap and shall not be credit against the Annual Earnout Cap. The total amount of Earnout Payments paid by Buyer as a result of the foregoing shall not exceed the Total Earnout Cap. Upon such payment by Buyer, Buyer’s obligation to make any Earnout Payments with respect to such assets will terminate.

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Section 2.9 Company Assumed Liabilities; Seller Retained Liabilities.

(a)Buyer and the Company acknowledge and agree that, except for the Retained Liabilities and Obligations of Seller pursuant to the Environmental Agreement, (i) after the Closing, the Company will continue to retain all of its Obligations (including Company Environmental Liabilities), and (ii) to the extent not already assumed by the Company, the Company hereby unconditionally assumes all Obligations of Seller and its Affiliates in any way arising out of or related to the ownership, use or operation of the Assets or the Business on or after the Effective Time (all such Obligations in clauses (i) and (ii), whether past, present or future, known or unknown, absolute or contingent, and whether in the nature of Orders, Claims, Losses or otherwise, being herein referred to as “Company Assumed Liabilities”).

(b)As of the Closing, Seller hereby assumes and agrees to be liable for the following (collectively, the “Retained Liabilities”):

(i)Obligations arising out of or with respect to (A) Long-Term Inactive Employees’ employment with, or the termination of their employment from, Seller, the Company or the Acquired Subsidiary, whether such employment period is, or termination of employment occurs, prior to, on or after the Closing (except that Seller shall have no liability for Long-Term Inactive Employees who are re-employed by the Company or the Acquired Subsidiary under Section 7.1(a)(iii)); (B) Post-Closing Employees’ employment with Seller, the Company, the Acquired Subsidiary or their respective Affiliates prior to the Closing (but not Post-Closing Employees’ employment with, or the termination of their employment from, the Company or the Acquired Subsidiary after the Closing, including severance); (C) Company Plans or Company Benefit Obligations to Post-Closing Employees and other Employees prior to, on, or after the Closing Date only to the extent relating to employment of and eligibility of retirement benefits for the Post-Closing Employees and other Employees prior to and as of the Closing Date; (D)  employees formerly employed by the Company, excluding Post-Closing Employees or Long Term Inactive Employees related to their employment with, or the termination of their employment from the Company prior to the Closing Date; and (E) any other Obligations for which Seller or its Affiliates (other than the Company and the Acquired Subsidiary) are responsible for pursuant to Section 7.1 through Section 7.7;

(ii)any Obligation for which Seller or its Affiliates (other than the Company and the Acquired Subsidiary) are responsible for pursuant toSection 7.10;

(iii)any Obligation to the extent arising out of or relating to the Excluded Assets or the transfer of the Excluded Assets pursuant to the Excluded Asset Transfer, including any Taxes arising out of or relating thereto;

(iv)any accounts payable, notes payable or other amounts that are payable by the Companies to Seller or any of its Affiliates (other than the Company and the Acquired Subsidiary);

(v)any indebtedness of the Company incurred prior to the Closing Date for borrowed money or issued for or in exchange of indebtedness for borrowed money, or (b) indebtedness of the Company incurred prior to the Closing Date that is evidenced by a note, bond, debenture or similar instrument, except (i) trade debt in the ordinary course of business and (ii) indebtedness to Affiliates of the Company that will be settled prior to the Closing (for the avoidance of doubt the provisions of this clause (v) shall not apply to any lease Obligations of the Company);

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(vi)any liabilities to indemnify, reimburse or advance amounts to any officer or director of the Companies in respect of acting in such capacities (including with respect to any breach of fiduciary obligations by same), to the extent such liabilities accrue prior to the Closing Date, even if such Persons do not bring a Claim for indemnity, reimbursement or advancement for such liabilities until after the Closing Date; and

(vii)Seller Transaction Expenses but excluding such expenses that are taken into account as a liability of the Companies for purposes of the Final Net Working Capital.

For the avoidance of doubt, the Company Environmental Liabilities are included in the Company Assumed Liabilities and are excluded from the Retained Liabilities except to the extent indemnified by Seller pursuant to the Environmental Agreement.

Section 2.10 Excluded Assets. Each of Seller and Buyer acknowledges and agrees that (i) all rights and Obligations under the Excluded Contracts, (ii) all Excluded Intellectual Property and all of Seller’s and its Affiliates’ (other than the Companies’) proprietary trade names, trademarks and trade dress including the Tesoro Marks, (iii) all rights of the Company related to or arising from trademark registrations for “Tesoro” or “2 Go Tesoro” or any derivations thereof, (iv) all assets and rights owned by third parties, (v) all documents and communications of Seller and its Affiliates (other than the Companies’) that are subject to the attorney-client privilege or that comprise attorney work product or the attorney-client relationship, (vi) all rights on the part of Seller, its Affiliates (other than the Companies’) and their respective counsel to assert or rely upon the attorney-client privilege, (vii) any accounts receivable, notes receivable or other amounts that are receivable by the Company or the Acquired Subsidiary from Seller or any of its Affiliates (subsection (i) through (vii) being collectively referred to as the “Excluded Assets”) will be retained by Seller (or one or more of Seller and its Affiliates, as applicable) after the Closing. Immediately prior to Closing, the Companies shall distribute and transfer to Seller or its Affiliates (other than the Companies) or release and discharge all rights to all Excluded Assets (other than those owned by third parties) not already in possession of Seller or its Affiliates (with such distribution and transfer referred to as the “Excluded Asset Transfer”). The Excluded Asset Transfer shall be made pursuant to bills of sale, assignment and assumption agreements and such other general conveyance or release instruments as appropriate to transfer and assign title to or release and discharge rights to such Excluded Assets. Excluded Assets includes any Fuel Credits that (A) relate to the ownership or operation of the Business or the Assets and are in existence, acquired, generated, accrued or otherwise attributable to the period prior to the Closing, (B) do not otherwise relate to the operation of the Business or the Assets or (C) relate to the ownership or operation of any business by Seller or any of its Affiliates from and after the Closing. In connection with the Fuel Credits enumerated in subsection (A) in the preceding sentence, Buyer and Seller acknowledge that pursuant to the terms of that certain Product Contract by and between Aloha Petroleum Ltd. and the Company, RINs for 2013 provided for thereunder will not actually be transferred to the Company until after the Closing Date. Upon actual receipt by the Company of such RINs, Buyer agrees to cause the Company to segregate such RINs that arose on or prior to the Closing Date from those RINs that arose after the Closing Date and to transfer such pre-Closing Date RINs for 2013 to Seller through the Environmental Protection Agency’s Moderated Transaction System in accordance with Section 40 CFR 80.1452 of the Renewable Fuel Standard.

Section 2.11Undelivered Refinery Inventory. In the event and to the extent Undelivered Refinery Inventory exists as of the Measurement Time, Seller and its Affiliates, as applicable, shall transfer and assign title to the Undelivered Refinery Inventory, effective as of the Measurement Time, to the Company. In the event and to the extent Seller or its Affiliates are contractually prohibited from transferring and assigning title to any Undelivered Refinery Inventory to the Company as of the Measurement Time then Seller (and its Affiliates, if applicable) shall continue to retain title to such Undelivered Refinery Inventory until such time as title can be transferred and assigned to the Company at

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which time Buyer shall cause the Company to purchase and acquire title to such Undelivered Refinery Inventory. Measurement and valuation of all Undelivered Refinery Inventory shall be made pursuant to Exhibit G-1 and G-2 and shall be included in the Hydrocarbon Inventory Value and the Estimated Hydrocarbon Inventory Value. Notwithstanding any other provision in this Agreement to the contrary, Buyer shall indemnify, defend and hold harmless the Seller Indemnitees from and against any and all Claims and Losses related to or arising from the Undelivered Refinery Inventory (and any other Feedstock Inventory acquired by the Company as a result of or in furtherance of the Refinery Turnaround and Startup Activities) regardless of whether the Closing occurs and regardless of any reason that the Closing does not occur; provided, however, such indemnification shall not apply in the event (i) all of the conditions to Closing pursuant to Article VIII are satisfied (other than those conditions that by their nature are to be performed at Closing) and Seller defaults in its Obligation to consummate the Closing or (ii) Buyer terminates this Agreement pursuant to Section 10.1(c) solely due to the breach by Seller of its Fundamental Representations (excluding representations and warranties contained in Section 4.15) provided that all of the other conditions to Closing pursuant to Article VIII were satisfied at the time of Buyer’s termination (other than those conditions that by their nature were to be performed at Closing).

Section 2.12Committed Refinery Inventory. At the Closing, Seller shall transfer and assign (and, as applicable, shall cause its Affiliates (excluding the Companies) to transfer and assign), effective as of the Measurement Time, all of Seller’s and its Affiliates’ rights and obligations with respect to Committed Refinery Inventory which shall be transferred and assigned to the Company and the Company shall assume such rights and obligations. In the event and to the extent Seller or its Affiliates are contractually prohibited from transferring and assigning any rights or Obligations to Committed Refinery Inventory to the Company as of the Measurement Time then Seller (and its Affiliates, if applicable) shall continue to retain such rights and obligations until such time as such rights and Obligations can be transferred and assigned to the Company or title to the commodities represented thereby can be transferred to the Company at which time Buyer shall cause the Company to assume such rights and Obligations or, if applicable, purchase and acquire title to the actual commodities. Notwithstanding any other provision in this Agreement to the contrary, Buyer shall indemnify, defend and hold harmless the Seller Indemnitees from and against any and all Claims and Losses related to or arising from the Committed Refinery Inventory and the commodities represented thereby regardless of whether the Closing occurs and regardless of any reason that the Closing does not occur; provided, however, such indemnification shall not apply in the event (i) all of the conditions to Closing pursuant to Article VIII are satisfied (other than those conditions that by their nature are to be performed at Closing) and Seller defaults in its Obligation to consummate the Closing or (ii) Buyer terminates this Agreement pursuant to Section 10.1(c) solely due to the breach by Seller of its Fundamental Representations (excluding representations and warranties contained in Section 4.15) provided that all of the other conditions to Closing pursuant to Article VIII were satisfied at the time of Buyer’s termination (other than those conditions that by their nature were to be performed at Closing).

ARTICLE III

REPRESENTATIONS AND WARRANTIES REGARDING SELLER

Except as set forth in the Disclosure Schedules, Seller hereby represents and warrants to Buyer that the statements contained in this Article III are complete and correct as of the Execution Date, and will be complete and correct as of the Closing Date (unless any such representation or warranty speaks to an earlier date and provided that any such representation or warranty that speaks to a “current” or “currently” dated time period shall be deemed to refer to such representation or warranty as of the Execution Date):

Section 3.1 Organization and Qualification. Seller is a Delaware corporation, duly organized and validly existing and in good standing under the Laws of the State of Delaware. Seller has the requisite corporate power and authority to carry on its business as it is now being conducted. Seller is duly

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qualified as a foreign corporation and in good standing in each jurisdiction where the character of its properties owned or held under lease or the nature of its activities makes such qualification necessary, except where the failure to be so qualified would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on Seller’s ability to execute, deliver and perform its Obligations under this Agreement and the Related Agreements to which it will be a party.

Section 3.2 Authority; Enforceability. Seller has full corporate power and authority to execute, deliver and perform its Obligations under this Agreement and the Related Agreements to which it will be a party, and to carry out the transactions contemplated hereby and thereby. This Agreement has been and the Related Agreements to which Seller will be a party will be duly and validly executed and delivered by Seller and, assuming the due authorization, execution and delivery by Buyer, this Agreement and the Related Agreements to which Seller will be a party constitute the legal, valid and binding Obligations of Seller enforceable in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency or other similar Laws affecting the enforcement of 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.

Section 3.3 Conflicts and Approvals. Assuming the accuracy of Buyer’s representations and warranties and except for (a) the receipt of the Seller Third Person Consents set forth in Section 3.3(a) of the Disclosure Schedules and (b) the effectuation of all filings required under the HSR Act and the other filings and registrations with and the receipt of the Authorizations from Governmental Authorities set forth in Section 3.3(b) of the Disclosure Schedules, neither the execution and delivery by Seller of this Agreement or the Related Agreements to which Seller will be a party, nor the performance by Seller of its Obligations hereunder or thereunder will (A) conflict with, result in a breach or violation of the terms of, cause or constitute a default under, give rise to any right of termination, cancellation or acceleration under, or require to be obtained or made any consent, waiver, order, approval, order or authorization of, or declaration, of, or notice to, or filing or registration with, any third party or any Governmental Authority, under, (i) any Law applicable to Seller or to which the TH Interest is subject, (ii) the Governing Documents of Seller, (iii) any Authorizations or Orders binding on Seller or to which the TH Interest is subject or (iv) any contract or other instrument or obligation to which Seller is a party or by which the TH Interest is subject, (B) result in the imposition or creation of any Lien, other than Permitted Liens, on the TH Interest, other than any Liens that may be created by or on behalf of Buyer, or (C) with the passage of time, the giving of notice or the taking of any action, have any of the effects set forth in clauses (A) or (B) of this Section 3.3, except for any matters described in clauses (A)(i), (iii) or (iv) that would not reasonably be expected to have a Material Adverse Effect or materially and adversely affect the ability of Seller to execute, deliver and perform its Obligations under this Agreement and the Related Agreements to which it will be a party.

Section 3.4 Proceedings. There are no Proceedings or Orders pending (for which Seller has received service of process or otherwise notice) or, to Seller’s Knowledge, threatened, against Seller or its assets that would reasonably be expected to materially and adversely affect the ability of Seller to execute, deliver and perform its Obligations under this Agreement or any Related Agreement to which Seller will be a party.

Section 3.5 Ownership of the TH Interest. Seller is the sole record and beneficial owner of the TH Interest and Seller owns the TH Interest free and clear of any Liens, other than Liens (a) arising under this Agreement, (b) arising under the Governing Documents of the Company or as disclosed in Section 3.5 of the Disclosure Schedules, and (c) imposed pursuant to the Securities Act of 1933, as amended (the “Securities Act”), and applicable state securities or “blue sky” laws. At the Closing, the delivery of the TH Interest to Buyer in accordance with the terms of this Agreement will transfer good and valid title to

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the TH Interest free and clear of any Liens, other than the Liens described in clauses (a) through (c) above.

Section 3.6 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or the Related Agreements based upon arrangements made by or on behalf of Seller or any of its Affiliates, except any fees and commissions that will be discharged by Seller. For the avoidance of doubt, Seller has engaged Aegis Energy Advisors Corp. as financial advisor to Seller and Seller shall be responsible for the fees and expenses of such financial advisor.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANIES

Except as set forth in the Disclosure Schedules, Seller and the Company hereby represent and warrant, jointly and severally, to Buyer that the statements contained in this Article IV are complete and correct as of the Execution Date, and will be complete and correct as of the Closing Date (unless any such representation or warranty speaks to an earlier date and provided that any such representation or warranty that speaks to a “current” or “currently” dated time period shall be deemed to refer to such representation or warranty as of the Execution Date):

Section 4.1 Organization and Qualification.

(a)The Company is an Hawaii limited liability company duly organized and validly existing and in good standing under the Laws of the State of Hawaii. The Acquired Subsidiary is an Hawaii corporation organized and validly existing and in good standing under the Laws of the State of Hawaii.

(b)Each of the Companies has the requisite power and authority to carry on its respective portion of the Business as currently conducted by such company. Each of the Companies is qualified and in good standing in each jurisdiction where the character of its properties owned or held under lease or the nature of its activities makes such qualification necessary, except where the failure to be so qualified would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Seller has heretofore made available to Buyer complete and correct copies of the Governing Documents of each of the Companies, each as amended to the Execution Date and each of which is in full force and effect. None of the Companies is in violation of its Governing Documents.

(c)Other than the Acquired Subsidiary, there are no corporations, partnerships, limited partnerships, limited liability companies, joint ventures or other legal entities in which the Company owns, of record or beneficially, any direct or indirect Equity Securities or any right (contingent or otherwise) to acquire the same.

Section 4.2 Authority; Enforceability. Each of the Companies has full power and authority to execute, deliver and perform its Obligations under this Agreement and the Related Agreements to which it will be a party, and to carry out the transactions contemplated hereby and thereby. This Agreement has been and the Related Agreements to which each of the Companies will be a party will be duly and validly executed and delivered by the Companies, as applicable, and, assuming the due authorization, execution and delivery by Buyer, this Agreement and the Related Agreements to which each of the Companies will be a party constitute the legal, valid and binding Obligations of each of the Companies, as applicable, enforceable in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency or other similar Laws affecting the enforcement of creditors’ rights generally and

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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.

Section 4.3 Conflicts and Approvals. Assuming the accuracy of Buyer’s representations and warranties and except for (a) the receipt of the Seller Third Person Consents set forth in Section 3.3(a) of the Disclosure Schedules, (b) the effectuation of all filings required under the HSR Act and the other filings and registrations with and the receipt of the Authorizations from Governmental Authorities set forth in Section 3.3(b) of the Disclosure Schedules and (c) for any consents, approvals or notices that may be required related to the Pipeline ROW Interests, neither the execution and delivery by the Companies of this Agreement or the Related Agreements to which each or either of the Companies will be a party, nor the performance by each of the Companies of its Obligations, as applicable, hereunder or thereunder will (A) conflict with, result in a breach or violation of the terms of, cause or constitute a default under, give rise to any right of termination, cancellation or acceleration under, or require to be obtained or made any consent, waiver, order, approval, order or authorization of, or declaration, of, or notice to, or filing or registration with, any third party or any Governmental Authority, under, (i) any Law applicable to either of the Companies or to which any of their assets are subject, (ii) the respective Governing Documents of the Companies, (iii) any Authorizations or Orders binding on either of the Companies or to which any of their respective assets are subject or (iv) any contract or other instrument or obligation of either of the Companies or to which any of their assets are subject, (B) result in the imposition or creation of any Lien, other than Permitted Liens, on any asset of any of the Companies, other than any Liens that may be created by or on behalf of Buyer, or (C) with the passage of time, the giving of notice or the taking of any action by a third Person, have any of the effects set forth in clause (A) or (B) of this Section 4.3, except for any matters described in clauses (A)(i), (iii) or (iv) that would not reasonably be expected to have a Material Adverse Effect or materially and adversely affect the ability of each of the Companies to execute, deliver and perform its Obligations, as applicable, under this Agreement and the Related Agreements to which it will be a party.

Section 4.4 Capitalization of the Company. The TH Interest constitutes the sole issued and outstanding membership interest in the Company and consists of five hundred (500) issued and outstanding units. The TH Interest constitutes all of the Equity Securities of the Company. The TH Interest is uncertificated. The TH Interest is validly issued, fully paid and nonassessable and was issued and remains free of preemptive rights. There are no bonds, debentures, notes or other evidences of indebtedness issued or outstanding having the right to vote on any matters on which the holder of the TH Interest may vote. Other than Buyer’s rights as contemplated by this Agreement, there are no options, warrants, calls or other rights or agreements outstanding obligating Seller or the Company to issue, deliver or sell units representing the Company’s membership interest or debt securities, or obligating Seller or the Company to grant, extend or enter into any such option, warrant, call or other such right or agreement.

Section 4.5 Capitalization of the Acquired Subsidiary. The authorized capital stock of the Acquired Subsidiary consists of 1,000 shares of common stock, $1.00 par value, of which 1,000 shares (the “Subsidiary Shares”) are issued and outstanding. The Subsidiary Shares constitute all of the Equity Securities of the Acquired Subsidiary. The Company owns of record and beneficially all of the Subsidiary Shares free and clear of any Liens, other than Liens (a) arising indirectly under this Agreement, (b) arising under the Governing Documents of the Acquired Subsidiary, and (c) imposed pursuant to the Securities Act and applicable state securities or “blue sky” laws. The Subsidiary Shares are validly issued, fully paid and nonassessable and were issued and remain free of preemptive rights. There are no bonds, debentures, notes or other evidences of indebtedness issued or outstanding having the right to vote on any matters on which the holder of the capital stock of the Acquired Subsidiary may vote. There are no options, warrants, calls or other rights or agreements outstanding obligating the Acquired Subsidiary to

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issue, deliver or sell capital stock or debt securities, or obligating the Acquired Subsidiary to grant, extend or enter into any such option, warrant, call or other such right or agreement.

Section 4.6 Financial Statements.

(a)Section 4.6 of the Disclosure Schedules sets forth the following financial statements (collectively, the “Financial Statements”):

(i)the audited consolidated balance sheet of the Company (including the Acquired Subsidiary) as of December 31, 2011 and 2010, together with corresponding audited consolidated statements of operations and of cash flows of the Company (including the Acquired Subsidiary) for the fiscal years ended December 31, 2011, 2010 and 2009;

(ii)the unaudited consolidated balance sheet of the Company (including the Acquired Subsidiary) as of December 31, 2012, together with corresponding unaudited consolidated statements of operations and of cash flows for the twelve-month period ended December 31, 2012; and

(iii)the unaudited consolidated interim balance sheet of the Company (including the Acquired Subsidiary) as of March 31, 2013, together with corresponding unaudited consolidated interim statements of operations and of cash flows for the three-month period ended March 31, 2013.

(b)The Financial Statements described in Section 4.6(a)(i) have been prepared from the records of the Company (including the Acquired Subsidiary) and present fairly, in all material respects, the consolidated financial position of the Company (including the Acquired Subsidiary) as of the respective dates of the balance sheets included therein and the consolidated results of operations and cash flows of the Company (including the Acquired Subsidiary) for the respective periods set forth therein, all in accordance with GAAP applied on a consistent basis during the periods covered thereby (except as noted in the accompanying footnotes thereto).

(c)The Financial Statements described in Section 4.6(a)(ii) and Section 4.6(a)(iii) have been prepared from the records of the Company (including the Acquired Subsidiary) and reflect all adjustments necessary for a fair statement, in all material respects, of the consolidated financial position of the Company (including the Acquired Subsidiary) as of the respective dates of the balance sheet included therein and the consolidated results of operations and cash flows of the Company (including the Acquired Subsidiary) for the respective periods set forth therein, all in accordance with GAAP applied on a consistent basis during the respective period covered thereby (except as noted therein) (subject to the absence of footnote disclosures and to normal and recurring year-end adjustments).

(d)Historically, financial statements have not been prepared for the Business as it has not operated as a separate, stand-alone enterprise. The Financial Statements for the Business have been prepared from the historical accounting records of the Companies in anticipation of a potential transaction to separate the Business from the other business activities of Seller and its other Affiliates as though the Business had been managed as a separate, stand-alone enterprise for all periods presented. As the Business has been historically managed and financed as part of a larger group, its accounts reflect certain charges for functions provided by Seller and its Affiliates that have been identified as related party transactions. It is possible that the terms of the related party transactions are not the same as the terms that might otherwise result from transactions between unrelated parties. To Seller’s Knowledge, all adjustments have been reflected that are necessary for a fair presentation of the carve-out financial statements for the Business for their respective dates. The allocations have been made on a reasonable

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basis and have been consistently applied for each period presented. The Financial Statements may not necessarily reflect the financial position, results of operations or cash flows that the Business might have had in the past, or might have in the future, if it had existed as a separate, stand-alone enterprise.

(e)The net investment of Seller and its other Affiliates in the Companies has been presented in lieu of stockholder’s equity in the Financial Statements. Inter-company transactions associated with the Business that involve Seller and its other Affiliates have been included in the net investment reflected in the Financial Statements since payments are not made with respect to such inter-company transactions. Transfers of asset and liabilities to and from the Companies and Seller and its other Affiliates is reflected as a component of the changes in the net investment identified by the headings “Net change in Parent advances” or “Net cash advances by Parent.”

(f)Since the Balance Sheet Date, the Companies have not incurred any liabilities that would be required by GAAP to be included on a consolidated balance sheet of the Companies but excluding liabilities (i) reflected or reserved against in the Financial Statements or disclosed in the footnotes thereto, (ii) incurred in the ordinary course of business, (iii) included in the Final Net Working Capital, relate to the Shutdown Activities or the Startup Activities or (v) that have individually or in the aggregate, not had or would not reasonably be expected to have a Material Adverse Effect.

Section 4.7 Assets.

(a)To Seller’s Knowledge, the Title Commitments contain legal descriptions of all lands owned in fee simple or leased by the Company and on which the material operations of the Refinery (but not any pipelines or terminals serving it) are located subject in each case to Permitted Liens.

(b)Subject to the receipt of any Third Person Consent or Authorization for the transfer and assignment from Seller to the Company or the Acquired Subsidiary, as applicable, the Company and the Acquired Subsidiary own, lease or have the legal right to use their respective material Assets (or in the case of the Company’s or Acquired Subsidiary’s contract rights, receive the benefits of their respective Assets) free and clear of all Liens except Permitted Liens.

(c)The Company and the Acquired Subsidiary have good and marketable title to, or valid leasehold interests in, or license to, all of their tangible personal property, free and clear of all Liens, other than Permitted Liens, except for such nonmaterial properties as are no longer used or useful in the conduct of the Business.

(d)Section 4.7(d) of the Disclosure Schedules lists all material fixed assets used in or reasonably necessary for the operation of the Refinery as conducted prior to the Refinery Shutdown Activities other than the Excluded Assets.

(e)Section 4.7(e) of the Disclosure Schedules sets forth a complete and correct list of all Real Property Interests owned in fee simple by the Company (the “Owned Real Property”). There are no outstanding options or rights of first refusal to purchase or lease the Owned Real Property or any portion thereof or interest therein. There are no pending or, to the Knowledge of Seller, threatened condemnation proceedings (for which Seller or the Company has received service of process or otherwise notice) before any Governmental Authority with respect to any Owned Real Property. The Acquired Subsidiary does not own any Real Property Interests in fee simple.

(f)Section 4.7(f) of the Disclosure Schedules sets forth a list of all Real Property Interests leased to the Company (the “Leased Real Property”), including the name and address of each landlord for each such lease. Seller has delivered to Buyer complete and correct copies of each such lease.

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The Company is not a sublessor or grantor under any sublease or other instrument granting to another Person any right to the possession, lease, occupancy or enjoyment of the Leased Real Property except as set forth in Section 4.7(f) of the Disclosure Schedules. The Acquired Subsidiary does not own any leasehold interest in any Real Property Interests, except as a sublessee for certain Retail Assets.

(g)To the Knowledge of Seller, there are no pending special assessments or reassessments (for which Seller or the Company has received service of process or otherwise notice) of any parcel included in the Real Property Interests that would reasonably be expected to result in a material increase in the real property taxes or other similar charges payable by the Company with respect to any parcel of Owned Real Property or a material increase in the rent, additional rent or other sums and charges payable by the Company under the leases for the Leased Real Property.

Section 4.8 Material Contracts.

(a)For purposes of this Agreement, a “Material Contract” means, with respect to a Person, any of the following, except for this Agreement, any Excluded Contract, any Company Plan and any contract for the purchase or sale of crude oil feedstocks:

(i)any contract relating to any indebtedness of such Person for borrowed money in an amount in excess of $500,000, or the granting of any Lien by such Person securing any such borrowing;

(ii)any contract whereby such Person guarantees an Obligation in excess of $500,000 of any other Person;

(iii)any contract with an employee or consultant of such Person providing for annual payment by such Person in excess of $500,000 or a change in control severance benefit in excess of $500,000;

(iv)any contract with any officer, director or manager of such Person;

(v)other than the CBAs set forth in Section 4.14(a) of the Disclosure Schedules, any collective bargaining contract or other contract with a labor union;

(vi)any contract for the purchase or sale of feedstocks, intermediate stocks or refined products that (A) provides for forward physical delivery on a date more than ninety (90) days in the future or (B) provides for the future payment by or to the such Person of more than $2,500,000;

(vii)any contract for the supply of goods or services by or to such Person not covered in any other paragraph of this Section 4.8(a) that provides for future payments by or to such Person of more than $1,000,000;

(viii)any contract for the sale of any asset by or to such Person not covered in any other paragraph of this Section 4.8(a) that provides for the future payment by or to such Person of more than $1,000,000;

(ix)any lease covering the Leased Real Property or any other lease under which such Person is the lessor or lessee of real or personal property that provides for an annual base rental to or from such Person of more than $500,000;

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(x)any contract prohibiting such Person from competing with another Person in any business or area or soliciting or hiring any Person with respect to employment;

(xi)any contract or agreement providing for the direct or indirect merger, consolidation, or other reorganization of the Company or the Acquired Subsidiary;

(xii)any other contract or agreement (other than a contract or agreement of a type described in clause (vi) above) of such Person not covered in any other paragraph of this Section 4.8(a) that provides for the future payment by or to such Person of more than $1,000,000;

(xiii)any joint venture, partnership, limited liability company or other similar contract;

(xiv)any contract that grants “most favored nations” pricing to a customer or counterparty; and

(xv)any contract or agreement to enter into any agreement with respect to any of the matters described in any other paragraph of this Section 4.8(a).

(b)Section 4.8(b) of the Disclosure Schedules sets forth a list of each Material Contract to which the Company or the Acquired Subsidiary is a party or to which any of the Assets is bound (the “Material Company Contracts”).

(c)Section 4.8(c) of the Disclosure Schedules sets forth a list of each Material Contract to which Seller or any Affiliate of Seller (excluding the Companies) is a party, other than the Excluded Contracts, which relate primarily to the Business as currently conducted by the Company or the Acquired Subsidiary (the “Seller Contracts”).

(d)Section 4.8(d) of the Disclosure Schedules sets forth a list of each material contract or agreement to which the Company, the Acquired Subsidiary, Seller, or any Affiliate of Seller is a party and which are used in the operation of the Business, as currently conducted by the Company or the Acquired Subsidiary, that are to be retained by Seller or its Affiliates (or if the Company or the Acquired Subsidiary is a party, which are to be assigned to Seller or its Affiliates prior to the Closing or terminated as to the Company or the Acquired Subsidiary prior to the Closing) (the “Excluded Contracts”).

(e)Except as set forth in Section 4.8(e) of the Disclosure Schedules and as would not reasonably be expected to have a material effect, (i) none of the Company, the Acquired Subsidiary, Seller or any Affiliate of Seller has breached and is continuing the terms of any Material Company Contract or Seller Contract, or received from any third party to any such Material Company Contract or Seller Contract written notification that such contract is not in full force and effect, that the Company, the Acquired Subsidiary, Seller or any Affiliate of Seller, as applicable, has failed to perform, and such failure is continuing, its Obligations thereunder to date, or that any third party thereto has not performed its Obligations thereunder to date, (ii) to Seller’s Knowledge, no event has occurred and no circumstance or condition exists, that (with or without notice or lapse of time) would reasonably be expected to result in a breach or violation of, or a default under, any such Material Company Contact or Seller Contract and (iii) each Material Company Contract or Seller Contract is a legal, valid, binding and enforceable agreement of the Company, the Acquired Subsidiary, Seller or any Affiliate of Seller, as applicable, and, to Seller’s Knowledge, the other parties thereto and is in full force and effect, except as enforcement may be limited by bankruptcy, insolvency or other similar Laws affecting the enforcement of 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.

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(f)Seller has provided to Buyer complete and correct copies of each Material Company Contract and Seller Contract relating to the Business as currently conducted by the Company or the Acquired Subsidiary (including all waivers thereunder).

Section 4.9 Authorizations.

(a)The Companies possess, as of the Execution Date, all Authorizations (or have timely applied for the renewal, the granting of which is pending) that are materially necessary to carry on the Business, as currently conducted, all of which, to the extent material to the operation of the Business (taken as a whole) as currently conducted, are set forth in Section 4.9(a) of the Disclosure Schedules, and, to Seller’s Knowledge, all such Authorizations are in full force and effect (except to the extent affected by the Refinery Shutdown Activities). A complete and correct copy of each material Authorization set forth in Section 4.9(a) of the Disclosure Schedules has previously been delivered to or made available for inspection by Buyer or Buyer has been given access thereto;

(b)To Seller’s Knowledge, (i) no event has occurred and no circumstance or condition exists, that (with or without notice or lapse of time) would reasonably be expected to constitute or result in a violation by any of the Companies of, or a failure on the part of any of the Companies to comply with the terms of, any Authorization set forth in Section 4.9(a) of the Disclosure Schedules, (ii) neither of the Companies has received from any Governmental Authority written notification that any Authorization set forth in Section 4.9(a) of the Disclosure Schedules (A) is not in full force and effect, (B) has been violated in any respect, or (C) is subject to any suspension, revocation, modification or cancellation, and (iii) there is no Proceeding pending (for which the Companies have received service of process or otherwise notice) or threatened, regarding suspension, revocation, modification or cancellation of any such Authorization.

(c)Notwithstanding the foregoing, no representation or warranty is made in this Section 4.9 with respect to (i) Authorizations under Environmental Laws, which are addressed exclusively in Environmental Agreement, (ii) Authorizations under ERISA, which are addressed exclusively in Section 4.13 or (iii) Authorizations under Tax Laws, which are addressed exclusively in Section 4.15.

Section 4.10 Compliance With Law. Except as set forth in Section 4.10 of the Disclosure Schedules, to Seller’s Knowledge: (a) the Companies are in compliance in all material respects with all material Laws, (b) neither of the Companies has received any written notification from any applicable Governmental Authority that it is not in compliance in all material respects with any material Laws, and (c) no event has occurred and no circumstance or condition exists, that (with or without notice or lapse of time) would reasonably be expected to constitute or result in a failure of the Companies to comply in all material respects with the terms of any material Law. Notwithstanding the foregoing, no representation or warranty is made in this Section 4.10 with respect to (A) compliance with Environmental Laws, which are addressed exclusively in the Environmental Agreement, (B) compliance with ERISA, which are addressed exclusively in Section 4.13 or (C) compliance with Tax Laws, which are addressed exclusively in Section 4.15.

Section 4.11 Proceedings and Orders. Except (i) as set forth in Section 4.11 of the Disclosure Schedules or (ii) as would not reasonably be expected to have a material effect, there are no Proceedings or Orders pending (for which the Companies have received service of process or otherwise notice) or, to Seller’s Knowledge, threatened, against the Companies or to which the Assets or the Business, as currently conducted by the Companies, are subject, in any court or before or by any other Governmental Authority or any arbitrator. Notwithstanding the foregoing, no representation or warranty is made in this Section 4.11 with respect to (i) Proceedings or Orders under or involving Environmental Laws, which are

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addressed exclusively in the Environmental Agreement, (ii) Proceedings or Orders under or involving ERISA, which are addressed exclusively in Section 4.13 or (iii) Proceedings or Orders under or involving Tax Laws, which are addressed exclusively in Section 4.15.

Section 4.12 Employee Matters.

(a)Section 4.12(a) of the Disclosure Schedules sets forth a list of:

(i)the regular, full-time and regular, part-time active employees employed by the Company as of the end of the pay period immediately preceding the Execution Date (each, an “Employee”, and collectively the “Employees”); and

(ii)the employees of the Company who, as of the Execution Date, are not actively at work, including those who are on inactive employee status or leave of absence, separately identifying those employees classified as Short-Term Inactive Employees and those employees classified as Long-Term Inactive Employees. “Short-Term Inactive Employee” means an employee who is not actively at work due to a Company-approved leave of absence of six (6) months or less that entitles such employee to reinstatement upon completion of the leave under the applicable leave policies of the Company or Laws. “Long-Term Inactive Employee” means an employee who is not actively at work due to a Company-approved leave of absence that entitles the employee to reinstatement upon completion of the leave or Laws and is not a Short-Term Inactive Employee.

(b)Section 4.12(a) of the Disclosure Schedules also sets forth each Employee who is represented by United Steelworkers, Local Union No. 12-591 (the “Union”) (each such Employee being a “Represented Employee”).

(c)There are no individual employment agreements governing the employment of Employees. With the exception of Employees represented by the Union, the Employees are employed at will.

(d)The Acquired Subsidiary does not have any employees.

Section 4.13 Company Plans.

(a)With respect to each Company Plan to which the following could apply: (i) no withdrawal liability, within the meaning of Section 4201 of ERISA, has been incurred that would reasonably be expected to result in a material liability to the Company after the Closing, which withdrawal liability has not been satisfied, (ii) no liability to the Pension Benefit Guaranty Corporation that would reasonably be expected to result in a material liability to the Company after the Closing has been incurred by the Company or any ERISA Affiliate, which liability has not been satisfied, (iii) no failure to meet the minimum funding standard, whether or not waived, within the meaning of Section 302 of ERISA or Section 412 of the Code or any funder or other requirement of the Pension Protection Act has been incurred that would reasonably be expected to result in a material liability to the Company after the Closing, (iv) all contributions (including installments) to such plan required by Section 302 of ERISA and Section 412 of the Code and the requirements of the Pension Protection Act have been timely made, (v) neither the Company nor any of its ERISA Affiliates maintains or has an obligation to contribute, either presently or within the past six (6) years, to a “multiemployer plan” within the meaning of Section 3(37) of ERISA, and (vi) no notification to or approval from the Pension Benefit Guaranty Corporation or Internal Revenue Service is required in connection with or as a result of any transactions contemplated by this Agreement.

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(b)Section 4.13(b) of the Disclosure Schedules sets forth a list of all material Company Plans and Company Benefit Obligations to the extent applicable to the Post-Closing Employees. Seller has made available to Buyer complete and correct copies of each of the following with respect to the Company Plans and the Company Benefit Obligations, to the extent applicable to any Post-Closing Employee: (i) any plan documents and all amendments thereto, the most recent written descriptions thereof which have been distributed to the Employees, (ii) the most recent determination or opinion letter issued with respect to each Company Plan that is intended to be qualified under Code Section 401(a), (iii) the actuarial report prepared for the last three (3) plan years for each Company Plan for which such a report was prepared, (iv) all trust documents, declarations of trust and other documents establishing other funding arrangements and all amendments thereto, and the latest financial statements thereof, (v) all material contracts and agreements relating to each Company Plan and Company Benefit Obligation, and (vi) annual report (Form 5500 series), if applicable, for the three (3) most recent plan years and all schedules thereto. Except as set forth in Section 4.13(b) of the Disclosure Schedules, transactions contemplated by this Agreement will not constitute a reportable event under ERISA or require any notice or approval from any trustee or CBA representative or other third party on account of or in connection with any Company Plan or Company Benefit Obligation or collective bargaining agreement. The transactions contemplated by this Agreement will not result in any additional funding obligation under any Company Plan or Company Benefit Obligation by the Company or its successors.

(c)Each Company Plan and Company Benefit Obligation has been maintained and administered in all material respects in compliance with its terms, ERISA, the Code and all applicable Laws. There are no material claims, causes of actions, penalties, penalty taxes, audit or investigation or events for any of the foregoing with respect to any Company Plan or Company Benefit Obligation.

(d)No payment, vesting or other benefit that could be received (whether in cash or property or the vesting of property) as a result of the transactions contemplated by this Agreement (alone or in combination with any other event) by any Person who is or was associated with the Company and is a “disqualified individual” (as defined in Treasury Regulation Section 1.280G-1) would be characterized as an “excess parachute payment” (as defined in Section 280G(b)(1) of the Code).

(e)The consummation of the transactions contemplated by this Agreement, either alone or in conjunction with another event that occurred on or prior to the Closing Date (such as a termination of employment), will result in payments of any kind that would not be deductible under Section 162(m) of the Code.

Notwithstanding any other provisions in this Agreement to the contrary, the representations and warranties contained in this Section 4.13 are the only representations and warranties made with respect to matters arising under ERISA.

Section 4.14 Labor Matters.

(a)Section 4.14(a) of the Disclosure Schedules sets forth a list of all CBAs to which the Company is a party or is bound. Seller has provided to Buyer complete and correct copies of such CBAs.

(b)Except as disclosed in (b) of the Disclosure Schedules or except as would not reasonably be expected to have a Material Adverse Effect, to Seller’s Knowledge, (i) there are no arbitrations pending (for which the Company has received notice) pursuant to the CBAs nor are there any unfair labor practice Claims pending (for which the Company has received notice) before any agency having jurisdiction over any of the Employees and there are no union representation Claims involving any of the active Represented Employees and (ii) there are no pending strikes, work stoppages, work

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slowdowns, picketing, lockouts or similar labor activity, except for routine grievance matters or complaints by or with respect to any of the active Represented Employees.

Section 4.15 Taxes. Except as set forth in Section 4.15 of the Disclosure Schedules:

(a)There are no audits or other reviews pertaining to Taxes pending or scheduled (for which the Seller, the Company or the Acquired Subsidiary have received written notice) with respect to the Company or the Acquired Subsidiary.

(b)All Tax Returns which were required to be filed by or with respect to the Company or the Acquired Subsidiary have been duly and timely filed (taking into account any valid extensions) and each such Tax Return was complete and correct in all material respects; all material Taxes that were required to be paid by or with respect to the Company and the Acquired Subsidiary (whether or not shown as due on any such Tax Return) have been timely (taking into account any valid extensions) paid in full.

(c)The Company and the Acquired Subsidiary have withheld and paid all material Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, member, shareholder or other third party.

(d)There is no Lien for unpaid Taxes against the property of the Company or the Acquired Subsidiary other than Permitted Liens. Seller has not received any written notice of, and does not otherwise have Knowledge of, any audit, other examination or matter in controversy with respect to Taxes being conducted by a Taxing Authority with respect to the Company or the Acquired Subsidiary.

(e)There are no waivers of any statute of limitations in respect of Taxes or any extension of time with respect to a Tax assessment or deficiency affecting the Company or the Acquired Subsidiary.

(f)There are no pending proposed deficiencies or other claims (for which the Companies have received written notice) by a Taxing Authority for unpaid Taxes of or with respect to the Company or the Acquired Subsidiary.

(g)Neither the Company nor the Acquired Subsidiary has any liability for the Taxes of any Person other than the Company, the Acquired Subsidiary or the Seller Affiliated Group under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local, or foreign Tax Law), as a transferee or successor, or pursuant to any contract, law, rule or regulation.

(h)Neither the Company nor the Acquired Subsidiary has received a written Claim from any Taxing Authority in a jurisdiction where the Company or the Acquired Subsidiary does not file Tax Returns stating that the Company or the Acquired Subsidiary is or may be subject to taxation by that jurisdiction.

(i)Neither the Company nor the Acquired Subsidiary is the beneficiary of any extension of time within which to file any Tax Return.

(j)The unpaid Taxes of the Company and the Acquired Subsidiary did not, as of the Balance Sheet Date, materially exceed the reserve for Tax liabilities shown on the interim balance sheet as of the Balance Sheet Date included in the Financial Statements.

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(k)No power of attorney granted by the Company or the Acquired Subsidiary with respect to any Taxes is currently in force.

(l)Immediately prior to the Closing, the Company will be disregarded as an entity separate from the Seller for U.S. federal income tax purposes, and no election has been, or will be, made under Treasury Regulations Section 301.7701-3(c) prior to the Closing to treat the Company as an association taxable as a corporation for U.S. federal income tax purposes after the Closing.

(m)The Acquired Subsidiary has not been a “controlled corporation” or a “distributing corporation” in any distribution of stock intended to qualify for tax-free treatment under Section 355 of the Code occurring during the two-year period ending on the date hereof.

(n)All Tax returns which were required to be filed by or with respect to the Seller Affiliated Group have been duly and timely filed (taking into account any valid extensions) and each such Tax Return was correct and complete in all material respects; all material taxes that were required to be paid by the Seller Affiliated Group (whether or not shown as due on any such Tax Return) have been timely (taking into account any valid extensions) paid in full.

(o)The only state or political subdivisions therein in which the Company or the Acquired Subsidiary currently is required to file Tax Returns or pay Taxes is the State of Hawaii and political subdivisions therein.

Notwithstanding any other provisions in this Agreement to the contrary, the representations and warranties contained in this Section 4.15 are the only representations and warranties made with respect to Tax matters.

Section 4.16 Intellectual Property.

(a)Except as set forth in Section 4.16(a) of the Disclosure Schedules, (i) the Company or the Acquired Subsidiary owns, or is licensed to use, all material trademarks, tradenames, copyrights, technology, know-how and processes necessary for the conduct of the Business as currently conducted by the Companies (the “Intellectual Property”), (ii) no Claim has been asserted and is pending (for which the Companies have received notice) by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor, to Seller’s Knowledge, is there any valid basis for any such Claim, and (iii) to Seller’s Knowledge, the use of such Intellectual Property by the Company or the Acquired Subsidiary, as applicable, does not infringe on the material rights of any Person.

(b)Except as would not have a Material Adverse Effect, all payment obligations and royalties accruing prior to the Execution Date under the licenses of Intellectual Property set forth in Section 4.16(b) of the Disclosure Schedules (the “Process Licenses”) which are used by the Company in connection with the operation of the Refinery process units, have been paid.

Section 4.17 Absence of Certain Changes. Except as contemplated by this Agreement or as reflected in Section 4.17 of the Disclosure Schedules, the Business, as currently conducted by the Companies, has not, since the Balance Sheet Date, experienced any occurrence outside of the ordinary course of business which constituted a Material Adverse Effect. Without limiting the generality of the preceding sentence, since the Balance Sheet Date there has not been any:

(i)offer, sale, issue or grant, or any authorization of any offering, sale, issuance or grant of, any Equity Securities of the Companies;

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(ii)acquisition or disposition, whether by merger or consolidation, by purchasing Equity Securities or otherwise, of (A) any business or any corporation, partnership, association or other business organization or division thereof by the Companies or (B) any material assets or properties of the Companies, in each case, except for the purchase or sale of inventory in the ordinary course of business or pursuant to the Refinery Shutdown Activities or the Refinery Turnaround and Startup Activities;

(iii)adoption of any amendments to the Governing Documents of the Companies;

(iv)incurrence by the Companies of any Obligations for borrowed money or purchase money indebtedness, whether or not evidenced by a note, bond, debenture or similar instrument, or entrance into any guarantees, except trade debt in the ordinary course of business;

(v)change in any accounting principle, policy, method or procedure of the Companies or any revaluation of any material Assets;

(vi)material damage, destruction or loss to the Assets prior to the Execution Date;

(vii)destruction of any books or records of the Company or the Acquired Subsidiary other than in the ordinary course of business;

(viii)the settlement of any Proceeding, other than in the ordinary course of business, in each case in an amount in excess of $1,000,000 or that imposes non-monetary relief that materially adversely affects the ability of the Companies to operate the Business as currently conducted;

(ix)increase in the salaries or base wages of any Employee except pursuant to regular salary/wage review procedures or pursuant to CBAs;

(x)acceleration or delay in the collection of material accounts or notes receivable or the payment of accounts or notes payable; or

(xi)agreement or commitment to do any of the foregoing, or any action or omission that would reasonably be expected to result in any of the foregoing.

Section 4.18 Bank Accounts. Section 4.18 of the Disclosure Schedules is a complete and correct list of all bank accounts and safety deposit boxes of the Companies and the names of all the Persons authorized to draw thereon and have access thereto.

Section 4.19 Insurance. The Companies maintain, or under contractual arrangements are named as an additional insured in, policies or binders of fire, liability, product liability, umbrella liability, real and personal property, workers’ compensation, vehicular, directors’ and officers’ liability, fiduciary liability and other casualty and property insurance relating to the Business which are customarily maintained by Persons engaged in businesses similar to the Business.

Section 4.20 Customers and Suppliers.

(a)Section 4.20(a) of the Disclosure Schedules sets forth the name of (i) each of the top ten (10) customers (as determined by revenue) and (ii) each of the top ten (10) suppliers (as

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determined by expenses) of the Business, in each case for the twelve months ended on the December 31, 2012.

(b)Except as set forth in Section 4.20(b) of the Disclosure Schedules, to Seller’s Knowledge, since December 31, 2012 until the Execution Date, no material vendor, exhibitor, advertiser, customer, supplier or distributor of the Business has (i) terminated, or threatened in writing to terminate, its relationship with either of the Companies or (ii) decreased materially, or threatened in writing to decrease materially, its services, supplies or materials to either of the Companies or its usage of either of the Companies’ services or products in connection with the Business except to the extent related to or as a result of the Refinery Shutdown Activities.

ARTICLE V

REPRESENTATIONS AND WARRANTIES REGARDING BUYER

Except as set forth in the Disclosure Schedules, Buyer hereby represents and warrants to Seller that the statements contained in this Article V are complete and correct as of the Execution Date, and will be complete and correct as of the Closing Date (unless any such representation or warranty speaks to an earlier date and provided that any such representation or warranty that speaks to a “current” or “currently” dated time period shall be deemed to refer to such representation or warranty as of the Execution Date):

Section 5.1 Organization and Qualification. Buyer is a limited liability company duly organized and validly existing and in good standing under the Laws of the State of Delaware. Buyer has the requisite limited liability company power and authority to carry on its business as it is now being conducted. Buyer is duly qualified as a foreign limited liability company and in good standing in each jurisdiction where the character of its properties owned or held under lease or the nature of its activities makes such qualification necessary, except where the failure to be so qualified would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on Buyer’s ability to execute, deliver and perform its Obligations under this Agreement and the Related Agreements to which it will be a party.

Section 5.2 Authority; Enforceability. Buyer has full limited liability company power and authority to execute, deliver and perform its Obligations under this Agreement and the Related Agreements to which it will be a party, and to carry out the transactions contemplated hereby and thereby. This Agreement has been and the Related Agreements to which Buyer will be a party will be duly and validly executed and delivered by Buyer and, assuming the due authorization, execution, and delivery by Seller, this Agreement and the Related Agreements to which Buyer will be a party constitute the legal, valid and binding Obligations of Buyer enforceable in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency or other similar Laws affecting the enforcement of 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.

Section 5.3 Conflicts and Approvals. Assuming the accuracy of Seller’s representations and warranties and except for (a) the receipt of the Buyer Third Person Consents set forth in Section 5.3(a) of the Disclosure Schedules and (b) the effectuation of all filings required under the HSR Act and the other filings and registrations with and the receipt of the Authorizations from Governmental Authorities set forth in Section 5.3(b) of the Disclosure Schedules, neither the execution and delivery by Buyer of this Agreement or the Related Agreements to which Buyer will be a party, nor the performance by Buyer of its Obligations hereunder or thereunder will (A) violate or breach the terms of or cause a default under (i) any Law applicable to Buyer, (ii) the Governing Documents of Buyer, (iii) any Authorizations or Orders binding on Buyer or to which any of its assets are subject or (iv) any Material Contract of Buyer or

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(B) with the passage of time, the giving of notice or the taking of any action by a third Person, have any of the effects set forth in clause (A) of this Section 5.3, except for any matters described in this Section 5.3 that would not reasonably be expected to materially and adversely affect the ability of Buyer to execute, deliver and perform its Obligations under this Agreement and the Related Agreements to which it will be a party.

Section 5.4 Proceedings. There are no Proceedings or Orders pending (for which Buyer has received service of process or otherwise notice) or, to Buyer’s Knowledge, threatened, against Buyer or its assets that would reasonably be expected to materially and adversely affect the ability of Buyer to execute, deliver and perform its Obligations under this Agreement or any Related Agreement to which Buyer will be a party.

Section 5.5 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or the Related Agreements based upon arrangements made by or on behalf of Buyer, except any fees and commissions that will be discharged by Buyer.

Section 5.6 Purchase the TH Interest for Investment.

(a)The TH Interest, when acquired by Buyer at the Closing, will be acquired from Seller for Buyer’s own account, for investment purposes and Buyer is not acquiring the TH Interest from Seller with a view to, or to make offers of sales for Seller in connection with, any distribution thereof, or to participate or have a direct or indirect participation in any such undertaking, or to participate or have a participation in the direct or indirect underwriting of any such undertaking, in each case within the meaning of the Securities Act, or applicable state securities Laws.

(b)Buyer understands that (i) the TH Interest has not been registered under the Securities Act by reason of their issuance in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act and has not been qualified under any state securities Laws on the grounds that the offering and sale of securities contemplated by this Agreement are exempt from registration thereunder, and (ii) Seller’s reliance on such exemptions is predicated on Buyer’s representations set forth herein. Buyer understands that the resale of the TH Interest may be restricted indefinitely, unless a subsequent disposition thereof is registered under the Securities Act and registered under any state securities Law or is exempt from such registration.

(c)Buyer is an “accredited investor” as that term is defined in Rule 501 of Regulation D promulgated under the Securities Act. Buyer is able to bear the economic risk of the acquisition of the TH Interest pursuant to the terms of this Agreement, including a complete loss of Buyer’s investment in the TH Interest.

(d)Buyer can bear the economic risk of its investment in the TH Interest (including possible complete loss of such investment) for an indefinite period of time and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of its acquisition of the TH Interest.

(e)Buyer, together with its representatives and advisors, is familiar with investments of the nature of the TH Interest, understands that the purchase of the TH Interest involves certain risks, and believes that it has adequately investigated the Company, and has substantial knowledge and experience in financial and business matters such that it is capable of evaluating, and has evaluated, the merits and risks inherent in purchasing the TH Interest. Buyer and its representatives and advisors have been afforded access, to the extent not prohibited by Law, to such information concerning the Companies

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and have been afforded an opportunity to ask such questions of Seller and the Companies as Buyer has deemed necessary or desirable to evaluate the merits and risks of the prospective investments in the TH Interest contemplated herein.

(f)For purposes of state “blue sky” Laws, Buyer represents and warrants that Buyer is located in the State of Texas and that the decision by Buyer to acquire the TH Interest shall be deemed to occur solely in the State of Texas.

Section 5.7 Financing. Prior to the execution of this Agreement, Buyer has delivered to Seller complete and correct copies of executed commitment letters from (i) Deutsche Bank AG New York Branch and Deutsche Bank Securities Inc. and (ii) Barclays Bank PLC (including all schedules, annexes, exhibits or other attachments to such commitment letters other than those documents solely relating to fee arrangements in connection with such letters (collectively, the “Commitment Letters”)). The documents relating to such fee arrangements do not contain any conditions precedent relating to the provision of the financing referred to in the Commitment Letters except for the payment of the fees provided therein. Pursuant to the Commitment Letters, such lenders and their affiliates have committed to provide and arrange the financing described therein subject to the terms and conditions set forth therein, the proceeds of which may be used to consummate the transactions contemplated by this Agreement (such financing collectively referred to as the “Financing”). The Commitment Letters are in effect as of the Execution Date and Buyer has not agreed to any material amendment or modification to any of the Commitment Letters that would adversely affect the ability of Buyer or its Affiliates to obtain financing as contemplated thereby. As of the date of this Agreement, (i) Buyer has not received from or provided to any counterparty to the Commitment Letters written notification that the Commitment Letters are not in full force and effect or have been withdrawn or terminated or otherwise amended or modified in any respect, that Buyer has failed to perform, and such failure is continuing, its Obligations thereunder to date, or that any counterparty thereto has not performed its Obligations thereunder to date, (ii) to Buyer’s Knowledge, no event has occurred and no circumstance or condition exists, that (with or without notice or lapse of time) has resulted in or would reasonably be expected to result in a breach or violation of, or a default under, the Commitment Letters and (iii) each Commitment Letter is a legal, valid, binding and enforceable agreement of Buyer, and, to Buyer’s Knowledge, the other parties thereto and is in full force and effect, except as enforcement may be limited by bankruptcy, insolvency or other similar Laws affecting the enforcement of 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. Buyer and its Affiliates are in a position to satisfy all of their respective conditions to advances under the Commitment Letters to the extent such conditions are within their control. Buyer acknowledges that obtaining the Financing (y) is not a condition to its Obligation to consummate the transactions contemplated by this Agreement and (z) is not to be treated as a provision of Section 8.3.

Section 5.8 Solvency. Buyer is not entering into the transactions contemplated by this Agreement with the actual intent to hinder, delay, or defraud either present or future creditors. Assuming (i) satisfaction of the conditions to the obligations of Buyer to consummate the transactions contemplated by this Agreement and (ii) the accuracy of the representations and warranties in Article III and Article IV, at and immediately after the Closing, and after giving effect to the Closing and the other transactions contemplated hereby, Buyer will not (A) be insolvent (in that both the fair value of its assets will not be less than the sum of its debts and the present fair saleable value of its assets will not be less than the amount required to pay its probable liability on its debts as they become absolute and matured) and (B) have incurred debts beyond its ability to pay as they become absolute and matured.

Section 5.9Personnel Credentials. Buyer or its Affiliates will, as of the Closing Date, have employed, contracted with, or otherwise retained sufficient personnel having the credentials, experience,

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training and safety records reasonably necessary for the safe operation of the Refinery from and after the Closing.

ARTICLE VI

PRE-CLOSING COVENANTS

Section 6.1 Refinery Shutdown, Turnaround and Startup Activities.

(a)Refinery Shutdown. Buyer acknowledges that prior to the Execution Date the Company determined and commenced activities to shut down the Refinery and intended to convert the Refinery into an import terminal. The Company ceased refining operations at the Refinery on or about April 23, 2013 pursuant to which the Company shut down those processing units of the Refinery set forth in Section 6.1(a) of the Disclosure Schedules including ceasing long-term capital improvement and replacement projects and ceasing routine maintenance and routine preventive maintenance activities necessary for ongoing refining operations (collectively, the “Refinery Shutdown Activities”).

(b)Refinery Turnaround and Startup. Seller shall use Commercially Reasonable Efforts, beginning promptly after the execution of this Agreement, to provide, to and for the benefit of the Company, the Consulting Work and the Management Work (collectively, the “Refinery Turnaround and Startup Activities”). Buyer hereby approves the Scope of Work.

(i)The Refinery Turnaround and Startup Activities shall be deemed to be complete when the operations of the Refinery satisfy the Startup Criteria (the “Refinery Startup Completion”), and Seller shall not be obligated to perform any further Refinery Turnaround and Startup Activities following the Refinery Startup Completion.

(ii)If Seller and Buyer are unable to agree whether the Startup Criteria have been met, then an independent and experienced third party engineering firm that is mutually agreeable to Seller and Buyer shall be engaged to determine and evaluate the non-legal issues that are in dispute. The cost of retaining such firm shall be borne equally by Buyer and Seller.

(c)Changes in Scope of Work. Any amendments or modifications to the Scope of Work shall be in writing signed by an authorized representative of Seller and Buyer, and an authorized representative of Buyer shall be reasonably available during the normal business hours of the Company to make such decisions. In the event that Seller proposes a change to the Scope of Work to which Buyer does not agree, and Seller believes in good faith that such change is necessary for successful and safe completion of the remaining items in the Scope of Work (a “Refinery Startup Dispute”), Seller shall provide written notice to Buyer setting forth in reasonable detail the basis of the Refinery Startup Dispute. A member of senior management (vice president level or higher) of Buyer and Seller shall meet by telephone, or at a mutually agreeable location, in good faith to attempt to resolve the Refinery Startup Dispute within five (5) days from the date of the notice. In the event Buyer and Seller are unable to resolve the Refinery Startup Dispute in accordance with the foregoing provisions, Seller may, in Seller’s discretion, cease further Refinery Turnaround and Startup Activities.

(d)Pricing and Payment; Reimbursement. Seller shall pay the Refinery Startup Expenses, subject to the reimbursement provisions set forth below. For the avoidance of doubt, Seller shall not be reimbursed by Buyer for Refinery Startup Expenses in excess of $15,000,000 unless and until the Refinery Startup Expenses exceed $20,000,000, in which event Seller shall receive reimbursement from Buyer for amounts in excess of $20,000,000 (whether pursuant to Section 2.5(a)(i)(6) at Closing or Section 6.1(d)(iv) prior to Closing).

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(i)Within seven (7) days of the Execution Date, Buyer shall pay Seller, by wire transfer of immediately available funds to an account, or accounts, designated by Seller, an initial deposit for the benefit of Seller in the amount of $15,000,000 (the “Refinery Startup Deposit”).

(ii)In the event that the Refinery Startup Expenses incurred by Seller or its Affiliates exceed $20,000,000 in the aggregate, Seller shall so notify Buyer in writing. Within three (3) Business Days of receipt of such notice, Buyer shall replenish the Refinery Startup Deposit by paying Seller, by wire transfer of immediately available funds to an account, or accounts, designated by Seller, an additional deposit for the benefit of Seller in the amount of $7,000,000.

(iii)As soon as practicable after receipt of any funds attributed to the Refinery Startup Deposit by Seller, but in any event within ten (10) days thereafter, Seller shall transfer the Refinery Startup Deposit into a segregated investment account.

(iv)Seller may transfer portions of the Refinery Startup Deposit to its own account from time to time as Seller may desire to reimburse Seller for Startup Refinery Expenses. Seller may not transfer any portion of the Refinery Startup Deposit to its own account unless the Refinery Startup Expenses incurred to date exceed the Startup Deposit Drawn Amount. From and after the date the Refinery Turnaround and Startup Activities commence, Seller shall provide, as requested by Buyer, reasonably appropriate records indicating the Refinery Startup Expenses incurred to date with a reasonable level of detail sufficient to allow Buyer to evaluate Seller’s draws on the Refinery Startup Deposit. If Buyer disputes the amount or payment of any Refinery Startup Expenses, at any time (subject to Section 6.1(d)(viii)), Buyer shall provide Seller with written notice setting forth in reasonable detail the amounts in dispute and the reasons therefor. If Buyer provides such a notice, a procedure similar to the procedure set forth in Section 2.6(d) and Section 2.6(e) shall be followed to resolve the dispute.

(v)At least three (3) Business Days prior to the Closing Date, Seller shall submit in writing to Buyer its good faith estimate, as of the Closing Date, by which the Refinery Startup Expenses will exceed $27,000,000 (the “Estimated Refinery Startup Reimbursement”) along with documentation supporting its good faith calculation of the Estimated Refinery Startup Reimbursement and shall reasonably respond to questions and comments from Buyer regarding such submission prior to the Closing Date. The Base Amount payable by Buyer on the Closing Date shall be increased or decreased, as applicable, by the amount of the Estimated Refinery Startup Reimbursement.

(vi)In the event that the total amount of the Refinery Startup Deposit delivered to Seller exceeds the Refinery Startup Expenses upon the completion of the Refinery Turnaround and Startup Activities, Seller shall refund to Buyer such excess at the Closing (subject to a reasonable amount reserved by Seller for invoices Seller expects to receive after the Closing).

(vii)Notwithstanding any other provision in this Agreement to the contrary and regardless of whether or not the Closing occurs and regardless of any reason that the Closing does not occur, Buyer shall pay to Seller (1) the Estimated Refinery Startup Reimbursement, either at the Closing pursuant to Section 2.5(a)(i)(6) or within ten (10) Business Days of the termination of this Agreement, and (2) the Final Refinery Startup Reimbursement within five (5) Business Days after the Final Refinery Startup Reimbursement becomes final pursuant to Section 6.1(d)(viii).

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(viii)Within sixty (60) days after the payment contemplated in Section 6.1(d)(vii) has been delivered by Buyer to Seller, Seller shall deliver to Buyer notice of the amount by which the Refinery Startup Expenses exceeded $27,000,000 (the “Final Refinery Startup Reimbursement”). Unless Buyer gives notice to Seller on or before the thirtieth (30th) day after Buyer’s receipt of such notice that Buyer disputes the amount setting forth in reasonable detail the amounts in dispute and the reasons therefor, then the Final Refinery Startup Reimbursement as specified in the notice shall become final and binding on the Parties. If Buyer provides such a notice, a procedure similar to the procedure set forth in Section 2.6(d) and Section 2.6(e) shall be followed to arrive at a Final Refinery Startup Reimbursement. Buyer shall promptly pay any amounts not in dispute.

(ix)Seller shall provide, as reasonably requested by Buyer, accounting reports setting forth actual and budgeted amounts for the Refinery Startup Expenses. Seller shall permit a Diligence Representative of Buyer to have reasonable access to the Refinery, subject to Section 6.6, to review such reports and monitor the Refinery Turnaround and Startup Activities.

(e)Course of performance. To the extent Seller performs the Refinery Turnaround and Startup Activities, during the course thereof:

(i)Seller shall use its Commercially Reasonable Efforts to perform the Refinery Turnaround and Startup Activities within the time frames indicated in the Scope of Work and to perform the Refinery Turnaround and Startup Activities in a diligent, orderly and professional manner; and

(ii)Seller shall keep Buyer informed of all material factors which may affect Seller’s progress of the Refinery Turnaround and Startup Activities and the various dates when Seller anticipates completion of the items detailed on the Scope of Work.

(f)Independent Contractor. Seller will be an independent contractor with respect to all Refinery Turnaround and Startup Activities performed pursuant to this Section. Neither Seller nor any contractors nor the employees of either shall be deemed to be servants, employees or agents of Buyer.

(g)Waiver of Warranties. Notwithstanding any other provision in this Agreement to the contrary, SELLER HAS NOT MADE AND HEREBY DISCLAIMS ANY REPRESENTATION OR WARRANTY, WHETHER EXPRESS OR IMPLIED, AND WHETHER BY COMMON LAW, STATUTE, OR OTHERWISE, REGARDING (I) THE QUALITY, CONDITION, OR OPERABILITY OF THE ASSETS AS MODIFIED BY THE REFINERY TURNAROUND AND STARTUP ACTIVITIES, (II) THE MERCHANTABILITY OF THE ASSETS AS MODIFIED BY THE REFINERY TURNAROUND AND STARTUP ACTIVITIES, (III) FITNESS FOR ANY PARTICULAR PURPOSE OF THE ASSETS AS MODIFIED BY THE REFINERY TURNAROUND AND STARTUP ACTIVITIES, OR (IV) THE CONFORMITY OF THE ASSETS AS MODIFIED BY THE REFINERY TURNAROUND AND STARTUP ACTIVITIES TO MODELS, SAMPLES OF MATERIALS OR MANUFACTURER DESIGN, AND ALL TANGIBLE PURCHASED ASSETS SUBJECT TO THE REFINERY TURNAROUND AND STARTUP ACTIVITIES SHALL BE DELIVERED “AS IS, WHERE IS” WITH ALL FAULTS.

(h)Release and Indemnification of Seller. In addition to other indemnifications provided by Buyer elsewhere in this Agreement, Buyer hereby releases and discharges and agrees to indemnify, defend, and hold harmless the Seller Indemnitees from and against any and all Claims and Losses caused by, arising out of, or in any way incidental to or in connection with the performance of the Refinery Turnaround and Startup Activities, whether arising before or after completion thereof, and in

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any manner directly or indirectly caused, occasioned or contributed to, in whole or in part, or claimed to be caused, occasioned or contributed to, in whole or in part, by the following:

(i)The negligence or fault or gross negligence, whether active or passive, (but excluding willful misconduct) of the Seller Indemnitees or their contractors, subcontractors or vendors;

(ii)The negligence, fault, gross negligence or willful misconduct, whether active or passive, of Buyer or its contractors, subcontractors or vendors or any third parties (or any of its owners, directors, officers, employees or agents);

(iii)The concurrent negligence or fault, whether active or passive, of any combination of the Seller Indemnitees, Buyer or its contractors, subcontractors or vendors, or any third party (or any of their respective owners, directors, officers, employees or agents); or

(iv)Where liability with or without fault is imposed, or sought to be imposed, on the basis of any theory of strict liability by operation of law or any violation or failure to comply with any law, rule, regulation, order or requirement of any Governmental Authority.

BUYER UNDERSTANDS, ACKNOWLEDGES AND AGREES THAT SUCH INDEMNIFICATION INCLUDES AN INDEMNIFICATION OF THE SELLER INDEMNITEES FOR AND AGAINST EACH OF THEIR OWN NEGLIGENCE AND GROSS NEGLIGENCE (but excluding to the extent of willful misconduct of the Seller Indemnitees). The provisions of this Section 6.1(h) shall survive the termination or completion of the Refinery Turnaround and Startup Activities and the Closing.

Section 6.2 Operation of the Business. Except (i) as set forth in Section 6.2 of the Disclosure Schedules, (ii) as otherwise contemplated by this Agreement (including the pre-Closing transfer of any Excluded Assets to Seller or any Affiliate of Seller (other than to the Company or the Acquired Subsidiary) and including the Refinery Shutdown Activities and the Refinery Turnaround and Startup Activities), or (iii) as otherwise consented to by Buyer, such consent not to be unreasonably withheld, conditioned or delayed, during the Interim Period Seller shall (and shall cause the Company and the Acquired Subsidiary) to:

(a)afford to Buyer and its agents, advisors and representatives reasonable access during normal business hours to the Company’s and the Acquired Subsidiary’s properties, personnel and the books and records and shall furnish such information about the Company and the Acquired Subsidiary’s as Buyer shall reasonably request, all upon reasonable notice to Seller and in a manner that does not interfere in any material respect with the normal operations of the Business and the Company or the Acquired Subsidiary;

(b)operate the Business and provide routine maintenance of the Assets in the usual and ordinary course consistent with past practice or as otherwise provided in Section 6.2 of the Disclosure Schedules;

(c)use Commercially Reasonable Efforts to preserve substantially intact its business organization, and to preserve relationships with agents, lessors, suppliers, customers and employees;

(d)not offer, sell, issue or grant, or authorize the offering, sale, issuance or grant of, any Equity Securities of the Companies;

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(e)not acquire or sell by or through the Companies, whether by merger or consolidation, by purchasing Equity Securities or otherwise, any business or any corporation, partnership, association or other business organization or division thereof or any material assets or properties of the Companies, in each case, except for the purchase or sale of inventory in the ordinary course of business or assets purchased pursuant to the Refinery Turnaround and Startup Activities;

(f)not adopt any amendments to the Governing Documents of the Companies;

(g)not incur any Obligations of the Companies for borrowed money or purchase money indebtedness, whether or not evidenced by a note, bond, debenture or similar instrument, nor enter into any guarantees by the Companies, except (i) trade debt in the ordinary course of business and (ii) indebtedness to Affiliates of the Company and the Acquired Subsidiary that will be settled prior to Closing;

(h)not destroy any books or records of the Companies other than in the ordinary course of business;

(i)promptly notify Buyer of any material emergency or other material change in the Business or the Assets (for purposes of this subsection (i) only, “material” shall mean events or circumstances which result or would reasonably be likely to result in Losses equal to or greater than $5 million in relation to the Refinery, $1 million in relation to the Logistic Assets and $250,000 in relation to the Retail Assets);

(j)not settle any Proceeding related to the Companies or the Business, other than in the ordinary course of business or as contemplated pursuant to Section 6.15 related to the Hawaii Consent Decree, in each case in an amount in excess of $1,000,000 or that imposes non-monetary relief that materially and adversely affects the ability of the Companies to operate the Business as currently conducted;

(k)not create any Lien (other than a Permitted Lien the release of which the Companies are pursuing by Commercially Reasonable Efforts) against any of the Assets;

(l)not make an election under Treasury Regulations Section 301.7701-3(c) to treat the Company as an association taxable as a corporation for U.S. federal income tax purposes;

(m)except as may be required by GAAP, not change any accounting method or accounting practice of the Companies;

(n)not enter into, terminate or materially amend or materially modify any Material Company Contract or Seller Contract (excluding Multi-Site Contracts), or otherwise waive, release or assign any material rights, claims or benefits of the Company or the Acquired Subsidiary under any such Material Contract or enter into any derivative, option, hedge or futures contracts in all cases other than in the ordinary course of business; provided, that this provision shall not require the Company to seek or obtain Buyer’s consent in order to set or change the prices at which the Company or the Acquired Subsidiary provides goods or services to customers in the ordinary course of business;

(o)perform and comply in all material respects with the Material Company Contracts;

(p)comply in all material respects with applicable Laws;

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(q)maintain (or continue to have the benefit of) insurance with respect to the Business, comparable in amount, scope and coverage to that in effect on the Execution Date;

(r)not adopt, enter into or amend any Company Plan or CBA if the adoption, entry or amendment would reasonably be likely to result in any materially increased cost or expense to either of the Companies after the Closing;

(s)not enter into or amend any employment, severance, consulting or other compensation agreement or arrangement with any existing or new director, officer, independent contractor or employee of either of the Companies except for offer letters, employment agreements and individual consulting agreements for new hires (other than the hiring of officer-level employees) entered into in the ordinary course of business that are terminable at will and without further liability to either of the Companies;

(t)not materially increase the salaries or base wages of any Employee, or terminate any individual without cause or except pursuant to a CBA, if applicable;

(u)not agree, resolve or commit to do any of the actions prohibited in clauses (d) through (h), (j) through (n) or (r) through (t) that would, or the effects of which would, survive the Closing.

Section 6.3 Appropriate Action; Consents; Filings. During the Interim Period:

(a)Subject to Seller’s and Buyer’s additional Obligations in clauses (b), (c) and (d) of this Section 6.3 and the other terms and conditions of this Agreement, Seller and Buyer shall each use Commercially Reasonable Efforts to (i) take, or cause to be taken, all actions, and do, or cause to be done, all things that, in either case, are necessary, proper or advisable under Law or otherwise to consummate and make effective the transactions contemplated by this Agreement and the Related Agreements; provided, however, that the foregoing shall not require or cause any Party to waive any right it may have under other provisions of this Agreement and (ii) obtain from the relevant Governmental Authorities all Authorizations required to be obtained at or prior to the Closing by Buyer, Seller, the Company or the Acquired Subsidiary in connection with the authorization, execution, delivery and performance of this Agreement and the Related Agreements and the consummation of the transactions contemplated hereby and thereby.

(b)As promptly as practicable, Seller and Buyer shall make all necessary filings, including filings under the HSR Act and other filings and registrations referred to in the Disclosure Schedules, and thereafter make any other required submissions, with respect to this Agreement and the transactions contemplated hereby required under any Law at or prior to the Closing. Buyer and Seller shall bear the costs and expenses of their respective filings; provided, that Buyer shall pay the filing fee in connection with any such filings. Seller and Buyer shall reasonably cooperate in connection with the making of all such filings and subsequent submissions to any Governmental Authority. Seller and Buyer shall each use Commercially Reasonable Efforts to furnish to the other Party such necessary information and reasonable assistance as the other Party may reasonably request in connection with the foregoing and will keep the other Party reasonably informed with respect to any consent, authorization, order or approval sought from, or exemption, review, investigation or inquiry conducted by, any Governmental Authority in connection with this Agreement and the transactions contemplated hereby. Each Party shall (i) have the right to review in advance, and to the extent practicable consult on, any written materials submitted to any Governmental Authority in connection with the transactions contemplated by this Agreement, and (ii) consult with and consider in good faith the views of the other Party, prior to making

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any submission, providing any material correspondence or entering into any agreement with any Governmental Authority with respect to the transactions contemplated hereby.

(c)Buyer and Seller shall each give prompt notice to the other of the receipt of and if in writing, furnish the others with copies of (or, in the case of oral communications, advise the others of the contents of) any notice or other communication from (i) any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated hereby, (ii) any Governmental Authority in connection with the transactions contemplated hereby, (iii) any Governmental Authority or other Person regarding the initiation or threat of initiation of any Claims or Proceedings against, relating to, or involving or otherwise affecting the Company, the Acquired Subsidiary, Buyer or Seller that relate to the consummation of the transactions contemplated hereby, and (iv) any Person regarding the occurrence or nonoccurrence of any event the occurrence or nonoccurrence of which would be reasonably likely to (A) cause any condition to the Obligations of the other Party to consummate the transactions contemplated hereby not to be satisfied, (B) cause a breach of the representations, warranties or covenants of such Party under this Agreement, or (C) delay or impede the ability of either Buyer or Seller, respectively, to consummate the transactions contemplated by this Agreement or to fulfill their respective Obligations set forth herein.

(d)Buyer and Seller each agree to cooperate and to use Commercially Reasonable Efforts to contest and to resist any action, including legislative, administrative or judicial action, and to have vacated, lifted, reversed or overturned any Order (whether temporary, preliminary or permanent) of any court or other Governmental Authority that is in effect and that restricts, prevents or prohibits the consummation of the transactions contemplated by this Agreement or the Related Agreements, including the pursuit of all available avenues of administrative and judicial appeal and all available legislative action. Notwithstanding the foregoing, nothing in this Section 6.3 shall require, or be construed to require any Party or its Affiliates to agree to (i) sell, hold, divest, discontinue or limit, before or after the Closing Date, any assets, businesses or interests of the Parties or any of their respective Affiliates; (ii) any conditions relating to, or changes or restrictions in, the operations of any such assets, businesses or interests which, in either case, could reasonably be expected to result in a Material Adverse Effect or materially and adversely impact the economic or business benefits to the Parties of the transactions contemplated by this Agreement; or (iii) any material modification or waiver of the terms and conditions of this Agreement. Neither Buyer nor Seller nor any of their respective Affiliates shall purchase or otherwise acquire or agree to purchase or otherwise acquire, whether directly or indirectly, any assets or interest in any assets or Persons that would reasonable be expected to materially and adversely affect the filings made pursuant to Section 6.3(b).

(e)Buyer and Seller shall each timely give or cause to be given all notices to third Persons and use Commercially Reasonable Efforts to obtain all Third Person Consents (i) set forth in Section 3.3(a) and Section 5.3(a) of the Disclosure Schedules, (ii) required under any Material Company Contract or Seller Contract in connection with the consummation of the transactions contemplated hereby or (iii) otherwise required to prevent a Material Adverse Effect from occurring prior to or after the Closing.

(f)Buyer shall use Commercially Reasonable Efforts to secure the release of Seller and its Affiliates from liability for any post-Closing Obligations of the Companies under any Authorizations or Material Contracts assigned or transferred from Seller or its Affiliates to the Companies, and to secure the release of Seller and its Affiliates from any guarantees of the Companies’ post-Closing Obligations under any Authorizations or Material Contracts to which the Companies remain a party after Closing. Buyer’s efforts in this regard shall include, if necessary, causing the Buyer Guarantor to guarantee the Obligations of the Company under the affected Authorizations or Material Contracts. Buyer acknowledges that Seller and its Affiliates shall have the right to cancel or revoke all

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guarantees, bonds, letters of credit and similar undertakings provided by them or on their behalf to secure any post-Closing Obligations of the Companies. The provisions of this paragraph shall survive the Closing.

(g)Notwithstanding Section 6.3(f), prior to the Closing Buyer shall deliver to the applicable beneficiary or counterparty replacement or substitute guaranties, letters of credit, bonds, security deposits, and other surety obligations and evidence of financial capacity, in each case acceptable to Buyer and the relevant beneficiary or counterparty, in substitution and replacement of those credit support arrangements set forth in Section 6.3(g) of the Disclosure Schedules (the “Credit Support Arrangements”), in form and substance acceptable to Seller, and shall cause the release as of the Closing of Seller and its Affiliates from all Obligations relating to the Credit Support Arrangements.

Section 6.4 Breach Notice. If, prior to the Closing Date, Buyer obtains Knowledge of a breach of any of Seller’s representations, warranties or covenants contained in this Agreement, Buyer shall notify Seller in writing of such information (the “Breach Notice”) as promptly as reasonably possible but in all events no later than two (2) Business Days prior to the Closing Date. The Breach Notice shall contain reasonable details regarding the alleged breach and Buyer’s good faith estimate of the potential Losses associated with such breach.

Section 6.5 Exclusive Dealing. During the Interim Period, Seller and the Company shall, and each shall cause each of their respective officers, directors, employees and Affiliates to, not discuss, or otherwise enter into any agreements or other arrangements regarding, a possible sale or other disposition (whether by merger, reorganization, recapitalization or otherwise) of all or any part of the Equity Securities or assets of the Companies with any other Person (an “Acquisition Proposal”) or provide any information to any third party other than information which is traditionally provided in the ordinary course of such entity’s business operations to third parties where such entity and its officers, directors and Affiliates have no reason to believe that such information may be utilized to evaluate any such possible sale or other disposition of the equity or assets of the Companies. During the Interim Period, Seller and the Company shall, and each shall cause their respective officers, directors, employees and Affiliates to, immediately cease and cause to be terminated any and all contacts, discussions and negotiations with third parties regarding the foregoing. Notwithstanding the foregoing, the provisions of this Section 6.5 shall not apply to or limit or impair any future discussions, plans, negotiations or agreements for the sale, merger or consolidation of Seller.

Section 6.6 Right of Entry.

(a)Buyer hereby acknowledges that any access to the Refinery and any other Assets of the Company or the Acquired Subsidiary utilized by Buyer or any representative, consultant or other Person acting by or on behalf of Buyer (“Diligence Representative”) shall be at the sole risk, cost and expense of Buyer. Buyer shall comply and shall ensure that each Diligence Representative complies with all safety and similar requirements customarily imposed by the Company or the Acquired Subsidiary on its properties. Before and after the Closing, Buyer shall assume and indemnify, defend and hold harmless the Seller Indemnitees from and against any and all Claims and Losses for personal injury, death, disease, illness or property damage or other Losses arising out of Buyer’s or any Diligence Representative’s entry upon or access to the Refinery and any other assets or other Losses of the Company or the Acquired Subsidiary and all Losses incurred by the Seller Indemnitees with respect to each such Claim. Additionally, any inspection or investigation conducted by or on behalf of Buyer or its Diligence Representatives shall be conducted in accordance with all Laws, including all Environmental Laws, applicable Refinery rules and regulations (including those related to health, safety, security and the environment) and in such manner as not to unreasonably interfere with the Refinery or any other Assets or operations of the Company or the Acquired Subsidiary. During the Interim Period, Buyer shall not be

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entitled to conduct any invasive testing or environmental assessments or any other sampling (including air sampling) or testing of soil or ground or surface water at, on or under, any real property associated with the Refinery or any other Assets of the Company or the Acquired Subsidiary, without the prior written consent of Seller, Buyer being limited to the review of Seller’s or its Affiliate’s records or any other publicly available materials or information with regard to these matters.

(b)Before Buyer or any Diligence Representative is permitted to engage in any activities within the Refinery or at any other locations of Assets, Buyer shall (or shall cause the applicable Diligence Representative to) provide proof or otherwise attest that the following types and minimum amounts of insurance coverage are in effect and cover the activities of Buyer or such Diligence Representative:

A.	1. Worker’s Compensation1 2. Employer’s Liability	As required by applicable law. $100,000 each accident
B.	Commercial General Liability:	$1,000,000 Combined Single Limit endorsed to cover (i) contractual liability Bodily Injury and Property Damage assumed under this Agreement, (ii) products liability, and (iii) completed operations
C.	Automobile Liability Coverage: endorsed to cover all owned, non-owned and hired vehicles	$1,000,000 Combined Single Limit Bodily Injury and Property Damage Combined
D.	Umbrella Liability in excess of A.2., B. & C. Endorsed to provide a drop-down endorsement in the event underlying limits are exhausted by claims. (Not required for Diligence Representatives whose scope of work is limited to low risk activities distant from Refinery operational areas.)	$10,000,000

Buyer shall furnish (or cause to be furnished) to Seller a certificate of insurance evidencing that the above minimum coverages are in effect. All policies shall contain a waiver of subrogation clause in favor of the Seller Indemnitees. All policies except A.1 above shall be endorsed to name the Seller Indemnitees as additional insureds. The certificate of insurance shall further specify that all coverages are primary over (and not contributory with or secondary to) any insurance carried by the Seller Indemnitees for their own account. Such insurance shall be endorsed with a standard cross liability clause in favor of the Seller Indemnitees. Such insurance shall cover the actions of Buyer and all Diligence Representatives. The certificate of insurance shall state that Seller shall be provided with not less than thirty (30) days prior written notice of any cancellation or material adverse change with respect to any of the policies.

Notwithstanding anything to the contrary contained in this Agreement, the provisions of this Section 6.6 shall survive the Closing and any cancellation or termination of this Agreement. The insurance required under this paragraph shall operate independent and apart from Buyer’s indemnification Obligations under this Agreement.

Section 6.7 Condition of the Assets. In consummating the purchase and the sale of the TH Interest contemplated hereunder, Buyer acknowledges that it will become the sole member of the Company and thereby an indirect owner of the Assets including the Subsidiary Shares, and that, and that, except for (and without limiting) the representations and warranties expressly made in Article III and

____________________________

¹Not required for individual Diligence Representatives who have no employees.

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Article IV or in any other document delivered pursuant hereto, BUYER ACCEPTS SUCH ASSETS AS MODIFIED IN CONNECTION WITH THE REFINERY TURNAROUND AND STARTUP ACTIVITIES (TO THE EXTENT SUCH ACTIVITIES HAVE BEEN CONDUCTED AS OF THE CLOSING) IN THEIR AS-IS, WHERE-IS, CONDITION, WITH ALL FAULTS, WITHOUT ANY EXPRESS OR IMPLIED COVENANT, WARRANTY AS TO TITLE, CONDITION (INCLUDING ANY ENVIRONMENTAL CONDITION), MERCHANTABILITY, PERFORMANCE, FITNESS (BOTH GENERALLY AND FOR ANY PARTICULAR PURPOSE) OR OTHERWISE (WHICH WARRANTIES SELLER HEREBY EXPRESSLY DISCLAIMS), OR RECOURSE, OTHER THAN AS EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE ENVIRONMENTAL AGREEMENT.

Section 6.8 Independent Investigation. EXCEPT FOR (AND WITHOUT LIMITING) THE REPRESENTATIONS AND WARRANTIES EXPRESSLY MADE BY SELLER IN ARTICLE III AND ARTICLE IV OF THIS AGREEMENT, OR IN ANY OTHER DOCUMENT DELIVERED PURSUANT HERETO, BUYER ACKNOWLEDGES AND AGREES THAT: (a) THERE ARE NO REPRESENTATIONS, WARRANTIES, STATEMENTS, ASSURANCES OR GUARANTEES MADE BY SELLER OR ANY OF ITS AFFILIATES, EXPRESS OR IMPLIED, AS TO (i) THE ASSETS, OR (ii) THE LIABILITIES, THE BUSINESS, RESULTS OF OPERATIONS, CONDITION (FINANCIAL, ENVIRONMENTAL OR OTHERWISE) OR PROSPECTS RELATING TO THE BUSINESS, AND THAT IN MAKING ITS DECISION TO ENTER INTO THIS AGREEMENT AND TO CONSUMMATE THE PURCHASE OF THE TH INTEREST, BUYER HAS RELIED AND WILL RELY SOLELY UPON ITS OWN INDEPENDENT INVESTIGATION, VERIFICATION, ANALYSIS AND EVALUATION; (b) SELLER DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY OTHER REPRESENTATION, WARRANTY, STATEMENT OR INFORMATION ORALLY OR IN WRITING MADE OR COMMUNICATED TO BUYER INCLUDING ANY OPINION, INFORMATION OR ADVICE WHICH MAY HAVE BEEN PROVIDED TO BUYER BY OR ON BEHALF OF SELLER, THE COMPANY, THE ACQUIRED SUBSIDIARY OR ANY AFFILIATES OF SELLER, INCLUDING (i) ANY MODELS PROVIDED BY SELLER OR ITS AFFILIATES, WHICH HAVE BEEN PROVIDED FOR ILLUSTRATION PURPOSES ONLY, (ii) ANY OTHER INFORMATION PROVIDED IN THE CONFIDENTIAL INFORMATION MEMORANDUM DATED MAY 2012, AS SUPPLEMENTED, IF ANY, TO THE DATE OF THIS AGREEMENT, (iii) ANY CORRESPONDENCE FROM SELLER OR AEGIS ENERGY ADVISORS CORP. OR ANY OF THEIR RESPECTIVE REPRESENTATIVES OR AFFILIATES, (iv) ANY PRESENTATION BY THE MANAGEMENT OF SELLER OR ITS AFFILIATES, AND (v) ANY INFORMATION MADE AVAILABLE TO BUYER, OR STATEMENTS MADE TO BUYER, DURING SITE OR OFFICE VISITS, IN ANY DATA ROOM OR MANAGEMENT PRESENTATION; (c) NEITHER SELLER NOR ANY AFFILIATE, AGENT, OR REPRESENTATIVE OF SELLER HAS MADE, AND SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES, ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, FITNESS (BOTH GENERALLY AND FOR A PARTICULAR PURPOSE), OR CONFORMITY TO MODELS OR SAMPLES AND ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, RELATING TO THE COMPANY, THE ACQUIRED SUBSIDIARY OR THEIR RESPECTIVE ASSETS; AND (d) SELLER MAKES NO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE USE OR CONDITION (INCLUDING ENVIRONMENTAL USE OR CONDITION), THE PRESENCE OR ABSENCE OF HAZARDOUS MATERIALS AT, ON, UNDER OR FROM ANY PORTION OF THE REFINERY OR THE OTHER ASSETS, COMPLIANCE WITH APPLICABLE STATUTES, LAWS, CODES, ORDINANCES, REGULATIONS OR REQUIREMENTS RELATING TO LEASING, ZONING, SUBDIVISION, PLANNING, LAND USE, BUILDING, FIRE, SAFETY, HEALTH OR ENVIRONMENTAL MATTERS, COMPLIANCE WITH COVENANTS, CONDITIONS AND RESTRICTIONS (WHETHER OR NOT OF RECORD), OTHER INTERNATIONAL, NATIONAL, REGIONAL, FEDERAL, STATE, PROVINCIAL OR LOCAL REQUIREMENTS OR OTHER

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STATUTES, LAWS, CODES, ORDINANCES, REGULATIONS OR REQUIREMENTS, INCLUDING ENVIRONMENTAL HEALTH AND SAFETY LAWS AND PERMITS.

WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, SELLER MAKES NO REPRESENTATION OR WARRANTY REGARDING ANY THIRD PARTY BENEFICIARY RIGHTS OR OTHER RIGHTS WHICH BUYER MIGHT CLAIM UNDER ANY STUDIES, REPORTS, TESTS OR ANALYSES PREPARED BY ANY THIRD PARTIES FOR SELLER OR ANY OF ITS AFFILIATES OTHER THAN COMPANY AND THE ACQUIRED SUBSIDIARY (SHOULD THE CLOSING OCCUR), EVEN IF THE SAME WERE MADE AVAILABLE FOR REVIEW BY BUYER OR ITS AGENTS, REPRESENTATIVES OR CONSULTANTS.

BUYER EXPRESSLY ACKNOWLEDGES AND AGREES THAT BUYER SHALL INDEMNIFY, DEFEND AND HOLD THE SELLER INDEMNITEES HARMLESS AGAINST ALL CLAIMS AND LOSSES CAUSED BY BUYER’S CLAIMING OR ATTEMPTING TO EXERCISE ANY RIGHTS (WHETHER AS A THIRD PARTY BENEFICIARY OR OTHERWISE) UNDER, ANY STUDIES, REPORTS, TESTS OR ANALYSES PREPARED BY ANY THIRD PARTIES FOR SELLER OR ANY OF ITS AFFILIATES.

WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BUYER EXPRESSLY ACKNOWLEDGES AND AGREES THAT NONE OF THE DOCUMENTS, INFORMATION OR OTHER MATERIALS PROVIDED TO BUYER AT ANY TIME OR IN ANY FORMAT BY SELLER OR ANY OF ITS AFFILIATES CONSTITUTE LEGAL ADVICE, AND BUYER (i) WAIVES ALL RIGHTS TO ASSERT THAT IT RECEIVED ANY LEGAL ADVICE FROM SELLER, ANY OF SELLER’S AFFILIATES, OR ANY OF THEIR RESPECTIVE EMPLOYEES, AGENTS, REPRESENTATIVES OR COUNSEL, OR THAT IT HAD ANY SORT OF ATTORNEY-CLIENT RELATIONSHIP WITH ANY OF SUCH PERSONS, AND (ii) AGREES TO INDEMNIFY, DEFEND AND HOLD THE SELLER INDEMNITEES HARMLESS AGAINST ANY SUCH ASSERTION MADE BY OR ON BEHALF OF ANY OF BUYER’S AFFILIATES.

Section 6.9 Supplement to Disclosure Schedules.

(a)Seller may from time to time prior to the Closing, by written notice to Buyer, supplement or amend the Disclosure Schedules (including adding new Sections to the Disclosure Schedules related to provisions of this Agreement that currently do not contemplate qualification by the Disclosure Schedules) with new or updated information with respect to matters that occur or arise after the Execution Date to correct any matter that would constitute a breach of any representation or warranty of Seller in Article III or Article IV as of the Closing Date (such new or additional information being “New Seller Information”). For purposes herein “New Seller Information” shall not include information that is updated in the ordinary course of business during the Interim Period (e.g., updated lists of Employees) and is provided to Buyer prior to the Closing.

(b)For purposes of determining whether Buyer’s conditions set forth in Section 8.3 have been fulfilled, the Disclosure Schedules shall be deemed to include only that information contained therein on the Execution Date and shall be deemed to exclude the New Seller Information. If Buyer has a right to terminate this Agreement pursuant to Section 10.1(c) as a result of the conditions set forth in Section 8.3 not being satisfied but Buyer elects to proceed with the Closing and the Closing does occur, then the New Seller Information shall be deemed to be accepted by Buyer, and Buyer shall be deemed to have waived and not be entitled to make a Claim thereon under this Agreement (including pursuant to Article XI) or otherwise. If, however, Buyer does not have such a right to terminate this Agreement pursuant to Section 10.1(c) as a result of the conditions set forth in Section 8.3 being satisfied and the Closing does occur, then the New Seller Information shall not be deemed to be accepted or waived by

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Buyer, and Buyer shall be entitled to make a Claim thereon under this Agreement (including pursuant to Article XI) or otherwise.

Section 6.10 Financing Matters.

(a)During the Interim Period, Seller and the Companies shall use Commercially Reasonable Efforts to, and shall cause its and their respective accountants, legal counsel, officers and employees to use Commercially Reasonable Efforts to, provide, at Buyer’s expense, reasonable cooperation as may be requested by Buyer in connection with Buyer’s efforts to obtain the Financing provided that (a) the Companies shall not be required to pay any commitment or other similar fee or incur any Obligation in connection with the Financing, except following the Closing, (b) such cooperation does not unreasonably interfere with the ongoing operations of Seller or of the Business, (c) Seller shall not have any Obligation for any statements, materials or information provided by Seller or the Companies or their representatives to Buyer and (d) prior to the Closing, the Companies shall not have any liability for any statements, materials or information provided by the Companies or their representatives to Buyer. For the avoidance of doubt, neither Seller nor the Companies will be requested or required to prepare projections, pro forma statements, information memoranda, offering memoranda or similar documents that may be required of Buyer in connection with the Financing. The foregoing provisions shall not alter or amend Buyer’s Obligation to consummate the transactions contemplated by this Agreement and a breach or purported breach of this Section 6.10(a) shall not be treated as a provision of Section 8.3.

(b)During the Interim Period, Buyer shall keep Seller reasonably informed regarding the status of Buyer’s activities (including status of negotiations and documentation) to obtain the Financing.

Section 6.11 Company Monthly Financial Statements. During the Interim Period, the Company shall deliver to Buyer, as soon as reasonably practicable, but in no event later than twenty (20) Business Days after the end of each calendar month, the unaudited consolidated interim balance sheet and statement of operations and cash flows of the Company and the Acquired Subsidiary as of and for the period for each calendar month ended after the Execution Date (the “Company Monthly Financial Statements”). The Company Monthly Financial Statements shall be prepared on a basis consistent with manner in which the Financial Statements of Section 4.6(a)(iii) were prepared.

Section 6.12 Title Insurance and Surveys. Buyer, at its sole cost and expense, may procure owner’s title insurance policies (the “Title Policies”) from Title Company with respect to the Owned Real Property or the Leased Real Property insuring title subject only to the Permitted Liens and such other general title exceptions as may be raised by the Title Company; provided, that Buyer’s ability or inability to obtain title insurance from the Title Company on the Owned Real Property or the Leased Real Property shall not result in an adjustment to the Purchase Price. If Buyer requests extended coverage policies or any endorsements to the Title Policies, Buyer shall also be responsible for the cost of such extended coverage and endorsements and the delivery of any documentation required by the Title Company in connection with the issuance of such extended coverage and endorsements (including surveys or zoning reports), however, Seller shall deliver the documentation required by the Title Company in connection therewith as described below. At Buyer’s request, Seller and its Affiliates shall cooperate with and assist Buyer with any reasonable request in Buyer’s efforts to obtain the Title Policies and shall execute and deliver to the Title Company such affidavits, certificates and other documentation as are customary and reasonably requested to cause the Title Company to issue CLTA Standard Coverage Policy – 1990 for the Owned Real Property or the Leased Real Property (including assistance to obtain a “non-imputation” or similar endorsement), provided that no such cooperation or assistance and nothing in such affidavits, certificates or documentation shall require Seller or its Affiliates to incur any Obligations to any Person that are not otherwise expressly set forth in this Agreement. Notwithstanding the preceding, Seller shall

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use Commercially Reasonable Efforts to provide, in support of any such “non-imputation” or similar endorsement, a legal opinion to the Title Company from the general counsel of the Company, subject to customary assumptions and qualifications, as to such counsel’s opinion, without additional inquiry, as to the status of the title rights of the Company to the Owned Real Property lying within the boundary fence of the Refinery. In no event shall Seller be obligated to seek estoppel certificates in connection with any of the Leased Real Properties. Prior to Closing, Buyer may, at its sole cost and expense, obtain and update any surveys pertaining to the Owned Real Property or the Leased Real Property; provided, however, that any such surveys and survey updates shall be performed by a surveyor acceptable to Seller, the approval of which shall not be unreasonably withheld, conditioned or delayed. Neither Buyer’s or any of its lenders’ receipt of any new or updated surveys shall constitute a condition to Closing or form the basis for delaying Closing; however, Seller agrees to reasonably cooperate with Buyer prior to the Closing to permit Buyer to attempt to procure any surveys of the Real Property Interests that Buyer reasonably deems necessary, all at Buyer’s sole risk, cost and expense.

Section 6.13 Cooperation with Respect to Financial Statements. During the Interim Period and after the Closing, Seller shall (and shall cause the Companies during the Interim Period to) provide such reasonable cooperation as may be requested by Buyer with respect to preparation, at Buyer’s expense, of such other financial information in such form and for such periods as may be required pursuant to the requirements of Regulation S-X of the SEC or other applicable U.S. federal securities Laws relating to Buyer’s acquisition of the TH Interest. Any such cooperation shall be provided at Buyer’s expense for third party fees and expenses.

Section 6.14Closing Date Feedstock Inventory.

(a)During the Interim Period as Buyer may reasonably request, Seller shall meet with Buyer and its representatives to discuss Seller’s plans for nominations for and purchases of Feedstock Inventory in anticipation of the Closing. Seller shall meet with and advise Buyer at least thirty (30) days prior to the anticipated Closing Date regarding Seller’s then operational plan for the Refinery (the “Refinery Operational Plan”) including the minimum levels of Feedstock Inventory, Undelivered Refinery Inventory and Committed Refinery Inventory expected to be at the Refinery, in transit to the Refinery or committed in each case as of the anticipated Measurement Time. At or prior to such meeting, Buyer may propose changes to the Refinery Operational Plan and to Seller’s ordinary course of business of handling the Committed Refinery Inventory in order to support Buyer’s planned operation of the Refinery after the Closing. Seller shall take actions during the Interim Period as are necessary to cause the Feedstock Inventory plus the Undelivered Refinery Inventory and the Committed Refinery Inventory, as of the Measurement Time, to include a supply chain of crude oil, feedstock and blendstock in quantities that Seller reasonably expects are sufficient to continue to support the Refinery Operational Plan for sixty (60) days after the Closing Date.

(b)Buyer understands and agrees that it is the intent of the Parties to make Buyer ultimately responsible, regardless of whether the Closing occurs and regardless of any reason that the Closing does not occur, for the cost of all Undelivered Refinery Inventory and Committed Refinery Inventory under the terms hereof, as well as all Taxes, incidental costs and expenses, and other Obligations, Claims and Losses arising out of, incurred in connection with or relating to activities relating to the Undelivered Refinery Inventory and the Committed Refinery Inventory; provided, however, such understanding does not apply in the event (i) all of the conditions to Closing pursuant to Article VIII are satisfied (other than those conditions that by their nature are to be performed at Closing) and Seller defaults in its Obligation to consummate the Closing or (ii) Buyer terminates this Agreement pursuant to Section 10.1(c) solely due to the breach by Seller of its Fundamental Representations (excluding representations and warranties contained in Section 4.15) provided that all of the other conditions to

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Closing pursuant to Article VIII were satisfied at the time of Buyer’s termination (other than those conditions that by their nature were to be performed at Closing).

(c)Seller shall use Commercially Reasonable Efforts to nominate shipments of Committed Refinery Inventory for delivery to the Refinery, and shall provide Buyer with confirmations of the scheduled shipments promptly upon receipt by Seller and its Affiliates.

Section 6.15 Hawaii Consent Decree. During the Interim Period Seller anticipates continuing discussions to enter into final binding settlement(s) whether by judicial decree, judgment, agreement or otherwise, memorializing Seller’s settlement with the United States Environmental Protection Agency and the United States Department of Justice and other applicable entities or agencies, if any, regarding alleged violations of the Clean Air Act related to the ownership and operation of multiple facilities owned by Seller and its Affiliates, including air emissions originating from the Refinery (to the extent such settlement(s) relate to air emissions originating from the Refinery such settlement(s) are referred to herein as the “Hawaii Consent Decree”).

Section 6.16 Personnel Credentials. Prior to the Closing, Buyer shall discuss with and provide information to Seller relating to the credentials, experience and training of personnel employed and expected to be employed by Buyer and its Affiliates to manage and operate the Refinery from and after the Closing.

Section 6.17Data Room Documentation. As promptly as practicable after the date of this Agreement (and in any event within five (5) Business Days after the date of this Agreement), Seller shall, at its expense, authorize Intralinks, Inc. to copy to DVDs all documents posted to the Data Room as of the Execution Date and deliver ten (10) copies of such DVDs to Buyer.

ARTICLE VII

POST-CLOSING COVENANTS; TAX AND EMPLOYEE MATTERS

Section 7.1 Retention of Employees.

(a)Continued Employment.

(i)Buyer shall cause the Company to continue to employ each Employee (excluding Long-Term Inactive Employees, except as set forth in Section 7.1(a)(iii)), and subject to the severance provisions in Section 7.7(a).

(ii)Seller shall assume or retain responsibility and liability, if any, for all Long-Term Inactive Employees, except to the extent that any Long-Term Inactive Employee becomes re-employed by the Company under Section 7.1(a)(iii) and Buyer shall assume and retain responsibility and liability, if any, for all Short-Term Inactive Employees, except to the extent Seller may be responsible for providing long-term disability benefits with respect to the disability of any Post-Closing Employee in any case in which the onset of the disability occurred on or prior to the Closing. Any such Short-Term Employee who then becomes eligible for long-term disability benefits provided by Seller as contemplated in the foregoing sentence shall in no event be considered an Employee of Seller after Closing and shall not otherwise be eligible for any other benefits offered to eligible employees of Seller after the Closing. Moreover, such individual shall not be considered a Long-Term Inactive Employee as defined herein.

(iii)Buyer shall cause the Company to re-employ each Long-Term Inactive Employee on the date such employee is able to return to work, provided such return to work is

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within twelve (12) months of the initial date of disability. Notwithstanding any provision herein to the contrary, upon re-employment, each such employee shall be considered a Post-Closing Employee for all purposes herein and shall no longer be considered a Long-Term Inactive Employee.

(iv)The provisions of this Section 7.1(a) do not create any new or additional right or expectation of continued employment for Employees with the Company, Buyer, Seller or any of their respective Affiliates or otherwise modifies any employment at will status of any individual.

(b)Employment Data. Seller shall, as of thirty (30) days prior to the Closing Date, provide Buyer with employment data, including the name, title, employment history (including years of service), and current salary, base wages, bonus and incentive opportunity, sick or short-term disability pay, exempt or non-exempt status, and the job grade of each Employee that is employed by the Company as of the Closing Date and Company Plans and Company Benefit Obligations in which each such Employee participates.

(c)Orderly Transition. Each Employee who continues employment with the Company after the Closing as described above is referred to herein as a “Post-Closing Employee.”

(d)Employment Terms Assurances. Buyer shall cause benefits to be provided to each Post-Closing Employee who is a not a Represented Employee for a period of at least twelve (12) months beginning on the Closing Date (unless earlier terminated for cause or by resignation) pursuant to Buyer’s employee benefit plans as will be established as of the Closing Date (“Buyer’s Plans”). The terms of the Buyer’s Plans, as well as the compensation terms applicable to each such Post-Closing Employee, shall be, in the aggregate, comparable to those offered by the Company, Seller or Seller’s Affiliates, as applicable, to such Post-Closing Employee prior to the Closing Date.

(e)Union Recognition. Buyer shall cause the Company to continue to recognize the Union as the exclusive representative of the bargaining unit at the Refinery and adopt the current CBA including existing Memoranda Agreement.

Section 7.2 Service Recognition for Post-Closing Employees. Except as provided in this Section 7.2, Buyer shall ensure that all of Buyer’s Plans in which the Post-Closing Employees participate after the Closing recognize the years of service with the Company or its Affiliates and predecessor employers prior to the Closing of any such Post-Closing Employees (to the extent such past service as reflected in the employment data furnished to Buyer pursuant to Section 7.1) for eligibility, vesting and benefit determination purposes to the same extent as such Post-Closing Employee was entitled, before the Closing, to credit for such service under any similar Seller’s Plans, but Buyer shall have no Obligation to recognize such years of service for benefit accrual purposes. Without limiting the foregoing none of the Company, Buyer or their respective Affiliates shall have any Obligation to recognize such past service for the determination of benefit amounts payable under a defined benefit pension plan but will recognize such service for eligibility and vesting purposes under the Buyer’s Plans.

Section 7.3 Pension Plan Coverage.

(a)On and after the Closing, Post-Closing Employees shall become participants in a tax-qualified pension plan to be established or maintained by Buyer as of the Closing Date (“Buyer’s Pension Plan”) with full credit for eligibility, vesting and benefit entitlement purposes (but not for benefit accrual) for service with the Company or its Affiliates and predecessor employers prior to the Closing as provided for in Section 7.2. For the avoidance of doubt, Buyer’s Pension Plan may be a

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defined contribution plan. As of the Closing Date, Post-Closing Employees who are participants in the Tesoro Corporation Retirement Plan or the Tesoro Corporation Restoration Retirement Plan (collectively, the “Seller’s Pension Plans”) shall be fully vested in their accrued benefits under the Seller’s Pension Plans, and all Obligations under the Seller’s Pension Plans shall remain the obligations of Seller, and none of Buyer, the Company or any of their respective Affiliates shall have any Obligation with respect to Seller’s Pension Plans.

(b)Buyer shall permit each Post-Closing Employee to elect on the Closing Date (or as soon thereafter as reasonably practicable) a direct rollover of his or her eligible rollover distributions, except to the extent of any outstanding plan loans or as prohibited by applicable Law, under the Tesoro Corporation Thrift Plan, the Tesoro Corporation Retail Savings Plan, and the Tesoro Corporation Executive Deferred Compensation Plan (collectively, the “Seller’s Savings Plans”) to a tax-qualified deferred contribution plan to be established by Buyer as of the Closing Date (the “Buyer’s Savings Plan”). Any such rollovers shall be made to the Buyer’s Savings Plan in cash. Seller represents, covenants and agrees with respect to the Seller’s Savings Plans, and Buyer represents, covenants and agrees with respect to the Buyer’s Savings Plan, that, as of each date of a rollover described in this paragraph, such plan (i) is intended to satisfy the requirements of Section 401 (a) and (k) of the Code, and (ii) will have received, or an application will be timely filed for, a favorable determination letter from the Internal Revenue Service regarding such qualified status. Buyer will have no Obligation with respect to amounts attributable to Seller’s Savings Plans other than acceptance of the rollovers requested by Post-Closing Employees. Seller shall take (or shall cause its Affiliates to take) any action required to ensure that Post-Closing Employees who are participants in the Seller’s Savings Plans shall be fully vested in their accounts in the Seller’s Savings Plans.

Section 7.4 Welfare Plan Coverage.

(a)With respect to each Post-Closing Employee who elects to participate in Welfare Plans to be established by Buyer prior to the expiration of the transition period as contemplated under the Transition Services Agreement, Buyer shall, to the extent allowed under Buyer’s Welfare Plans, waive any pre-existing condition exclusions to coverage, any evidence of insurability provisions, any active at work requirement and any waiting period or service requirements that did not exist or had been waived or otherwise satisfied under Seller’s Welfare Plans, provided the Post-Closing Employee enrolls within the period of time required under the terms of the plan after first becoming eligible to enroll.

(b)Buyer shall establish a flexible spending plan (“Buyer’s FSP”) prior to the Closing. Post-Closing Employees shall be eligible to participate in Buyer’s FSP following the Closing. Buyer and Seller agree to determine an appropriate transition strategy for outstanding balances held by Post-Closing Employees under Seller’s flexible spending plan and the reimbursement of claims thereunder to the extent necessary.

Section 7.5 Post-Retirement Welfare Benefits. Seller and its Affiliates shall be responsible for all post-retirement medical, dental and life insurance (“Retiree Welfare Benefit”) coverage for any Employees eligible for retirement as of the Closing Date or eligible former employees who do not become Post-Closing Employees and none of Buyer, the Company or any of their respective Affiliates will have any Obligation with respect thereto. For the avoidance of doubt, Buyer shall be responsible for all Retiree Welfare Benefit coverage for all Post-Closing Employees that are not eligible for retirement, pursuant to Company Plans, as of the Closing Date under the plan established by the Company or Buyer after the Closing Date.

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Section 7.6 Other Benefits.

(a)Vacation. Promptly following the Closing Date, Seller shall pay Post-Closing Employees for vacation that the Post-Closing Employees have accumulated under Seller’s vacation policy up to and including the Closing Date. Post-Closing Employees shall be covered by Buyer’s vacation policy/schedule following the Closing Date and going forward but with recognition of past service to determine vacation entitlement levels such that no Post-Closing Employee shall be provided an annual vacation entitlement less than that provided under Seller’s vacation policy, which shall be pro-rated for the 2013 calendar year for their time of employment with Buyer or its Affiliates. Within thirty (30) days after the Closing Date, Seller will provide to Buyer a list of the annual vacation entitlement for the Post- Closing Employees.

(b)Bonuses. Promptly following the Closing Date, Seller shall pay (or cause its Affiliates to pay) to eligible Post-Closing Employees at the time of Closing a pro rata portion of any bonuses payable for 2013 based on the number of days prior to the Closing that the Post-Closing Employees were covered under Tesoro’s bonus plan, such payments to be based on targeted bonus amounts for such employees under Tesoro’s bonus plan.

(c)Tuition Reimbursement. Buyer agrees to reimburse Post-Closing Employees for tuition payments incurred by such Employees after the Closing for courses that began before the Closing, but only if such courses qualified for reimbursement under Seller’s Educational Assistance plan.

Section 7.7 Liabilities and Indemnities.

(a)Post-Closing Severance. Buyer shall provide severance in accordance with Section 7.7(a) of the Disclosure Schedules for Post-Closing Employees terminated by the Company or any of its Affiliates. Buyer and the Company shall be responsible for, and Buyer shall indemnify the Seller Indemnitees from and against all Claims and Losses arising out of the notification or other requirements of the Worker Adjustment and Retraining Notification Act of 1988, as amended (the “WARN Act”) or any state or local law equivalent incurred with respect to Post-Closing Employees after the Closing. However, Seller shall be responsible for, and shall indemnify the Buyer Indemnitees from and against all Claims and Losses arising out of the notification or other requirements of the WARN Act or any state or local law equivalent with respect to Employees who do not become Post-Closing Employees, whether or not the termination occurs prior to, on, or after the Closing.

(b)Workers’ Compensation. Seller shall be responsible for workers’ compensation claims with respect to any Post-Closing Employee to the extent the incident or alleged incident giving rise to the claim occurred at or prior to the Closing. Buyer and the Company shall be responsible for any workers’ compensation claims with respect to any Post-Closing Employee to the extent the incident or alleged incident giving rise to the claim occurs after the Closing. In the event of doubt as to the date of the occurrence of the incident or alleged incident, Buyer shall process the claim. With respect to all workers’ compensation or similar claims (hereinafter “Compensation Claims”) filed with an appropriate agency by or on behalf of any Post-Closing Employee (such employees are, for purposes of this paragraph, hereinafter collectively referred to as a “Claiming Employee”), or by the spouse, dependent(s) or personal representative of such Claiming Employee which is first filed after the Closing, (i) Seller shall process, defend and be responsible for, and shall indemnify the Buyer Indemnitees from and against any such Compensation Claim if the incident or alleged incident giving rise to the claim is alleged to have occurred on or prior to the Closing, (ii) Buyer shall process, defend and be responsible for, and shall indemnify the Seller Indemnitees from and against any such Compensation Claim if the incident or alleged incident giving rise to the claim is alleged to have occurred subsequent to the Closing, and (iii) in the event any such Compensation Claim is filed after the Closing and the incident

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or alleged incident giving rise to the claim is alleged to have occurred both prior and subsequent to the Closing, Buyer shall, in consultation with Seller and taking into account Seller’s reasonable suggestions, process such claim (and Seller shall reimburse Buyer for its allocable portion of the reasonable cost of defense), and the liability for such claim as between the Parties shall be based upon the length of exposure to such incident or alleged incident while employed by the Company before and after the Closing. Thus, as between the Parties, the proportionate share of liability shall equal a fraction the denominator of which shall be the Claiming Employee’s total length of exposure to such incident or alleged incident, and the numerator of which shall be in the case of Buyer, the Claiming Employee’s total length of exposure while employed after the Closing, and in the case of Seller, the Claiming Employee’s total length of exposure while employed prior to the Closing.

(c)None of Buyer, the Company or Affiliates shall have any liability or obligation with respect to any Company Plan or Company Benefit Obligation, and Seller shall take all necessary actions to remove the Company as a participating employer under all such plans after the Closing Date.

Section 7.8 No Third Party Beneficiaries. No provision of Section 7.1 through Section 7.7, whether express or implied, shall create any third-party beneficiary rights in any Person, including any employee or former employee (and any beneficiaries, dependents or representatives thereof) of the Company, Seller or Buyer or any of their respective Affiliates, and no provision of Section 7.1 through Section 7.7, whether express or implied, shall create such third-party beneficiary rights in any Person (including the Union or any Represented Employee), in either case in respect of any compensation or benefits that may be provided, directly or indirectly, under any employee benefit plan or arrangement of Buyer or its Affiliates or to claim any right to employment or recall, any right to continued employment or any other right of any kind or nature whatsoever and shall not be interpreted to amend any employee benefit plan, policy or program.

Section 7.9 Insurance.

(a)Seller and Buyer acknowledge that Seller participates in a program of property and liability insurance coverage for itself and its Affiliates. This program has been designed to achieve a coordinated risk-management package for Seller and all of its Affiliates. The program consists of various types of policies including: (i) policies issued to Seller or its predecessors; (ii) policies issued directly to Affiliates by one of Seller’s wholly-owned insurance companies (“Seller Captive Insurers”); (iii) policies issued to Affiliates by one of the Seller Captive Insurers that may or may not be reinsured by third party insurers; and (iv) policies issued under a fronting arrangement policy (or its equivalent) by third party insurers that may or may not be reinsured (including through a guarantee, indemnity, letter of credit or similar undertaking) by Tesoro or its Affiliates. All of the insurance policies through which the program of coverage is presently or has previously been provided by or to Seller, its predecessors or Affiliates (including the Company and the Acquired Subsidiary) are herein referred to collectively as the “Seller Policies.” It is understood and agreed by Buyer that from and after the Closing:

(i)No insurance coverage shall be provided under the Seller Policies to Buyer, the Company or the Acquired Subsidiary;

(ii)Any and all policies insured or reinsured by any of the Seller Captive Insurers which, but for this provision, would have insured the Refinery shall be deemed terminated, commuted and cancelled ab initio as to the Refinery, the Business, Buyer and its Affiliates (including the Company and the Acquired Subsidiary), but without prejudice to Seller’s and its Affiliates’ rights thereunder; and

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(iii)No Claims regarding any matter whatsoever, whether or not arising from events occurring prior to the Closing, shall be made by Buyer, the Company or the Acquired Subsidiary against or with respect to any of the Seller Policies, regardless of their date of issuance.

(b)Buyer shall procure, pay for and maintain in effect its own policies of insurance with respect to the Business and the Assets and shall indemnify and defend Seller and its Affiliates against, and shall hold them harmless from, any Orders, Claims, Losses or other Obligations arising out of claims made after the Closing against any of the Seller Policies by the Company, the Acquired Subsidiary, Buyer, any Affiliate of Buyer or any Person claiming to be subrogated to Buyer’s or any of its Affiliates’ rights. Such indemnity shall cover, without limitation, any claim by an insurer for reinsurance, retrospective premium payments, prospective premium increases or any other restitution or funding requirements attributable to any such claim or policy requirements.

Section 7.10 Tax Matters.

(a)Straddle Period Allocation. In the case of any taxable period that includes (but does not end on) the Closing Date (a “Straddle Period”), the amount of any Taxes (other than Property, Motor Fuels, and Sales Taxes) of the Company and the Acquired Subsidiary for the portion of the Straddle Period that relates to the Pre-Closing Tax Period shall be determined based on an interim closing of the books as of and including the Closing Date (with exemptions, allowances or deductions that are calculated on an annual basis (including depreciation and amortization deductions) apportioned between the Pre-Closing Tax Period and the portion of such Straddle Period after the Pre-Closing Tax Period based on the number of days in each such period), and the amount of any real property, personal property, ad valorem or similar Taxes, motor fuels Taxes, Hawaii general excise Taxes or sales or use Taxes of the Company and the Acquired Subsidiary (“Property, Motor Fuels, and Sales Taxes”) for the portion of the Straddle Period that relates to the Pre-Closing Tax Period shall be deemed to be the amount of such Property, Motor Fuels, and Sales Taxes for the entire Straddle Period, multiplied by a fraction, the numerator of which is the number of days in the Straddle Period ending on the Closing Date, and the denominator of which is the number of days in such Straddle Period. For the avoidance of doubt, no election shall be made under Treasury Regulations Section 1.1502-76(b)(2)(ii) to ratably allocate income with respect to Acquired Subsidiary or the transactions or matters contemplated herein.

(b)Tax Returns. Except as otherwise provided in Section 7.10(g):

(i)Seller shall prepare and timely file (taking into account all valid extensions), or shall cause to be prepared and timely filed (taking into account all valid extensions), all Tax Returns of the Company or the Acquired Subsidiary covering a taxable period ending on or prior to the Closing Date that are required to be filed after the Closing Date (each, a “Pre-Closing Tax Return”), and each such Pre-Closing Tax Return shall be prepared in a manner consistent with past custom and practice except as otherwise required by applicable Law or fact. Seller shall provide a copy of each such Pre-Closing Tax Return, together with all supporting documentation and workpapers, to Buyer for Buyer’s review and reasonable comment at least thirty (30) days prior to the due date (taking into account all valid extensions) for filing such Pre-Closing Tax Return, and Seller shall include any reasonable comments provided in writing by Buyer to Seller at least five (5) days prior to the due date (taking into account all valid extensions) for filing such Pre-Closing Tax Return; provided, that in the case of a Pre-Closing Tax Return which filing deadline (including extensions) is within thirty (30) days after the Closing Date, the Seller (Y) shall in good faith attempt (but shall not have any obligation) to provide a copy of such Pre-Closing Tax Return to Buyer for Buyer’s review and (Z) does not have any obligation to accept any of Buyer’s comments with respect to such Pre-Closing Tax

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Return. Subject to Seller’s obligations pursuant to Section 7.10(b)(iii) and the indemnification obligations of the Seller pursuant to Section 11.2(a)(iv), the Company or the Acquired Subsidiary, as applicable, shall be responsible for timely paying (taking into account all valid extensions) all Taxes reflected on a Pre-Closing Tax Return to the applicable Taxing Authority.

(ii)Buyer shall prepare and timely file (taking into account all valid extensions), or shall cause to be prepared and timely filed (taking into account all valid extensions), all Tax Returns of the Company or the Acquired Subsidiary covering a Straddle Period (each, a “Straddle Tax Return”), and each such Straddle Tax Return shall be prepared in a manner consistent with past custom and practice except as otherwise required by applicable Law or fact. Buyer shall provide a copy of each such Straddle Tax Return, together with all supporting documentation and workpapers, to Seller for Seller’s review and reasonable comment at least thirty (30) days prior to the due date (taking into account all valid extensions) for filing such Straddle Tax Return, and Buyer shall include any reasonable comments provided in writing by Seller to Buyer at least five (5) days prior to the due date (taking into account all valid extensions) for filing such Straddle Tax Return; provided, that in the case of a Straddle Tax Return which filing deadline (including extensions) is within thirty (30) days after the Closing Date, Buyer (Y) shall in good faith attempt (but shall not have any obligation) to provide a copy of such Straddle Tax Return to Seller for Seller’s review and (Z) does not have any obligation to accept any of Seller’s comments with respect to such Straddle Tax Return. Subject to Seller’s obligations pursuant to Section 7.10(b)(iii) and the indemnification obligations of Seller pursuant to Section 11.2(a)(iv), the Company or the Acquired Subsidiary, as applicable, shall be responsible for timely paying (taking into account all valid extensions) all Taxes reflected on a Straddle Tax Return to the applicable Taxing Authority.

(iii)To the extent the Taxes reflected on a Pre-Closing Tax Return are the obligation of Seller pursuant to Section 11.2(a)(iv), Seller will pay to Buyer the amount of Taxes reflected on such Pre-Closing Tax Return on the date that such Pre-Closing Tax Return is filed with the applicable Taxing Authority. To the extent Taxes reflected on a Straddle Tax Return are the obligation of Seller pursuant to Section 11.2(a)(iv), Seller will pay to Buyer the amount of Taxes reflected on such Straddle Tax Return, as applicable, that are the obligation of Seller pursuant to Section 11.2(a)(iv) within five (5) Business Days after the later of (i) a written request by Buyer, or (ii) the date that such Straddle Tax Return was filed with the applicable Taxing Authority.

(iv)For the avoidance of doubt, the term Pre-Closing Tax Return and Straddle Tax Return shall not include, and this Section 7.10(b) shall not apply to, any Tax Return that is not required under applicable Law to be filed by the Company or the Acquired Subsidiary, such as (x) the consolidated U.S. federal income tax return of the Seller Affiliated Group or (y) any state, local or foreign consolidated, combined, affiliated, unitary or aggregate group income or franchise Tax Return of an applicable group or groups of taxable entities which includes or include one or more members of the Seller Affiliated Group and which is required under applicable Law to be filed by a member of the Seller Affiliated Group other than the Company or the Acquired Subsidiary.

(c)Amended Tax Returns. Buyer shall not, and shall not cause or permit any of its Affiliates, the Company, or the Acquired Subsidiary to (i) amend any Tax Return of the Company or the Acquired Subsidiary that covers a Pre-Closing Tax Period or (ii) make any Tax election that has retroactive effect to any Pre-Closing Tax Period, in each case without the prior written consent of Seller, which consent shall not be unreasonably withheld, conditioned or delayed.

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(d)Tax Contests.

(i)Buyer shall notify Seller in writing within ten (10) days of receipt by Buyer (or any Buyer Indemnitee) of written notice of any pending or threatened audits, adjustments, claims, examinations, assessments or other administrative or judicial proceedings with the purpose or effect of re-determining Taxes of or with respect to the Company or the Acquired Subsidiary (including any administrative or judicial review of any claim for refund) for which Seller may be required to provide indemnification pursuant to this Agreement (a “Tax Contest”), and shall provide Seller with a copy of any such written notice. Seller shall notify Buyer in writing within ten (10) days of receipt by Seller of written notice of any pending or threatened Tax Contest, and shall provide Buyer with a copy of any such written notice. The failure of either Buyer or Seller to provide a notification described in this Section 7.10(d)(i) shall not release Seller or Buyer, respectively, from its obligations hereunder except to the extent, and only to the extent, that the party that was supposed to receive the notification is prejudiced as a result of such failure.

(ii)Seller shall have the right to control and defend the conduct of any Tax Contest covering any taxable period ending on or prior to the Closing Date (a “Pre-Closing Tax Contest”) with counsel (including, for the avoidance of doubt, accountants) of its choice; provided, however, that (A) Seller shall keep Buyer reasonably informed regarding the progress and substantive aspects of the Pre-Closing Tax Contest, (B) Buyer may retain separate co-counsel at its sole cost and expense, and participate in the defense of with respect to the Pre-Closing Tax Contest, including having an opportunity to review and reasonably comment on any written materials prepared in connection with such Pre-Closing Tax Contest and the right to attend and participate in any conferences relating thereto, and (C) Seller will not settle or consent to the entry of any Order or other similar determination or finding with respect to such Pre-Closing Tax Contest without the prior written consent of Buyer (which consent shall not be unreasonably withheld, conditioned or delayed).

(iii)Buyer shall have the right to control and defend (x) any Tax Contest covering any Straddle Period, (y) any Tax Contest that is not a Pre-Closing Tax Contest, and (z) any Pre-Closing Tax Contest for which Seller has not assumed its right to control and defend such Pre-Closing Tax Contest as contemplated by Section 7.10(d)(ii) (each, an “Other Tax Contest”) with counsel (including, for the avoidance of doubt, accountants) of its choice, provided, that, with respect to any Tax items in the Other Tax Contest for which the resulting Tax liability Seller would be required to provide indemnification pursuant to this Agreement, (A) Buyer shall keep Seller reasonably informed regarding the progress and substantive aspects of such Tax items in the Other Tax Contest, (B) Seller may retain separate co-counsel at its sole cost and expense, and participate in the defense of such Tax items in the Other Tax Contest, including having an opportunity to review and reasonably comment on any written materials prepared in connection with such Tax items in the Other Tax Contest and the right to attend and participate in any conferences relating thereto, and (C) Buyer will not settle or consent to the entry of any Order or other similar determination or finding with respect to such Tax items in the Other Tax Contest without the prior written consent of Seller (which consent shall not to be unreasonably withheld, conditioned, or delayed).

(iv)For the avoidance of doubt, the term Tax Contest shall not include, and this Section 7.10(d) shall not apply to, any audits, adjustments, claims, examinations, assessments or other administrative or judicial proceedings with the purpose or effect of re-determining Taxes of or with respect to any Tax Return of the Seller Affiliated Group (which includes the consolidated U.S. federal income tax return of the Seller Affiliated Group).

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(e)Refunds. The amount or economic benefit of any refund (whether in cash or as a credit against or offset to any Tax) in respect of any Tax of the Company or the Acquired Subsidiary attributable to any Pre-Closing Tax Period received by Buyer, the Company, the Acquired Subsidiary or any of their respective Affiliates shall be for the account of Seller, and the recipient thereof shall pay such amount (including any interest received thereon) over to the Seller within ten (10) days after any such refund is received, credited or applied as an offset, as the case may be.

(f)Cooperation. Each of Buyer and Seller, and each of their respective Affiliates, shall cooperate fully, as and to the extent reasonably requested by the other Party, in connection with the filing of Tax Returns of or with respect to the Company or the Acquired Subsidiary and/or during the course of any audit, litigation or other proceeding with respect to Taxes of or attributable to the Company or the Acquired Subsidiary. Such cooperation shall include the retention and (upon the other Party’s request) the provision of records and information that are reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Each of Seller and Buyer agrees, (i) that Seller shall retain all books and records with respect to Tax matters pertaining to the Company and the Acquired Subsidiary relating to any taxable period beginning on or before the Closing Date until the expiration of the applicable statute of limitations (and, to the extent notified by Buyer, any extensions thereof) of the respective taxable periods; shall provide copies of the foregoing to Buyer upon Buyer’s request; and shall abide by all record retention agreements entered into with any Taxing Authority, and (ii) to give the other Party (and following the Closing, Buyer agrees to cause the Company and the Acquired Subsidiary to give the Seller) reasonable written notice prior to transferring, destroying or discarding any such books and records and, on receipt of such notice, if the other Party so requests, Seller or Buyer shall, as applicable, allow the other Party to take possession of such books and records. Buyer and Seller further agree, upon request, to use Commercially Reasonable Efforts to obtain any certificate or other document from any Governmental Authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed (including with respect to the transactions contemplated hereby).

(g)Transfer Taxes. All transfer, documentary, sales, Hawaii general excise, use, stamp, registration and other such Taxes, and all conveyance fees, recording charges and other fees and charges (including any penalties and interest), incurred in connection with the transactions contemplated by this Agreement (“Transfer Taxes”) shall be paid by Buyer when due, and Buyer will file, or cause to be filed all necessary Tax Returns and other documents with respect to all such Taxes, fees and charges; provided that Seller shall reimburse Buyer for 50% of any such Transfer Taxes (excluding any penalties or interest incurred by Buyer).

(h)Tax Treatment. For all U.S. federal income Tax purposes (and state, local, and foreign Tax purposes where applicable), each of Seller and Buyer intend for the purchase of the TH Interest to be treated as a sale of all the Assets (and the Subsidiary Stock), subject to all the Company Assumed Liabilities. Seller and Buyer shall each report, and shall cause each of their Affiliates where applicable to report, the purchase of the TH Interest pursuant to this Agreement consistent with such intended treatment for all U.S. federal income Tax purposes (and state, local, and foreign Tax purposes where applicable). Except as otherwise required by applicable Law, each of Seller and Buyer agrees that it will not, and will not permit its Affiliates to, take any position for Tax purposes (whether on any Tax Return, in any Tax proceeding, or otherwise) that is inconsistent with such intended treatment.

(i)Section 338(h)(10) Elections.

(i)Because of the intended treatment set forth in Section 7.10(h), each of Seller and Buyer intend for the deemed purchase and sale of the Assets to result in the deemed

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purchase and sale of the Subsidiary Shares and, therefore, intend for such deemed purchase and sale of the Subsidiary Shares to qualify as a “qualified stock purchase” within the meaning of Treasury Regulations Section 1.338(h)(10)-1(c). Seller and Buyer shall make a joint election under Section 338(h)(10) of the Code and under any comparable provision of applicable state, local, and foreign Law with respect to Buyer’s deemed purchase of the Subsidiary Shares (collectively, the “Section 338(h)(10) Elections”). Buyer and Seller shall take all necessary steps and cooperate in good faith, including the exchange of information, to effect and preserve valid and timely Section 338(h)(10) Elections. Except as otherwise required by applicable Law, each of Seller and Buyer agrees that (A) it shall, and shall cause each of its Affiliates, to report, act and file all Tax Returns in all respects and for all purposes consistent with the Section 338(h)(10) Elections, and (B) it will not, and will not permit its Affiliates to, take any position that is inconsistent with the Section 338(h)(10) Elections.

(ii)At least three (3) Business Days prior to the Closing Date, Buyer shall prepare and deliver an Internal Revenue Service Form 8023, Elections Under Section 338 for Corporations Making Qualified Stock Purchases, and any corresponding forms under comparable provisions of applicable state, local or foreign tax Law, in substance reasonably satisfactory to Seller (collectively, the “Section 338(h)(10) Election Forms”). At the Closing, Seller shall deliver to Buyer such Section 338(h)(10) Election Forms, duly executed. Seller authorizes Buyer to file each Section 338(h)(10) Election Form with the appropriate Taxing Authority on behalf of Seller and Buyer. Promptly following each such filing, Buyer shall provide Seller with a copy of such filed Section 338(h)(10) Election Forms. As reasonably requested from time to time by Buyer, Seller shall assist Buyer in, and shall provide the necessary information to Buyer, in connection with the preparation of any other forms and documentation required to effect valid and timely Section 338(h)(10) Elections.

(j)Purchase Price Allocations.

(i)Within ninety (90) days after the Final Net Working Capital is finally determined pursuant to Section 2.6 Buyer shall deliver to Seller an allocation schedule (the “Asset Purchase Allocation Schedule”) allocating the Purchase Price (together with the Company Assumed Liabilities and other amounts required to be treated as part of the purchase price for U.S. federal income tax purposes) among the Assets (and the Subsidiary Stock) in accordance with Section 1060 of the Code and the Treasury Regulations promulgated thereunder.

(ii)Within ninety (90) days after the Final Net Working Capital is finally determined pursuant to Section 2.6, Buyer shall deliver to Seller an allocation schedule (the “Section 338 Allocation Schedule”) allocating the “aggregate deemed sales price” and the “adjusted grossed-up basis” (as defined under applicable Treasury Regulations) that results from the Section 338(h)(10) Elections among the assets of the Acquired Subsidiary in accordance with Sections 338 and 1060 of the Code and the Treasury Regulations promulgated thereunder.

(iii)Each of the Asset Purchase Allocation Schedule and the Section 338 Allocation Schedule (each, an “Allocation Schedule,” and collectively, the “Allocation Schedules”) delivered by Buyer shall become final and binding upon Buyer and Seller on the fifteenth (15th) day following the date that such Allocation Schedule was delivered by Buyer to Seller, unless prior to such date Seller notifies Buyer of any reasonable objections to such Allocation Schedule (an “Allocation Schedule Notice of Disagreement”). An Allocation Schedule Notice of Disagreement shall specifically set forth all of Seller’s disputed items to the applicable Allocation Schedule, together with Seller’s proposed changes thereto, including an explanation in reasonable detail of the basis on which Seller proposes such changes. If Seller has

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delivered a timely Allocation Schedule Notice of Disagreement with respect to an Allocation Schedule, then Buyer and Seller shall use their good faith efforts to reach agreement on the disputed items to determine the final and binding Allocation Schedule. If all of Seller’s disputed items with respect to an Allocation Schedule have not been resolved by Buyer and Seller by the thirtieth (30th) day following the date that Buyer receives the Allocation Schedule Notice of Disagreement with respect to such Allocation Schedule, then the items that are still disputed shall be submitted to binding arbitration to be determined by the Arbiter. The Arbiter’s determination of the disputed issues shall in no event be more favorable to Buyer than reflected on such Allocation Schedule as proposed by Buyer or more favorable to Seller than reflected in the proposed changes to such Allocation Schedule delivered by Seller in the Allocation Schedule Notice of Disagreement. Following the determination by the Arbiter, such Allocation Schedule shall be revised to include the determination of the Arbiter on the disputed issues, and such revised Allocation Schedule shall be final and binding upon Buyer and Seller. The fees and expenses of any such arbitration shall be borne fifty percent (50%) by Buyer and fifty percent (50%) by Seller.

(iv)Any adjustment of the Purchase Price, and to any other items of consideration, cost or expense taken into account in the Allocation Schedules for U.S. federal income tax purposes, will be allocated in a manner consistent with the Allocation Schedules that has become final and binding pursuant to this Section 7.10(j). Except as otherwise required by applicable Law, (A) each of Buyer and Seller shall, and shall cause each of its Affiliates, to report, act and file all Tax Returns in all respects and for all purposes consistent with the Allocation Schedules determined to be final and binding pursuant to this Section 7.10(j), and (B) each of Buyer and Seller will not, and will not permit of any of its Affiliates to, take any position that is inconsistent with such final and binding Allocation Schedules.

(k)Tax Treatment of Indemnity Payments. Except as otherwise required by applicable Law, each of Buyer and Seller agree that any indemnification payments made under this Agreement shall be treated as Purchase Price adjustments for U.S. federal income tax purposes (and state, local, and foreign Tax purposes where applicable).

(l)Tax Sharing Agreements. All Tax sharing agreements or similar agreements with respect to or involving the Company or the Acquired Subsidiary shall be terminated as of the Closing Date, and after the Closing Date, the Company and the Acquired Subsidiary shall not be bound thereby or have any liability thereunder.

(m)Consolidated Returns for Periods Through the Closing Date. For the avoidance of doubt, Seller shall include the income of the Acquired Subsidiary (including any deferred items triggered into income by Treasury Regulations Section 1.1502-12 and any excess loss account taken into income under Treasury Regulations Section 1.1502-19) on the Seller Affiliated Group’s consolidated U.S. federal income tax return for all periods through the end of the Closing Date and pay any U.S. federal income taxes attributable to such income, subject to indemnification by Buyer as may be herein provided. The Company and the Acquired Subsidiary shall furnish Tax information to the Seller as necessary or helpful with respect to the foregoing.

(n)Tax Withholding. With respect to any amount of Taxes deducted or withheld by Buyer pursuant to Section 2.5(a)(i)(7), Buyer shall timely pay the full amount of any such Taxes deducted or withheld to the applicable Taxing Authority and provide written notice to Seller of such payments when made.

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(o)Conflict. In the event of conflict between any of the provisions of this Section 7.10 and any other provision of this Agreement, the provisions of this Section 7.10 shall control.

Section 7.11No Solicitation/Non-Competition.

(a)To the extent not prohibited by Law, for a period of five (5) years after the Closing, Buyer shall not, and shall not permit any of its Affiliates to, hire, employ or engage, or seek to hire, employ or engage, any employee of Seller or any of its Affiliates without the prior written consent of Seller, which consent may be withheld in the sole discretion of Seller; provided, that the provisions of this Section 7.11 shall not apply to general solicitations not specifically targeted towards such employees, nor shall they apply to Post-Closing Employees.

(b)In (i) consideration for the purchase by Buyer of the TH Interests and the goodwill, if any, associated therewith, with which Seller is associated and which Seller is causing to be sold, (ii) order to protect the goodwill obtained by Buyer as a result of the acquisition of the TH Interests, and (iii) order to satisfy certain conditions to the consummation of the transactions contemplated by this Agreement, Seller expressly covenants and agrees that, during the Prohibited Period, Seller will refrain from carrying on or engaging directly in the Business (as conducted as of the Closing Date) in the State of Hawaii (the “Restricted Area”). Seller agrees and covenants that, because the following conduct would effectively constitute carrying on or engaging in the Business, Seller will not, in the Restricted Area during the Prohibited Period, (1) own, manage, operate or directly participate in any business or Person which, to Seller’s Knowledge, engages in the Business (as conducted as of the Closing Date) or (2) directly loan money (excluding purchase money indebtedness) to any business or Person which, to Seller’s Knowledge, engages in the Business where the purpose of such loan is to promote the Business (as conducted as of the Closing Date) in the Restricted Area. For the avoidance of doubt, the preceding sentence shall not prohibit sales by Seller to wholesale customers of products similar to the Hydrocarbon Inventory that are ultimately resold or used in the Restricted Area by Persons other than Seller or its Affiliates. As used in this Agreement, “Prohibited Period” means the period beginning on the Closing Date and ending on the fifth (5^th) anniversary of the Closing Date.

(c)To the extent that any part of this Section 7.11 may be invalid, illegal or unenforceable for any reason, it is intended that such part shall be enforceable to the extent that a court of competent jurisdiction shall determine that such part, if more limited in scope, would have been enforceable, such part shall be deemed to have been so written and the remaining parts shall as written be effective and enforceable in all events and the Parties agree to request that such court enforce this Section 7.11 as if so written.

(d)The Parties agree that the limitations as to time, geographic area and scope of activity to be restrained as set forth in this Section 7.11 are reasonable and do not impose any greater restraint than is necessary to protect the goodwill, if any, that Seller is selling and causing to be sold pursuant to this Agreement and are necessary to protect the legitimate business interests of Buyer and that these limitations are intended to comply with all Laws. The Parties agree that, in the event of a breach or threatened breach of any of the provisions of this Section 7.11, Buyer shall be entitled to immediate injunctive relief, as any such breach may cause Buyer irreparable injury for which it would have no adequate remedy at law. Nothing herein shall be construed so as to prohibit Buyer from pursuing or realizing any other remedies available to it under this Agreement, at law or in equity for any such breach or threatened breach.

(e)Seller acknowledges that the geographic scope and duration of the covenants contained in this Section 7.11 are the result of arm’s-length bargaining and are fair and reasonable in light of (i) the nature and wide geographic scope of the operations of the Business (as conducted as of the

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Closing Date), (ii) Seller’s level of control over, contact with, and association with the goodwill of, the Business (as conducted as of the Closing Date) in all jurisdictions in which it is conducted, (iii) the fact that the Business (as conducted as of the Closing Date) is conducted by the Companies throughout the Restricted Area, and (iv) the consideration that Seller is receiving in connection with the transactions contemplated by this Agreement and the amount of goodwill for which Buyer is paying. It is the desire and intent of the Parties that the provisions of this Agreement be enforced to the fullest extent permitted under Law, whether now or hereafter in effect and therefore, to the extent permitted by Law, the parties waive any provision of Law that would render any provision of this Section 7.11 invalid or unenforceable.

Section 7.12 Third Person Consents Not Obtained Prior To Closing.

(a)Notwithstanding anything to the contrary in this Agreement, this Agreement shall not constitute an agreement to assign any Seller Contract or any benefit arising under or resulting from such Seller Contract if an attempted assignment thereof, without a required Third Person Consent or Authorization, would constitute a breach or other contravention of the rights of such third party, would be ineffective with respect to any party to an agreement concerning such Seller Contract, would violate or otherwise is not permitted by Law or would in any way adversely affect the rights of Seller or, upon transfer, of the Company under or in respect of such Seller Contract. If any transfer or assignment by Seller to, or any assumption by the Company of, any interest in, or Obligation under, any Seller Contract, requires any Third Person Consent or Authorization, then no such assignment or assumption shall be made without such Third Person Consent or Authorization being obtained. To the extent any Seller Contract may not be assigned to the Company by reason of the absence of any such Third Person Consent or Authorization, the Company shall not be required to assume any Obligations arising under such Seller Contract; provided, however, that upon the receipt of any such Third Person Consent or Authorization after the Closing, such Seller Contract shall be assigned to the Company and the Company shall assume such Seller Contract.

(b)If any such Third Person Consent or Authorization is not obtained prior to the Closing Date, Seller shall, to the extent not prohibited by the terms of any applicable Seller Contract or Law and until the receipt of such Third Person Consent or Authorization, hold the Seller Contract, subject to such Third Person Consent or Authorization, together with any proceeds therefrom, in trust for the Company, and Seller and the Company shall cooperate (each at its own expense) in any mutually acceptable, lawful and reasonable arrangement under which the Company shall obtain, to the extent practicable, the economic rights and benefits under such Seller Contract with respect to which the Third Person Consent or Authorization has not been obtained in accordance with this Agreement. Such reasonable arrangement may include the entering into of a subcontract, sublicense, sublease or other similar arrangement between Seller and the Company. During the period from Closing until such Third Person Consent or Authorization is obtained, Seller will use Commercially Reasonable Efforts to enforce such Seller Contracts for the benefit of the Company, on the condition that the Company shall bear all costs and expenses (including legal expenses) related to such enforcement. If the Company is able to receive the economic rights and benefits under such Seller Contract, such economic rights and benefits shall constitute an Asset, and the Obligations, if any, related to such economic rights and benefits under such Asset shall constitute Obligations of the Company (other than any Obligations arising out of or relating to a breach or any operation of the Business or the ownership or operation of the Assets that occurred prior to the Effective Time), as applicable. Seller’s Obligations under this Section 7.12(b) shall expire as of the second (2^nd) anniversary of the Closing Date.

(c)In the event that any Third Person Consent is not obtained prior to the Closing Date related to those certain Leased Real Properties set forth in the electronic folder titled “Specified Leased Real Property Consents” located in the Data Room and the lack of such Third Person Consents results in a termination of the leases related to such Leased Real Properties within ninety (90) days after

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the Closing Date, then Seller agrees to negotiate in good faith with Buyer after the Closing for a refund/reduction in the Purchase Price in an amount equal to the combined discounted value to the Company of the anticipated lost net income associated with the termination of such leases.

Section 7.13 Multi-Site Contracts. Section 7.13 of the Disclosure Schedules sets forth a list of certain “master” contracts and agreements that the Company or the Acquired Subsidiary is a party to, or otherwise authorized to utilize, and which pertain to multiple refineries and facilities owned by Seller and its Affiliates in addition to the Assets (each, a “Multi-Site Contract” andcollectively, the “Multi-Site Contracts”).Some of those Multi-Site Contracts may constitute Seller Contracts or Material Company Contracts. With respect to all Multi-Site Contracts, Buyer acknowledges and agrees that the Company shall not be entitled to remain or become a party thereto, or otherwise make use thereof, after Closing, and it is Seller’s intention to terminate all Multi-Site Contracts as to the Company effective as of Closing. Notwithstanding such termination, the Company shall be obligated to honor any work releases, purchase commitments or other similar commitments made by them under any Multi-Site Contracts prior to Closing, but not yet fully performed or satisfied as of Closing, so long as such commitments were not made in violation of Seller’s Obligations under Section 6.2. To the extent a Multi-Site Contract by its terms is not terminable as to the Company, Buyer covenants and agrees to (i) negotiate in good faith with the counterparty(ies) to such Multi-Site Contract in an effort to enter into a new agreement between such counterparty(ies) and the Company as soon as reasonably practicable as possible following Closing, and (ii) until such new agreement becomes effective, honor the terms of the Multi-Site Contract and not make any elective purchases or other elective commitments thereunder. Buyer acknowledges that the terms and conditions of Multi-Site Contracts that relate to other facilities of Seller and its Affiliates other than the Refinery (including rate sheets and other commercial terms and conditions covering such other facilities) are confidential and proprietary information of Seller and its Affiliates, and Buyer shall destroy any such information it may inadvertently obtain, and shall not use such information for any purpose. Without limiting any of Buyer’s other indemnification Obligations under this Agreement, Buyer shall indemnify, defend and hold harmless the Seller Indemnitees against any and all Claims and Losses arising out of Buyer’s breach or utilization of any Multi-Site Contract after Closing.

Section 7.14 Operation of Business. During the period commencing at the Closing and ending at the Measurement Time, Buyer (with respect to the Companies and the Business) shall, and shall cause the Companies to operate and maintain the properties and assets of the Companies and the Business in the ordinary course of business (including maintenance of appropriate insurance coverages with respect to the assets to be measured hereunder as of the Measurement Time) and not enter into or effect any transaction outside the ordinary course of business; provided that the Companies shall be permitted to enter into financing arrangements during such period and the Parties agree that the impact of such financing arrangements shall not be taken into account in the determination of Net Working Capital.

Section 7.15 Seller’s Names; Removal of Logos and Signs.

(a)Except as provided in this Section 7.15 or the License Agreement, following the Measurement Time, Buyer will not (and will cause the Companies not to) use or otherwise exploit the Tesoro Marks in the operation of the Business. As promptly as practicable following the Closing Date, but in no event later than one hundred eighty (180) days after the Closing Date, Buyer will stop (and will cause the Companies to stop) using the Tesoro Marks in any form in the operation of the Business except as permitted pursuant to the License Agreement, including by removing, permanently obliterating or covering all references to the Tesoro Marks that appear on any Assets, including all signage, storage containers, uniforms and clothing, promotional or advertising literature, stationery, purchase order forms, office forms and labels, packaging, manuals, policy books, reference materials and other such documents (including signs displaying Seller’s or its Affiliates’ emergency contact telephone numbers or otherwise using or displaying the Tesoro Marks or the phrase “Tesoro” in whole or in part). As promptly as

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practical after the Closing Date, Buyer shall post Buyer’s emergency contact telephone numbers in place of any of Seller’s or its Affiliates’ emergency contact telephone numbers. Without limiting the foregoing restrictions, until such time as the Tesoro Marks are removed or covered by Buyer or the Companies as provided above, in no event will Buyer or the Companies use or display the Tesoro Marks in any way other than in the same manner used by the Business immediately prior to the Closing Date and all signs and graphics incorporating any of the Tesoro Marks shall be maintained by Buyer and the Companies in keeping with a first class operation. During any period that the Company is using the Tesoro Marks as provided in this Section 7.15, the Company shall use Commercially Reasonable Efforts to inform customers, suppliers and contractors that Buyer and the Companies are not part of or Affiliates of Seller and that the Companies are using the Tesoro Marks with permission solely to facilitate the transition of the Business or as permitted pursuant to the License Agreement. Notwithstanding anything to the contrary, neither Buyer nor the Companies shall have any right to create any new materials to be used in the operation of the Business containing the Tesoro Marks or any right to transfer, assign, license or sublicense any of the Tesoro Marks except as permitted pursuant to the License Agreement. Neither Buyer nor the Companies shall contest the validity of the Tesoro Marks, claim adversely to Seller or its Affiliates any right, title or interest in or to the Tesoro Marks, or the distinctive features of the designs used in connection with the Tesoro Marks, and shall not register, apply to register or aid a third party in registering any of the Tesoro Marks or a confusingly similar trademark or service mark.

(b)Within ten (10) days following the Closing Date, Buyer shall (a) cause the Company to file appropriate documentation with the applicable Governmental Authorities to change the legal name of the Company to remove the name “Tesoro” and any name that would reasonably be expected to be confused therewith; (b) provide Seller evidence of such filings; and (c) take such other actions as required to cause the Company and the Acquired Subsidiary to abandon the name “Tesoro” and any derivation thereof that would reasonably be expected to be confused therewith except to the extent expressly permitted pursuant to the License Agreement.

Section 7.16 Further Assurances. Without limiting Section 6.3, Seller and Buyer each agree that from time to time after the Closing Date they will execute and deliver and will cause their respective Affiliates to execute and deliver such further instruments, and take, and cause their respective Affiliates to take, such other actions as may be reasonably necessary to carry out the purposes and intents of this Agreement and the Related Agreements, including with respect to any consent, authorization, order or approval sought from, or exemption, review, investigation or inquiry conducted by, any Governmental Authority in connection with this Agreement and the transactions contemplated hereby; provided, however that the provisions of this Section 7.16 shall not impose any Obligation on any Party or its Affiliates greater than (and shall be subject to limitations similar to) the Obligations imposed on the Parties during the Interim Period pursuant to Section 6.3.

Section 7.17 Retention of and Access to Books and Records.

(a)As promptly as practicable after the Closing Date, Seller will deliver or cause to be delivered to Buyer the Books and Records that are in the possession or control of Seller or its Affiliates other than Books and Records in the possession of the Company. Buyer agrees (and shall cause the Company to agree) to hold and maintain the Books and Records that are transferred to Buyer or the Company so that they may be reasonably retrievable and not to destroy or dispose of any portion thereof for a period of five (5) years from the Closing Date or such longer time as may be required by applicable Law, provided, that, if Buyer or the Company desires to destroy or dispose of such Books and Records during such period, they will first offer in writing at least ninety (90) days before such destruction or disposition to surrender them to Seller, and if Seller does not accept such offer within sixty (60) days after receipt of such offer, Buyer or the Company, as applicable, may proceed with the destruction of such Books and Records.

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(b)Unless in violation of Law, each Party agrees (and shall cause its Affiliates to agree) to afford the other Party and its Affiliates and their respective accountants and counsel, during normal business hours, upon reasonable request, at a mutually agreeable time, full access to and the right to make copies of the Books and Records delivered to Buyer or other information that Seller retains that relates to the Assets or the Business (including those that are not “Books and Records”) at no cost to such Party or its Affiliates (other than for reasonable out-of-pocket copying expenses); provided, however, that in the event of any litigation, nothing herein shall limit any Party’s rights of discovery under applicable Law. Without limiting the generality of the preceding sentences, each Party agrees to provide the other Party and its Affiliates reasonable access to and the right to make copies of the Books and Records or other information (excluding confidential, privileged or proprietary information) that Seller retains that relates to the Assets or the Business (including those that are not “Books and Records”) after the Closing Date, for the purposes of assisting such Party and its Affiliates (i) in complying with the Obligations under this Agreement or the Related Agreements (including to comply with any indemnity obligations), (ii) in preparing and delivering any accounting statements provided for under this Agreement or the Related Agreements and adjusting, prorating and settling the charges and credits provided for in this Agreement or the Related Agreements, (iii) in the case of the Seller, in owning or operating the Excluded Assets or Retained Liabilities, (iv) in preparing Tax Returns or in responding to or disputing any Tax audit, Tax appeal, other Tax proceeding, (v) in asserting, defending or otherwise dealing with any Claim, known or unknown, under this Agreement or the Related Agreements or, in the case of the Seller, with respect to Excluded Assets or Retained Liabilities or (vii) in asserting, defending or otherwise dealing with any Third-Party Claim or dispute by or against a Party or its Affiliates relating to the Business or the Assets.

Section 7.18Intellectual Property.

(a)Grants to Intellectual Property Owned by Seller. Seller shall grant and hereby does grant to the Company effective as of the Closing Date, for use by the Company solely in the internal operations of the Refinery in a manner substantially similar to the operations prior to Closing, a non-exclusive, irrevocable royalty-free, paid-up license (without a right to sublicense or transfer except as expressly provided in this Section 7.18) to any Intellectual Property that is owned by Seller or any of its Affiliates, which exists at the Closing Date and which is or has been in use in the operation of the Refinery as currently operated or as operated immediately prior to the Closing (“Seller IP”). Such grant is made without representation, recourse or warranty, and any warranties which may be implied by Law are hereby disclaimed. The sole purpose of this paragraph is to prevent Seller or any of its Affiliates from hereafter bringing any Claims against Buyer or the Company seeking payment of royalties for the use of, or alleging unauthorized use by Buyer or the Company of, any Seller IP, so long as such use is solely in the internal operations of the Refinery in a manner substantially similar to the operations prior to the Closing. Buyer and the Company shall have no obligation to grant back to Seller or its Affiliates or otherwise make available to Seller or any of its Affiliates any improvements or enhancement to any Seller IP that may be developed by Buyer or the Company after the Closing.

(b)Subsequent Transfer of Intellectual Property. In the event the Company transfers or pledges to any Person, ownership of the Refinery, or any part thereof, the license granted in Section 7.18(a) may be extended to such transferee or lender subject to outstanding obligations to third parties and subject to an assumption in writing by such transferee or lender of all relevant duties and obligations under the applicable portions of this Agreement.

(c)Seller Process Licenses. Seller shall transfer to the Company or cause the transfer of (A) all licenses of Intellectual Property held by Seller or its Affiliates that are used exclusively in connection with the operation of the Refinery process units or other Assets as currently operated or as operated immediately prior to the Closing, and (B) that portion of any license agreement covering the

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Refinery or other Assets as well as other facilities or assets owned by Seller or its Affiliates (a “Multi-Site License”) that is allocable to the operation of the Refinery process units or other Assets as currently operated or as operated immediately prior to the Closing (the interests in the foregoing clauses (A) and (B) being herein collectively referred to as the “Licensed Technology Rights”), in all cases only to the extent that such Licensed Technology Rights are freely transferable or to the extent that the licensor otherwise agrees to such transfer, it being understood that Seller makes no representations or warranties as to the assignability or transferability of any Licensed Technology Rights. Buyer shall be solely responsible for seeking the consent of the licensor(s) of any such Licensed Technology Rights and for paying any costs associated with the transfer of such Licensed Technology Rights or the issuance of replacement licenses; provided, however, that Seller agrees to (i) reasonably cooperate in requesting such transfers and in executing any reasonable transfer or assignment documents that do not impose any Obligations on Seller, and (ii) pay any accrued and unpaid royalties arising out of Seller’s use of the Licensed Technology Rights at the Refinery prior to Closing. Without limiting the foregoing, Buyer agrees that Seller shall not be obligated to transfer any Licensed Technology Rights to the Company where such transfer would require Seller or its Affiliates to surrender any paid-up capacity or other rights allocable to other facilities owned by Seller or its Affiliates (but for the avoidance of doubt, Seller will agree to release any Licensed Technology Rights allocable to the Refinery or other Assets under a Multi-Site License). Effective as of and related to the period on and after the Closing Date, Buyer or the Company shall be solely responsible for complying with all Obligations (including non-disclosure, export control and grant-back obligations) under Licensed Technology Rights used by the Company after Closing and shall indemnify, defend and hold the Seller Indemnitees harmless in accordance with Section 11.3 against any Losses they may suffer by reason of Buyer’s or the Company’s failure to do so. Without limiting the foregoing, Buyer shall indemnify, defend and hold the Seller Indemnitees harmless in accordance with Section 11.3 against any Losses they may suffer by reason of Buyer’s or the Company’s use of Licensed Technology Rights beyond the use of such rights by the Company as of the Closing.

(d)Seller’s obligations under this Section 7.18 shall expire on the second (2^nd) anniversary of the Closing Date.

Section 7.19 Releases.

(a)Simultaneously with the Closing, Seller, on behalf of itself and its Affiliates (other than the Companies), hereby unconditionally and irrevocably releases and forever discharges, effective as of and forever after the Closing Date, to the fullest extent permitted by Law, each of the Companies from any and all debts, Obligations, Claims, Proceedings, judgments or controversies of any kind whatsoever (collectively, “Pre-Transaction Claims”) that Seller and its Affiliates (other than the Companies), may possess, if any, against the Companies to the extent arising out of or based upon any agreement or understanding or act or failure to act (INCLUDING ANY ACT OR FAILURE TO ACT THAT CONSTITUTES ORDINARY OR GROSS NEGLIGENCE OR RECKLESS OR WILLFUL, WANTON MISCONDUCT), misrepresentation, omission, transaction, fact, event or other matter occurring prior to the Closing Date (whether based at law or in equity or otherwise, foreseen or unforeseen, matured or unmatured, known or unknown, accrued or not accrued) (collectively, “Pre-Transaction Matters”), including: (a) claims by Seller with respect to repayment of loans or other indebtedness; (b) any rights, titles and interests in, to or under any agreements, arrangements or understandings to which Seller or any of its Affiliates (other than the Companies), is a party; and (c) Claims by Seller and its Affiliates (other than the Companies), with respect to dividends, distributions, violations of preemptive rights and Seller’s status as a stockholder, option holder or other security holder of the Companies; provided, however, that this Section 7.19(a) shall not apply to any Claim or Obligation pursuant to this Agreement or the Related Agreements or any Obligation of the Companies that is taken into account as a liability of the Companies for purposes of the Final Net Working Capital. Seller, on behalf of itself and its Affiliates (other than the Companies), hereby further agrees, from and after the

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Closing Date, not to file or initiate any Proceeding before any Governmental Authority on the basis of or respecting any Pre-Transaction Claim concerning any Pre-Transaction Matter that is released under this Section 7.19(a).

(b)Simultaneously with the Closing, Buyer, on behalf of the Companies, hereby unconditionally and irrevocably releases and forever discharges, effective as of and forever after the Closing Date, to the fullest extent permitted by Law, Seller and its Affiliates from any and all Pre-Transaction Claims that the Companies may possess, if any, against Seller and its Affiliates to the extent arising out of or based upon any Pre-Transaction Matters, including: (a) claims by the Companies with respect to repayment of loans or other indebtedness; (b) any rights, titles and interests in, to or under any agreements, arrangements or understandings to which either of the Companies, is a party; and (c) Claims by the Companies with respect to dividends and distributions; provided, however, that this Section 7.19(b) shall not apply to any Claim or Obligation pursuant to this Agreement or the Related Agreements or any Obligation of Seller that is taken into account as an asset of the Companies for purposes of the Final Net Working Capital. Buyer, on behalf of the Companies, hereby further agrees, from and after the Closing Date, not to file or initiate any Proceeding before any Governmental Authority on the basis of or respecting any Pre-Transaction Claim concerning any Pre-Transaction Matter that is released under this Section 7.19(b).

ARTICLE VIII

CLOSING CONDITIONS

Section 8.1 Conditions to Obligations of Each Party Under this Agreement. The respective Obligations of Buyer and Seller to consummate the transactions contemplated hereby shall be subject to the satisfaction at or prior to the Closing of the following conditions, any or all of which may be waived by the Parties, in whole or in part, to the extent permitted by Law:

(a)Any waiting or review period applicable to the transactions contemplated by this Agreement under applicable antitrust, trade regulation or foreign investment Laws and regulations, including the HSR Act, shall have expired or been terminated;

(b)No temporary restraining Order, preliminary or permanent injunction or other Order issued by any court of competent jurisdiction or other statute, rule or legal restraint of a Governmental Authority shall be in effect preventing the consummation of the transactions contemplated hereby; and

(c)There shall not be pending or threatened in writing any Proceeding instituted by any Governmental Authority to materially restrain, prohibit or otherwise materially interfere with or obtain substantial monetary damages in connection with the consummation of the transactions contemplated by this Agreement.

Section 8.2 Additional Conditions to Seller’s Obligations. The Obligations of Seller to effect the transactions contemplated hereby shall be subject to the satisfaction at or prior to the Closing of the following conditions, any or all of which may be waived by Seller, in whole or in part, to the extent permitted by Law:

(a)The representations and warranties of Buyer made in Section 5.1 (Organization and Qualification) and Section 5.2 (Authority; Enforceability) shall be complete and correct in all respects when made and on and as of the Closing Date, as though made on and as of the Closing Date (except for representations and warranties that speak only as of a specific date or time, which need be so complete and correct only as of such date or time). The other representations and warranties of Buyer made in

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Article V shall, when read without any qualification as to “materiality” or “material adverse effect” or another similar qualifier shall be complete and correct in all respects when made and on and as of the Closing Date, as though made on and as of the Closing Date (except for representations and warranties that speak as of a specific date or time, which need be so complete and correct only as of such date or time) except where the failure to be so complete and correct, individually and in the aggregate, has not had and is not reasonably likely to have a material adverse effect on the ability of Buyer to consummate the transactions contemplated by this Agreement or to perform its Obligations under this Agreement, and Seller shall have received a certificate of an executive officer of Buyer, dated the Closing Date, to such effect;

(b)Buyer shall have performed or complied in all material respects with all Obligations required by this Agreement to be performed or complied with by it on or prior to the Closing Date, and Seller shall have received a certificate of an executive officer of Buyer, dated the Closing Date, to such effect;

(c)All Third Person Consents and all Authorizations specified in Section 8.2(c) of the Disclosure Schedules shall have been obtained;

(d)Since the Execution Date, there must not have been any event or series of events which has had or would reasonably be expected to have a Material Adverse Effect; and

(e)Buyer shall have provided to Seller reasonable confirmation (which shall include an unaudited balance sheet and bank statements of Buyer) that the Adjusted Net Worth of Buyer immediately prior to the Closing shall equal or exceed an amount equal to One Hundred Fifty Million Dollars ($150,000,000).

Section 8.3 Additional Conditions to Buyer’s Obligations. The Obligations of Buyer to effect the transactions contemplated hereby shall be subject to the satisfaction at or prior to the Closing of the following conditions, any or all of which may be waived by Buyer, in whole or in part, to the extent permitted by Law:

(a)The representations and warranties of Seller and the Company, as applicable, made in Section 3.1 and Section 4.1 (Organization and Qualification), Section 3.2 and Section 4.2 (Authority; Enforceability), Section 3.5 (Ownership of the TH Interest), Section 4.4 (Capitalization of the Company), and Section 4.5 (Capitalization of the Acquired Subsidiary) shall be complete and correct in all respects when made and on and as of the Closing Date, as though made on and as of the Closing Date (except for representations and warranties that speak only as of a specific date or time, which need be so complete and correct only as of such date or time). The other representations and warranties of Seller and the Company, as applicable, made in Article III and Article IV shall, when read without any qualification as to “materiality” or “Material Adverse Effect” or another similar qualifier shall be complete and correct in all respects when made and on and as of the Closing Date, as though made on and as of the Closing Date (except for representations and warranties that speak as of a specific date or time, which need be so complete and correct only as of such date or time) except where the failure to be so complete and correct, individually and in the aggregate, has not had and is not reasonably likely to have a Material Adverse Effect or a material adverse effect on the ability of Seller to consummate the transactions contemplated by this Agreement or to perform its Obligations under this Agreement, and Buyer shall have received a certificate of an executive officer of Seller, dated the Closing Date, to such effect;

(b)Seller shall have performed or complied in all material respects with all Obligations required by this Agreement to be performed or complied with by it on or prior to Closing

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Date, and Buyer shall have received a certificate of an executive officer of Seller, dated the Closing Date, to such effect;

(c)All Third Person Consents and all Authorizations specified in Section 8.2(c) of the Disclosure Schedules shall have been obtained;

(d)Since the Execution Date, there must not have been any event or series of events which has had or would reasonably be expected to have a Material Adverse Effect;

(e)The Startup Criteria shall have been met in all material respects; and

(f)Seller (or its Affiliates) shall have successfully created a functional SAP “clone” of Seller’s current Hawaii operating system pursuant to the Pre-Closing Transition Services Agreement which shall be hosted and managed by Seller (or its Affiliates) at its datacenter and without any modifications by Buyer.

ARTICLE IX

CASUALTY OR CONDEMNATION

Section 9.1 Notice. In the event that, prior to the Closing Date, all or any portion of the tangible Assets are damaged or destroyed by fire, theft, vandalism, flood, wind, hurricane, explosion or other casualty for which the associated repair or replacement costs (excluding insurance or other potential third party reimbursements) would reasonably be expected to exceed $5,000,000 (a “Casualty”) or taken by condemnation or eminent domain or by agreement in lieu thereof with any Person or Governmental Authority authorized to exercise such rights (a “Taking”), Seller shall promptly notify Buyer thereof.

Section 9.2 Repair or Replacement.

(a)In the event of a Casualty or Taking during the Interim Period affecting the tangible Assets, Seller shall elect (i) to repair or replace or make adequate provision for the repair or replacement of the affected Asset at Seller’s cost prior to the Closing, in which case Buyer’s Obligation to effect the Closing shall not be affected, but the Closing Date shall be deferred until three (3) Business Days after repairs or replacement have been completed and the affected Asset has been restored to performance substantially comparable in all material respects to that prior to the Casualty or Taking or (ii) to negotiate with Buyer to reduce the Purchase Price by an amount agreed to by Seller and Buyer to reflect the cost to repair or replace the affected Assets, as may be mutually agreed to by Buyer and Seller (the “Repair Costs”), in which case, in the event of a Repair Cost Dispute, the Closing Date and the Termination Date shall be deferred as provided in Section 9.5. Notwithstanding the foregoing, Seller’s election in clause (i) of this Section 9.2(a) shall be unavailable and clause (ii) of this Section 9.2(a) shall apply if the required repairs or replacements would reasonably be expected to result in an extension of the Closing Date for more than forty-five (45) days.

(b)If Seller and Buyer agree on the Repair Costs within fifteen (15) days of Buyer’s receipt of Seller’s notice of the Casualty or Taking (the “Repair Negotiation Period”), Buyer’s Obligation to effect the Closing shall not be affected, but the Purchase Price shall be reduced by the amount of the Repair Costs so agreed that exceeds $5,000,000.

(c)If Seller and Buyer do not agree on the Repair Costs within the Repair Negotiation Period (a “Repair Cost Dispute”), either party may request an engineering company that shall be mutually agreed to by Buyer and Seller to evaluate the affected Assets and deliver to Buyer and Seller

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its written estimate of the Repair Costs (the “Third-Party Estimate”) within fifteen (15) days after the end of the Repair Negotiation Period.

(i)If the Third-Party Estimate is equal to or less than $5 million, Buyer’s Obligation to effect the Closing shall not be affected and the Parties shall submit the Repair Cost Dispute to binding arbitration for resolution after the Closing, with a post-Closing adjustment to the Purchase Price equal to the amount by which the finally-determined Repair Costs exceed $5 million in the aggregate.

(ii)If the Third-Party Estimate is equal to or greater than $5 million but less than $20 million, Buyer’s Obligation to effect the Closing shall not be affected, but the Closing Date Payment shall be reduced by the amount that the Third-Party Estimate exceeds $5 million in the aggregate and the Parties shall submit the Repair Cost Dispute to binding arbitration after the Closing, with a post-Closing adjustment of the Purchase Price equal to the amount by which the difference between the Third-Party Estimate and the finally-determined Repair Costs exceed $5 million in the aggregate.

(iii)If the Third-Party Estimate is equal to or greater than $20 million, either Seller or Buyer may elect, by giving the other Party written notice of election within fifteen (15) days of receipt of the Third-Party Estimate, to terminate this Agreement pursuant to Section 10.1(e); provided, however, that if within such time period, Buyer is ready and able to proceed to Closing and agrees in writing to (x) waive the closing condition set forth in Section 8.3(e) with respect to the Refinery Turnaround and Startup Activities and satisfaction of the Startup Criteria and (y) to hold the Closing within five (5) Business Days of such agreement, then Seller shall not elect to terminate this Agreement pursuant to this Section or Section 10.1(e).

Section 9.3 Condemnation Awards. In the event of any reduction in the Purchase Price in connection with a Taking at the Refinery, as provided in Section 9.2(a), Buyer shall be entitled to collect from any condemnor the entire award(s) that may be made in any such Proceeding, without deduction, to be paid out as follows: subject to actual receipt of such award(s) by Buyer, (a) Buyer shall pay to Seller all such amounts, up to the amount of such Purchase Price reduction, and (b) Buyer shall be entitled to retain the balance (if any) of such award(s).

Section 9.4 Purchase Price Adjustment. Any adjustment of the Purchase Price pursuant to Section 9.2(c) which is necessary to reflect a final determination of Repair Costs after the Closing shall be made as follows: (a) an adjustment in favor of Buyer shall be paid in cash by Seller; and (b) an adjustment in favor of Seller shall be paid in cash to the extent the Purchase Price had been reduced pursuant to this Article IX. Any such reduction, refund or payment shall be made within ten (10) Business Days after such final determination.

Section 9.5 Deferral of Closing Date and Termination Date. In the event of a Repair Cost Dispute, the Closing Date and the Termination Date shall be deferred until (a) three (3) Business Days after receipt of the Third-Party Estimate, or (b) if Seller elects the option in Section 9.2(c)(i), as provided therein.

ARTICLE X

TERMINATION

Section 10.1 Termination. This Agreement may be terminated at any time prior to the Closing:

(a)by mutual written consent of Seller and Buyer;

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(b)by Seller upon notice to Buyer, if any of the conditions in Section 8.1 or Section 8.2 shall not have been fulfilled by the Closing Date or are or shall have become incapable of fulfillment on or prior to the Termination Date, provided that in each such case the failure to Close is not due, inter alia, to any breach by Seller of any of its representations, warranties, covenants or other Obligations contained in this Agreement;

(c)by Buyer upon notice to Seller, if any of the conditions in Section 8.1 or Section 8.3 shall not have been fulfilled by the Closing Date or are or shall have become incapable of fulfillment on or prior to the Termination Date, provided that in each such case the failure to Close is not due, inter alia, to any breach by Buyer of any of its representations, warranties, covenants or other Obligations contained in this Agreement;

(d)by Seller or Buyer upon notice to the other Party, if the Closing contemplated hereby shall not have occurred (other than through the failure of any Party seeking to terminate this Agreement to comply with its Obligations under this Agreement) on or before September 30, 2013 (the “Termination Date”), provided that in each such case the failure to Close is not due, inter alia, to any breach by the Party seeking to terminate this Agreement of any of its representations, warranties, covenants or other Obligations contained in this Agreement; or

(e)by Seller or Buyer upon notice to the other Party, pursuant to Section 9.2(c)(iii).

Section 10.2 Deferral of Closing Date and Termination Date. Notwithstanding the Termination Date being September 30, 2013 as provided pursuant to Section 10.1(d), Buyer may defer the Termination Date to a date no later than October 31, 2013 solely due to Buyer’s efforts to obtain the Financing provided that Buyer provides written notice to Seller of such election on or before September 16, 2013.

Section 10.3 Effect of Termination. Except for this Section 10.3, Section 2.11, Section 2.12, Section 6.1(d)(vii), Section 6.1(h), Section 6.6, Section 6.14, Section 11.7(c), Section 11.8, Section 11.9, Section 12.2, Section 12.3 and Section 12.4, this Agreement shall, upon termination hereof pursuant to Section 10.1, forthwith become of no further force or effect and (a) except as provided in this Section 10.3 and by Section 2.2, there shall be no liability on the part of Seller, the Company, the Acquired Subsidiary or Buyer or any of their respective Affiliates, or any of their respective officers, directors or managers, to any other party and (b) all rights and Obligations of any Party shall cease; provided, however, that any such termination shall not relieve Seller, the Company, the Acquired Subsidiary or Buyer from liability for any intentional and material breach of this Agreement occurring prior to such termination. The termination of this Agreement shall have no effect on the provisions of the Confidentiality Agreement.

ARTICLE XI

INDEMNIFICATION AND REMEDIES

Section 11.1 Survival. Subject to the limitations and other provisions of this Agreement, (a) the representations and warranties of the Parties contained in this Agreement shall survive the Closing and shall remain in full force and effect for a period of eighteen (18) months after the Closing Date (except for those contained in Section 3.1, Section 4.1 and Section 5.1 (Organization and Qualification), Section 3.2, Section 4.2 and Section 5.2 (Authority; Enforceability), Section 3.5 (Ownership of the TH Interest), Section 4.4 (Capitalization of the Company), Section 4.5 (Capitalization of the Acquired Subsidiary), and Section 3.6 and Section 5.5 (Brokers), and Section 4.15 (Taxes) (the foregoing representations hereinafter referred to as the “Fundamental Representations”), which shall survive the Closing until the thirtieth (30^th) day following the expiration of the applicable statute of limitations, and until the resolution of the

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indemnification Claims received by the Indemnifying Party in accordance with the provisions hereof prior to the expiration of the relevant time period, (b) each covenant and agreement of the Parties contained in this Agreement which by its terms requires performance after the Closing Date shall survive the Closing and shall remain in full force and effect until such covenant or agreement is fully performed, and (c) the provisions of Section 6.7 and Section 6.8 shall survive the Closing without limit as to time.

Section 11.2 Indemnification Provisions for the Benefit of Buyer.

(a)If the Closing occurs and subject to the other provisions of this Article XI, Seller shall indemnify, defend, save and hold the Buyer Indemnitees harmless from and against any Claims and Losses actually suffered or incurred by them to the extent arising out of or related to:

(i)the breach of any representation or warranty of Seller or the Company contained in this Agreement when made or at and as of the Closing Date (or at and as of such different date or period specified for such representation or warranty) as though such representation and warranty were made at and as of the Closing Date (or such different date or period);

(ii)the breach of any covenants or agreements of Seller contained in this Agreement (other than with respect to the Retained Liabilities and for Taxes, which are covered by clauses (iii) and (iv) below);

(iii)the Retained Liabilities; and

(iv)any and all Taxes, without duplication, (A) imposed on the Company or the Acquired Subsidiary for any Pre-Closing Tax Period (as determined in accordance with Section 7.10(a) for Straddle Periods); (B) for which the Company or the Acquired Subsidiary becomes liable by reason of being a member of any affiliated group (within the meaning of Section 1504(a) of the Code or any similar group defined under a similar provision of state, local or foreign Tax Law) on or prior to the Closing Date, including pursuant to Treasury Regulations Section 1.1502-6 or any analogous or similar state, local, or foreign Tax Law; (C) for which the Company or the Acquired Subsidiary becomes liable by reason of being a transferee or successor of any Person (other than the Company or the Acquired Subsidiary), by contract or pursuant to any Law, with respect to an event or transaction occurring on or before the Closing Date; and (D) which are the responsibility of Seller as described in Section 7.10(g); provided, however, (Y) in the case of subclauses (A), (B), (C), or (D), only if and to the extent that such Taxes are in excess of the amount, if any, of such Taxes that are included as a liability and taken into account in the Final Net Working Capital that has been finally determined pursuant to Section 2.6, and (Z) that Seller shall have no obligation to indemnify the Buyer Indemnitees from and against any Claims and Losses arising out of or related to Taxes described in subclause (A) if such Taxes are attributable to transactions occurring after the Closing outside the ordinary course of business (other than any such transactions specifically contemplated by this Agreement).

Notwithstanding anything in this Agreement to the contrary, all Claims and Losses of the Buyer Indemnitees arising under or related to Environmental Laws (including Third-Party Claims arising under or related to Environmental Laws) shall be governed by the Environmental Agreement and not this Agreement.

(b)No Claim may be asserted nor may any Proceeding be commenced against Seller pursuant to this Section 11.2 unless written notice of such Claim or Proceeding is received by Seller describing in reasonable detail the facts and circumstances with respect to the subject matter of such

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Claim or Proceeding, and with respect to Claims or Proceedings based on the breach of any representation or warranty, on or prior to the date such representation or warranty ceases to survive as set forth in Section 11.1; provided, however, that no Claim may be asserted nor may any Proceeding be commenced by Buyer against Seller arising out of or related to a breach of any representation or warranty of which Buyer had Knowledge on or prior to the Closing Date and for which Buyer failed to deliver a Breach Notice in accordance with Section 6.4. If a Buyer Indemnitee has recovered any Losses pursuant to one subsection of this Section 11.2(a), such Buyer Indemnitee shall not be entitled to recover the same Losses under another subsection of this Section 11.2(a). Notwithstanding the foregoing, a Buyer Indemnitee shall be entitled to seek recovery under such provisions of this Agreement that maximizes its recovery.

(c)No Claim may be made against Seller for indemnification pursuant to clauses (i) or (ii) of Section 11.2(a) with respect to any individual action, occurrence or event subject to the indemnifications thereunder (or group of related actions, occurrences or events) unless (i) such individual action, occurrence or event exceeds $5,000 for a Retail Asset, $25,000 for a Logistics Asset and $100,000 for an asset related to the Refinery (individually, each as applicable, the “De Minimis Amount”) (and in such case, no Loss below such De Minimis Amounts be applied to or considered for purposes of calculating the aggregate amount of the Buyer Indemnitees’ Losses) or (ii) such Claim relates to the breach of a Fundamental Representation by Seller.

(d)No Claim may be made against Seller for indemnification pursuant to clauses (i) or (ii) of Section 11.2(a) unless the aggregate amount of all Claims and Losses of the Buyer Indemnitees with respect to clauses (i) and (ii) of Section 11.2(a) (excluding individual Claims and Losses less than the De Minimis Amounts) shall exceed an amount equal to $500,000 (the “Indemnification Deductible”), after which point Seller shall be obligated only to indemnify the Buyer Indemnitees from and against such aggregate Claims and Losses (excluding individual Claims and Losses less than the De Minimis Amounts) in excess of the Indemnification Deductible, provided, that the Indemnification Deductible shall not apply with respect to Losses arising under Section 11.2(a)(i) with respect to a breach of a Fundamental Representation by Seller or the Company.

(e)The maximum amount that Seller shall be required to pay pursuant to clauses (i) and (ii) of Section 11.2(a) in respect of all Claims and Losses by all Buyer Indemnitees shall equal $2,500,000 (the “Indemnification Cap”), after which point Seller will have no Obligation to indemnify the Buyer Indemnitees from and against further such Claims and Losses; provided, however, that with respect to a breach of a Fundamental Representation made by Seller or the Company, the maximum amount of Losses that Buyer will be able to recover from Seller pursuant to Section 11.2(a)(i) shall not be limited by the Indemnification Cap but shall be limited to an amount not to exceed the Base Amount. In addition, Seller shall have as an affirmative defense to any claim for indemnity under Section 11.2(a)(i) arising out of or related to a breach of any representation or warranty of Seller or the Company that Buyer had Knowledge of such breach on or prior to the Closing Date and Buyer failed to deliver a Breach Notice in accordance with Section 6.4.

(f)Amounts paid by Seller that are counted against or applied toward the Indemnification Deductible or the Indemnification Cap shall not count against and be applied toward the Environmental Deductible and the Indemnification Cap (as such terms are defined in the Environmental Agreement) and vice versa, amounts paid by Seller that are counted against or applied toward the Environmental Deductible or the Environmental Cap shall not count against and be applied toward the Indemnification Deductible and the Indemnification Cap.

(g)Seller’s indemnification obligations pursuant to this Agreement shall be reduced in the event and to the extent amounts for such indemnified obligations are taken into account as a liability for purposes of the Final Net Working Capital.

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Section 11.3 Indemnification Provisions for the Benefit of Seller.

(a)If the Closing occurs and subject to the other provisions of this Article XI, Buyer agrees to indemnify, defend, save and hold the Seller Indemnitees harmless from and against any Claims and Losses actually suffered or incurred by them to the extent arising out of or related to:

(i)the breach of any representation or warranty of Buyer contained in this Agreement when made or at and as of the Closing Date (or at and as of such different date or period specified for such representation or warranty) as though such representation and warranty were made at and as of the Closing Date (or such different date or period);

(ii)the breach of any covenants or agreements of Buyer contained in this Agreement (other than with respect to employees and employee benefits, Taxes, Multi-Site Contracts, Earnout Payments and Startup Activities, which are covered by clauses (v) through (ix) below, respectively);

(iii)the Company Assumed Liabilities;

(iv)the ownership of the TH Interest, the Company, the Acquired Subsidiary, or the Assets after the Effective Time, or the operation of the Business after the Effective Time (in each case excluding the Excluded Assets and the Retained Liabilities and to the extent such Losses are not indemnifiable by Seller pursuant to Section 11.2);

(v)any Obligations of Buyer with respect to employees and employee benefits as provided in Section 7.1 through Section 7.7;

(vi)(A) the breach of any covenants or agreements of Buyer (or any Affiliate of Buyer, which includes the Companies post-Closing) with respect to Taxes contained in this Agreement, or (B) any Obligations of Buyer (or any Affiliate of Buyer, which includes the Companies post-Closing) with respect to Taxes which are the responsibility of Buyer (or any Affiliate of Buyer, which includes the Companies post-Closing) as provided in Section 7.10;

(vii)any Obligations of Buyer with respect to Multi-Site Contracts as provided in Section 7.13;

(viii)any Obligations of Buyer with respect to Earnout Payments as provided in Section 2.8;

(ix)any Obligations of Buyer with respect to Undelivered Refinery Inventory (including Feedstock Inventory) and Committed Refinery Inventory as provided in Section 2.11 and Section 2.12.

(x)any Obligations of Buyer with respect to Refinery Turnaround and Startup Activities as provided in Section 6.1.

Notwithstanding anything in this Agreement to the contrary, all Claims and Losses of the Seller Indemnitees arising under or related to Environmental Laws (including Third-Party Claims arising under or related to Environmental Laws) shall be governed by the Environmental Agreement and not this Agreement.

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(b)No Claim may be asserted nor may any Proceeding be commenced against Buyer pursuant to this Section 11.3 unless written notice of such Claim or Proceeding is received by Buyer describing in reasonable detail the facts and circumstances with respect to the subject matter of such Claim or Proceeding, and with respect to Claims or Proceedings based on the breach of representation or warranty, on or prior to the date such representation or warranty ceases to survive as set forth in Section 11.1. If a Seller Indemnitee has recovered any Losses pursuant to one subsection of Section 11.3(a), such Seller Indemnitee shall not be entitled to recover the same Losses under another subsection of Section 11.3(a). Seller and Buyer acknowledge and agree that, with respect to any failure by Buyer to comply with its Obligations with respect to Post-Closing Employees as set forth in Section 7.1 through Section 7.7, Seller shall be entitled to specific performance of such Obligations by Buyer and immediate injunctive relief, without the necessity of proving the inadequacy of money damages as a remedy.

(c)No Claim may be made against Buyer for indemnification pursuant to clauses (i) or (ii) of Section 11.3(a): (i) with respect to any individual action, occurrence or event subject to the indemnifications thereunder (or group of related actions, occurrences or events), except for Claims relating to the breach of a Fundamental Representation, unless the aggregate Claims and Losses of Seller Indemnitees with respect thereto exceeds $10,000 (nor shall any Claim or Loss below such threshold be applied to or considered for purposes of calculating the aggregate amount of Seller Indemnitees’ Losses) and (ii) unless the aggregate amount of all Claims and Losses of Seller Indemnitees with respect to clauses (i) and (ii) of Section 11.3(a) shall exceed the Indemnification Deductible (after which Buyer shall be obligated only to indemnify Seller Indemnitees from and against aggregate Losses in excess of the Indemnification Deductible), provided, that the Indemnification Deductible shall not apply with respect to Losses arising under Section 11.3(a)(i) with respect to a breach of a Fundamental Representation by Buyer. The maximum amount that Buyer shall be required to pay pursuant to clauses (i) and (ii) of Section 11.3(a) in respect of all Claims and Losses by all Seller Indemnitees shall equal the Indemnification Cap, after which point Buyer will have no Obligation to indemnify Seller Indemnitees from and against further such Claims or Losses; provided, however, that with respect to a breach of a Fundamental Representation made by Buyer, the maximum amount of Losses that Seller will be able to recover from Buyer pursuant to Section 11.3(a)(i) shall not be limited by the Indemnification Cap but shall be limited to an amount not to exceed the Base Amount. Notwithstanding the preceding sentences to the contrary, the provisions of this Section 11.3(c) shall not apply to the indemnification Obligations of Buyer set forth in Section 2.12, Section 6.6, Section 6.8, Section 7.7, Section 7.9, Section 7.13, and Section 7.18. Additionally, for the avoidance of doubt, any Claims or Losses to be paid by Buyer pursuant to Section 11.3(a)(iii) through Section 11.3(a)(vii) are not subject to the limitations of this Section 11.3(c).

Section 11.4 Indemnification Procedures; Matters Involving Third Parties.

(a)A Seller Indemnitee or Buyer Indemnitee, as the case may be (for purposes of this Section 11.4, an “Indemnified Party”), shall give the indemnifying party under Section 11.2 and Section 11.3, as applicable (for purposes of this Section 11.4, an “Indemnifying Party”), prompt written notice of any matter which it has determined has given or could give rise to a right of indemnification under this Agreement stating the nature of the Claim and an estimated or actual amount of the Loss, if known, and method of computation thereof, containing a reference to the provisions of this Agreement in respect of which such right of indemnification is claimed or arises; provided, however, that the failure to provide such notice shall not release the Indemnifying Party from its Obligations under this Article XI except to the extent, and only to the extent, the Indemnifying Party is prejudiced by such failure or to the extent the survival period, if applicable, expires pursuant to Section 11.1 prior to the giving of such notice.

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(b)If any third party shall notify an Indemnified Party with respect to any matter (a “Third-Party Claim”) that may give rise to a claim for indemnification against the Indemnifying Party under this Article XI, then the Indemnified Party shall promptly (and in any event within twenty (20) days after receiving notice of the Third-Party Claim) notify the Indemnifying Party thereof in writing; provided, however, that the failure to provide such notice shall not release the Indemnifying Party from its Obligations under this Article XI except to the extent, and only to the extent, the Indemnifying Party is prejudiced by such failure.

(c)The Indemnifying Party shall have the right to participate in, or by giving written notice to the Indemnified Party, to assume and thereafter conduct the defense of any Third-Party Claim at the Indemnifying Party’s expense and by the Indemnifying Party’s own counsel, and the Indemnified Party shall cooperate in good faith in such defense. In the event that the Indemnifying Party assumes the defense of any Third-Party Claim, subject to Section 11.4(d), it shall have the right to take such action as it deems necessary to avoid, dispute, defend, appeal or make counterclaims pertaining to any such Third-Party Claim in the name and on behalf of the Indemnified Party. The Indemnified Party shall have the right to participate in the defense of any Third-Party Claim with counsel selected by it subject to the Indemnifying Party’s right to control the defense thereof. The fees and disbursements of such counsel shall be at the expense of the Indemnified Party. The Parties shall cooperate in a manner to preserve in full (to the extent possible) the attorney-client and work-product privileges.

(d)The Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third-Party Claim without the prior written consent of the Indemnified Party unless the judgment or proposed settlement (i) involves only the payment of money damages and does not impose an injunction or other equitable relief upon the Indemnified Party or would not reasonably be expected to have a material adverse effect on the Indemnified Party and (ii) includes as an unconditional term thereof the giving by the claimant or the plaintiff to the Indemnified Party a complete release from all liability in respect of such Third-Party Claim and does not involve any admission of wrongdoing by the Indemnified Party or any of its Affiliates.

(e)Unless and until the Indemnifying Party assumes the defense of the Third Party Claim as provided in Section 11.4(c), the Indemnified Party may defend against the Third- Party Claim in any manner it may reasonably deem appropriate.

(f)In no event will the Indemnified Party consent to the entry of any judgment or enter into any settlement with respect to the Third-Party Claim without the prior written consent of the Indemnifying Party (not to be unreasonably withheld).

(g)If a claim for indemnification against the Indemnifying Party under this Article XI does not relate to a Third-Party Claim (a “Direct Claim”), the Indemnifying Party shall have thirty (30) days after its receipt of notice to respond in writing to such Direct Claim. If the Indemnifying Party does not so respond within such thirty (30) day period, the Indemnifying Party shall be deemed to have rejected such claim, in which case the Indemnified Party shall be free to pursue such remedies as may be available to the Indemnified Party on the terms and subject to the provisions of this Agreement with respect to the Losses specified in such notice.

(h)The provisions of Section 11.4(b) through (g) shall not apply to Third Party Claims pertaining to Taxes.

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Section 11.5 Determination of Losses.

(a)The Losses giving rise to any indemnification Obligation hereunder shall be reduced by any insurance proceeds actually received by the Indemnified Party as a result of the events giving rise to the claim for indemnification, net of any expenses related to the receipt of such proceeds, including retrospective premium adjustments, if any. The amount of the indemnity payment shall be computed by taking into account the timing of the loss or payment, as applicable, at the Applicable Rate from the date the Indemnified Party provides notice of the Loss to the Indemnifying Party until the date paid. Upon the request of the Indemnifying Party, the Indemnified Party shall provide the Indemnifying Party with information sufficient to allow the Indemnifying Party to calculate the amount of the indemnity payment in accordance with this Section 11.5.

(b)An Indemnified Party shall take all reasonable steps to mitigate damages in respect of any claim for which it is seeking indemnification and shall use reasonable efforts to avoid any costs or expenses associated with such claim and, if such costs and expenses cannot be avoided, to minimize the amount thereof; provided, that an Indemnified Party shall have no Obligation to make a claim for recovery against any insurer of such Indemnified Party with respect to any such Losses.

(c)For purposes of determining whether a breach has occurred and calculating a Loss in connection with a claim for indemnification under this Article XI, each of the representations and warranties that contains any qualifications as to materiality or “Material Adverse Effect” will be determined with regard to such materiality or “Material Adverse Effect” qualifier contained in the terms of such representation and warranty; provided, however, that if the representation or warranty is breached (after taking into consideration such materiality or “Material Adverse Effect” qualifier) then the amount of Losses arising out of such breach will be determined without regards to such materiality or “Material Adverse Effect” qualifier.

Section 11.6 No Multiple Recoveries. Any liability for indemnification hereunder shall be determined without duplication of recovery by reason of the state of facts giving rise to such liability constituting a breach of more than one representation, warranty or covenant.

Section 11.7 Limitations on Liability/Exclusive Remedies.

(a)BUYER ACKNOWLEDGES AND AGREES THAT, EXCEPT FOR ACTUAL FRAUD, INTENTIONAL MISREPRESENTATION AND INTENTIONAL BREACH, THE REMEDIES SET FORTH IN ARTICLE VII, ARTICLE X, THIS ARTICLE XI (INCLUDING THE LIABILITY LIMITS AND SURVIVAL PERIODS SET FORTH ABOVE AND SUBJECT TO THE DISCLAIMERS SET FORTH IN SECTION 6.7 AND SECTION 6.8) AND THE ENVIRONMENTAL AGREEMENT, ARE INTENDED TO BE, AND SHALL BE, THE SOLE AND EXCLUSIVE REMEDIES OF THE BUYER INDEMNITEES WITH RESPECT TO ANY ASPECT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. IF THE CLOSING OCCURS, EXCEPT FOR THE REMEDIES SET FORTH IN ARTICLE VII, ARTICLE X, AND THIS ARTICLE XI, BUYER HEREBY IRREVOCABLY WAIVES, DISCHARGES AND RELEASES (ON BEHALF OF ITSELF AND THE OTHER BUYER INDEMNITEES), TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL OTHER CLAIMS, OBLIGATIONS AND LOSSES (INCLUDING RIGHTS OF CONTRIBUTION, IF ANY) WHICH EXIST OR MAY ARISE IN THE FUTURE, THAT THE BUYER INDEMNITEES MAY HAVE AGAINST SELLER OR ITS AFFILIATES, AS THE CASE MAY BE, ARISING UNDER OR BASED UPON ANY LAW (INCLUDING ANY SUCH LAW RELATING TO ENVIRONMENTAL LAW OR ARISING UNDER OR BASED UPON ANY SECURITIES LAW, COMMON OR CIVIL LAW OR OTHERWISE) THAT ARE ATTRIBUTABLE TO OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE

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BUSINESS, THE ASSETS, THE TH INTEREST, THE COMPANY OR THE ACQUIRED SUBSIDIARY.

(b)SELLER ACKNOWLEDGES AND AGREES THAT, EXCEPT FOR ACTUAL FRAUD, INTENTIONAL MISREPRESENTATION AND INTENTIONAL BREACH, THE REMEDIES SET FORTH IN ARTICLE VII, ARTICLE X, THIS ARTICLE XI (INCLUDING THE LIABILITY LIMITS AND SURVIVAL PERIODS SET FORTH ABOVE) AND THE ENVIRONMENTAL AGREEMENT, ARE INTENDED TO BE, AND SHALL BE, THE SOLE AND EXCLUSIVE REMEDIES OF THE SELLER INDEMNITEES WITH RESPECT TO ANY ASPECT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

(c)NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT OR THE ENVIRONMENTAL AGREEMENT, NO PARTY HERETO SHALL BE ENTITLED TO RECOVER FROM ANY OTHER PARTY HERETO OR ANY OF SUCH PARTY’S AFFILIATES ANY AMOUNT IN RESPECT OF EXEMPLARY, PUNITIVE, SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES, INCLUDING LOST PROFITS; EXCEPT, HOWEVER, WITH RESPECT TO ANY OF THE FOREGOING PAID OR OWING TO A THIRD PARTY WITH RESPECT TO A THIRD PARTY CLAIM, WHICH DAMAGES SHALL BE CONSIDERED PART OF LOSSES AND SHALL BE COVERED BY THE INDEMNIFICATIONS SET FORTH IN THIS ARTICLE XI AND THE ENVIRONMENTAL AGREEMENT, AS APPLICABLE.

(d)ALL RELEASES, DISCLAIMERS, LIMITATIONS ON LIABILITY AND INDEMNITIES IN THIS AGREEMENT AND THE ENVIRONMENTAL AGREEMENT, INCLUDING THOSE IN THIS ARTICLE XI, SHALL APPLY EVEN IN THE EVENT OF THE SOLE, JOINT OR CONCURRENT, ACTIVE OR PASSIVE NEGLIGENCE, STRICT LIABILITY OR FAULT OF THE PARTY WHOSE LIABILITY IS RELEASED, DISCLAIMED, LIMITED OR INDEMNIFIED.

Section 11.8 Governing Law. This Agreement shall be construed (both as to validity and performance), interpreted and enforced in accordance with, and governed by, the Laws of the State of Texas, without regard to conflicts of laws rules or principles as applied in Texas.

Section 11.9 Jurisdiction; Consent to Service of Process; Waiver. Each of the Parties agrees that it shall bring any Proceeding in respect of any claim arising out of or related to this Agreement, whether in tort or contract or at law or in equity, exclusively in any Federal or state court in Harris County, Texas and solely in connection with claims arising under such agreement or instrument or the transactions contained in or contemplated by such agreement or instrument, (i) irrevocably submits to the exclusive jurisdiction of such courts, (ii) waives any objection to laying venue in any such Proceeding in such courts, (iii) waives any objection that such courts are an inconvenient forum or do not have jurisdiction over it and (iv) agrees that service of process upon it may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to it at its address specified in Section 12.2. The foregoing consents to jurisdiction and service of process shall not constitute general consents to service of process in the State of Texas for any purpose except as provided herein and shall not be deemed to confer rights on any Person other than the Parties. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY DISPUTE IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE RELATED AGREEMENTS OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT: (i) NO REPRESENTATIVE,

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AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER; (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER; (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY; AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS Section 11.9.

ARTICLE XII

MISCELLANEOUS

Section 12.1 Amendment. This Agreement (including this Section 12.1) may not be amended except by an instrument in writing executed and delivered by the Parties. The failure of any Party at any time or times to require performance of any provision hereof shall in no manner affect the right at a later time to enforce the same. No waiver by any Party of any condition, or of any breach of any term, covenant, representation or warranty contained in this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such condition or breach or a waiver of any other condition or of any breach of any other term, covenant, representation or warranty. No course of dealing between or among any Persons having any interest in this Agreement shall be deemed effective to modify, amend or discharge any part of this Agreement or any rights or obligations of any Person under or by reason of this Agreement.

Section 12.2 Notices. All notices and other communications that are required to be or may be given pursuant to this Agreement shall be in writing and shall be deemed to have been duly given if delivered in person or by courier or mailed by registered or certified mail (postage prepaid, return receipt requested) or by a national overnight delivery service to the relevant Party at the following addresses or sent by facsimile (with transmission confirmation) to the following numbers:

If to Seller or to the Company (prior to the Closing for the Company), to:
Tesoro Corporation
19100 Ridgewood Parkway
San Antonio, Texas 78259
Attention: Executive Vice President and General Counsel
Fax: (210) 745-4659

with a copy to (which shall not constitute notice):Norton Rose Fulbright1301 McKinney, Suite 5100
Houston, Texas 77010
Attention: Daniel L. Mark
Fax: (713) 651-5246

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If to Buyer or to the Company (after the Closing for the Company), to:
Par Petroleum Corporation
1301 McKinney, Suite 2025
Houston, Texas 77010
Attention: Chief Financial Officer
Fax: (713) 650-0502

with a copy to (which shall not constitute notice):
Porter Hedges LLP
1000 Main, 36th Floor
Houston, Texas 77002
Attention: E. James Cowen
Fax: (713) 228-1331

or to such other address or facsimile number as any party may, from time to time, designate in a written notice given in accordance with this Section 12.2. Any such notice or communication shall be effective (i) if delivered in person or by courier, upon actual receipt by or on behalf of the intended recipient, (ii) if sent by facsimile transmission, 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 recipient’s normal business hours, or (iii) if mailed in accordance with the foregoing provisions, upon the earlier of the third (3^rd) Business Day after deposit in the mail or the date of delivery as shown by the return receipt therefor.

Section 12.3 Public Announcements. No Party shall issue or make any press releases or similar public announcements concerning the transactions contemplated hereby or by the Related Agreements without the written consent of Buyer and Seller (which consent shall not be unreasonably withheld, conditioned or delayed), except as may be required by Law or the rules or regulations of any applicable United States securities exchange or Governmental Authority to which the relevant Party is subject, wherever situated. In the event that a Party believes it is required to issue or make any press release or public announcement, such Party shall (a) give prompt notice thereof to the other Parties, (b) allow such other Parties reasonable opportunity to review and provide comments with respect to the content of such press release or public announcement and (c) use Commercially Reasonable Efforts to incorporate any reasonable comment from any other Party prior to any release or public announcement.

Section 12.4 Expenses. Except as otherwise expressly provided herein, all costs and expenses incurred by Seller or its Affiliates in connection with this Agreement and the transactions contemplated hereby shall be paid by Seller, and all costs and expenses incurred by Buyer or its Affiliates in connection with this Agreement and the transactions contemplated hereby shall be paid by Buyer. For the avoidance of doubt, in the event Buyer elects to obtain title insurance based upon the Title Commitments then all costs and expenses related to such title insurance shall be paid by Buyer.

Section 12.5 Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

Section 12.6No Strict Construction. The Parties acknowledge that each of them has been represented by counsel in connection with this Agreement and the transactions contemplated hereby. Notwithstanding the fact that this Agreement has been drafted or prepared by one of the Parties, the

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Parties confirm that they and their respective counsel have reviewed, negotiated and adopted this Agreement as the joint agreement and understanding of the Parties, and the language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Person and any rule of Law that would require interpretation of any claimed ambiguities in this Agreement against the Party that drafted it has no application and is expressly waived.

Section 12.7 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect, and the invalid, illegal or unenforceable provision shall be reformed to the minimum extent required to render such provision valid, legal and enforceable and in a manner so as to preserve the economic and legal substance of the transactions contemplated hereby to the fullest extent permitted by Law. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.

Section 12.8 Assignment. This Agreement shall not be assigned by any Party (including by operation of Law or otherwise) except with the prior written consent of the other Parties. Any purported assignment of this Agreement in violation of this Section 12.8 shall be null and void.

Section 12.9 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each Party and its permitted successors and assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement; except, that the Seller Indemnitees and the Buyer Indemnitees shall be third party beneficiaries of the indemnifications provided for in Article XI.

Section 12.10 Failure or Indulgence Not Waiver. No failure or delay on the part of any Party in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty, covenant or agreement herein, nor shall any single or partial exercise of any such right preclude other or further exercise thereof or of any other right.

Section 12.11 Disclosure Schedules. Any matter disclosed by Seller in the Disclosure Schedules pursuant to any Section of this Agreement shall be deemed to have been disclosed by Seller for purposes of each other Section of this Agreement to which such disclosure is relevant as and to the extent that the relevance of such matter to such other Section is readily apparent on the face of such disclosure. The listing (or inclusion of a copy) of a document or other item in the Disclosure Schedules shall be adequate to disclose an exception to a representation or warranty made herein if the nature and relevance of such exception is readily apparent from the listing (or inclusion of a copy) of such document.

Section 12.12 Time of the Essence. Time is of the essence in this Agreement. If the date specified in this Agreement for giving any notice or taking any action is not a Business Day (or if the period during which any notice is required to be given or any action taken expires on a date which is not a Business Day), then the date for giving such notice or taking such action (and the expiration date of such period during which notice is required to be given or action taken) shall be the next day which is a Business Day.

Section 12.13 Entire Agreement. This Agreement and the Related Agreements (together with the Exhibits, the Disclosure Schedules and the other Schedules hereto and thereto) constitute the entire agreement of the parties hereto and thereto, and supersede all prior agreements and undertakings, both

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written and oral, among the Parties, with respect to the subject matter hereof (other than the Confidentiality Agreement, which shall continue in full force and effect).

Section 12.14 Confidentiality. For a period of three (3) years following the Closing Date, Seller shall, and shall cause its Affiliates to, hold, and shall use Commercially Reasonable Efforts to cause its or their respective representatives to hold, in confidence any and all information, whether written or oral, that primarily relates to the Companies or the Business, except to the extent that Seller can show that such information (a) is generally available to or known by the public through no fault of Seller, any of its Affiliates or their respective representatives; or (b) is lawfully acquired by Seller, any of its Affiliates or their respective representatives from and after the Closing from sources which are not prohibited, to Seller’s Knowledge, from disclosing such information by a legal, contractual or fiduciary obligation. If Seller or any of its Affiliates or their respective representatives are compelled to disclose any such information by judicial or administrative process or by other requirements of Law, Seller shall promptly notify Buyer in writing and shall disclose only that portion of such information which Seller is advised by its counsel in writing is legally required to be disclosed.

Section 12.15Specific Performance. Each Party acknowledges that the breach of this Agreement by the other Parties would cause irreparable damage to such Party and that money damages or other legal remedies would not be an adequate remedy for any such damages. Therefore, the Obligations of each Party under this Agreement, including Seller’s obligation to sell the TH Interest to Buyer and Buyer’s obligation to purchase the TH Interest from Seller, shall be enforceable by a decree of specific performance and appropriate injunctive relief may be applied for and granted in connection therewith, without the requirement to post any bond or security in connection therewith. Such remedies shall, however, be cumulative and not exclusive and shall be in addition to any other remedies which any Party may have under this Agreement or otherwise.

Section 12.16 Counterparts. This Agreement may be executed in multiple counterparts and by the different Parties in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Signed counterparts of this Agreement may be delivered by facsimile and by scanned pdf image; provided that each Party uses Commercially Reasonable Efforts to deliver to each other Party original signed counterparts as soon as possible thereafter.

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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

TESORO CORPORATION
By:	/s/ GREGORY J. GOFF
	Gregory J. Goff,
	President and Chief Executive Officer
HAWAII PACIFIC ENERGY, LLC
by PAR PETROLEUM CORPORATION, as its
sole member
By:	/s/ R. SETH BULLOCK
	R. Seth Bullock,
	Chief Financial Officer
For the limited purpose of agreeing to be bound by
the provisions of Section 2.8, Section 2.9, Section
6.15, Article IV and Article VII to the extent
applicable to the Company:
TESORO HAWAII, LLC
By:	/s/ DANIEL R. ROMASKO
	Daniel R. Romasko,
	Executive Vice President, Operations

Membership Interest Purchase Agreement

EXHIBIT C

ENVIRONMENTAL AGREEMENT

THIS ENVIRONMENTAL AGREEMENT (this “Environmental Agreement”) is entered into as of [_________________], 2013 (the “Execution Date”), by and among TESORO CORPORATION, a Delaware corporation (“Seller”), HAWAII PACIFIC ENERGY, LLC, a Delaware limited liability company (“Buyer”), and TESORO HAWAII, LLC, a Hawaii limited liability company (the “Company”). Seller, Buyer and the Company may be referred to herein individually as a “Party,” and collectively as the “Parties.”

W I T N E S S E T H:

WHEREAS, the Parties have entered into that certain Membership Interest Purchase Agreement dated June 17, 2013 for the sale of all of the issued and outstanding units representing membership interests in the Company (as such agreement may hereafter be amended, restated, supplemented or otherwise revised) (the “Purchase Agreement”); and,

WHEREAS, in connection with the Closing, the Parties have agreed to enter into this Environmental Agreement in relation to their respective obligations arising under Environmental Laws and certain matters relating thereto.

NOW, THEREFORE, in consideration of the mutual promises made herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby expressly acknowledged, and subject to the conditions hereinafter set forth, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS AND INTERPRETATIONS

1.01     Definitions; Usage. Unless the context shall otherwise require, capitalized terms used and not defined herein shall have the meanings assigned thereto in the Purchase Agreement and all rules as to interpretation and usage set forth therein shall apply hereto except that all references herein to Articles, Sections, Exhibits and Schedules are to Articles and Sections of and Exhibits and Schedules attached to and forming part of this Environmental Agreement, unless the contrary is specifically stated. As used in this Environmental Agreement, the following terms shall have the meanings set forth below, unless the context otherwise requires:

“Acceptable Corrective Action Method” means the minimum method using a demonstrated and acceptable technology or techniques to Remediate at the minimum required expense allowable under, and which satisfies the requirements of, all Environmental Laws in effect and as interpreted as of the Closing Date for the type of property affected consistent with its use on the Closing Date (i.e., industrial). For the avoidance of doubt, Acceptable Corrective Action Method may include (a) risk assessment or risk reduction principles or programs, (b) natural attenuation of contamination in appropriate circumstances, (c) capping in place, or (d) acceptance of perpetual land use or institutional use restrictions or engineering controls.

“Acquired Subsidiary” means Smiley’s Super Service, Inc., a Hawaii corporation.

“Asbestos” means any asbestos containing material, the management, maintenance, removal, abatement or disposal of which is regulated under Environmental Laws.

“BHP Environmental Agreement” means that certain Environmental Agreement dated as of May 29, 1998, by and among BHP Hawaii Inc., BHP Petroleum Pacific Islands Inc., and Tesoro Petroleum Corporation.

“BHP Hawaii” means BHP Hawaii Inc. and its successors and assigns.

“BHP Pacific” means BHP Petroleum Pacific Islands Inc. and its successors and assigns.

“Breach Notice” has the meaning set forth in Section 2.02.

“Buyer” has the meaning given such term in the preamble of this Environmental Agreement.

“Capital Projects” has the meaning given such term in Section 3.03(c).

“Change in Control” means, and shall be deemed to have occurred upon one or more of the following events:

(A) any transaction, or series of related transactions, that results or would result in the transfer of fifty percent (50%) or more of the Equity Interests in Buyer or its subsidiaries (or fifty percent (50%) or more of the Equity Interest in any business entity that owns or controls, directly or indirectly, fifty percent (50%) or more of the Equity Interests of Buyer (the “Buyer Parent”)) to a single transferee or multiple transferees under common control (other than transferred to the Buyer Parent or any of its subsidiaries but in such event the Buyer Parent or such subsidiary shall thereafter be subject to the definition of Change in Control);

(B) any transaction that would result in the Company or its subsidiaries (or Buyer or the Buyer Parent) merging, directly or indirectly, with one or more other entities, provided, that a merger as a result of which the holders of Equity Interests of the Company, such subsidiary or Buyer or the Buyer Parent, as applicable, immediately prior to such merger possess fifty percent (50%) or more of the voting power, directly or indirectly, of the business entity surviving such merger (or other business entity which is the issuer of the Equity Interest into which the Equity Interest of the Company, such subsidiary or Buyer or the Buyer Parent, as applicable, is converted or exchanged in such merger) shall not be treated as a Change in Control but such surviving entity shall thereafter be subject to the definition of Change in Control; or

(C) any transaction (or series of related transactions) not in the ordinary course of business of the Company, its subsidiaries, Buyer or the Buyer Parent that results in the direct or indirect sale, purchase or other transfer or exchange of assets, including manufacturing facilities and ownership interests in other business entities, representing fifty percent (50%) or more of the fair market value of the assets of Buyer and its subsidiaries, on a consolidated basis, to any Person other than the Buyer Parent or any of its subsidiaries but in such event the Buyer Parent or such subsidiary shall thereafter be subject to the definition of Change in Control.

“Claim” means any demand, claim, complaint, notice of violation or any other assertion of an Obligation, whether written or oral, for any Loss, specific performance, injunctive relief, remediation or other equitable relief whether or not ultimately determined to be valid.

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“Closure” means achieving compliance with the commercial and industrial cleanup standards established by the applicable Governmental Authority such that the Refinery and the other Assets may be used to the same extent as Seller has operated them on a recent historical basis prior to the Closing Date. Compliance shall be established by (i) receipt of a “No Further Action Letter” or similar communication from the applicable Governmental Authority that no further action is required or that the action taken by Seller has been completed (a “Closure Letter”); (ii) except for the Refinery Groundwater Remediation, three (3) years after the date Seller has submitted written notice and supporting documentation to such applicable Governmental Authority indicating that Seller considers its action to be complete and in compliance with all applicable Environmental Laws in effect and as interpreted as of the Closing Date (provided that the Governmental Authority has failed to respond during such period and that no adverse status changes attributable solely to Seller occur during the three-year period, which changes would materially alter the conclusion that the action was complete and compliant with Environmental Laws in effect and as interpreted as of the Closing Date); or (iii) except for the Refinery Groundwater Remediation, five (5) years following the date that the applicable Government Authority directs Seller to “monitor only" at the particular location, regardless of whether Seller has submitted a written notice described in subparagraph (ii) above; provided, however the time period will terminate after three (3) years if levels of all Hazardous Materials remain constant or are showing a negative downward trend over such three (3) year time period.

“Company” has the meaning given such term in the preamble of this Environmental Agreement.

“Company Assumption” has the meaning given such term in Section 4.01(a).

“Company Environmental Liabilities” means any and all Orders, Claims, Losses or Obligations, including required capital expenditures, arising from or related to Environmental Laws or the Hawaii Consent Decree, whether known or unknown, of the Companies or the Business, whether arising before or after the Closing, including those related to Third Party Claims, actual or threatened Releases of Hazardous Materials, off-site treatment, storage, recycling, or disposal and off-site migrations of Hazardous Materials or any fine, penalty or other cost assessed in connection with any alleged or actual violation(s) of Environmental Laws.

“Companies” means the Company and the Acquired Subsidiary.

“Construction Activity” has the meaning set forth in Section 4.01(d).

“Corrective Action” means all Remediation Activities, whether undertaken pursuant to judicial or administrative Order or otherwise, reasonably necessary to comply with applicable Environmental Laws in effect and as interpreted as of the Closing Date to investigate, monitor and, if required, clean up, remove, treat, cover and protect from human or environmental exposure.

“De Minimis Amount” has the meaning given such term in Section 5.02(c).

“Environmental Authorization” means any Authorization of any applicable Governmental Authority required by Environmental Laws in effect and as interpreted as of the Closing Date for the ownership, operation or use of the Assets as they are operated by the Company as of the Closing Date.

“Environmental Cap” has the meaning given such term in Section 5.02(e).

“Environmental Claim” shall mean any administrative, regulatory or judicial action, suit, Order, demand, directive, claim, lien, governmental investigation, proceeding or written or oral notice of noncompliance or violation by or from any Person alleging liability of whatever kind or nature (including

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liability or responsibility for the costs of enforcement proceedings, Corrective Action, governmental response, natural resources damages, property damages, personal injuries, medical monitoring, penalties, contribution, indemnification and injunctive relief) arising out of, based on or resulting from (i) the presence or Release of, or exposure to, any Hazardous Materials; or (ii) the failure to comply with any Environmental Laws in effect and as interpreted as of the Closing Date.

“Environmental Condition” means any condition at, on, under, within or migrating from any tangible Assets, in each case arising out of the presence or Release of any Hazardous Materials on, at or underlying the Real Property Interests or the Pipeline ROW Interests.

“Environmental Deductible” has the meaning given such term in Section 5.02(d).

“Environmental Law” means any Law pertaining to public or employee exposure to Hazardous Materials, pollution, the environment or the protection of fish, wildlife or natural resources. For the avoidance of doubt, due to the inclusion of the word “applicable” in the definition of “Law” incorporated into this definition, any references in this Environmental Agreement to “any Environmental Law” or “any applicable Environmental Law” shall have the same meaning.

“Environmental Testing” means any environmental site assessment, test, inspection or investigation of the Assets that could reasonably be expected to lead to the discovery, investigation or assessment of an Environmental Condition.

“EPA Attestations” means the procedures applicable to the Refinery described in 40 CFR § 80.

“Hawaii Consent Decree” has the meaning given such term in Section 3.03(a).

“Hazardous Materials” means (i) any chemicals, materials or substances in any form, whether solid, liquid, gaseous, semisolid, or any combination thereof, whether waste materials, raw materials, chemicals, finished products, by-products, degradation products or any other materials or articles, which are listed, defined or otherwise designated as hazardous, toxic or dangerous and as such are regulated under any Environmental Law, including asbestos, and lead-containing paints or coatings, (ii) any petroleum (including crude oil), petroleum derivatives, petroleum products or by-products of petroleum refining or any oxygenate (including degradation products) in any fuel, and (iii) any other chemical, substance or waste that is regulated by any Environmental Law.

“Indemnified Party” has the meaning set forth in Section 5.04.

“Indemnifying Party” has the meaning set forth in Section 5.04.

“Lead-Based Paint” means any intact paint or other surface coating containing lead or lead-based materials, the application, management, maintenance, removal, abatement or disposal of which is regulated under Environmental Laws.

“NORM” has the meaning given such term in Section 3.01.

“Order” means any order, writ, ruling, decision, verdict, decree, assessment, award (including arbitration awards), judgment, stipulation, injunction, or other determination, decision or finding by, before or under the supervision of any Governmental Authority, including the Hawaii Consent Decree.

“PCBs” has the meaning given such term in Section 3.01.

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“Pre-Existing Environmental Condition” means any Environmental Condition (whether known or unknown) at, on, under, or within the Real Property Interests or any Pipeline ROW Interest or any improvements thereon or therein existing as of the Closing Date; provided, however, that Pre-Existing Environmental Conditions shall not include Lead-Based Paint, NORM, PCB’s or non-friable Asbestos on or within the buildings or other improvements included in the Assets or migration of Hazardous Materials onto or into the Real Property Interests or any Pipeline ROW from outside sources or locations.

“Purchase Agreement” has the meaning given such term in the Recitals of this Environmental Agreement.

“Refinery Groundwater Remediation” means the Remediation of groundwater contamination currently being conducted by the Company at the Refinery.

“Release” means any spilling, leaking, seeping, pumping, pouring, emitting, emptying, injecting, discharging, escaping, leaching, dumping, disposing or releasing of a Hazardous Material into the environment (including the air, soil, surface water, groundwater, sewer, septic system, or waste treatment, storage, or disposal systems) of any kind whatsoever, including the abandonment or discarding of barrels, containers, tanks or other receptacles containing or previously containing a Hazardous Material.

“Remediate,” “Remediation” or “Remediation Activities” means testing, investigation, assessment, study, design, monitoring, cleanup, treatment, removal, response, remediation, corrective action, reporting or other similar activities in each case undertaken pursuant to Environmental Laws to address any Environmental Condition or any Release, including any such temporary, interim, emergency or permanent activities involving investigation, study, design, assessment, testing, monitoring, containment, removal, disposal, Closure, corrective action, passive remediation, natural attenuation or bioremediation, the installation and operation of remediation systems, or reporting of released Hazardous Materials to applicable Governmental Authorities.

“Seller” has the meaning given such term in the preamble of this Environmental Agreement.

“Seller Remediation Activities” has the meaning given such term in Section 4.01.

“Tank Replacements” has the meaning given such term in Section 3.04.

ARTICLE II

SELLER’S ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES

2.01     Representations and Warranties. Except as set forth in Schedule 2.01, Seller represents and warrants to Buyer to Seller’s Knowledge, as follows:

(a)     Except as would not reasonably be expected to have a Material Adverse Effect, the Companies, the Business and the Assets are, and for the five (5) years prior to the Execution Date, have been operated in compliance with all applicable Environmental Laws (in each case, as in effect and interpreted at the respective times within such five-year period);

(b)     Except as would not reasonably be expected to have a Material Adverse Effect, all Environmental Authorizations required to be obtained, filed or applied for by the Companies under any Environmental Law in connection with the Business or their respective Assets as normally operated prior to the Execution Date have been duly obtained, filed or applied for by the Companies, as applicable, and each of the Companies is and, for the five (5) years prior to the Execution Date, has been in compliance with the terms and conditions of such Environmental Authorizations, as applicable;

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(c)     Except as would not reasonably be expected to have a material effect, (i) there are no Claims, Proceedings or Orders (including any alleging criminal violations or liability) pending or threatened by or before any Governmental Authority arising under any Environmental Law relating to the Companies, the Assets or the Business, and (ii) neither of the Companies has received written notice of any potential violation of, or liability under, any Environmental Law;

(d)     Except as would not reasonably be expected to have a Material Adverse Effect, neither the operations of the Companies nor the operations of the Business prior to the Effective Time has resulted in a Release at concentrations in excess of those allowed for under applicable Environmental Laws or Environmental Authorizations;

(e)     Except as would not reasonably be expected to have a Material Adverse Effect, neither of the Companies has assumed by contract any liabilities arising under Environmental Laws of any other Person; and

(f)     Seller has prior to the Execution Date provided or made available to Buyer (i) in the Data Room, copies of all material non-privileged environmental site assessments, audits, investigations and studies prepared by third parties that are in the possession, custody or control of Seller or its Affiliates relating to the Companies, the Business, the Assets or properties or assets formerly owned, leased, operated or used by the Companies or the Business, or (ii) by examination of all files in the possession of the Company located at any of its company facilities, copies of material non-privileged environmental site assessments, audits, investigations and studies relating to the Companies, the Business, the Assets or properties or assets formerly owned, leased, operated or used by the Companies or the Business.

2.02     Breach Notice. If, prior to the Closing Date, Buyer obtains Knowledge of a breach of any of Seller’s representations, warranties or covenants contained in this Environmental Agreement, Buyer shall notify Seller in writing of such information (the “Breach Notice”) within three (3) Business Days of such discovery or on the day prior to the Closing Date, whichever is earlier. The Breach Notice shall contain reasonable details regarding the alleged breach and Buyer’s good faith estimate of the potential Losses associated with such breach.

ARTICLE III

ENVIRONMENTAL PROVISIONS

3.01     Incidental Contamination and NORM. Buyer acknowledges that the Assets may contain inter alia Asbestos in pipe coating, undisplaced petroleum hydrocarbon compounds in pipelines, coats of Lead-Based Paints, polychlorinated biphenyls (“PCBs”) in transformers or rectifiers, mercury in electrical switches, and Naturally Occurring Radioactive Material (“NORM”) in various potential forms. Buyer also expressly understands that special procedures may be required for the Remediation, removal, transportation and disposal of such contained, affixed or attached materials. Notwithstanding any provision to the contrary contained in this Environmental Agreement, Buyer expressly assumes liability for or in connection with the future abandonment and removal of NORM, Lead-Based Paint, undisplaced petroleum hydrocarbon compounds, mercury, Asbestos or PCBs to the extent contained, affixed or attached in or on the Assets; provided, however, that nothing in this Section 3.01 shall in any way affect Seller’s liability for NORM, Lead-Based Paint, petroleum hydrocarbon compounds, mercury, Asbestos or PCBs that have been Released into the environment prior to Closing.

3.02     Reports and Submittals. For any reports or submittals required by any Governmental Authority that cover periods of both Seller’s and the Company’s ownership or use of the Assets or operation of the Refinery, the Company shall prepare such reports to the extent it is able to do

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so, segregated to the extent feasible based on the Closing Date, and send Seller’s portion to Seller for its completion, review, approval and signature (if a separate report from Seller is required by the Governmental Authority or if such report or submittal could reasonably impact Seller’s Obligations under this Environmental Agreement, Seller’s liability under Environmental Laws or Seller’s Obligations to third parties). The Company’s preparation of such report shall not modify, change, alter or diminish any other provision in this Environmental Agreement as applied to the subject matter of such report and the rights, liabilities, responsibilities, obligations and indemnities for any matters contained in such reports shall be as set forth elsewhere herein. Seller agrees to prepare reports responsive to the Hawaii Consent Decree until such time that the Parties agree this should become the Company’s responsibility. Notwithstanding the foregoing, each of Seller and Buyer shall prepare and file the EPA Attestations relating to the ownership and operation of the Assets in 2013 for such Party’s period of ownership of the Assets during such year.

3.03     Hawaii Consent Decree.

(a)     Seller anticipates entering into final binding settlement(s) whether by judicial decree, judgment, agreement or otherwise, memorializing Seller’s settlement with the United States Environmental Protection Agency and the United States Department of Justice and other applicable entities or agencies, if any, regarding alleged violations of the Clean Air Act related to the ownership and operation of multiple facilities owned by Seller and its Affiliates, including the Refinery. Buyer hereby irrevocably authorizes Seller (i) to finalize the negotiations for such settlement related to the ownership and operation of the Refinery even if such negotiations extend beyond the Closing Date and (ii) to cause the Company (prior to Closing) or, if applicable, to have Buyer to cause the Company (after the Closing) to enter into such settlement (the “Hawaii Consent Decree”) provided that the terms and conditions of the Hawaii Consent Decree solely relate to air emissions originating from the Refinery and such terms and conditions, as they relate to the Company or the Refinery, are reasonably consistent with the proposed terms as described on Schedule 3.03(a). The Hawaii Consent Decree may be evidenced in a separate agreement between the Company and the applicable Governing Authorities or included in a multi-refinery consent decree between Seller and its Affiliates (including the Company) and the applicable Governing Authorities. To the extent such Hawaii settlement is included in a multi-refinery consent decree then the term “Hawaii Consent Decree” shall refer to the provisions of such multi-refinery consent decree that are applicable to the Company or the Refinery from or after the Closing Date.

(b)     The Company shall cooperate with and assist Seller as Seller shall reasonably request in finalizing and executing the Hawaii Consent Decree. Seller shall provide Buyer with monthly oral reports regarding the status of the negotiations and execution of the Hawaii Consent Decree. Seller shall provide Buyer the opportunity, with reasonable advance notice, to attend meetings with, or hearings before, any Governmental Authority regarding the Hawaii Consent Decree to the extent such meetings and hearings relate to the Refinery (Buyer shall not participate in such meetings or hearings to the extent such meetings or hearings do not involve the Company or the Refinery). Seller shall, following any such meeting or hearing with such Governmental Authority, advise Buyer of the substance of any action or position taken by such Governmental Authority during any such meeting or hearing with regards to the Company or the Refinery. Notwithstanding the preceding, Buyer’s decision to attend or not any such meeting or hearing shall not delay or postpone such meetings or hearings with a Governmental Authority. Seller shall promptly provide Buyer with copies of significant reports, plans, correspondence and other substantive communications received by or on behalf of Seller from or submitted by or on behalf of Seller to a Governmental Authority with respect to the negotiation or execution of the Hawaii Consent Decree.

(c)     Provided that the Startup Criteria have been met in all material respects as of the Execution Date, Seller shall (or shall cause its Affiliates to) reimburse the Company for reasonable third party capital expenditures incurred by the Company for the construction, installation and

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commissioning of capital projects at the Refinery as and when and to the extent required pursuant to the Hawaii Consent Decree (collectively, the “Capital Projects”). Seller and Buyer agree to communicate, consult and reasonably cooperate with one another in the design, engineering, procurement, construction, installation and commissioning of the Capital Projects, provided such consultation and cooperation are consistent with the terms of this section. Seller and Buyer (and their Affiliates) shall minimize the capital expenditures for the Capital Projects to the extent necessary to satisfy the obligations of the Hawaii Consent Decree. Seller and the Company agree to use Commercially Reasonable Efforts to work together during the design, engineering, procurement and construction of the Capital Projects to minimize the potential for disruption of Refinery operations during implementation of the Capital Projects. Between Seller and the Company, Seller shall have the primary responsibility, at Seller’s expense, for the design and engineering of the Capital Projects. Buyer shall cause the Company to permit Seller and its Affiliates and their respective representatives (including Seller’s engineering contractors) to have reasonable access to the Refinery (subject to appropriate safety and security standards of the Company) and applicable books and records and reasonable access to and inquiry of employees and other personnel who are employed, retained or controlled by the Company who have relevant information necessary for the designing and engineering of the Capital Projects. Seller and the Company agree to use Commercially Reasonable Efforts to work together to develop the Capital Projects in a cost effective manner while meeting the requirements of the Hawaii Consent Decree and also minimizing the anticipated impact on the Refinery’s operating expenses following implementation. NOTWITHSTANDING ANY OTHER PROVISIONS IN THIS AGREEMENT TO THE CONTRARY, NEITHER SELLER NOR ANY AFFILIATE, AGENT, OR REPRESENTATIVE OF SELLER HAS MADE, AND SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES, ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, FITNESS (BOTH GENERALLY AND FOR A PARTICULAR PURPOSE), OR CONFORMITY TO MODELS, DESIGNS OR SAMPLES OR ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, RELATING TO THE CAPITAL PROJECTS.

(d)     Seller shall retain sole responsibility for the payment of any fines or penalties imposed on the Company arising from the Hawaii Consent Decree to the extent related to acts or omissions of Seller or the Company prior to the Closing Date.

(e)     The Company shall be responsible for compliance with the Hawaii Consent Decree except to the extent provided above in this Section 3.03.

3.04     Tank Replacements. Seller shall cause (or shall cause its Affiliates to cause), at Seller’s expense, the replacement of existing underground storage tanks at the Retail Assets listed on Schedule 3.04, including any Corrective Action relating to Pre-Existing Environmental Conditions identified at the time of such tank replacements (the “Tank Replacements”). The Company shall provide reasonable assistance and cooperation in order for Seller (or its Affiliates) to complete the Tank Replacements in an efficient and timely manner. The Company shall permit Seller and its Affiliates and their respective representatives (including Seller’s contractors) to have reasonable access to the Retail Assets listed on Schedule 3.04 (subject to appropriate safety and security standards of the Company) to complete the Tank Replacements.

3.05     Company Environmental Liabilities. Except as otherwise provided herein, Buyer and the Company acknowledge and agree that after the Closing, the Company will continue to retain all Company Environmental Liabilities.

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ARTICLE IV

CORRECTIVE ACTION AND ENVIRONMENTAL TESTING

4.01     Conduct of Corrective Action.

(a)     In the event Corrective Action is necessary after the Closing to Remediate a Pre-Existing Environmental Condition (whether known or unknown as of the Closing Date) and for which Seller has agreed to indemnify, defend and hold Buyer harmless pursuant to Section 5.02, then Seller (or its Affiliates) shall control such Corrective Action (the “Seller Remediation Activities”) until (i) Seller’s indemnification obligation terminates pursuant to Section 5.02 or (ii) a Claim is made against Buyer or the Company by a Governmental Authority after the Closing with respect to such Pre-Existing Environmental Condition and Buyer or the Company elects, by providing written notice to Seller, to assume control of such Corrective Action (a “Company Assumption”); provided, however, that if Buyer or the Company elects to assume control of any Corrective Action, Seller shall have no further obligation to indemnify, defend or hold Buyer harmless for such Corrective Action pursuant to Section 5.02. Seller (and its Affiliates) shall take (and shall only be required to take) all actions and make all expenditures reasonably required by applicable Environmental Laws in effect and as interpreted as of the Closing Date in order to Remediate such Pre-Existing Environmental Condition consistent with the Acceptable Corrective Action Method. In determining the Acceptable Corrective Action Method, Seller shall consult with Buyer, consider in good faith any reasonable recommendations or proposals made by Buyer, and take into account the intended usage of the relevant property.

(b)     In connection with any Seller Remediation Activities:

(i)     The Company shall provide reasonable assistance and cooperation in order for Seller to complete the Seller Remediation Activities in an efficient and timely manner; provided, that any third party costs or expenses incurred by or on behalf of Buyer or the Company in connection with such assistance and cooperation shall be borne by Seller to the extent approved by Seller in writing in advance and subject to the limitations of Section 5.02;

(ii)     Seller shall provide the Company the opportunity, with reasonable advance notice, to attend meetings with, or hearings before, any Governmental Authority regarding such Seller Remediation Activities. Seller shall, following any such meeting or hearing with such Governmental Authority, advise the Company of the substance of any action or position taken by such Governmental Authority during any such meeting or hearing. Notwithstanding the preceding, the Company’s decision to attend or not any such meeting or hearing shall not delay or postpone such meetings or hearings with a Governmental Authority;

(iii)     Seller will coordinate the schedule of on-site Seller Remediation Activities with the Company so that disruptions of the Company’s operations of the Assets will be minimized;

(iv)     The Company shall permit Seller and its Affiliates and their respective representatives (including Seller’s environmental contractors) to have reasonable access to the Assets (subject to appropriate safety and security standards of the Company) and applicable books and records and reasonable access to and inquiry of employees and other personnel who are employed, retained or controlled by the Company who have relevant information regarding the Assets related to the obligations of Seller for Corrective Action. The Company shall provide Seller, without additional charge, reasonable access to utilities

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and available equipment and operations (including wastewater treatment units) used in connection with Seller Remediation Activities;

(v)     Seller shall provide the Company with copies of third party reports and studies, notices and filings received or prepared on behalf of Seller prior to the delivery of such submissions to any Governmental Authority and shall allow the Company a reasonable opportunity (which shall not be fewer than ten (10) days to review such filings in advance of any such submission and, if requested, shall consider in good faith all reasonable comments to such submissions made by the Company prior to submitting such materials to such Governmental Authority. The Company shall respond promptly to requests for information by a Governmental Authority with respect to Seller Remediation Activities. The Company shall respond promptly and without unreasonable conditions to reasonable requests by Seller for execution and delivery of any submissions or applications reasonably requested by Seller that are required to be filed by or on behalf of the Company with respect to the Seller Remediation Activities;

(vi)     Seller shall promptly provide the Company with copies of significant reports, plans, correspondence and other substantive communications received by or on behalf of Seller from or submitted by or on behalf of Seller to a Governmental Authority with respect to the Seller Remediation Activities;

(vii)     The Company shall promptly provide Seller with copies of all reports, plans, correspondence and other substantive communications received by or on behalf of the Company from or submitted by or on behalf of the Company to a Governmental Authority with respect to the Seller Remediation Activities;

(viii)     Seller shall be responsible for transportation and offsite disposition of solid wastes generated in connection with Seller Remediation Activities and required to be managed offsite; and

(ix)     To the extent that Seller Remediation Activities include land use or institutional use restrictions or engineering controls consistent with an Acceptable Corrective Action Method, the Company shall (at Seller’s cost and expense) execute such commercially reasonable agreements embodying such restrictions as may be required by a Governmental Authority in order to bind the Company and any subsequent owners of any of the Assets to such land use or institutional use restrictions or engineering controls.

(c)     In the event of a Company Assumption, Seller shall coordinate with the Company to transition responsibility for such Corrective Action to the Company. Seller shall promptly provide the Company with copies of all reports, studies, plans, data, correspondence and notices relating to the assumed Corrective Action. For the avoidance of doubt, Seller’s indemnification obligations pursuant to Section 5.02 shall terminate with respect to any Corrective Action that is the subject of a Company Assumption, and Seller shall have no further obligation to indemnify, defend or hold Buyer harmless for such Corrective Action pursuant to Section 5.02.

(d)     In the event the Company plans after the Closing to conduct construction activity which will or may cause disturbance of soils, sediment or other media containing Hazardous Materials (“Construction Activity”) for which Seller may be obligated to conduct Seller Remediation Activities, the Company shall consult with Seller prior to such construction activity and to consider in good faith Seller’s requests and comments with respect to Remediation methods and location of construction, all to the extent reasonably practicable and consistent with an Acceptable Corrective Action

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Method and that do not unreasonably interfere with the Company's proposed construction activity. Notwithstanding anything in this Environmental Agreement to the contrary, Seller shall not have any liability to indemnify, defend or hold Buyer Indemnified Parties harmless pursuant to Section 5.02 for Corrective Action (or other Losses related thereto) required or incurred as a result of Construction Activity to the extent such Corrective Action would not be required (or related Losses incurred) in the event the Construction Activity did not occur.

(e)     If a Release shall occur or is continuing after the Closing at a location or in an amount not readily distinguishable from an Environmental Condition existing prior to the Closing for which Seller is required to indemnify, defend and hold harmless a Buyer Indemnified Party pursuant to Section 5.02, then the Company shall be responsible for the incremental costs incurred for the Remediation of the post-Closing Release as compared to the costs that would otherwise have been incurred to Remediate such pre-Closing Environmental Condition. The Company and Seller shall negotiate in good faith to allocate all respective obligations arising out of such pre-Closing Environmental Condition and post-Closing Release in question in an equitable manner, which allocation shall take into consideration and reflect all pertinent facts, which pertinent facts may include: (i) the quantity or volume of Hazardous Materials present immediately prior to such post-Closing Release, and present as a result of the post-Closing Release; (ii) differences, if any, in the composition of the Hazardous Materials present immediately prior to such post-Closing Release, and present as a result of the post-Closing Release; and (iii) if and to what extent the post-Closing Release has impacted geographical areas not impacted by the pre-Closing Environmental Condition prior to the post-Closing Release. Seller shall control the Remediation of such commingled Environmental Conditions until Seller’s obligation to indemnify, defend and hold harmless for the pre-Closing Environmental Condition terminates.

(f)     The Company shall not cause, suffer or permit the waiver, modification, suspension or termination of any obligation of BHP Hawaii or BHP Pacific to conduct and pay for Remediation Activities at, on, under or within the Real Property Interests or the Pipeline ROW Interests pursuant to the BHP Environmental Agreement and the Company shall use Commercially Reasonable Efforts to assist Seller to enforce BHP Hawaii’s and BHP Pacific’s obligations to conduct and pay for such Remediation Activities under the BHP Environmental Agreement to the extent that such obligations exist as of the date of this Environmental Agreement.

(g)     Simultaneously with the execution hereof, Seller will provide Buyer with a list of all third parties currently conducting any Corrective Action at any Asset.

(h)     In the event the Company is required pursuant to Environmental Laws to continue Remediation Activities beyond or subsequent to the conclusion of any Seller Remediation Activities, then Seller shall coordinate with the Company to transition responsibility for such Remediation Activities to the Company. Seller shall promptly provide the Company with copies of all reports, studies, plans, data, correspondence and notices relating to the assumed Remediation Activities.

4.02     Closure and Anticipated Use.

(a)     With respect to any Corrective Action that Seller is responsible for under this Environmental Agreement, Seller (and its Affiliates) shall only be obligated to implement and complete such Corrective Action as is necessary to obtain Closure, subject to the limitations of Section 5.02. Unless terminated earlier, Seller’s obligations to perform such Corrective Action shall be deemed satisfied and shall terminate once Closure is obtained, and Seller shall have no obligation to perform further Corrective Action with respect to the Environmental Condition or Release to which the Corrective Action relates, provided that receipt of Closure shall not impact any other Obligations as between Buyer and Seller, even if such Obligations arise out of such Environmental Condition or Release.

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(b)     Seller shall not be required to address contamination beyond the Acceptable Corrective Action Method. The Company shall be responsible for any incremental cost associated with changes in Environmental Laws or a more restrictive ongoing use of the Refinery or the other Assets (i.e. commercial or residential use).

4.03     Environmental Testing.

(a)     Until the expiration of Seller’s obligation to conduct Seller Remediation Activities, or until the Company provides notice of a Company Assumption pursuant to Section 4.01(a) (but only to the extent necessary to conduct the Corrective Action that is subject to the Company Assumption), the Company shall not directly or indirectly, initiate or conduct Environmental Testing of the Assets. Notwithstanding the preceding sentence, the Company may conduct Environmental Testing of the Assets in the event (i) such Environmental Testing is performed in the ordinary course of business of the Company such as geophysical studies of building foundations or in connection with construction, remodeling or demolition and rebuild work on Assets, (ii) the Company or its Affiliates are ordered or directed to conduct such Environmental Testing by any Governmental Authority having jurisdiction thereof, (iii) such Environmental Testing is conducted as a result of and reasonably necessary to respond to a Release that occurs after the Closing, (iv) there is reasonable evidence that such Environmental Testing is required by applicable Environmental Laws then in effect and interpreted, or (v) such Environmental Testing is conducted as a result of any written Claim by a Person other than a Buyer Indemnified Party. For the avoidance of doubt, the Company may at any time(s) conduct non-intrusive investigations of Environmental Conditions of the Assets, including Phase I environmental site assessments.

(b)     Prior to engaging in any Environmental Testing, the Company shall provide Seller with reasonable advance written notice so that Seller may, at its own expense, observe such activities and obtain any split samples it may desire. The Company shall provide Seller with copies of all written, non-privileged reports prepared by third parties related to Environmental Testing. In the event that exigent circumstances (such as responding to a Release) do not allow for reasonable advance written notice of Environmental Testing, the Company will make a good faith attempt to orally advise Seller of such Environmental Testing and shall, within a reasonable time thereafter, provide written notice to Seller describing the Environmental Testing that was conducted.

ARTICLE V

INDEMNIFICATION; SURVIVAL

5.01     Survival. Subject to the limitations and other provisions of this Environmental Agreement, (a) Seller’s representations and warranties contained in Article II shall survive the Closing and shall remain in full force and effect for a period of eighteen (18) months after the Closing Date, and until the resolution of the indemnification Claims received by the Indemnifying Party in accordance with the provisions hereof prior to the expiration of the relevant time period, and (b) each covenant and agreement of the Parties contained in this Environmental Agreement which by its terms requires performance after the Closing Date shall survive the Closing Date and shall remain in full force and effect until such covenant or agreement is fully performed.

5.02     Indemnification Provisions for the Benefit of Buyer.

(a)     Subject to the other provisions of this Article V, Seller shall indemnify, defend, save and hold the Buyer Indemnitees harmless from and against any Claims and Losses actually suffered or incurred by them to the extent arising out of or related to:

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(i)     the breach of any representation or warranty of Seller contained in this Environmental Agreement;

(ii)     all Corrective Action relating to Pre-Existing Environmental Conditions other than a Company Assumption (except to the extent addressed specifically in Sections 5.02(a)(v) or 5.02(a)(vi)), to the extent and pursuant to the procedures described in Section 4.01; provided that if the Company causes or permits a change in the use of Assets from industrial use after the Closing, then Seller shall not be required to incur any cost or make any expenditure with respect to Seller Remediation Activities related to such property greater than that which would have been required if such property had continued in its current use as of the Closing Date (i.e., industrial);

(iii)     Third Party Claims arising under Environmental Laws (as in effect and as interpreted as of the Closing Date) for personal injury or property damage to the extent arising out of or relating to Releases of Hazardous Materials that occur from the ownership, operation or use of the Assets by the Company prior to the Closing Date;

(iv)     except with respect to the Hawaii Consent Decree (which is addressed specifically in Section 5.02(a)(viii)), any fine, penalty or other cost assessed by a Government Authority in connection with violations of Environmental Laws by the Company prior to the Closing Date;

(v)     the Refinery Groundwater Remediation to the extent and pursuant to the procedures described in Section 4.01;

(vi)     the replacement of underground storage tanks at the Retail Assets listed on Schedule 3.04, including Corrective Action relating to Pre-Existing Environmental Conditions identified at the time of such tank replacements other than a Company Assumption;

(vii)     any fines or penalties imposed on the Company arising from the Hawaii Consent Decree to the extent related to the acts or omissions of Seller or the Company prior to the Closing Date; and

(viii)     the Pearl City Superfund Site, including the presence or removal of any equipment located thereon, including any storage tanks or associated piping.

(b)     No Claim may be asserted nor may any Proceeding be commenced against Seller pursuant to this Section 5.02 unless written notice of such Claim or Proceeding is received by Seller describing in reasonable detail the facts and circumstances with respect to the subject matter of such Claim or Proceeding, and with respect to Claims or Proceedings based on the breach of any representation or warranty, on or prior to the date such representation or warranty ceases to survive as set forth in Section 5.01; provided, however, that no Claim may be asserted nor may any Proceeding be commenced by Buyer against Seller arising out of or related to a breach of any representation or warranty of which Buyer had Knowledge on or prior to the Closing Date and for which Buyer failed to deliver a Breach Notice in accordance with Section 2.02. If a Buyer Indemnitee has recovered any Losses pursuant to one subsection of this Section 5.02(a), such Buyer Indemnitee shall not be entitled to recover the same Losses under another subsection of this Section 5.02(a).

(c)     No Claim may be made against Seller for indemnification pursuant to Section 5.02(a)(i-iv) with respect to any individual action, occurrence or event subject to the

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indemnifications thereunder (or group of related actions, occurrences or events) unless such individual action, occurrence or event exceeds $5,000 for a Retail Asset, $25,000 for a Logistics Asset and $100,000 for the Refinery (individually, each as applicable, the “De Minimis Amount”) (nor shall any Loss below such De Minimis Amounts be applied to or considered for purposes of calculating the aggregate amount of the Buyer Indemnitees’ Losses).

(d)     No Claim may be made against Seller for indemnification pursuant to Section 5.02(a)(i-iv) unless the aggregate amount of all Losses of the Buyer Indemnitees with respect to Section 5.02(a)(i-iv) (excluding individual Losses less than the De Minimis Amounts) shall exceed an amount equal to $1,000,000 (the “Environmental Deductible”), after which point Seller shall be obligated only to indemnify the Buyer Indemnitees from and against such aggregate Losses (excluding individual Losses less than the De Minimis Amounts) in excess of the Environmental Deductible.

(e)     The maximum amount that Seller shall be required to pay pursuant to Section 5.02(a)(i)-(v) and for Corrective Actions relating to Pre-Existing Environmental Conditions pursuant to 5.02(a)(vi) in respect of all Losses by all Buyer Indemnitees shall equal $15,000,000 (the “Environmental Cap”), after which point Seller will have no Obligation to indemnify the Buyer Indemnitees from and against further such Losses; provided, however, that Seller’s obligations to pay pursuant to Section 5.02(a)(vii)-(viii) shall be excluded from the Environmental Cap. In addition, Seller shall have as an affirmative defense to any claim for indemnity under Section 5.02(a)(i) arising out of or related to a breach of any representation or warranty of Seller that Buyer had Knowledge of such breach on or prior to the Closing Date and Buyer failed to deliver a Breach Notice in accordance with Section 2.02.

(f)     All Claims made against Seller for indemnification pursuant to clauses (ii)- (viii) of Section 5.02(a), other than Claims for reasonable third party capital expenditures incurred by the Company for the construction, installation and commissioning of the Capital Projects pursuant to Section 3.03(c), must be made to Seller on or before the third (3rd) annual anniversary of the Closing Date and to the extent such Claims are made on or before such date, then Seller’s obligation to indemnify for such Claims shall remain in effect beyond such date.

(g)     For avoidance of doubt, Section 5.02(a)(iii) shall not apply to Third Party Claims arising out of a post-Closing Date fire, explosion or catastrophic incident allegedly occurring as a result of any pre-Closing non-compliance with Environmental Laws.

(h)     Seller’s indemnification obligations pursuant to Section 5.02(a) shall automatically terminate and be of no further force or effect in the event and to the extent (i) the Company sells, transfers, leases to a third party or exchanges any of the Assets (in which case such indemnification obligations shall terminate only with respect to those Assets that are sold, transferred, leased or exchanged and shall otherwise remain in full force and effect) or (ii) there is a Change in Control after the Closing; provided, however, that such limitations on indemnification would not apply to (A) transfers to a wholly owned subsidiary of the Company or (B) transfers of Owned Real Property parcels lying within the boundary fence line of the Refinery provided such Owned Real Property parcels are subject to deed restrictions reasonably acceptable to Seller that restrict the use of such parcels to industrial uses.

(i)     Seller’s indemnification obligations pursuant to this Environmental Agreement shall be reduced in the event and to the extent amounts for such indemnified obligations are taken into account as a liability for purposes of the Final Net Working Capital.

(j)     Amounts paid by Seller that are counted against or applied toward the Indemnification Deductible or the Indemnification Cap (as such terms are defined in the Purchase

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Agreement) shall not count against and be applied toward the Environmental Deductible and the Indemnification Cap and vice versa, amounts paid by Seller that are counted against or applied toward the Environmental Deductible or the Environmental Cap shall not count against and be applied toward the Indemnification Deductible and the Indemnification Cap.

5.03     Indemnification Provisions for the Benefit of Seller.

(a)     Subject to the other provisions of this Article V, Buyer and the Company agree, jointly and severally, to indemnify, defend, save and hold the Seller Indemnitees harmless from and against any Claims and Losses actually suffered or incurred by them to the extent arising out of or related to:

(i)     the breach of any covenants or agreements of Buyer contained in this Environmental Agreement;

(ii)     the Company Environmental Liabilities to the extent not indemnified by Seller pursuant to Section 5.02; and

(iii)     any Claims or Losses under Environmental Laws arising out of or related to the ownership of the TH Interest, the Company, the Acquired Subsidiary, or the Assets after the Closing Date, or the operation of the Business after the Closing Date.

(b)     No Claim may be asserted nor may any Proceeding be commenced against Buyer or the Company pursuant to this Section 5.03 unless written notice of such Claim or Proceeding is received by Buyer or the Company describing in reasonable detail the facts and circumstances with respect to the subject matter of such Claim or Proceeding. If a Seller Indemnitee has recovered any Losses pursuant to one subsection of this Section 5.03(a), such Seller Indemnitee shall not be entitled to recover the same Losses under another subsection of this Section 5.03(a).

(c)     No Claim may be made against Buyer or the Company for indemnification pursuant to clause (i) of Section 5.03(a): (i) with respect to any individual action, occurrence or event subject to the indemnifications thereunder (or group of related actions, occurrences or events) unless the such individual action, occurrence or event exceeds the respective De Minimis Amounts (nor shall any Claim or Loss below such threshold be applied to or considered for purposes of calculating the aggregate amount of Seller Indemnitees’ Losses) and (ii) unless the aggregate amount of all Claims and Losses of Seller Indemnitees with respect to clause (i) of Section 5.03(a) shall exceed the Indemnification Deductible (after which Buyer and the Company shall be obligated only to indemnify Seller Indemnitees from and against aggregate Losses in excess of the Indemnification Deductible). The maximum amount that Buyer and the Company shall be required to pay pursuant to clauses (i) of Section 5.03(a) in respect of all Claims and Losses by all Seller Indemnitees shall equal $15 million, after which point Buyer and the Company will have no Obligation to indemnify Seller Indemnitees from and against further such Claims or Losses. For the avoidance of doubt, any Claims or Losses to be paid by Buyer or the Company pursuant to Section 5.03(a)(ii) is not subject to the limitations of this Section 5.03(c).

5.04     Indemnification Procedures; Matters Involving Third Parties.

(a)     A Seller Indemnitee or Buyer Indemnitee, as the case may be (for purposes of this Section 5.04, an “Indemnified Party”), shall give the indemnifying party under Section 5.02 and Section 5.03, as applicable (for purposes of this Section 5.04, an “Indemnifying Party”), prompt written notice of any matter which it has determined has given or could give rise to a right of indemnification under this Environmental Agreement stating the nature of the Claim and an estimated or actual amount of

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the Loss, if known, and method of computation thereof, containing a reference to the provisions of this Environmental Agreement in respect of which such right of indemnification is claimed or arises; provided, however, that the failure to provide such notice shall not release the Indemnifying Party from its Obligations under this Article V except to the extent, and only to the extent, the Indemnifying Party is prejudiced by such failure or to the extent the survival period, if applicable, expires pursuant to Section 5.01 prior to the giving of such notice.

(b)     If any third party shall notify an Indemnified Party with respect to any matter (a “Third-Party Claim”) that may give rise to a claim for indemnification against the Indemnifying Party under this Article V, then the Indemnified Party shall promptly (and in any event within five (5) Business Days after receiving notice of the Third-Party Claim) notify the Indemnifying Party thereof in writing; provided, however, that the failure to provide such notice shall not release the Indemnifying Party from its Obligations under this Article V except to the extent, and only to the extent, the Indemnifying Party is prejudiced by such failure.

(c)     The Indemnifying Party will have the right to assume and thereafter conduct the defense of the Third-Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party; provided, that the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third-Party Claim without the prior written consent of the Indemnified Party (not to be unreasonably withheld) unless the judgment or proposed settlement involves only the payment of money damages and does not impose an injunction or other equitable relief upon the Indemnified Party or would reasonably be expected to have a material adverse effect on the Indemnified Party.

(d)     Unless and until the Indemnifying Party assumes the defense of the Third Party Claim as provided in Section 5.04(c), the Indemnified Party may defend against the Third- Party Claim in any manner it may reasonably deem appropriate.

(e)     In no event will the Indemnified Party consent to the entry of any judgment or enter into any settlement with respect to the Third-Party Claim without the prior written consent of the Indemnifying Party (not to be unreasonably withheld).

(f)     If the Parties are unable to agree as to issues related to Seller’s environmental indemnification, then an independent and experienced third party environmental consulting firm that is mutually agreeable to Seller and Buyer shall evaluate and determine the non-legal issues that are in dispute.

5.05     Determination of Losses.

(a)     The Losses giving rise to any indemnification Obligation hereunder shall be reduced by any insurance proceeds actually received by the Indemnified Party as a result of the events giving rise to the claim for indemnification, net of any expenses related to the receipt of such proceeds, including retrospective premium adjustments, if any. The amount of the indemnity payment shall be computed by taking into account the timing of the loss or payment, as applicable, at the Applicable Rate from the date the Indemnified Party provides notice of the Loss to the Indemnifying Party until the date paid. Upon the request of the Indemnifying Party, the Indemnified Party shall provide the Indemnifying Party with information sufficient to allow the Indemnifying Party to calculate the amount of the indemnity payment in accordance with this Section 5.05.

(b)     An Indemnified Party shall take all reasonable steps to mitigate damages in respect of any claim for which it is seeking indemnification and shall use reasonable efforts to avoid any

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costs or expenses associated with such claim and, if such costs and expenses cannot be avoided, to minimize the amount thereof; provided, that an Indemnified Party shall have no Obligation to make a claim for recovery against any insurer of such Indemnified Party with respect to any such Losses.

(c)     For purposes of determining whether a breach has occurred and calculating a Loss in connection with a claim for indemnification under this Article V, each of the representations and warranties that contains any qualifications as to materiality or “Material Adverse Effect” will be determined with regard to such materiality or “Material Adverse Effect” qualifier contained in the terms of such representation and warranty; provided, however, that if the representation or warranty is breached (after taking into consideration such materiality or “Material Adverse Effect” qualifier) then the amount of Losses arising out of such breach will be determined without regards to such materiality or “Material Adverse Effect” qualifier.

5.06     No Multiple Recoveries. Any liability for indemnification hereunder shall be determined without duplication of recovery by reason of the state of facts giving rise to such liability constituting a breach of more than one representation, warranty or covenant.

5.07     Limitations on Liability/Exclusive Remedies.

(a)     NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS ENVIRONMENTAL AGREEMENT, NO PARTY HERETO SHALL BE ENTITLED TO RECOVER FROM ANY OTHER PARTY HERETO OR ANY OF SUCH PARTY’S AFFILIATES ANY AMOUNT IN RESPECT OF EXEMPLARY, PUNITIVE, SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES, INCLUDING LOST PROFITS; EXCEPT, HOWEVER, WITH RESPECT TO ANY OF THE FOREGOING PAID OR OWING TO A THIRD PARTY WITH RESPECT TO A THIRD PARTY CLAIM, WHICH DAMAGES SHALL BE CONSIDERED PART OF LOSSES AND SHALL BE COVERED BY THE INDEMNIFICATIONS SET FORTH IN THIS ARTICLE V.

(b)     ALL RELEASES, DISCLAIMERS, LIMITATIONS ON LIABILITY AND INDEMNITIES IN THIS ENVIRONMENTAL AGREEMENT, INCLUDING THOSE IN THIS ARTICLE V, SHALL APPLY EVEN IN THE EVENT OF THE SOLE, JOINT OR CONCURRENT, ACTIVE OR PASSIVE NEGLIGENCE, STRICT LIABILITY OR FAULT OF THE PARTY WHOSE LIABILITY IS RELEASED, DISCLAIMED, LIMITED OR INDEMNIFIED.

5.08     Governing Law. This Environmental Agreement shall be construed (both as to validity and performance), interpreted and enforced in accordance with, and governed by, the Laws of the State of Texas, without regard to conflicts of laws rules or principles as applied in Texas.

5.09     Jurisdiction; Consent to Service of Process; Waiver. Each of the Parties agrees that it shall bring any Proceeding in respect of any claim arising out of or related to this Environmental Agreement, whether in tort or contract or at law or in equity, exclusively in any Federal or state court in Harris County, Texas and solely in connection with claims arising under such agreement or instrument or the transactions contained in or contemplated by such agreement or instrument, (i) irrevocably submits to the exclusive jurisdiction of such courts, (ii) waives any objection to laying venue in any such Proceeding in such courts, (iii) waives any objection that such courts are an inconvenient forum or do not have jurisdiction over it and (iv) agrees that service of process upon it may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to it at its address specified in Section 6.02. The foregoing consents to jurisdiction and service of process shall not constitute general consents to service of process in the State of Texas for any purpose except as provided herein and shall not be deemed to confer rights on any Person other than the Parties. EACH

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PARTY ACKNOWLEDGES AND AGREES THAT ANY DISPUTE IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS ENVIRONMENTAL AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS ENVIRONMENTAL AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT: (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER; (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER; (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY; AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS ENVIRONMENTAL AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 5.09.

ARTICLE VI

MISCELLANEOUS PROVISIONS

6.01     Amendment. This Environmental Agreement (including this Section 6.01) may not be amended except by an instrument in writing executed and delivered by the Parties. The failure of any Party at any time or times to require performance of any provision hereof shall in no manner affect the right at a later time to enforce the same. No waiver by any Party of any condition, or of any breach of any term, covenant, representation or warranty contained in this Environmental Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such condition or breach or a waiver of any other condition or of any breach of any other term, covenant, representation or warranty. No course of dealing between or among any Persons having any interest in this Environmental Agreement shall be deemed effective to modify, amend or discharge any part of this Agreement or any rights or obligations of any Person under or by reason of this Environmental Agreement.

6.02     Notices. All notices and other communications that are required to be or may be given pursuant to this Environmental Agreement shall be delivered in accordance with the notice provisions set forth in Section 12.2 of the Purchase Agreement.

6.03     Expenses. Except as otherwise expressly provided herein, all costs and expenses incurred by Seller or its Affiliates in connection with this Environmental Agreement and the transactions contemplated hereby shall be paid by Seller, and all costs and expenses incurred by Buyer or its Affiliates in connection with this Environmental Agreement and the transactions contemplated hereby shall be paid by Buyer.

6.04     Headings. The headings contained in this Environmental Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Environmental Agreement.

6.05     No Strict Construction. The Parties acknowledge that each of them has been represented by counsel in connection with this Environmental Agreement and the transactions contemplated hereby. Notwithstanding the fact that this Environmental Agreement has been drafted or prepared by one of the Parties, the Parties confirm that they and their respective counsel have reviewed, negotiated and adopted this Environmental Agreement as the joint agreement and understanding of the

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Parties, and the language used in this Environmental Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Person and any rule of Law that would require interpretation of any claimed ambiguities in this Environmental Agreement against the Party that drafted it has no application and is expressly waived.

6.06     Severability. If any term or other provision of this Environmental Agreement is invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other conditions and provisions of this Environmental Agreement shall nevertheless remain in full force and effect, and the invalid, illegal or unenforceable provision shall be reformed to the minimum extent required to render such provision valid, legal and enforceable and in a manner so as to preserve the economic and legal substance of the transactions contemplated hereby to the fullest extent permitted by Law. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Environmental Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.

6.07     Assignment. This Environmental Agreement shall not be assigned by any Party (including by operation of Law or otherwise) except with the prior written consent of the other Party. Any purported assignment of this Environmental Agreement in violation of this Section 6.07 shall be null and void.

6.08     Parties in Interest. This Environmental Agreement shall be binding upon and inure solely to the benefit of each Party and its permitted successors and assigns, and nothing in this Environmental Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Environmental Agreement.

6.09     Failure or Indulgence Not Waiver. No failure or delay on the part of any Party in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty, covenant or agreement herein, nor shall any single or partial exercise of any such right preclude other or further exercise thereof or of any other right.

6.10     Disclosure Schedules. Any matter disclosed by Seller in the Schedules pursuant to any Section of this Environmental Agreement shall be deemed to have been disclosed by Seller for purposes of each other Section of this Environmental Agreement to which such disclosure is relevant as and to the extent that the relevance of such matter to such other Section is readily apparent on the face of such disclosure. The listing (or inclusion of a copy) of a document or other item in the Schedules shall be adequate to disclose an exception to a representation or warranty made herein if the nature and relevance of such exception is readily apparent from the listing (or inclusion of a copy) of such document.

6.11     Time of the Essence. Time is of the essence in this Environmental Agreement. If the date specified in this Environmental Agreement for giving any notice or taking any action is not a Business Day (or if the period during which any notice is required to be given or any action taken expires on a date which is not a Business Day), then the date for giving such notice or taking such action (and the expiration date of such period during which notice is required to be given or action taken) shall be the next day which is a Business Day.

6.12     Entire Agreement. This Environmental Agreement, the Purchase Agreement and the Related Agreements (together with the Exhibits, the Disclosure Schedules and the other Schedules hereto and thereto) constitute the entire agreement of the parties hereto and thereto, and supersede all prior agreements and undertakings, both written and oral, among the Parties, with respect to the subject matter hereof (other than the Confidentiality Agreement, which shall continue in full force and effect).

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6.13     Specific Performance. Each Party acknowledges that the breach of this Environmental Agreement by the other Party would cause irreparable damage to such Party and that money damages or other legal remedies would not be an adequate remedy for any such damages. Therefore, the obligations of each Party under this Environmental Agreement shall be enforceable by a decree of specific performance and appropriate injunctive relief may be applied for and granted in connection therewith, without the requirement to post any bond or security in connection therewith. Such remedies shall, however, be cumulative and not exclusive and shall be in addition to any other remedies which any Party may have under this Environmental Agreement or otherwise.

6.14     Counterparts. This Environmental Agreement may be executed in multiple counterparts and by the different Parties in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Signed counterparts of this Environmental Agreement may be delivered by facsimile and by scanned pdf image; provided that each Party uses Commercially Reasonable Efforts to deliver to each other Party original signed counterparts as soon as possible thereafter.

[Balance of page intentionally left blank]

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The Parties have executed and delivered this Environmental Agreement as of the date first written above.

TESORO CORPORATION

By:____________________________________

     Name:

     Title:

HAWAII PACIFIC ENERGY, LLC (on behalf

of itself and on behalf of the Company)

By:____________________________________

     Name:

     Title:

Environmental Agreement

EX-10.5

Exhibit 10.5

SECOND AMENDED AND RESTATEDMASTER TERMINALLING SERVICES AGREEMENT

This Second Amended and Restated Master Terminalling Services Agreement (the “Agreement”) is executed as of May 3, 2013, to be effective as of the Effective Date, by and among Tesoro Refining & Marketing Company LLC, a Delaware limited liability company (“TRMC”), Tesoro Alaska Company, a Delaware corporation (“TAK” and, together with TRMC, “Tesoro”) and Tesoro Logistics Operations LLC, a Delaware limited liability company (“TLO”).

RECITALS

WHEREAS, by virtue of their indirect ownership interests in Tesoro Logistics LP, TLO’s parent entity (the “Partnership”), each of TAK and TRMC have an economic interest in the financial and commercial success of the Partnership and its operating subsidiary, TLO; and

WHEREAS, the Parties (as defined below and in the case of TRMC, its predecessor corporate entity) entered into an Amended and Restated Master Terminalling Services Agreement as of February 22, 2013, and desire to amend and restate that agreement in its entirety as set forth herein to memorialize the terms of their ongoing commercial relationship.

NOW, THEREFORE, in consideration of the covenants and obligations contained herein, the parties to this Agreement hereby agree as follows:

1. DEFINITIONS

Capitalized terms used throughout this Agreement shall have the meanings set forth below, unless otherwise specifically defined herein.

“Additive Facilities” has the meaning set forth in Section 17(a).

“Additized Gasoline” has the meaning set forth in Section 18(a).

“Adjusted Minimum Volume Commitment” means Tesoro’s Minimum Throughput Commitment, adjusted by deducting the applicable Stipulated Volume for each Terminal that is no longer subject to this Agreement at any time.

“Agreement” has the meaning set forth in the Preamble.

“Ancillary Services” means the following services to be provided by TLO to Tesoro: ethanol receipt (rail and truck), ethanol storage, ethanol blending, generic gasoline additization, jet additization, jet certification, lubricity/conductivity additization, Product receipt (barge), proprietary additive additization, red dye additization, transmix loading (truck) and winter flow improver additization.

“Applicable Law” means any applicable statute, law, regulation, ordinance, rule, determination, judgment, rule of law, order, decree, permit, approval, concession, grant, franchise, license, requirement, or any similar form of decision of, or any provision or condition

of any permit, license or other operating authorization issued by any Governmental Authority having or asserting jurisdiction over the matter or matters in question, whether now or hereafter in effect.

“Barrel” means a volume equal to 42 U.S. gallons of 231 cubic inches each, at 60 degrees Fahrenheit under one atmosphere of pressure.

“Base Gasoline” has the meaning set forth in Section 18(a).

“Blending Instructions” has the meaning set forth in Section 21(c).

“bpd” means Barrels per day.

“Business Day” means a day, other than a Saturday or Sunday, on which banks in New York, New York are open for the general transaction of business.

“Capacity Resolution” has the meaning set forth in Section 32(c).

“Carrier” means a third-party agent or contractor hired by Tesoro, who is in the business of transporting Products via tank trucks.

“Commencement Date” has the meaning set forth in Section 2.

“Confidential Information” means all confidential, proprietary or non-public information of a Party, whether set forth in writing, orally or in any other manner, including all non-public information and material of such Party (and of companies with which such Party has entered into confidentiality agreements) that another Party obtains knowledge of or access to, including non-public information regarding products, processes, business strategies and plans, customer lists, research and development programs, computer programs, hardware configuration information, technical drawings, algorithms, know-how, formulas, processes, ideas, inventions (whether patentable or not), trade secrets, schematics and other technical, business, marketing and product development plans, revenues, expenses, earnings projections, forecasts, strategies, and other non-public business, technological, and financial information.

“Curtailment Fee” has the meaning set forth in Section 30(b).

“DCA” has the meaning set forth in Section 18(a).

“Effective Date” means May 1, 2013.

“EPA” has the meaning set forth in Section 14(a).

“Ethanol Services” has the meaning set forth in Section 21(a).

“Excess Amounts” means, for any Month, the aggregate volumes throughput by Tesoro in excess of the Minimum Throughput Commitment, multiplied by the weighted average Terminalling Service Fee paid by Tesoro during such Month.

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“Extension Period” has the meaning set forth in Section 3.

“First Offer Period” has the meaning set forth in Section 34(b).

“Force Majeure” means circumstances not reasonably within the control of TLO and which, by the exercise of due diligence, TLO is unable to prevent or overcome that prevent performance of TLO’s obligations, including: acts of God, strikes, lockouts or other industrial disturbances, wars, riots, fires, floods, storms, orders of courts or Governmental Authorities, explosions, terrorist acts, breakage, accident to machinery, equipment, storage tanks or lines of pipe, inability to obtain or unavoidable delays in obtaining material or equipment and other similar events.

“Force Majeure Notice” has the meaning set forth in Section 31(a).

“Force Majeure Period” has the meaning set forth in Section 31(a).

“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.

“Initial Term” has the meaning set forth in Section 3.

“LAC” has the meaning set forth in Section 18(a).

“Minimum Throughput Commitment” means the aggregate Stipulated Volume (on a monthly average basis) in bpd as set forth for all Terminals on Schedule A attached hereto; provided however, that the Minimum Throughput Commitment during the Month in which the Commencement Date occurs shall be prorated in accordance with the ratio of the number of days including and following the Commencement Date in such Month to the total number of days in such Month.

“Month” means a calendar month.

“Notice Period” has the meaning set forth in Section 30(a).

“Offer Period” has the meaning set forth in Section 32(g).

“OPIS” has the meaning set forth in Section 8(a).

“Partnership” has the meaning set forth in the Recitals of this Agreement.

“Partnership Change of Control” means Tesoro Corporation ceases to possess, directly or indirectly, the power to direct or cause the direction of the management and policies of the general partner of the Partnership, whether through ownership of voting securities, by contract, or otherwise.

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“Party” or “Parties” means that each of TAK, TRMC and TLO is a “Party” and collectively are the “Parties” to this Agreement.

“Person” means any individual, partnership, limited partnership, joint venture, corporation, limited liability company, limited liability partnership, trust, unincorporated organization or Governmental Authority or any department or agency thereof.

“Product” or “Products” means the petroleum products, ethanol or biofuels, Transmix and intermediate products described herein as being handled under this Agreement.

“Receiving Party Personnel” has the meaning set forth in Section 37(d).

“Red Dye” has the meaning set forth in Section 19(a).

“Refineries” means the Tesoro refineries located in Anacortes, Washington; Kenai, Alaska; Mandan, North Dakota; Salt Lake City, Utah; and Martinez and Los Angeles, California.

“Restoration” has the meaning set forth in Section 32(b).

“Right of First Refusal” has the meaning set forth in Section 32(g).

“Shortfall Payment” has the meaning set forth in Section 7(b).

“Stipulated Volume” means the stipulated volume in bpd as set forth for each Terminal on Schedule A attached hereto.

“Storage Contract” has the meaning set forth in Section 32(g).

“Subject Tank” has the meaning set forth in Section 32(g).

“Suspension Notice” has the meaning set forth in Section 30(a).

“Tank Heels” consist of the minimum quantity of Product which either (a) must remain in a tank during all periods when the tank is available for service to keep the tank in regulatory compliance or (b) is necessary for physical operation of the tank. 

“TAK” has the meaning set forth in the Preamble.

“Term” has the meaning set forth in Section 3.

“Terminalling Right of First Refusal” has the meaning set forth in Section 34(b).

“Terminalling Service Fee” means, for a particular Terminal, for any Month during the Term, the total fee per Barrel of throughput paid by Tesoro during that Month for terminalling, dedicated storage and Ancillary Services at that Terminal.

“Terminals” means the Terminals set forth on Schedule A attached hereto.

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“Terminal Service Order” has the meaning set forth in Section 5(a).

Termination Notice” has the meaning set forth in Section 31(a).

“Tesoro” has the meaning set forth in the Preamble.

“Tesoro Termination Notice” has the meaning set forth in Section 31(b).

“TLO” has the meaning set forth in the Preamble.

“Transmix” has the meaning set forth in Section 13.

“TRMC” has the meaning set forth in the Preamble.

2. COMMENCEMENT DATE

The Parties agree that the “Commencement Date” was April 26, 2011.

3. TERM

The initial term of this Agreement shall commence on the Commencement Date and shall continue through April 30, 2021 (the “Initial Term”); provided, however, that Tesoro may, at its option, extend the Initial Term for up to two (2) renewal terms of five (5) years each (each, an “Extension Period”) by providing written notice of its intent to TLO no less than three hundred sixty-five (365) calendar days prior to the end of the Initial Term or the then-current Extension Period. The Initial Term, and any extensions of this Agreement as provided above, shall be referred to herein as the “Term.”

4. MINIMUM THROUGHPUT COMMITMENT

(a)During the Term and subject to the terms and conditions of this Agreement, Tesoro shall throughput the Minimum Throughput Commitment at the Terminals, and TLO shall make available to Tesoro commingled storage and throughput capacity at each respective Terminal, sufficient to allow Tesoro to throughput the Stipulated Volume of Products at such Terminal.

(b)Allocation of storage and throughput capacity for separate Products at each Terminal shall be in accordance with current practices, or as otherwise may be set forth in a Terminal Service Order, as described below.

(c)Tesoro may throughput volumes in excess of its Minimum Throughput Commitment, up to the then-available capacity of each Terminal, net of any third-party commitments, as determined by TLO at any time, which allocation of any excess capacity shall be in accordance with current practices, or as otherwise may be set forth in a Terminal Service Order, as described below.

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(d)In the event at any time this Agreement is terminated as to one or more Terminals, as provided herein, then the Minimum Throughput Commitment shall thereafter be adjusted to be the Adjusted Minimum Volume Commitment.

5. TERMINAL SERVICE ORDERS

(a)In addition to the throughput subject to the Minimum Volume Commitment set forth in this Agreement, TLO and Tesoro may enter into terminal service orders substantially in the form attached hereto as Exhibit 1 (each, a “Terminal Service Order”). Upon a request by Tesoro pursuant to this Agreement or as deemed necessary or appropriate by TLO in connection with the services to be delivered pursuant hereto, TLO shall generate a Terminal Service Order to set forth the specific terms and conditions for providing the applicable services described therein and the applicable fees to be charged for such services. No Terminal Service Order shall be effective until fully executed by both TLO and Tesoro.

(b)Items available for inclusion on a Terminal Service Order include, but are not limited to, the following:

(i)allocation of storage and throughput capacity for separate Products at each Terminal, other than pursuant to current practices;

(ii)per-Barrel fees for the volumes Tesoro throughputs at the Terminals;

(iii)if dedicated storage tanks are to be utilized and the fees payable by Tesoro therefor;

(iv)any allocation of excess capacity, other than pursuant to current practices;

(v)fees to be paid by Tesoro for the use of any allocation of excess capacity;

(vi)any Ancillary Services for each Terminal and the fees for such Ancillary Services;

(vii)any surcharge not otherwise imposed by TLO pursuant to Section 6;

(viii)any capital expenditures and related costs subject to reimbursement pursuant to Section 9;

(ix)any cleaning of tanks or the conversion of a dedicated tank to storage of a different Product pursuant to Section 9 and the fees related thereto;

(x)any Transmix handling fees pursuant to Section 13;

(xi)any special or proprietary additive injection services or higher additive injection rates and the fees for such services pursuant to Sections 16 and 18;

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(xii)any fees to be paid by Tesoro to TLO for lubricity and conductivity additive and injection services (including DCA injection) provided pursuant to Section 17 and 18 for Low Sulfur Diesel/Ultra Low Sulfur Diesel Fuel delivered to trucks for Tesoro’s account;

(xiii)any fees for the operation of special additive equipment described in Section 20;

(xiv)the receipt, storage and blending of ethanol into Tesoro’s gasoline pursuant to Section 21;

(xv)the reimbursement of any costs incurred by TLO for periodic software updates, replacement of loading systems or software or other upgrades pursuant to Section 22; and

(xvi)any dedicated storage to be provided and applicable fees therefor.

(c)Any fees set forth in this Agreement and any Terminal Service Order shall be increased on July 1 of each year of the Term, by a percentage equal to the greater of zero or the positive change in the CPI-U (All Urban Consumers), as reported by the U.S. Bureau of Labor Statistics.

(d)In case of any conflict between the terms of this Agreement and the terms of any Terminal Service Order, the terms of the applicable Terminal Service Order shall govern.

6. SURCHARGES

If, during the Term, any existing laws or regulations are changed or any new laws or regulations are enacted that require TLO to make substantial and unanticipated expenditures (whether capitalized or otherwise) with respect to the Terminals, TLO may impose a monthly surcharge, as set forth in a Terminal Service Order, to cover Tesoro’s pro rata share of the cost of complying with these laws or regulations, based upon the percentage of Tesoro’s use of the services or facilities impacted by such new laws or regulations. TLO and Tesoro 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 level of the monthly surcharge.

7. PAYMENT; SHORTFALL PAYMENTS

(a)TLO shall invoice Tesoro on a monthly basis and Tesoro shall pay all amounts due under this Agreement and any Terminal Service Order (including Shortfall Payments and Curtailment Fees, each as defined herein) no later than ten (10) calendar days after Tesoro’s receipt of TLO’s invoices. Any past due payments owed by Tesoro to TLO shall accrue interest, payable on demand, at the rate of eight percent (8%) per annum from the due date of the payment through the actual date of payment.

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(b)If, during any Month during the Term, Tesoro throughputs aggregate volumes less than the Minimum Throughput Commitment for such Month, then Tesoro shall pay TLO an amount (a “Shortfall Payment”) for any shortfall. Shortfall Payments shall be equal to the weighted average Terminalling Service Fee paid by Tesoro during that Month across all of the Terminals, multiplied by the aggregate monthly shortfall across all Terminals. The dollar amount of any Shortfall Payment paid by Tesoro shall be posted as a credit to Tesoro’s account and may be applied against any Excess Amounts owed by Tesoro during any of the succeeding three (3) Months. For informational purposes only, attached as Exhibit 2 hereto is a sample calculation demonstrating the Shortfall Payment and its application. Credits will be applied in the order in which such credits accrue and any remaining portion of the credit that is not used by Tesoro during the succeeding three (3) Months shall expire (e.g., a credit that accrues in January will be available in February, March and April, will expire at the end of April, and must be applied prior to applying any credit which accrues in February).

(c)If at any time during the Term, any tank, rack or other equipment or facility of TLO that is dedicated to Tesoro or otherwise being used to provide services hereunder, is removed from service for reasons other than routine repair and maintenance, and if removal of such tank, rack or other equipment or facility from service restricts Tesoro from being able to throughput its Stipulated Volume and receive associated Ancillary Services at the Terminal where such tank, rack or other equipment or facility is located, then until such tank, rack or other equipment or facility is restored to service, Tesoro’s Minimum Throughput Commitment shall be reduced by the difference between the Stipulated Volume and the amount that Tesoro can effectively throughput at such location without restriction until such tank, rack or other equipment or facility is restored to service.

8. VOLUME LOSSES

(a)With respect only to the Anchorage, Boise, Burley, Stockton and Vancouver Terminals and on a per Terminal basis, not based on the aggregate of all Terminals, TLO shall bear the risk of any actual volume losses of each Product to the extent that such losses exceed 0.25% of the volumes of such Product received at the Terminal, to be pro rated among users of such Terminal, during any Month during the Term. Volumes and losses of each Product shall be determined and accounted for as of the end of each Month. To the extent that actual losses of any Product are less than 0.25% during any particular Month, Tesoro shall repurchase from TLO the difference between the actual loss and the 0.25% allowance at a price per Barrel for that Product as reported by the Oil Price Information Service (“OPIS”) using the monthly average OPIS unbranded contract rack posting for that Product during the Month in which the volume difference was accounted for. All such sales shall be “AS IS”, “WHERE IS”, without any warranty, express or implied, including warranties of merchantability, fitness or title, all of which are expressly excluded. If volume losses of any Product exceed 0.25% during any particular Month, TLO shall pay Tesoro for the difference between the actual loss and the 0.25% allowance at a price per Barrel for that Product as reported by OPIS using the monthly average OPIS unbranded contract rack posting for that Product during the Month in which the volume difference was accounted for. Deliveries on Saturday, Sunday or federal holidays shall be excluded from the calculation for the applicable Month.

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(b)For all other Terminals, TLO shall have no obligation to measure volume gains and losses and shall have no liability whatsoever for physical losses, except if such losses are caused by the gross negligence or willful misconduct of TLO, as further described in Section 27 herein.

9. REIMBURSEMENT

(a)Tesoro shall reimburse TLO for: (i) the actual cost of any regulatory fees incurred by TLO based on Tesoro’s proportionate share of the actual volumes Tesoro throughputs based upon the percentage of Tesoro’s use of the services or facilities impacted by regulatory fees; (ii) the actual cost of any capital expenditures that TLO agrees to make upon Tesoro’s request pursuant to a Terminal Service Order to provide services hereunder, other than capital expenditures required for TLO to continue to provide those services specified hereunder; and (iii) the actual cost of any third-party fees, including port fees, incurred in connection with carrying out the terms of this Agreement or any Terminal Service Order.

(b)If cleaning of any tanks is performed by TLO at the specific request of Tesoro, a Terminal Service Order shall provide for Tesoro to bear (or reimburse TLO) for all costs to clean, degas or otherwise prepare the tank(s) including, without limitation, the cost of removal, processing, transportation, disposal, of all waste and the cost of any taxes or charges TLO may be required to pay in regard to such waste. For any tanks that are dedicated to Tesoro for segregated storage of Tesoro’s Products as set forth in any Terminal Service Order, Tesoro agrees to reimburse TLO for the reasonable cost of changes necessary to return the segregated storage tanks to TLO on termination of their dedication for segregated storage under this Agreement or any Purchase order, in the same condition as originally received less normal wear and tear. If Tesoro requests that any such dedicated tank be converted to storage of a different Product, then a Purchase order shall provide for Tesoro to be responsible for reimbursing TLO for all costs of such conversion, including all costs to clean, degas or otherwise prepare the tank(s) including, without limitation, the cost of removal, processing, transportation, disposal, of all waste and the cost of any taxes or charges TLO may be required to pay in regard to such waste. Tesoro shall not be responsible to TLO for any throughput fees and dedicated tank storage fees associated with any dedicated storage tanks taken out of service during the period that such tank is out of service.

(c)All of the foregoing reimbursements shall be made in accordance with the payment terms set forth in Section 7(a) herein.

10. CUSTODY TRANSFER AND TITLE

(a)Pipeline

(i)Receipts. For Product received into a Terminal by pipeline, custody of the Product shall pass to TLO at the flange where it enters the Terminal’s receiving line. For receipts of Product at a Terminal rack at Mandan, Salt Lake City or Wilmington, custody shall transfer at the point where the pipeline from the Refinery crosses onto the property controlled by TLO.

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(ii)Deliveries. For Product delivered by a Terminal into pipeline, custody of the Product shall pass to Tesoro at the flange where it exits the Terminal’s delivery line.

(b)Rail Receipts. For Product received by rail, custody shall pass to TLO when the locomotive used to transfer Tesoro’s rail cars to the Terminal is uncoupled from such rail cars at the Terminal.

(c)Truck. For receipts and deliveries to or from trucks, custody shall pass at the flange where the hoses at TLO’s facility interconnect with the truck.

(d)Marine. For receipts and deliveries to or from marine vessel at Vancouver, custody shall pass at the flange where TLO’s facility interconnects with the hoses connected to the marine vessel; for receipts and deliveries to or from marine vessel at Anchorage, custody shall pass at the flange where TLO’s facility interconnects with the Port of Anchorage Valve Yard.

(e)General. Upon re-delivery of any Product to Tesoro’s account, Tesoro shall become solely responsible for any loss, damage or injury to person or property or the environment, arising out of transportation, possession or use of such Product after transfer of custody and the loss allowance provisions hereof shall apply to Product while in TLO’s custody. Title to all Tesoro’s Product received in the Terminals shall remain with Tesoro at all times. Both Parties acknowledge that this Agreement and any Terminal Service Orders represent a bailment of Products by Tesoro to TLO and not a consignment of Products, it being understood that TLO has no authority hereunder to sell or seek purchasers for the Products of Tesoro, except as provided in Section 8 above and Section 13 below. Tesoro hereby warrants that it shall, at all times, have good title to and the right to deliver, throughput, store and receive Products pursuant to the terms of this Agreement or any applicable Terminal Service Order.

11. PRODUCT QUALITY

(a)Tesoro warrants that all Products delivered under this Agreement or any Purchaser Order shall meet the latest applicable pipeline specifications or otherwise mutually agreed upon specifications for that Product upon receipt at the applicable Terminal and contain no deleterious substances or concentrations of any contaminants that may make it or its components commercially unacceptable in general industry application. Tesoro shall not deliver to any of the Terminals any Products which: (i) would in any way be injurious to any of the Terminals; (ii) would render any of the Terminals unfit for the proper storage of similar Products; (iii) would contaminate or otherwise downgrade the quality of the Products stored in commingled storage; (iv) may not be lawfully stored at the Terminals; or (v) otherwise do not meet applicable Product specifications for such Product that are customary in the location of the Terminal. If, however, there are Products that do not have such applicable specifications, the specifications shall be mutually agreed upon by the Parties. Should Tesoro’s commingled Products not meet or exceed the minimum quality standards set forth in this Agreement or any applicable Terminal Service Order, Tesoro shall be liable for all loss, damage and cost incurred thereby, including damage to Products of third parties commingled with Tesoro’s unfit Products.

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(b)TLO shall have the right to store compatible Products received for Tesoro’s account with Products belonging to TLO or third parties in TLO’s commingled storage tanks. TLO shall handle Tesoro’s fungible Products in accordance with TLO’s prevailing practices and procedures for handling such Products. The quality of all Products tendered into commingled storage for Tesoro’s account shall be verified either by Tesoro’s refinery analysis or supplier’s certification, such that Products so tendered shall meet TLO’s Product specifications. All costs for such analysis shall be borne solely by Tesoro. TLO shall have the right to sample any Product tendered to the Terminals hereunder. The cost of such sampling shall be borne solely by TLO. All Products returned to Tesoro shall meet or exceed Product specifications in effect on the date the Products are delivered to Tesoro. Notwithstanding any other provision herein, any and all Products that leave the Terminals shall meet all relevant ASTM, EPA, federal and state specifications, and shall not leave the Terminals in the form of a sub-octane grade Product.

(c)TLO shall exercise reasonable care to ensure that all Products delivered by third parties into commingled storage with Tesoro’s Products meet applicable Product specifications for such Product that are customary in the location of the Terminal. In the event that Tesoro’s Products are commingled with third-party Products that do not meet or exceed the minimum quality standards set forth in this Agreement or any Terminal Service Order, TLO shall be liable for all loss, damage and cost incurred thereby.

12. MEASUREMENT

All quantities of Products received or delivered by or into truck, rail, or marine vessel shall be measured and determined based upon the meter readings at each Terminal, as reflected by delivery tickets or bills of lading, or if such meters are unavailable, by applicable calibration tables. All quantities of Products received and delivered by pipeline at each Terminal shall be measured and determined based upon the meter readings of the pipeline operator, as reflected by delivery tickets, or if such meters are unavailable, by applicable calibration tables. Deliveries to a Terminal rack at Mandan, Salt Lake City or Wilmington from a Refinery shall be deemed to be the same as the corresponding volumes delivered contemporaneously from the Terminal rack. Deliveries by book transfer shall be reflected by entries in the books of TLO. All quantities shall be adjusted to net gallons at 60° F in accordance with ASTM D-1250 Petroleum Measurement Tables, or latest revisions thereof. Meters and temperature probes shall be calibrated according to applicable API standards. Tesoro shall have the right, at its sole expense, and in accordance with rack location procedure, to independently certify such calibration. Storage tank gauging shall be performed by TLO’s personnel. TLO’s gauging shall be deemed accurate unless challenged by an independent certified gauger. Tesoro may perform joint gauging at its sole expense with TLO’s personnel at the time of delivery or receipt of Product, to verify the amount involved. If Tesoro should request an independent gauger, such gauger must be acceptable to TLO and such gauging shall be at Tesoro’s sole expense.

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13. PRODUCT DOWNGRADE AND INTERFACE

Product downgraded as a result of ordinary Terminal or pipeline operations including line flushing, rack meter provings or other necessary Terminals operations shall not constitute losses for which TLO is liable to Tesoro. TLO shall account for the volume of Product downgraded, and Tesoro’s inventory of Products and/or interface shall be adjusted, provided that, in some cases interface volume (“Transmix”) received shall be ratably shared between Tesoro and other customers receiving Products in the same shipment or stored in commingled storage. Tesoro shall remove its Transmix upon notice from TLO and shall be subject to applicable Transmix handling fees upon its removal, as provided in a Terminal Service Order. If Transmix is not removed within fifteen (15) Business Days after notification, TLO shall have the right to sell such Transmix at market rates and return any proceeds to Tesoro, less applicable Transmix handling fees and delivery costs in effect at the time of such sale.

14. PRODUCT DELIVERIES, RECEIPTS AND WITHDRAWALS

(a)All supervised deliveries, receipts and withdrawals hereunder shall be made within the normal business hours of each Terminal and at such times as may be required by Tesoro upon prior notice and approval by TLO, all in accordance with the agreed-upon scheduling. Unsupervised deliveries, receipts and withdrawals shall be made only with TLO’s prior approval and in strict accordance with TLO’s current operating procedures for the Terminals. Tesoro warrants that all vehicles permitted to enter the Terminals on behalf of Tesoro shall meet all requirements and standards promulgated by applicable regulatory authority including the Department of Transportation, the Occupational Safety and Health Administration, and the Environmental Protection Agency (the “EPA”). Tesoro further warrants that it shall only send to the Terminals those employees, agents and other representatives acting on behalf of and at Tesoro’s direction who have been properly instructed as to the characteristics and safe hauling methods associated with the Products to be loaded and hauled. Tesoro further agrees to be responsible to TLO for the performance under this Agreement or any Terminal Service Order by its agents and/or representatives receiving or delivering Products at the Terminals.

(b)Tesoro shall withdraw from the Terminals only those Products that it is authorized to withdraw hereunder. Tesoro shall neither duplicate nor permit the duplication of any loading device (i.e., card lock access) provided hereunder. Tesoro shall be fully and solely responsible for all Products loaded through the use of the loading devices issued to Tesoro in accordance with this Agreement or pursuant to any Terminal Service Order; provided, however; that Tesoro shall not have any responsibility or liability hereunder in the event that the load authorization system provided hereunder fails or malfunctions in any way unless a credit department override is provided, which authorizes Tesoro to load the Products.

(c)Both Parties shall abide by all federal, state and local statutes, laws and ordinances and all rules and regulations which are promulgated by TLO and which are either furnished to Tesoro or posted at the Terminals, with respect to the use of the Terminals as herein provided. It is understood and agreed by Tesoro that these rules and regulations may be changed, amended or modified by TLO at any time. All changes, amendments and

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modifications shall become binding upon Tesoro ten (10) days following the posting of a copy at the affected Terminals or the receipt by Tesoro of a copy, whichever occurs sooner.

(d)For all purposes hereunder, Tesoro’s jobbers, distributors, Carriers, haulers and other customers designated in writing or otherwise by Tesoro to have loading privileges under this Agreement or any Terminal Service Order or having possession of any loading device furnished to Tesoro pursuant to this Agreement or any Terminal Service Order, together with their respective officers, servants and employees, shall, when they access the Terminals, be deemed to be representatives of Tesoro.

15. DELIVERIES INTO TRANSPORT TRUCKS

Prior to transporting any Products loaded into transport trucks at the Terminals, TLO shall make or cause to be made, the following certifications on the delivery receipt or bill of lading covering the Products received:

“If required by 49 CFR 172.204, this is to certify that the above-named materials are properly classified, described, packaged, marked and labeled, and are in proper condition for transportation according to the applicable regulations of the Department of Transportation. Carrier hereby certifies that the cargo tank used for this shipment is a proper container for the commodity loaded therein and complies with Department of Transportation specifications and certifies that cargo tank is properly placarded and marked to comply with regulations pertaining to hazardous materials.”

TLO may require each Carrier coming into the Terminals to expressly agree in writing to be bound by the provisions of a carrier access agreement with respect to withdrawals and loading of Products hereunder or thereunder, to conduct its operations at the Terminals in a safe manner, in accordance with all Applicable Law.

16. ADDITIZATION OPTIONS

At each Terminal, TLO shall provide equipment for the injection of generic additives, as provided below. Subject to the other provisions set forth herein, and the availability of suitable space in a Terminal and its equipment, Tesoro shall have the option of installing its own proprietary additive systems at the Terminals which TLO shall operate, or utilizing the generic additive service provided by TLO, or a combination of both. Tesoro shall designate pursuant to a Terminal Service Order which additive injection service it desires. TLO shall be responsible for providing generic additives as provided herein, and Tesoro shall be responsible for providing any special or proprietary additives requested by Tesoro.

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17. LUBRICITY AND CONDUCTIVITY ADDITIVE

(a)TLO owns, maintains and operates diesel lubricity and conductivity additive injection facilities (the “Additive Facilities”) at each of the Terminals. TLO shall continue to maintain and operate such Additive Facilities in accordance with customary industry standards during the Term or pursuant to an applicable Terminal Service Order, including all required reporting and record keeping prescribed by Applicable Law.

(b)During the Term or pursuant to an applicable Terminal Service Order, TLO shall arrange for purchase and delivery of any and all required lubricity and conductivity additive for injection through the Additive Facilities at the Terminals.

(c)During the Term or pursuant to an applicable Terminal Service Order, TLO shall inject into all Ultra Low Sulfur Diesel delivered to Tesoro at the Terminals an amount of lubricity and conductivity additive that TLO determines to be sufficient to comply with current ASTM diesel lubricity and conductivity specifications. TLO shall, upon request, provide Tesoro with documentation of additive specifications and additive injection, which TLO shall keep on file at each Terminal.

18. DCA ADDITIVE INJECTION

(a)All gasoline Product leaving the Terminals shall be additized (“Additized Gasoline”). As an exception, TLO shall accommodate a request from Tesoro to lift base gasoline from the Terminals. In that case, the bill of lading issued by TLO shall label all such Product as base gasoline (“Base Gasoline”). TLO shall provide a generic Deposit Control Additive (“DCA”) injection service, including all required reporting and record keeping prescribed by Applicable Law. The additive supplied shall be a an EPA certified DCA. Subject to the other provisions hereof, Tesoro may request TLO to instead inject a different proprietary DCA into certain gasoline delivered hereunder, instead of the generic DCA provided by TLO, and TLO shall accommodate such requests pursuant to a Terminal Service Order specifying the specific additization required and fees to be charged for its injection, subject to Tesoro providing a suitable Additized Gasoline system for such proprietary additive. TLO shall ensure that such additive is injected into all appropriate gasoline Product delivered to Tesoro at a rate no lower than the Lowest Allowable Concentration (“LAC”) at which such additive was certified. The gasoline additization rate shall be determined by Tesoro, but shall not be less than 1.1 times the LAC specified by the respective additive manufacturer or supplier.

(b)Notwithstanding the above, Tesoro shall be solely responsible for registering with the EPA or any other government agency its use of generic or proprietary additive in its fuels, as required by Applicable Law. Tesoro shall submit, to each applicable Terminal, evidence of registration in compliance with 40 C.F.R. Part 80. Tesoro shall also be responsible for full compliance with any quarterly or other regulatory reporting, and any other requirements under Applicable Law, rule or regulation related to use of generic or proprietary additive in Tesoro’s Product.

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19. RED DYE INJECTION

(a)TLO shall provide a generic red dye additive (“Red Dye”) injection service for diesel, including all required reporting and recordkeeping prescribed by Applicable Law. TLO shall be responsible for determining the injection rates, Red Dye inventory levels, meter readings, and calculations of actual treat rates, in compliance with the minimum levels prescribed by the Internal Revenue Service.

(b)Tesoro is responsible for designating which of its accounts shall be authorized to use Red Dye diesel injection services. TLO equipment shall enable designated Carriers and accounts to inject Red Dye upon request prior to loading diesel Product at Terminals. Tesoro’s Carrier shall be solely responsible for designating that a load of diesel Product be injected with Red Dye, and TLO shall have no liability with regard to whether a load of Product is additized with Red Dye. TLO shall not be responsible for any loss, damage or liability that arises from Carrier injecting or failing to inject Red Dye into Tesoro’s Product.

20. SPECIAL ADDITIVE EQUIPMENT

As set forth in a Terminal Service Order, and subject to the other provisions set forth herein and the availability of suitable space in a Terminal, TLO shall install and maintain at the Terminals, at Tesoro’s sole risk, cost and expense, such special additive equipment as may be desirable for Products to be delivered to Tesoro's account hereunder. The engineering and installation of any fixture, equipment or appurtenance placed on the Terminals in respect thereof shall be subject to TLO’s prior approval and supervision. During the Term, TLO shall operate the special additive equipment with any fees therefor to be set forth in a Terminal Service Order.

(a)Any such gasoline additive system shall include one above ground storage tank (and any necessary modifications thereto), one additive injection pump, any and all necessary piping and injectors. For the avoidance of doubt, the above ground storage tank shall be supplied by Tesoro.

(b)Subject to the supervision of TLO, TLO or its designee shall install the additive system. Tesoro shall be responsible for 100% of all costs of the Additized Gasoline system, including without limitation, costs associated with any required piping, nozzles, fittings, equipment, injection panels, labor and/or installation thereof, and if any existing load rack equipment will not support such additional additive system, then Tesoro shall bear all costs of enlarging or renovating such load rack to support the additional additive system requested by Tesoro pursuant to a Terminal Service Order. Tesoro shall reimburse TLO for all such costs within ten days after receipt of an invoice from TLO for such costs. Upon completion of the installation of the Additized Gasoline system, the Additized Gasoline system shall become the property of TLO, free and clear of any security interest or lien.

(c)Tesoro shall reimburse TLO for any and all necessary modifications to an additional additive system required by Tesoro during the Term.

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21. ETHANOL BLENDING SERVICES

(a)Where ethanol receiving, storage and blending facilities are available at a Terminal, and upon Tesoro’s request pursuant to a Terminal Service Order, TLO shall receive, store and blend ethanol into Tesoro’s gasoline at a Terminal (“Ethanol Services”). TLO shall provide and operate all equipment required for the Ethanol Services. The equipment shall consist of truck and/or rail unloading racks, tanks, pumps, motors, injectors, computer control, and any other ancillary equipment necessary for the providing of the Ethanol Services.

(b)Tesoro shall be solely responsible for supplying inventories of ethanol at its own expense, including the scheduling and transporting of ethanol into the Terminals, subject to mutually agreeable notice and scheduling procedures. TLO shall receive Tesoro’s ethanol into fungible ethanol storage at the Terminal.

(c)Upon a request from Tesoro for Ethanol Services, a Terminal Service Order shall provide the desired blending ratio of ethanol to gasoline at each applicable Terminal, including the minimum Octane (R+M/2) rating (“Blending Instructions”), for each grade of Tesoro’s gasoline Product, prior to blending. TLO shall not change the blending ratios without the prior written authorization of Tesoro.

(d)TLO shall maintain for a minimum of five (5) years written or electronic records of the type and volume of oxygenate blended into Tesoro’s gasoline.

(e)TLO shall maintain an industry standard quality assurance oversight program of the ethanol blending process. TLO shall provide Tesoro with an end-of-year report that, at a minimum, summarizes the volume of Tesoro’s gasoline received by TLO, the volume of oxygenate added to Tesoro’s gasoline, and total volume of blended gasoline. TLO will provide such report within fifteen (15) Business Days of Tesoro’s request.

(f)TLO shall allow Tesoro or its agents to monitor the oxygenate blending operation by periodic audit, sampling, testing and/or records review to ensure the overall volumes and type of oxygenate blended into gasoline is consistent with the oxygenate claimed by Tesoro as required by 40 CFR 80.101(d)(4)(ii)(B)(2). The scope and type of such audits will be negotiated in good faith by the Parties in advance via written notice.

(g)TLO shall rely on Blending Instructions and data provided by Tesoro in performing its obligations under this Agreement and any Terminal Service Order. Tesoro agrees to be solely responsible for all claims arising from TLO’s use of or reliance on these Blending Instructions and data.

(h)When performing the Ethanol Services as per Tesoro’s Blending Instructions, TLO shall not certify to Tesoro or any third-party that blended gasoline does or shall meet ASTM D 4814 or any federal, state, or local regulatory specifications. Tesoro agrees that it is receiving from TLO the Blended Gasoline in an “AS IS, WHERE IS” condition without warranties of any kind, including any warranties of merchantability or fitness for a particular purpose, or its ability to meet ASTM or regulatory specifications.

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22. ACCOUNTING PROVISIONS AND DOCUMENTATION

(a)TLO shall furnish Tesoro with the following reports covering services hereunder involving Tesoro’s Products:

(i)within ten (10) Business Days following the end of the Month, a statement showing, by Product: (A) Tesoro’s monthly aggregate deliveries into the Terminals; (B) Tesoro’s monthly receipts from the Terminals; (C) calculation of all Tesoro’s monthly storage and handling fees; (D) Tesoro’s opening inventory for the preceding Month; (E) appropriate monthly loss allowance adjustments (as applicable in accordance with Section 8); and (vi) Tesoro’s closing inventory for the preceding Month;

(ii)a copy of any meter calibration report, to be available for inspection upon reasonable request by Tesoro at the Terminals following any calibration;

(iii)upon delivery from the Terminals, a hard copy bill of lading to the Carrier for each truck, barge, or rail delivery. Upon reasonable request only, a hard copy bill of lading shall be provided to Tesoro’s accounting group. Upon each truck delivery from the Terminals, bill of lading information shall be sent electronically through General Electric Information Services Petroex System or other mutually agreeable system;

(iv)for each marine shipment, all bills of lading (or other appropriate document in the case of barges) and inspection reports (if conducted by independent inspector); and

(v)transfer documents for each in-tank transfer.

(b)TLO shall be required to maintain the capabilities to support truck load authorization technologies at each Terminal. However, costs incurred by TLO for periodic software updates, replacement of loading systems or software or other upgrades made at the request of Tesoro shall be recoverable from Tesoro pursuant to a Terminal Service Order either as a lump sum payment or through an increase in terminalling fees. Notwithstanding the foregoing, if an update, replacement or upgrade is made other than at Tesoro’s request, TLO and Tesoro shall mutually agree pursuant to a Terminal Service Order on a fee for such update, replacement or upgrade.

23. AUDIT AND CLAIMS PERIOD

Each Party and its duly authorized agents and/or representatives shall have reasonable access to the accounting records and other documents maintained by the other Party which relate to this Agreement and any Terminal Service Order, and shall have the right to audit such records at any reasonable time or times during the Term and for a period of up to three years after termination of this Agreement or any applicable Terminal Service Order. Claims as to shortage in quantity or defects in quality shall be made by written notice within ninety (90) days after the delivery in question or shall be deemed to have been waived.

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24. LIEN WAIVERS

TLO hereby waives, relinquishes and releases any and all liens, including without limitation, any and all warehouseman’s liens, custodian’s liens, rights of retention and/or similar rights under all applicable laws, which TLO would or might otherwise have under or with respect to the Products throughput, stored or handled hereunder.  TLO further agrees to furnish documents reasonably acceptable to Tesoro and its lender(s) (if applicable), and to cooperate with Tesoro in assuring and demonstrating that Products titled in Tesoro’s name shall not be subject to any lien on the Terminals or TLO’s Products throughput or stored there.

25. NEWLY IMPOSED TAXES AND REGULATORY FEES

(a)Tesoro shall promptly pay or reimburse TLO for any newly imposed taxes, levies, royalties, assessments, licenses, fees, charges, surcharges and sums due of any nature whatsoever (other than income taxes, gross receipt taxes and similar taxes) imposed by any federal, state or local government or agency that TLO incurs on Tesoro’s behalf for the services provided by TLO under this Agreement or any Terminal Service Order. If TLO is required to pay any of the foregoing, Tesoro shall promptly reimburse TLO in accordance with the payment terms set forth in this Agreement or any Terminal Service Order.

(b)Upon written request by TLO, Tesoro shall supply TLO with a completed signed original notification certificate of gasoline and diesel fuel registrant as required by the Internal Revenue Service’s excise tax regulation. Tesoro further agrees to comply with all Applicable Law with respect to such taxes.

(c)If Tesoro is exempt from the payment of any taxes allocated to Tesoro under the foregoing provisions, Tesoro shall furnish TLO with the proper exemption certificates.

26. LIMITATION ON LIABILITY

Notwithstanding anything to the contrary contained herein, neither Party shall be liable or responsible to the other Party or such other Party’s affiliated Persons for any consequential, incidental, or punitive damages, or for loss of profits or revenues (collectively referred to as “special damages”) incurred by such Party or its affiliated Persons that arise out of or relate to this Agreement, REGARDLESS OF WHETHER ANY SUCH CLAIM ARISES UNDER OR RESULTS FROM CONTRACT, NEGLIGENCE, OR STRICT LIABILITY OF THE PARTY WHOSE LIABILITY IS BEING WAIVED HEREBY; provided that the foregoing limitation is not intended and shall not affect special damages imposed in favor of unaffiliated Persons that are not Parties to this Agreement.

27. INDEMNITIES

(a)Notwithstanding anything else contained in this Agreement or any Terminal Service Order, TLO shall release, defend, protect, indemnify, and hold harmless Tesoro from and against any and all demands, claims (including third-party claims), losses, costs, suits, or causes of action (including, but not limited to, any judgments, losses, liabilities, fines, penalties, expenses, interest, reasonable legal fees, costs of suit, and damages, whether in law or equity and

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whether in contract, tort, or otherwise) for or relating to (i) personal or bodily injury to, or death of the employees of Tesoro and, as applicable, its Carriers, customers, representatives, and agents, (ii) loss of or damage to any property, products, material, and/or equipment belonging to Tesoro and, as applicable, its Carriers, customers, representatives, and agents, and each of their respective affiliates, contractors, and subcontractors (except for those volume losses of Products provided for in Section 8), (iii) loss of or damage to any other property, products, material, and/or equipment of any other description (except for those volume losses of Products provided for in Section 8), and/or personal or bodily injury to, or death of any other Person or Persons; and with respect to clauses (i) through (iii) above, which is caused by or resulting in whole or in part from the acts and omissions of TLO in connection with the ownership or operation of the Terminals and the services provided hereunder, and, as applicable, its carriers, customers (other than Tesoro), representatives, and agents, or those of their respective employees with respect to such matters, and (iv) any losses incurred by Tesoro due to violations of this Agreement or any Terminal Service Order by TLO, or, as applicable, its customers (other than Tesoro), representatives, and agents; PROVIDEDTHAT TLO SHALL NOT BE OBLIGATED TO INDEMNIFY OR HOLD HARMLESS TESORO FROM AND AGAINST ANY CLAIMS TO THE EXTENT THEY RESULT FROM THE BREACH OF CONTRACT, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF TESORO.

(b)Notwithstanding anything else contained in this Agreement or any Terminal Service Order, Tesoro shall release, defend, protect, indemnify, and hold harmless TLO and, and each of its respective affiliates, officers, directors, shareholders, agents, employees, successors-in-interest, and assignees from and against any and all demands, claims (including third-party claims), losses, costs, suits, or causes of action (including, but not limited to, any judgments, losses, liabilities, fines, penalties, expenses, interest, reasonable legal fees, costs of suit, and damages, whether in law or equity and whether in contract, tort, or otherwise) for or relating to (i) personal or bodily injury to, or death of the employees of TLO and, as applicable, its carriers, customers, representatives, and agents; (ii) loss of or damage to any property, products, material, and/or equipment belonging to TLO and, as applicable, its carriers, customers, representatives, and agents, and each of their respective affiliates, contractors, and subcontractors (except for those volume losses of Products provided for in Section 8); (iii) loss of or damage to any other property, products, material, and/or equipment of any other description (except for those volume losses of Products provided for in Section 8), and/or personal or bodily injury to, or death of any other Person or Persons; and with respect to clauses (i) through (iii) above, which is caused by or resulting in whole or in part from the acts and omissions of Tesoro, in connection with Tesoro’s and its customers’ use of the Terminals and the services provided hereunder and Tesoro’s Products stored hereunder, and, as applicable, its Carriers, customers, representatives, and agents, or those of their respective employees with respect to such matters; and (iv) any losses incurred by TLO due to violations of this Agreement or any Terminal Service Order by Tesoro, or, as applicable, its Carriers, customers, representatives, and agents; PROVIDED THAT TESORO SHALL NOT BE OBLIGATED TO INDEMNIFY OR HOLD HARMLESS TLO FROM AND AGAINST ANY CLAIMS TO THE EXTENT THEY RESULT FROM THE BREACH OF CONTRACT, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF TLO. For the avoidance of doubt, nothing herein shall constitute a release by Tesoro of any volume losses that are caused by the TLO’s gross negligence, breach of this Agreement or any Terminal Service Order or willful misconduct.

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28. INSURANCE

(a)At all times during the Term and for a period of two (2) years after termination of this Agreement for any coverage maintained on a “claims-made” or “occurrence” basis, Tesoro and/or its Carrier (if applicable) shall maintain at their expense the below listed insurance in the amounts specified below which are minimum requirements. Tesoro shall require that Carrier cause all of its contractors providing authorized drivers or authorized vehicles, to carry such insurance, and Tesoro shall be liable to TLO for their failure to do so. Such insurance shall provide coverage to TLO and such policies, other than Worker’s Compensation Insurance, shall include TLO as an Additional Insured. Each policy shall provide that it is primary to and not contributory with any other insurance, including any self-insured retention, maintained by TLO (which shall be excess) and each policy shall provide the full coverage required by this Agreement and any Terminal Service Order. All such insurance shall be written with carriers and underwriters acceptable to TLO, and eligible to do business in the states where the Terminals are located and having and maintaining an A.M. Best financial strength rating of no less than “A-” and financial size rating no less than “VII”; provided that Tesoro and/or the Carrier may procure worker’s compensation insurance from the state fund of the state where the Terminal(s) are located. All limits listed below are required MINIMUM LIMITS:

(i)Workers Compensation and Occupational Disease Insurance which fully complies with Applicable Law of the state where each Terminal is located, in limits not less than statutory requirements;

(ii)Employers Liability Insurance with a minimum limit of $1,000,000 for each accident, covering injury or death to any employee which may be outside the scope of the worker’s compensation statute of the jurisdiction in which the worker’s service is performed, and in the aggregate as respects occupational disease;

(iii)Commercial General Liability Insurance, including contractual liability insurance covering Carrier’s indemnity obligations under this Agreement or any Terminal Service Order, with minimum limits of $1,000,000 combined single limit per occurrence for bodily injury and property damage liability, or such higher limits as may be required by TLO or by Applicable Law from time to time. This policy shall include Broad Form Contractual Liability insurance coverage which shall specifically apply to the obligations assumed in this Agreement and any Terminal Service Order by Tesoro;

(iv)Automobile Liability Insurance covering all owned, non-owned and hired vehicles, with minimum limits of $1,000,000 combined single limit per occurrence for bodily injury and property damage liability, or such higher limit(s) as may be required by Tesoro or by Applicable Law from time to time. Coverage must assure compliance with Sections 29 and 30 of the Motor Carrier Act of 1980 and all applicable rules and regulations of the Federal Highway Administration’s Bureau of Motor Carrier Safety and Interstate Commerce Commissioner (Form MCS 90 Endorsement). Limits of liability for this insurance must be in accordance with the financial responsibility requirement of the Motor Carrier Act, but not less than $1,000,000 per occurrence;

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(v)Excess (Umbrella) Liability Insurance with limits not less than $4,000,000 per occurrence. Additional excess limits may be utilized to supplement inadequate limits in the primary policies required in items (ii), (iii), and (iv) above;

(vi)Pollution Legal Liability with limits not less than $25,000,000 per loss with an annual aggregate of $25,000,000. Coverage shall apply to bodily injury and property damage including loss of use of damaged property and property that has not been physically injured; cleanup costs, defense, including costs and expenses incurred in the investigation, defense or settlement of claim; and

(vii)Property Insurance, with a limit of no less than $1,000,000, which property insurance shall be first-party property insurance to adequately cover Tesoro’s owned property; including personal property of others.

(b)All such policies must be endorsed with a Waiver of Subrogation endorsement, effectively waiving rights of recovery under subrogation or otherwise, against TLO, and shall contain where applicable, a severability of interest clause and a standard cross liability clause.

(c)Upon execution of this Agreement and prior to the operation of any equipment by Tesoro, Carrier or its authorized drivers at the Terminals, Tesoro and/or Carrier will furnish to TLO, and at least annually thereafter (or at any other times upon request by TLO) during the Term (and for any coverage maintained on a “claims-made” basis, for two (2) years after the termination of this Agreement or any applicable Terminal Service Order), insurance certificates and/or certified copies of the original policies to evidence the insurance required herein, including on behalf of Carrier’s contractors providing authorized vehicles or authorized drivers. Such certificates shall be in the form of the “Accord” Certificate of Insurance, and reflect that they are for the benefit of TLO and shall provide that there will be no material change in or cancellation of the policies unless TLO is given at least thirty (30) days prior written notice. Certificates providing evidence of renewal of coverage shall be furnished to TLO prior to policy expiration.

(d)Tesoro and/or Carrier shall be solely responsible for any deductibles or self-insured retention.

29. GOVERNMENT REGULATIONS

(a)Product Certification. Each Party certifies that none of the Products covered by this Agreement or any Terminal Service Order were derived from crude petroleum, petrochemical, or gas which was produced or withdrawn from storage in violation of any federal, state or other governmental law, nor in violation of any rule, regulation or promulgated by any governmental agency having jurisdiction in the premises.

(b)Applicable Law. The Parties are entering into this Agreement and any Terminal Service Order in reliance upon and shall comply in all material respects with all Applicable Law which directly or indirectly affects the Products throughput hereunder, or any receipt, throughput delivery, transportation, handling or storage of Products hereunder or the ownership, operation or

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condition of each Terminal. Each Party shall be responsible for compliance with all Applicable Laws associated with such Party’s respective performance hereunder and the operation of such Party’s facilities. In the event any action or obligation imposed upon a Party under this Agreement and any Terminal Service Order shall at any time be in conflict with any requirement of Applicable Law, then this Agreement and any Terminal Service Order shall immediately be modified to conform the action or obligation so adversely affected to the requirements of the Applicable Law, and all other provisions of this Agreement and any Terminal Service Order shall remain effective.

(c)New Or Changed Applicable Law: If during the Term, any new Applicable Law becomes effective or any existing Applicable Law or its interpretations is materially changed, which change is not addressed by another provision of this Agreement or any Terminal Service Order and which has a material adverse economic impact upon a Party, either Party, acting in good faith, shall have the option to request renegotiation of the relevant provisions of this Agreement or any Terminal Service Order with respect to future performance. The Parties shall then meet to negotiate in good faith amendments to this Agreement or to an applicable Terminal Service Order that will conform to the new Applicable Law while preserving the Parties’ economic, operational, commercial and competitive arrangements in accordance with the understandings set forth herein.

30. SUSPENSION OF REFINERY OPERATIONS

(a)In the event that Tesoro decides to permanently or indefinitely suspend refining operations at any of Tesoro’s Refineries for a period that shall continue for at least twelve (12) consecutive Months, Tesoro may provide written notice to TLO of Tesoro’s intent to terminate that part of this Agreement or any Terminal Service Order relating to the applicable associated Terminal (the “Suspension Notice”). Such Suspension Notice shall be sent at any time after Tesoro has publicly announced such suspension and, upon the expiration of the twelve (12)-Month period following the date such notice is sent (the “Notice Period”), that part of this Agreement or any Terminal Service Order relating to such Terminal shall terminate. If Tesoro publicly announces, more than two Months prior to the expiration of the Notice Period, its intent to resume operations at the applicable Refinery, then the Suspension Notice shall be deemed revoked and the applicable portion of this Agreement or any Terminal Service Order shall continue in full force and effect as if such Suspension Notice had never been delivered.

(b)During the Notice Period, for any Month during which Tesoro does not throughput any volumes of Products at an affected Terminal, Tesoro shall be permitted to reduce its Minimum Throughput Commitment by an amount equal to the Stipulated Volume for such affected Terminal(s), provided that Tesoro pays TLO a fee for such Month (a “Curtailment Fee”). Curtailment Fees for each applicable Month shall be equal to (i) such Terminal’s Stipulated Volume multiplied by (ii) the number of days in the Month, multiplied by (iii) the weighted average monthly Terminalling Service Fee incurred by Tesoro at such Terminal during the twelve (12) calendar Months immediately preceding the Refinery’s suspension of operations. For avoidance of doubt, for the purposes of calculating Shortfall Payments during any Month in which Tesoro pays TLO a Curtailment Fee, volume shortfalls shall be determined by deducting volumes throughput at the Terminals by TRMC during such Month from the Adjusted Minimum

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Throughput Commitment reduced by an amount equal to the Stipulated Volume for such affected Terminal(s).

(c)Upon the expiration of the Notice Period, Tesoro shall no longer owe TLO any future Curtailment Fees and shall have no throughput obligation with respect to the affected Terminal, and Tesoro’s Minimum Throughput Commitment shall be adjusted to the Adjusted Minimum Volume Commitment for the remaining unaffected Terminals, by deducting the applicable Stipulated Volume for the Terminal removed from this Agreement or any Terminal Service Order under this Section 30. If refining operations at any of the Refineries are suspended for any reason (including Refinery turnarounds and other scheduled maintenance), then Tesoro shall remain liable for Shortfall Payments under this Agreement or any applicable Terminal Service Order for the duration of the suspension, unless and until this Agreement or applicable Terminal Service Order is terminated as provided above. Schedule B attached hereto includes a list of the Terminals associated with each of the Refineries.

31. FORCE MAJEURE

(a)As soon as possible upon the occurrence of a Force Majeure, TLO shall provide Tesoro with written notice of the occurrence of such Force Majeure (a “Force Majeure Notice”). TLO shall identify in such Force Majeure Notice the approximate length of time that TLO reasonably believes in good faith such Force Majeure shall continue (the “Force Majeure Period”). If TLO advises in any Force Majeure Notice that it reasonably believes in good faith that the Force Majeure Period shall continue for more than twelve (12) consecutive Months, then, subject to Section 32 below, at any time after TLO delivers such Force Majeure Notice, either Party may terminate this Agreement or any Terminal Service Order solely with respect to the affected Terminal(s), but only upon delivery to the other Party of a notice (a “Termination Notice”) at least twelve (12) Months prior to the expiration of the Force Majeure Period; provided, however; that such Termination Notice shall be deemed cancelled and of no effect if the Force Majeure Period ends prior to the expiration of such twelve (12)-Month period. If this Agreement or any Terminal Service Order is terminated as to a Terminal under this Section 31, then Tesoro’s Minimum Throughput Commitment shall be adjusted to the Adjusted Minimum Volume Commitment for the remaining unaffected Terminals, by deducting the applicable Stipulated Volume for the Terminal so removed from this Agreement or any Terminal Service Order. For the avoidance of doubt, neither Party may exercise its right under this Section 31(a) to terminate this Agreement or any Terminal Service Order as a result of a Force Majeure with respect to any Terminal that has been unaffected by, or has been restored to working order since, the applicable Force Majeure, including pursuant to a Restoration under Section 32.

(b)Notwithstanding the foregoing, if Tesoro delivers a Termination Notice to TLO (the “Tesoro Termination Notice”) and, within thirty (30) days after receiving such Tesoro Termination Notice, TLO notifies Tesoro that TLO reasonably believes in good faith that it shall be capable of fully performing its obligations under this Agreement or any Terminal Service Order within a reasonable period of time, then the Tesoro Termination Notice shall be deemed revoked and the applicable portion of this Agreement or any Terminal Service Order shall continue in full force and effect as if such Tesoro Termination Notice had never been given.

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(c)If either Party terminates a portion of this Agreement or any Terminal Service Order related to one or more specific Terminals, then the Minimum Throughput Commitment shall be reduced by the Stipulated Volume for the applicable Terminal(s).

32. CAPABILITIES OF FACILITIES

(a)Interruptions of Service. Subject to Force Majeure and interruptions for routine repair and maintenance, consistent with customary terminal industry standards, TLO shall use reasonable commercial efforts to minimize the interruption of service at each Terminal and any portion thereof. TLO shall promptly inform Tesoro operational personnel of any anticipated partial or complete interruption of service at any Terminal, including relevant information about the nature, extent, cause and expected duration of the interruption and the actions TLO is taking to resume full operations, provided that TLO shall not have any liability for any failure to notify, or delay in notifying, Tesoro of any such matters except to the extent Tesoro has been materially prejudiced or damaged by such failure or delay.

(b)Maintenance and Repair Standards. Subject to Force Majeure and interruptions for routine repair and maintenance, consistent with customary terminal industry standards, TLO shall maintain each Terminal in a condition and with a capacity sufficient to throughput a volume of Tesoro’s Products at least equal to the respective Stipulated Volume for such Terminal. TLO’s obligations may be temporarily suspended during the occurrence of, and for the entire duration of, a Force Majeure or other interruption of service that prevents TLO from terminalling the Minimum Throughput Commitment hereunder. To the extent TLO is prevented from terminalling volumes equal to the full Minimum Throughput Commitment for reasons of Force Majeure or other interruption of service, then Tesoro’s obligation to throughput the Minimum Throughput Commitment and pay any Shortfall Payment shall be reduced proportionately in an amount not to exceed the Stipulated Volume for the affected Terminal. At such time as TLO is capable of terminalling volumes equal to the Minimum Throughput Commitment, Tesoro’s obligation to throughput the full Minimum Throughput Commitment shall be restored. If for any reason, including, without limitation, a Force Majeure event, the throughput or storage capacity of any Terminal should fall below the capacity required for throughput of the Stipulated Volume for that Terminal, then within a reasonable period of time after the commencement of such reduction, TLO shall make repairs to the Terminal to restore the capacity of such Terminal to that required for throughput of the Stipulated Volume (“Restoration”). Except as provided below in Section 32(c), all of such Restoration shall be at TLO’s cost and expense, unless the damage creating the need for such repairs was caused by the negligence or willful misconduct of Tesoro, its employees, agents or customers or the failure of Tesoro’s Products to meet the specifications as provided for in Section 11(a).

(c)Capacity Resolution. In the event of the failure of TLO to maintain any Terminal in a condition and with a capacity sufficient to throughput a volume of Tesoro’s Products equal to the respective Stipulated Volume for such Terminal, then either Party shall have the right to call a meeting between executives of both Parties by providing at least two (2) Business Days’ advance written notice. Any such meeting shall be held at a mutually agreeable location and will be attended by executives of both Parties each having sufficient authority to commit his or her respective Party to a Capacity Resolution (hereinafter defined). At the meeting, the Parties will

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negotiate in good faith with the objective of reaching a joint resolution for the Restoration of capacity on the Terminal which will, among other things, specify steps to be taken by TLO to fully accomplish Restoration and the deadlines by which the Restoration must be completed (the “Capacity Resolution”). Without limiting the generality of the foregoing, the Capacity Resolution shall set forth an agreed upon time schedule for the Restoration activities. Such time schedule shall be reasonable under the circumstances, consistent with customary terminal industry standards and shall take into consideration TLO’s economic considerations relating to costs of the repairs and Tesoro’s requirements concerning its refining and marketing operations. TLO shall use commercially reasonable efforts to continue to provide storage and throughput of Tesoro’s Products at the affected Terminal, to the extent the Terminal has capability of doing so, during the period before Restoration is completed. In the event that Tesoro’s economic considerations justify incurring additional costs to restore the Terminal in a more expedited manner than the time schedule determined in accordance with the preceding sentence, Tesoro may require TLO to expedite the Restoration to the extent reasonably possible, subject to Tesoro’s payment, in advance, of the estimated incremental costs to be incurred as a result of the expedited time schedule. In the event the Parties agree to an expedited Restoration plan in which Tesoro agrees to fund a portion of the Restoration cost, then neither Party shall have the right to terminate this Agreement or any applicable Terminal Service Order in connection with a Force Majeure, so long as such Restoration is completed with due diligence, and Tesoro shall pay its portion of the Restoration costs to TLO in advance based on an estimate based on reasonable engineering standards promulgated by the Association for Facilities Engineering. Upon completion, Tesoro shall pay the difference between the actual portion of Restoration costs to be paid by Tesoro pursuant to this Section 32(c) and the estimated amount paid under the preceding sentence within thirty (30) days after receipt of TLO’s invoice therefor, or, if appropriate, TLO shall pay Tesoro the excess of the estimate paid by Tesoro over TLO’s actual costs as previously described within thirty (30) days after completion of the Restoration.

(d)Tesoro’s Right To Cure. If at any time after the occurrence of (x) a Partnership Change of Control or (y) a sale of a Refinery, TLO either (i) refuses or fails to meet with Tesoro within the period set forth in Section 32(c), (ii) fails to agree to perform a Capacity Resolution in accordance with the standards set forth in Section 32(c), or (iii) fails to perform its obligations in compliance with the terms of a Capacity Resolution, Tesoro may, as its sole remedy for any breach by TLO of any of its obligations under Section 32(c), require TLO to complete a Restoration of the affected Terminal, subject to and to the extent permitted under the terms, conditions and/or restrictions of applicable leases, permits and/or Applicable Law. Any such Restoration required under this Section 32(d) shall be completed by TLO at Tesoro’s cost. TLO shall use commercially reasonable efforts to continue to provide storage and throughput of Tesoro’s Products at the affected Terminal, during the period while such Restoration is being completed. Any work performed by TLO pursuant to this Section 32(d) shall be performed and completed in a good and workmanlike manner consistent with applicable industry standards and in accordance with all Applicable Law. Additionally, during such period after the occurrence of (x) a Partnership Change of Control or (y) a sale of a Refinery, Tesoro may exercise any remedies available to it under this Agreement or any Terminal Service Order (other than termination), including the right to immediately seek temporary and permanent injunctive relief for specific performance by TLO of the applicable provisions of this Agreement or any Terminal

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Service Order, including, without limitation, the obligation to make Restorations as described herein.

(e)Commingled Storage. Unless otherwise specified in a Terminal Service Order, all storage and throughput of Tesoro’s volumes shall be on a fungible commingled basis, and TLO may commingle such Products with Products of third parties of like grade and kind. All Tank Heels shall be allocated among all storage users on a pro rata basis. Tank heels cannot be withdrawn from any tank without prior approval of TLO. TLO shall have the right to enter into arrangements with third parties to throughput and store volumes of Products at each Terminal, provided however, that TLO shall not enter into any third party arrangements that would restrict or limit the ability of Tesoro to throughput the Stipulated Volume at each Terminal each Month without proration or allocation, on reasonable schedules consistent with Tesoro’s requirements, and to receive the Ancillary Services provided herein.

(f)Dedicated Storage. In the event that the Parties determine to use dedicated storage tanks during the Term pursuant to a Terminal Service Order, such storage tanks and capacities identified on a Terminal Service Order shall be dedicated and used exclusively for the storage and throughput of Tesoro’s Product. For those dedicated tanks, Tesoro shall be responsible for providing all Tank Heels required for operation of such tanks. Tesoro shall pay the fees specified on a Terminal Service Order for the dedication of such tanks. Tank heels cannot be withdrawn from any dedicated storage tank without prior approval of TLO.

(g)First Refusal. In the event that TLO desires to enter into a third-party dedicated storage arrangement (a “Storage Contract”) for any storage tank subject to this Agreement and existing on the Commencement Date (a “Subject Tank”), TLO shall provide Tesoro with (i) written notice of its intent to enter into a Storage Contract and the general terms of such transaction and (ii) a thirty (30)-day period (beginning upon Tesoro’s receipt of such written notice) (the “Offer Period”) in which Tesoro may make a good faith offer to enter into a Storage Contract with TLO with respect to such Subject Tank (the “Right of First Refusal”). If Tesoro makes an offer on terms no less favorable to TLO than the third-party offer for a Storage Contract with respect to such Subject Tank during the Offer Period, then TLO shall be obligated to enter into a Storage Contract with Tesoro. If Tesoro does not exercise its Right of First Refusal in the manner set forth above, TLO may, for the next ninety (90) days, proceed with the negotiation of the third-party Storage Contract. If no third-party Storage Contract is consummated during such ninety-day period, then the terms and conditions of this Section 32(g) shall again become effective with respect to such Storage Tank.

33. TERMINATION

(a)A Party shall be in default under this Agreement or any Terminal Service Order if:

(i)the Party breaches any provision of this Agreement or applicable Terminal Service Order, which breach has a material adverse effect on the other Party, and such breach is not excused by Force Majeure or cured within fifteen (15) Business Days after notice thereof (which notice shall describe such breach in reasonable detail) is received

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by such Party (unless such failure is not commercially reasonably capable of being cured in such fifteen (15) Business Day period in which case such Party shall have commenced remedial action to cure such breach and shall continue to diligently and timely pursue the completion of such remedial action after such notice);

(ii)the Party (A) files a petition or otherwise commences, authorizes or acquiesces in the commencement of a proceeding or cause of action under any bankruptcy, insolvency, reorganization or similar Applicable Law, or has any such petition filed or commenced against it, (B) makes an assignment or any general arrangement for the benefit of creditors, (C) otherwise becomes bankrupt or insolvent (however evidenced) or (D) has a liquidator, administrator, receiver, trustee, conservator or similar official appointed with respect to it or any substantial portion of its property or assets; or

(iii)if any of the Parties is in default as described above, then (A) if Tesoro is in default, TLO may or (B) if TLO is in default, Tesoro may: (1) terminate this Agreement or applicable Terminal Service Order upon notice to the defaulting Parties; (2) withhold any payments due to the defaulting Parties under this Agreement or applicable Terminal Service Order; and/or (3) pursue any other remedy at law or in equity.

(b)If a Party breaches any provision of this Agreement or a Terminal Service Order, which breach does not have a material adverse effect on the other Party, the breaching Party shall still have the obligation to cure such breach.

(c)Tesoro shall, upon expiration or termination of this Agreement or any Terminal Service Order, promptly remove all of its Products including any downgraded and interface Product and Transmix from the Terminals, and TLO shall remove the remaining Tank Heels and deliver them to Tesoro or Tesoro’s designee, within thirty (30) days of such termination or expiration. In the event all of the Product is not removed within such thirty (30) day period, Tesoro shall be assessed a storage fee to all Products held in storage more than thirty (30) days beyond the termination or expiration of this Agreement or applicable Terminal Service Order until such time Tesoro’s entire Product is removed from the Terminals.

(d)Tesoro shall, upon expiration or termination of this Agreement or any Terminal Service Order, promptly remove any and all of its owned equipment not purchased by TLO pursuant to Section 13 above, and restore the Terminals to their condition prior to the installation of such equipment.

34. RIGHT TO ENTER INTO A NEW TERMINALLING AGREEMENT

(a)Upon termination of this Agreement or a Terminal Service Order for reasons other than (x) a default by Tesoro and (y) any other termination of this Agreement or a Terminal Service Order initiated by Tesoro pursuant to Sections 30 or 31. Tesoro shall have the right to require TLO to enter into a new terminalling services agreement with Tesoro that (i) is consistent with the terms set forth in this Agreement, (ii) relates to the same Terminals that are the subject

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matter of this Agreement, and (iii) has commercial terms that are, in the aggregate, equal to or more favorable to TLO than fair market value terms as would be agreed by similarly-situated parties negotiating at arm’s length; provided, however; that the term of any such new terminalling services agreement shall not extend beyond April 30, 2031.

(b)In the event that TLO proposes to enter into a terminalling services agreement with a third party within two (2) years after the termination of this Agreement or any Terminal Service Order for reasons other than (x) by default by Tesoro and (y) any other termination of this Agreement or any Terminal Service Order initiated by Tesoro pursuant to Sections 30 or 31, TLO shall give Tesoro ninety (90) days’ prior written notice of any proposed new terminalling services agreement with a third party, including (i) details of all of the material terms and conditions thereof and (ii) a thirty (30)-day period (beginning upon Tesoro’s receipt of such written notice) (the “First Offer Period”) in which Tesoro may make a good faith offer to enter into a new terminalling agreement with TLO (the “Terminalling Right of First Refusal”). If Tesoro makes an offer on terms no less favorable to TLO than the third-party offer with respect to such terminalling services agreement during the First Offer Period, then TLO shall be obligated to enter into a terminalling services agreement with Tesoro on the terms set forth in Section 34(a) above. If Tesoro does not exercise its Terminalling Right of First Refusal in the manner set forth above, TLO may, for the next ninety (90) days, proceed with the negotiation of the third-party terminalling services agreement. If no third party agreement is consummated during such ninety-day period, the terms and conditions of this Section 34(b) shall again become effective.

35. ASSIGNMENT; PARTNERSHIP CHANGE OF CONTROL

(a)Tesoro shall not assign all of its obligations hereunder or under a Terminal Service Order without TLO’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however; that Tesoro may assign this Agreement or any Terminal Service Order, without TLO’s consent, in connection with a sale by Tesoro of a Refinery associated with one of TLO’s Terminals so long as the transferee: (i) agrees to assume all of Tesoro’s obligations under this Agreement and any Terminal Service Order with respect to the associated Terminal(s); and (ii) is financially and operationally capable of fulfilling the terms of this Agreement and any Terminal Service Order, which determination shall be made by Tesoro in its reasonable judgment.

(b)TLO shall not assign its rights or obligations under this Agreement or any Terminal Service Order without Tesoro’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that (i) TLO may assign this Agreement or any Terminal Service Order without Tesoro’s consent in connection with a sale by TLO of one or more of its Terminals so long as the transferee: (A) agrees to assume all of TLO’s obligations under this Agreement and any Terminal Service Order with respect to the associated Terminal(s); (B) is financially and operationally capable of fulfilling the terms of this Agreement and any Terminal Service Order, which determination shall be made by TLO in its reasonable judgment; and (C) is not a competitor of Tesoro; and (ii) TLO shall be permitted to make a collateral assignment of this Agreement or any Terminal Service Order solely to secure working capital financing for TLO.

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(c)If either Tesoro or TLO assigns its rights or obligations as permitted under this Agreement or any Terminal Service Order relating to a specific Terminal, then: (i) the Minimum Throughput Commitment shall be converted to the Adjusted Minimum Volume Commitment for the Terminals remaining subject to this Agreement or applicable Terminal Service Order by reducing by the amount of the Stipulated Volume for such assigned Terminal, and both Tesoro’s and TLO’s obligations shall continue with respect to the remaining Terminals and the adjusted Minimum Throughput Commitment; and (ii) the rights and obligations relating to the affected Terminal, and its Stipulated Volume, shall be novated into a new agreement with the assignee, and such assignee shall be responsible for the performance of the assigning Party’s obligations relating to the affected Terminal.

(d)Any assignment that is not undertaken in accordance with the provisions set forth above shall be null and void ab initio. A Party making any assignment shall promptly notify the other Party of such assignment, regardless of whether consent is required. This Agreement and any Terminal Service Order shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns.

(e)Tesoro’s obligations hereunder shall not terminate in connection with a Partnership Change of Control, provided however, that in the case of a Partnership Change of Control, Tesoro shall have the option to extend the Term as provided in Section 3. TLO shall provide Tesoro with notice of any Partnership Change of Control at least sixty (60) days prior to the effective date thereof.

36. NOTICE

All notices, requests, demands, and other communications hereunder will be in writing and will be deemed to have been duly given: (a) if by transmission by facsimile or hand delivery, when delivered; (b) if mailed via the official governmental mail system, five (5) Business Days after mailing, provided said notice is sent first class, postage pre-paid, via certified or registered mail, with a return receipt requested; (c) if mailed by an internationally recognized overnight express mail service such as Federal Express, UPS, or DHL Worldwide, one (1) Business Day after deposit therewith prepaid; or (d) if by e-mail, one Business Day after delivery with receipt confirmed. All notices will be addressed to the Parties at the respective addresses as follows:

If to TRMC or TAK, to:

c/o Tesoro Refining & Marketing Company LLC

19100 Ridgewood Parkway

San Antonio, Texas 78259

For legal notices:

Attention: Charles L. Magee, General Counsel

phone: (253) 896-8766

email: Charles.L.Magee@tsocorp.com

For all other notices and communications:

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Attention: Paul E. Carlson, Director of Supply Operations

phone: (210) 626-4389

email: Paul.E.Carlson@tsocorp.com

If to TLO, to:

Tesoro Logistics Operations LLC

19100 Ridgewood Parkway

San Antonio, Texas 78259

For legal notices:

Attention: Charles S. Parrish, General Counsel

phone: (210) 626-4280

email: charles.s.parrish@tsocorp.com

For all other notices and communications:

Attention: Rick D. Weyen, Vice President, Logistics

phone: (210) 626-4379

email: Rick.D.Weyen@tsocorp.com

or to such other address or to such other Person as either Party will have last designated by notice to the other Party.

37. CONFIDENTIAL INFORMATION

(a)Obligations. Each Party shall use reasonable efforts to retain the other Parties’ Confidential Information in confidence and not disclose the same to any third party nor use the same, except as authorized by the disclosing Party in writing or as expressly permitted in this Section 37. Each Party further agrees to take the same care with the other Party’s Confidential Information as it does with its own, but in no event less than a reasonable degree of care. Excepted from these obligations of confidence and non-use is that information which:

(i)is available, or becomes available, to the general public without fault of the receiving Party;

(ii)was in the possession of the receiving Party on a non-confidential basis prior to receipt of the same from the disclosing Party (it being understood, for the avoidance of doubt, that this exception shall not apply to information of TLO that was in the possession of Tesoro or any of its affiliates as a result of their ownership or operation of the Terminals prior to the Commencement Date);

(iii)is obtained by the receiving Party without an obligation of confidence from a third party who is rightfully in possession of such information and, to the receiving Party’s knowledge, is under no obligation of confidentiality to the disclosing Party; or

30

(iv)is independently developed by the receiving Party without reference to or use of the disclosing Party’s Confidential Information.

For the purpose of this Section 37, a specific item of Confidential Information shall not be deemed to be within the foregoing exceptions merely because it is embraced by, or underlies, more general information in the public domain or in the possession of the receiving Party.

(b)Required Disclosure. Notwithstanding Section 37(a) above, if the receiving Party becomes legally compelled to disclose the Confidential Information by a court, Governmental Authority or Applicable Law, or is required to disclose by the listing standards of any applicable securities exchange, any of the disclosing Party’s Confidential Information, the receiving Party shall promptly advise the disclosing Party of such requirement to disclose Confidential Information as soon as the receiving Party becomes aware that such a requirement to disclose might become effective, in order that, where possible, the disclosing Party may seek a protective order or such other remedy as the disclosing Party may consider appropriate in the circumstances. The receiving Party shall disclose only that portion of the disclosing Party’s Confidential Information that it is required to disclose and shall cooperate with the disclosing Party in allowing the disclosing Party to obtain such protective order or other relief.

(c)Return of Information. Upon written request by the disclosing Party, all of the disclosing Party’s Confidential Information in whatever form shall be returned to the disclosing Party upon termination of this Agreement or destroyed with destruction certified by the receiving Party, without the receiving Party retaining copies thereof except that one copy of all such Confidential Information may be retained by a Party’s legal department solely to the extent that such Party is required to keep a copy of such Confidential Information pursuant to Applicable Law, and the receiving Party shall be entitled to retain any Confidential Information in the electronic form or stored on automatic computer back-up archiving systems during the period such backup or archived materials are retained under such Party’s customary procedures and policies; provided, however, that any Confidential Information retained by the receiving Party shall be maintained subject to confidentiality pursuant to the terms of this Section 37, and such archived or back-up Confidential Information shall not be accessed except as required by Applicable Law.

(d)Receiving Party Personnel. The receiving Party will limit access to the Confidential Information of the disclosing Party to those of its employees, attorneys and contractors that have a need to know such information in order for the receiving Party to exercise or perform its rights and obligations under this Agreement or any Terminal Service Order (the “Receiving Party Personnel”). The Receiving Party Personnel who have access to any Confidential Information of the disclosing Party will be made aware of the confidentiality provision of this Agreement, and will be required to abide by the terms thereof. Any third party contractors that are given access to Confidential Information of a disclosing Party pursuant to the terms hereof shall be required to sign a written agreement pursuant to which such Receiving Party Personnel agree to be bound by the provisions of this Agreement, which written agreement will expressly state that it is enforceable against such Receiving Party Personnel by the disclosing Party.

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(e)Survival. The obligation of confidentiality under this Section 37 shall survive the termination of this Agreement for a period of two (2) years.

38. MISCELLANEOUS

(a)Modification; Waiver. This Agreement or any Terminal Service Order may be terminated, amended or modified only by a written instrument executed by the Parties. Any of the terms and conditions of this Agreement or any Terminal Service Order may be waived in writing at any time by the Party entitled to the benefits thereof. No waiver of any of the terms and conditions of this Agreement or any Terminal Service Order, or any breach thereof, will be effective unless in writing signed by a duly authorized individual on behalf of the Party against which the waiver is sought to be enforced. No waiver of any term or condition or of any breach of this Agreement or any Terminal Service Order will be deemed or will constitute a waiver of any other term or condition or of any later breach (whether or not similar), nor will such waiver constitute a continuing waiver unless otherwise expressly provided.

(b)Entire Agreement. This Agreement, together with the Schedules and Terminal Service Orders, constitutes the entire agreement among the Parties pertaining to the subject matter hereof and supersedes all prior agreements and understandings of the Parties in connection therewith.

(c)Governing Law; Jurisdiction. This Agreement and any Terminal Service Order shall be governed by the laws of the State of Texas without giving effect to its conflict of laws principles. Each Party hereby irrevocably submits to the exclusive jurisdiction of any federal court of competent jurisdiction situated in the United States District Court for the Western District of Texas, San Antonio Division, or if such federal court declines to exercise or does not have jurisdiction, in the district court of Bexar County, Texas. The Parties expressly and irrevocably submit to the jurisdiction of such Courts and irrevocably waive any objection which they may now or hereafter have to the laying of venue of any action, suit or proceeding arising out of or relating to this Agreement or any Terminal Service Order brought in such Courts, irrevocably waive any claim that any such action, suit or proceeding brought in any such Court has been brought in an inconvenient forum and further irrevocably waive the right to object, with respect to such claim, action, suit or proceeding brought in any such Court, that such Court does not have jurisdiction over such Party. The Parties hereby irrevocably consent to the service of process by registered mail, postage prepaid, or by personal service within or without the State of Texas. Nothing contained herein shall affect the right to serve process in any manner permitted by law.

(d)Counterparts. This Agreement and any Terminal Service Order may be executed in one or more counterparts (including by facsimile or portable document format (pdf)) for the convenience of the Parties hereto, each of which counterparts will be deemed an original, but all of which counterparts together will constitute one and the same agreement.

32

(e)Severability. Whenever possible, each provision of this Agreement and any Terminal Service Order will be interpreted in such manner as to be valid and effective under applicable law, but if any provision of this Agreement or any Terminal Service Order or the application of any such provision to any Person or circumstance will be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision hereof, and the Parties will negotiate in good faith with a view to substitute for such provision a suitable and equitable solution in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid, illegal or unenforceable provision.

(f)No Third Party Beneficiaries. It is expressly understood that the provisions of this Agreement and any Terminal Service Order do not impart enforceable rights in anyone who is not a Party or successor or permitted assignee of a Party.

(g)WAIVER OF JURY TRIAL. EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY PROCEEDINGS RELATING TO THIS AGREEMENT OR ANY TERMINAL SERVICE ORDER OR ANY PERFORMANCE OR FAILURE TO PERFORM OF ANY OBLIGATION HEREUNDER.

(h)Schedules and Terminal Service Order(s). Each of the Schedules and Terminal Service Order(s) attached hereto and referred to herein is hereby incorporated in and made a part of this Agreement as if set forth in full herein.

[Remainder of this page intentionally left blank.]

33

IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement as of the date first written above.

TESORO ALASKA COMPANY			TESORO REFINING & MARKETING COMPANY LLC
By:	/s/ GREGORY J. GOFF		By:	/s/ GREGORY J. GOFF
	Gregory J. Goff			Gregory J. Goff
	President			President
TESORO LOGISTICS OPERATIONS LLC
By:	TESORO LOGISTICS LP,
		its sole member
By:	TESORO LOGISTICS GP, LLC,
		its general partner
By:	/s/ PHILLIP M. ANDERSON
	Phillip M. Anderson
	President

SCHEDULE ASTIPULATED VOLUMES

Terminal	Stipulated Volume (bpd)
Anchorage	9,000
Boise	7,200
Burley	2,300
Los Angeles	33,300
Mandan	8,900
Salt Lake City	25,300
Stockton	16,000
Vancouver	6,400
TOTAL	108,400

If there are multiple Terminals at any of the above locations, the reference to that location shall include all of such Terminals.

SCHEDULE BTERMINALS ASSOCIATED WITH REFINERIES

Refineries	Associated Terminal
Alaska Refinery	Anchorage Terminal
Anacortes Refinery	Vancouver Terminal
Golden Eagle Refinery	Stockton Terminal
Los Angeles Refinery	Los Angeles Terminal
Mandan Refinery	Mandan Terminal
Salt Lake City Refinery	Salt Lake City, Boise and Burley Terminals

EXHIBIT 1FORM OF PURCHASE ORDER

PURCHASE ORDER PURSUANT TO MASTER TERMINALLING AGREEMENT

This Terminal Service Order is entered as of ___, 20__, by and among Tesoro Refining & Marketing Company LLC, a Delaware limited liability company (“TRMC”), Tesoro Alaska Company, a Delaware corporation (“TAK” and, together with TRMC, “Tesoro”) and Tesoro Logistics Operations LLC, a Delaware limited liability company (“TLO”), pursuant to and in accordance with the terms of the Amended and Restated Master Terminalling Agreement dated as of May __, 2013, but effective as of May 1, 2013, among such parties (the “Agreement).

Capitalized terms not otherwise defined herein shall have the meaning set forth in the Agreement.

Pursuant to Section 5 of the Agreement, the parties hereto agree to the following provisions:

[Insert applicable provisions:

Allocation of storage and throughput capacity for separate Products at each Terminal:

Per-Barrel fees for the volumes Tesoro throughputs at the Terminals:

Dedicated storage tanks and applicable fees:

Allocation of excess capacity and applicable fees:

Ancillary Services and applicable fees:

Surcharges pursuant to Section 6 of the Agreement:

Capital expenditures and related costs subject to reimbursement pursuant to Section 9;

Cleaning of tanks or the conversion of a dedicated tank to storage of a different Product pursuant to Section 9 of the Agreement and applicable fees:

Transmix handling fees pursuant to Section 13 of the Agreement:

Special or proprietary additive injection services or higher additive injection rates pursuant to Sections 16 and 18 and the fees for such services:

Fees for lubricity and conductivity additive and injection services (including for DCA injection) pursuant to Section 17 or 18 of the Agreement:

Fees for operation of special additive equipment pursuant to Section 20:

Receipt, storage and blending of ethanol into Tesoro’s gasoline pursuant to Section 21:

Periodic software updates, replacement of loading systems or software or other upgrades pursuant to Section 22 and applicable costs:

Dedicated storage to be provided and applicable fees:

Other:]

Except as set forth in this Terminal Service Order, the other terms of the Agreement shall continue in full force and effect and shall apply to the terms of this Terminal Service Order.

IN WITNESS WHEREOF, the parties hereto have duly executed this Terminal Service Order as of the date first written above [to be effective as of the Effective Date].

TESORO ALASKA COMPANY		TESORO REFINING & MARKETING COMPANY LLC
By:		By:
	Gregory J. Goff		Gregory J. Goff
	President		President
TESORO LOGISTICS OPERATIONS LLC
By:	TESORO LOGISTICS LP,
	its sole member
By:	TESORO LOGISTICS GP, LLC,
	its general partner
By:
	Phillip M. Anderson
	President

EXHIBIT 2SHORTFALL PAYMENTS

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Gregory J. Goff, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Tesoro Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

(d) Disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	August 5, 2013	/s/ GREGORY J. GOFF
		Gregory J. Goff
		Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, G. Scott Spendlove, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Tesoro Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

(d) Disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	August 5, 2013	/s/ G. SCOTT SPENDLOVE
		G. Scott Spendlove
		Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Tesoro Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gregory J. Goff, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ GREGORY J. GOFF

Gregory J. Goff

Chief Executive Officer

August 5, 2013

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Tesoro Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, G. Scott Spendlove, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ G. SCOTT SPENDLOVE

G. Scott Spendlove

Chief Financial Officer

August 5, 2013

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Operating Segments (Details)	6 Months Ended
	Jun. 30, 2013 segments
Segment Reporting Information
Number of operating segments (segments)	2
Foreign operations	We do not have significant operations in foreign countries. Therefore, revenue generated and long-lived assets located in foreign countries are not material to our operations.
Refining
Segment Reporting Information
Number of refineries (refineries)	6
Segment reporting description	Excluding the Hawaii refinery, we own and operate six petroleum refineries located in California, Washington, Alaska, North Dakota and Utah. These refineries manufacture gasoline and gasoline blendstocks, jet fuel, diesel fuel, residual fuel oil and other refined products. We sell these refined products, together with refined products purchased from third parties, at wholesale through terminal facilities and other locations. Our refining segment also sells refined products to unbranded marketers and opportunistically exports refined products to foreign markets.
Retail
Segment Reporting Information
Number of states with retail sites (states)	17
Segment reporting description	Excluding the Hawaii Business, our retail segment sells gasoline, diesel fuel and convenience store items through company-operated retail stations and branded jobber/dealers in 17 states.

XML

Condensed Consolidating Financial Information, Narrative (Details)	6 Months Ended
	Jun. 30, 2013
Guarantor Information
Percentage ownership of Tesoro Logistics LP	40.00%
Percentage ownership of subsidiary guarantors	100.00%
4.250% Senior Notes Due 2017
Guarantor Information
Debt instrument interest rate	4.25%
9.750% Senior Notes Due 2019
Guarantor Information
Debt instrument interest rate	9.75%
5.375% Senior Notes Due 2022
Guarantor Information
Debt instrument interest rate	5.375%

XML

Property, Plant and Equipment (Notes)

6 Months Ended

Jun. 30, 2013

Property, Plant and Equipment [Abstract]

PROPERTY, PLANT AND EQUIPMENT

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, at cost, is as follows (in millions):

	June 30, 2013			December 31, 2012
Refining	$	7,885		$	6,268
Retail	721			712
Corporate	228			226
Property, plant and equipment, at cost	8,834			7,206
Accumulated depreciation	(2,095		)	(1,974		)
Net property, plant and equipment	$	6,739		$	5,232

We capitalize interest as part of the cost of major projects during the construction period. Capitalized interest totaled $5 million and $4 million for the three months ended June 30, 2013 and 2012, respectively, and $9 million and $8 million for the six months ended June 30, 2013 and 2012, respectively, and is recorded as a reduction to net interest and financing costs in our condensed statements of consolidated operations. See Note B for more information regarding the property, plant and equipment acquired in the Carson Acquisition.

XML

Discontinued Operations Discontinued Operations (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended			6 Months Ended
	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Jun. 17, 2013
Disposal Group, Including Discontinued Operation, Classified Balance Sheet Disclosures [Abstract]
Total current assets related to discontinued operations	$ 463	$ 337		$ 463
Total current liabilities related to discontinued operations	58	60		58
Hawaii Operations
Discontinued Operations
Capacity (Mbpd)						94
Impairment charges		248
Asset retirement obligations	(14)	20		(14)
Sales price						75
Earnout arrangement maximum						40
Earnout arrangement period						3 years
Indemnification for environmental remediation						15
Revenues and earnings from discontinued operations
Revenues	642		772	1,451	1,585
Earnings (loss) from discontinued operations before tax	(16)		37	(17)	15
Income tax expense (benefit)	(5)		13	(5)	5
Earnings (loss) from discontinued operations, net of tax	(11)		24	(12)	10
Disposal Group, Including Discontinued Operation, Classified Balance Sheet Disclosures [Abstract]
Receivables, less allowance for doubtful accounts	80	95		80
Inventories	362	240		362
Prepayments and other current assets	2	2		2
Total current assets related to discontinued operations	444	337		444
Net property, plant and equipment	14	13		14
Other noncurrent assets, net	5	5		5
Total assets related to discontinued operations	463	355		463
Accounts payable	15	17		15
Other current liabilities	38	43		38
Total current liabilities related to discontinued operations	53	60		53
Other noncurrent liabilities	3	3		3
Debt	2	2		2
Total liabilities related to discontinued operations	58	65		58
Discontinued Operation, Additional Disclosures [Abstract]
Operating activities				192	75
Investing activities				$ (2)	$ (10)

XML

Condensed Statements of Consolidated Comprehensive Income (Unaudited) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Statement of Comprehensive Income [Abstract]
Net Earnings	$ 238	$ 393	$ 342	$ 455
Pension and other benefit liability adjustments, net of tax expense of $48 million	73	0	73	0
Total comprehensive income	311	393	415	455
Less: Noncontrolling interest in comprehensive income	11	6	22	12
COMPREHENSIVE INCOME ATTRIBUTABLE TO TESORO CORPORATION	$ 300	$ 387	$ 393	$ 443

XML

Tesoro Logistics LP (Notes)

6 Months Ended

Jun. 30, 2013

Variable Interest Entity, Measure of Activity [Abstract]

TESORO LOGISTICS LP

TESORO LOGISTICS LP

TLLP is a publicly traded limited partnership that was formed to own, operate, develop and acquire logistics assets. Its assets are integral to the success of Tesoro’s refining and marketing operations and are used to gather crude oil and distribute, transport and store crude oil and refined products.

We held an approximate 40% interest in TLLP at June 30, 2013, including a 2% interest in the general partner. This interest includes 2,729,476 common units, 15,254,890 subordinated units and 958,587 general partner units. All intercompany transactions with TLLP are eliminated upon consolidation.

Acquisitions

Northwest Products System Acquisition

On June 19, 2013, TLLP completed its acquisition of Chevron’s Northwest Products System for a purchase price of approximately $355 million. The Northwest Products System consists of a regulated common carrier products pipeline running from Salt Lake City, Utah to Spokane, Washington, a jet fuel pipeline to the Salt Lake City International Airport andthree refined products terminals in Boise and Pocatello, Idaho and Pasco, Washington. The amount paid by TLLP at closing was reduced by an advance deposit of $40 million that the Partnership paid in December 2012 upon execution of the asset sale and purchase agreements. Based on the preliminary valuation of the assets acquired and estimates of environmental liabilities, the preliminary purchase price allocation consisted of property, plant and equipment of $358 million, goodwill of $9 million, other noncurrent assets of $5 million and environmental liabilities of $17 million. This acquisition is not material to our consolidated financial statements.

In accordance with the sale and purchase agreements, as amended, for a period of two years, Chevron Pipe Line Company has retained financial and operational responsibility to remediate the site of a diesel fuel release that occurred on the Northwest Products System pipeline on March 18, 2013, in addition to paying any monetary fines and penalties assessed by any government authority arising from this incident. TLLP assumed responsibility for all other environmental contingencies. TLLP recognized an estimated $17 million of environmental liabilities assumed in connection with the acquisition of the Northwest Products System, including those obligations related to the diesel fuel release that were not indemnified by Chevron.

Carson Terminal Assets Acquisition

Effective June 1, 2013, TLLP entered into a transaction (the “Carson Terminal Assets Acquisition”) to acquire, from Tesoro, the Carson Terminal Assets. This transaction occurred immediately after the closing of the Carson Acquisition, discussed further in Note B. Tesoro received consideration of $640 million, comprised of $544 million in cash financed with borrowings under the TLLP Revolving Credit Facility and the issuance of TLLP equity with a combined fair value of $96 million. In connection with the Carson Terminal Assets Acquisition, we retained all of the liabilities we assumed in the Carson Acquisition to cleanup and monitor the environmental conditions related to the Carson Terminal Assets.

Revolver Amendments

Effective January 4, 2013, TLLP amended and restated the TLLP Revolving Credit Facility. On May 22, 2013, TLLP further amended the agreement. See Note I for more information regarding these amendments.

Equity Issuance

On January 14, 2013, TLLP closed an equity offering of 9,775,000 common units at a public offering price of $41.70 per unit. Net proceeds to TLLP from the sale of the units were approximately $392 million, which were used to fund the acquisition of Chevron’s Northwest Products System and for general partnership purposes. In connection with the offering, Tesoro Logistics GP, LLC (“TLGP”) purchased 199,490 general partner units at a price of $41.70 per unit to maintain its 2% general partner interest in TLLP.

Agreements with TLLP

TLLP generates revenue by charging fees for gathering, transporting and storing crude oil and for terminalling, transporting and storing crude oil and refined products. We do not provide financial or equity support through any liquidity arrangements or financial guarantees to TLLP.

TLLP provides us with various pipeline transportation, trucking, terminal distribution and storage services under long-term, fee-based commercial agreements expiring 2016 through 2023. Each of these agreements, with the exception of the storage and transportation services agreement, contain minimum volume commitments. Each agreement has fees that are indexed for inflation and, except for a trucking transportation services agreement, provides us with options to renew for two additional five-year terms.

In addition to commercial agreements, we are also party to an omnibus agreement with TLLP, which among other things, addresses the payment of a fee to us for various general and administrative services provided to TLLP. The annual omnibus fee increased to $4 million, as of June 30, 2013, as a result of the Carson Terminal Assets Acquisition. We are also party to an operational services agreement with TLLP, under which TLLP reimburses us with a fee for the provision of certain operational services in support of their pipelines, terminals and storage facilities and directly reimburses us for specifically identifiable charges. The annual operational services fee increased to approximately $4 million at June 30, 2013 as a result of the Carson Terminal Assets Acquisition.

With the exception of affiliate balances, which are eliminated upon consolidation, and their impact on equity, the TLLP condensed consolidated balance sheets as of June 30, 2013 and December 31, 2012, as presented below, are included in the condensed consolidated balance sheets of Tesoro Corporation.

	June 30, 2013		December 31, 2012
	(In millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	76	$	19
Receivables
Trade	2		—
Affiliate	25		18
Prepayments	1		1
Other current assets	5		—
Total Current Assets	109		38
NET, PROPERTY, PLANT AND EQUIPMENT	1,053		274
DEPOSITS	—		40
GOODWILL	9		—
OTHER NONCURRENT ASSETS	17		11
Total Assets	$	1,188	$	363
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable
Trade	$	15	$	9
Affiliate	9		7
Deferred revenue - affiliate	2		2
Accrued interest and financing costs	5		6
Other current liabilities	17		3
Total Current Liabilities	48		27
OTHER NONCURRENT LIABILITIES	5		—
DEBT	903		354
EQUITY (DEFICIT)	232		(18		)
Total Liabilities and Equity (Deficit)	$	1,188	$	363

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Condensed Consolidating Financial Information (Notes)

6 Months Ended

Jun. 30, 2013

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

CONDENSED CONSOLIDATING FINANCIAL INFORMATION

CONDENSED CONSOLIDATING FINANCIAL INFORMATION

Separate condensed consolidating financial information of Tesoro Corporation (the “Parent”), subsidiary guarantors and non-guarantors are presented below. At June 30, 2013, Tesoro and certain subsidiary guarantors have fully and unconditionally guaranteed our 4.250% Senior Notes due 2017, 9.750% Senior Notes due 2019 and 5.375% Senior Notes due 2022. TLLP, in which we had a 40% ownership interest as of June 30, 2013, and other subsidiaries have not guaranteed these obligations. As a result of these guarantee arrangements, we are required to present the following condensed consolidating financial information, which should be read in conjunction with the accompanying condensed consolidated financial statements and notes thereto. The following condensed consolidating financial information is provided as an alternative to providing separate financial statements for guarantor subsidiaries. Separate financial statements of Tesoro’s subsidiary guarantors are not included because the guarantees are full and unconditional and these subsidiary guarantors are 100% owned and are jointly and severally liable for Tesoro’s outstanding senior notes. The information is presented using the equity method of accounting for investments in subsidiaries. We ceased refining operations at our Hawaii refinery and subsequently entered into an agreement to sell all of our interest in Tesoro Hawaii, LLC during the second quarter of 2013. As a result, the results of operations and related assets and liabilities of the Hawaii Business have been classified as discontinued operations in these condensed consolidating statements of operations and comprehensive income and condensed consolidating balance sheets.

Condensed Consolidating Statement of Operations and

Comprehensive Income for the Three Months EndedJune 30, 2013

(In millions)

	Parent			Guarantor Subsidiaries			Non- Guarantors			Eliminations			Consolidated
REVENUES	$	—		$	10,446		$	1,081		$	(2,630	)	$	8,897
COSTS AND EXPENSES:
Cost of sales	—			9,515			1,024			(2,630		)	7,909
Operating, selling, general and administrative expenses	6			466			33			—			505
Depreciation and amortization expense	—			103			8			—			111
Loss on asset disposals and impairments	—			8			—			—			8
OPERATING INCOME (LOSS)	(6		)	354			16			—			364
Equity in earnings of subsidiaries	234			12			46			(292		)	—
Interest and financing costs, net	(4		)	(26		)	(7		)	4			(33		)
Interest income	—			—			4			(4		)	—
Other income, net	—			53			3			—			56
EARNINGS BEFORE INCOME TAXES	224			393			62			(292		)	387
Income tax expense (benefit) (a)	(3		)	141			—			—			138
NET EARNINGS FROM CONTINUING OPERATIONS	227			252			62			(292		)	249
Loss from discontinued operations, net of tax	—			(11		)	—			—			(11		)
NET EARNINGS	227			241			62			(292		)	238
Less: Net earnings from continuing operations attributable to noncontrolling interest	—			—			11			—			11
NET EARNINGS ATTRIBUTABLE TO TESORO CORPORATION	$	227		$	241		$	51		$	(292	)	$	227
COMPREHENSIVE INCOME
Total comprehensive income	$	300		$	241		$	62		$	(292	)	$	311
Less: Noncontrolling interest in comprehensive income	—			—			11			—			11
COMPREHENSIVE INCOME ATTRIBUTABLE TO TESORO CORPORATION	$	300		$	241		$	51		$	(292	)	$	300

_______________

(a) The income tax expense (benefit) reflected in each column does not include any tax effect of the equity in earnings from corporate subsidiaries, but does include the tax effect of the corporate partners’ share of partnership income.

Condensed Consolidating Statement of Operations and

Comprehensive Income for the Three Months EndedJune 30, 2012

(In millions)

	Parent			Guarantor Subsidiaries			Non- Guarantors			Eliminations			Consolidated
REVENUES	$	—		$	8,996		$	642		$	(2,305	)	$	7,333
COSTS AND EXPENSES:
Cost of sales	—			7,899			600			(2,305		)	6,194
Operating, selling, general and administrative expenses	3			365			19			—			387
Depreciation and amortization expense	—			98			4			—			102
Loss on asset disposals and impairments	—			6			—			—			6
OPERATING INCOME (LOSS)	(3		)	628			19			—			644
Equity in earnings of subsidiaries	391			13			10			(414		)	—
Interest and financing costs, net	(1		)	(31		)	(3		)	1			(34		)
Interest income	—			—			1			(1		)	—
Other expense, net	—			(19		)	—			—			(19		)
EARNINGS BEFORE INCOME TAXES	387			591			27			(414		)	591
Income tax expense (benefit) (a)	—			224			(2		)	—			222
NET EARNINGS FROM CONTINUING OPERATIONS	387			367			29			(414		)	369
Earnings from discontinued operations, net of tax	—			24			—			—			24
NET EARNINGS	387			391			29			(414		)	393
Less: Net earnings from continuing operations attributable to noncontrolling interest	—			—			6			—			6
NET EARNINGS ATTRIBUTABLE TO TESORO CORPORATION	$	387		$	391		$	23		$	(414	)	$	387
COMPREHENSIVE INCOME
Total comprehensive income	$	387		$	391		$	29		$	(414	)	$	393
Less: Noncontrolling interest in comprehensive income	—			—			6			—			6
COMPREHENSIVE INCOME ATTRIBUTABLE TO TESORO CORPORATION	$	387		$	391		$	23		$	(414	)	$	387

_______________

(a) The income tax expense (benefit) reflected in each column does not include any tax effect of the equity in earnings from corporate subsidiaries, but does include the tax effect of the corporate partners’ share of partnership income.

Condensed Consolidating Statement of Operations and

Comprehensive Income for the Six Months EndedJune 30, 2013

(In millions)

	Parent			Guarantor Subsidiaries			Non- Guarantors			Eliminations			Consolidated
REVENUES	$	—		$	19,589		$	1,903		$	(5,248	)	$	16,244
COSTS AND EXPENSES:
Cost of sales	—			17,940			1,780			(5,248		)	14,472
Operating, selling, general and administrative expenses	7			916			61			—			984
Depreciation and amortization expense	—			203			13			—			216
Loss on asset disposals and impairments	—			12			3			—			15
OPERATING INCOME (LOSS)	(7		)	518			46			—			557
Equity in earnings of subsidiaries	330			6			90			(426		)	—
Interest and financing costs, net	(6		)	(51		)	(12		)	6			(63		)
Interest income	—			1			6			(6		)	1
Other income, net	—			52			3			—			55
EARNINGS BEFORE INCOME TAXES	317			526			133			(426		)	550
Income tax expense (benefit) (a)	(3		)	196			3			—			196
NET EARNINGS FROM CONTINUING OPERATIONS	320			330			130			(426		)	354
Loss from discontinued operations, net of tax	—			(12		)	—			—			(12		)
NET EARNINGS	320			318			130			(426		)	342
Less: Net earnings from continuing operations attributable to noncontrolling interest	—			—			22			—			22
NET EARNINGS ATTRIBUTABLE TO TESORO CORPORATION	$	320		$	318		$	108		$	(426	)	$	320
COMPREHENSIVE INCOME
Total comprehensive income	$	393		$	318		$	130		$	(426	)	$	415
Less: Noncontrolling interest in comprehensive income	—			—			22			—			22
COMPREHENSIVE INCOME ATTRIBUTABLE TO TESORO CORPORATION	$	393		$	318		$	108		$	(426	)	$	393

_______________

(a) The income tax expense (benefit) reflected in each column does not include any tax effect of the equity in earnings from corporate subsidiaries, but does include the tax effect of the corporate partners’ share of partnership income.

Condensed Consolidating Statement of Operations and

Comprehensive Income for the Six Months EndedJune 30, 2012

(In millions)

	Parent			Guarantor Subsidiaries			Non- Guarantors			Eliminations			Consolidated
REVENUES	$	—		$	17,816		$	1,238		$	(4,714	)	$	14,340
COSTS AND EXPENSES:
Cost of sales	—			16,120			1,165			(4,714		)	12,571
Operating, selling, general and administrative expenses	5			717			37			—			759
Depreciation and amortization expense	—			191			7			—			198
Loss on asset disposals and impairments	—			11			1			—			12
OPERATING INCOME (LOSS)	(5		)	777			28			—			800
Equity in earnings of subsidiaries	450			—			41			(491		)	—
Interest and financing costs, net	(2		)	(64		)	(6		)	2			(70		)
Interest income	—			1			2			(2		)	1
Other expense, net	—			(19		)	—			—			(19		)
EARNINGS BEFORE INCOME TAXES	443			695			65			(491		)	712
Income tax expense (a)	—			267			—			—			267
NET EARNINGS FROM CONTINUING OPERATIONS	443			428			65			(491		)	445
Earnings from discontinued operations, net of tax	—			10			—			—			10
NET EARNINGS	443			438			65			(491		)	455
Less: Net earnings from continuing operations attributable to noncontrolling interest	—			—			12			—			12
NET EARNINGS ATTRIBUTABLE TO TESORO CORPORATION	$	443		$	438		$	53		$	(491	)	$	443
COMPREHENSIVE INCOME
Total comprehensive income	$	443		$	438		$	65		$	(491	)	$	455
Less: Noncontrolling interest in comprehensive income	—			—			12			—			12
COMPREHENSIVE INCOME ATTRIBUTABLE TO TESORO CORPORATION	$	443		$	438		$	53		$	(491	)	$	443

_______________

(a) The income tax expense reflected in each column does not include any tax effect of the equity in earnings from corporate subsidiaries, but does include the tax effect of the corporate partners’ share of partnership income.

Condensed Consolidating Balance Sheet as of June 30, 2013

(In millions)

	Parent		Guarantor Subsidiaries		Non- Guarantors		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	—	$	323	$	105	$	—		$	428
Receivables, less allowance for doubtful accounts	1		1,607		180		(1		)	1,787
Short-term receivables from affiliates	—		—		31		(31		)	—
Inventories	—		1,920		453		—			2,373
Prepayments	59		414		2		(4		)	471
Other current assets	119		136		10		—			265
Current assets related to discontinued operations	—		463		—		—			463
Total Current Assets	179		4,863		781		(36		)	5,787
Net Property, Plant and Equipment	—		5,607		1,132		—			6,739
Investment in Subsidiaries	5,346		96		1,404		(6,846		)	—
Long-Term Receivables from Affiliates	3,632		—		—		(3,632		)	—
Other Noncurrent Assets, Net:
Acquired intangibles, net	—		322		—		—			322
Other noncurrent assets, net	62		635		1,008		(884		)	821
Noncurrent assets related to discontinued operations	—		—		—		—			—
Total Other Noncurrent Assets, Net	62		957		1,008		(884		)	1,143
Total Assets	$	9,219	$	11,523	$	4,325	$	(11,398	)	$	13,669
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	2	$	2,203	$	285	$	—		$	2,490
Other current liabilities	193		595		40		(5		)	823
Short-term payables to affiliates	—		31		—		(31		)	—
Current liabilities related to discontinued operations	—		58		—		—			58
Total Current Liabilities	195		2,887		325		(36		)	3,371
Long-Term Payables to Affiliates	—		3,231		401		(3,632		)	—
Deferred Income Taxes	942		—		—		—			942
Other Noncurrent Liabilities	345		327		6		—			678
Debt	3,295		14		933		(884		)	3,358
Noncurrent liabilities related to discontinued operations	—		—		—		—			—
Equity-Tesoro Corporation	4,442		5,064		1,782		(6,846		)	4,442
Equity-Noncontrolling Interest	—		—		878		—			878
Total Liabilities and Equity	$	9,219	$	11,523	$	4,325	$	(11,398	)	$	13,669

Condensed Consolidating Balance Sheet as of December 31, 2012

(In millions)

	Parent		Guarantor Subsidiaries			Non- Guarantors		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	—	$	1,244		$	395	$	—		$	1,639
Receivables, less allowance for doubtful accounts	1		1,038			87		—			1,126
Short-term receivables from affiliates	—		—			47		(47		)	—
Inventories	—		1,091			247		—			1,338
Prepayments	17		36			1		—			54
Other current assets	114		25			3		—			142
Current assets related to discontinued operations	—		337			—		—			337
Total Current Assets	132		3,771			780		(47		)	4,636
Net Property, Plant and Equipment	—		4,873			359		—			5,232
Investment in Subsidiaries	5,041		(200		)	159		(5,000		)	—
Long-Term Receivables from Affiliates	1,846		—			—		(1,846		)	—
Other Noncurrent Assets, Net:
Acquired intangibles, net	—		214			—		—			214
Other noncurrent assets, net	47		505			160		(110		)	602
Noncurrent assets related to discontinued operations	—		18			—		—			18
Total Other Noncurrent Assets, Net	47		737			160		(110		)	834
Total Assets	$	7,066	$	9,181		$	1,458	$	(7,003	)	$	10,702
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	1	$	2,029		$	166	$	—		$	2,196
Other current liabilities	163		444			18		—			625
Short-term payables to affiliates	—		47			—		(47		)	—
Current liabilities related to discontinued operations	—		60			—		—			60
Total Current Liabilities	164		2,580			184		(47		)	2,881
Long-Term Payables to Affiliates	—		1,667			179		(1,846		)	—
Deferred Income Taxes	850		—			—		—			850
Other Noncurrent Liabilities	475		169			—		—			644
Debt	1,326		15			354		(110		)	1,585
Noncurrent liabilities related to discontinued operations	—		5			—		—			5
Equity-Tesoro Corporation	4,251		4,745			255		(5,000		)	4,251
Equity-Noncontrolling Interest	—		—			486		—			486
Total Liabilities and Equity	$	7,066	$	9,181		$	1,458	$	(7,003	)	$	10,702

Condensed Consolidating Statement of Cash Flows for the Six Months EndedJune 30, 2013

(In millions)

	Parent			Guarantor Subsidiaries			Non- Guarantors			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash used in operating activities	$	(14	)	$	(22	)	$	(125	)	$	—		$	(161	)
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
Capital expenditures	—			(266		)	(27		)	—			(293		)
Proceeds from asset sales	—			—			2			—			2
Investment in joint venture	—			(2		)	—			—			(2		)
Acquisitions	—			(1,870		)	(778		)	—			(2,648		)
Advance payments received for sale of assets	—			25			—			—			25
Intercompany notes, net	(1,719		)	—			—			1,719			—
Net cash used in investing activities	(1,719		)	(2,113		)	(803		)	1,719			(2,916		)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
Borrowings under revolving credit agreements	1,524			—			544			—			2,068
Borrowings under term loan credit agreement	500			—			—			—			500
Repayments on revolving credit agreements	(824		)	—			—			—			(824		)
Repayments of debt	—			(2		)	—			—			(2		)
Dividend payments	(55		)	—			—			—			(55		)
Proceeds from stock options exercised	68			—			—			—			68
Distributions to noncontrolling interest	—			—			(28		)	—			(28		)
Purchases of common stock	(241		)	—			—			—			(241		)
Net proceeds from issuance of Tesoro Logistics LP common units	—			—			392			—			392
Excess tax benefits from stock-based compensation arrangements	—			11			—			—			11
Net intercompany borrowings (repayments)	—			1,197			522			(1,719		)	—
Borrowings from general partner	774			—			(774		)	—			—
Distributions to TLLP unitholders and general partner	7			8			(15		)	—			—
Financing costs and other	(20		)	—			(3		)	—			(23		)
Net cash from financing activities	1,733			1,214			638			(1,719		)	1,866
DECREASE IN CASH AND CASH EQUIVALENTS	—			(921		)	(290		)	—			(1,211		)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	—			1,244			395			—			1,639
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—		$	323		$	105		$	—		$	428

Condensed Consolidating Statement of Cash Flows for the Six Months EndedJune 30, 2012

(In millions)

	Parent			Guarantor Subsidiaries			Non- Guarantors			Eliminations			Consolidated
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net cash from (used in) operating activities	$	9		$	717		$	(2	)	$	—		$	724
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
Capital expenditures	—			(234		)	(9		)	—			(243		)
Acquisitions	—			(38		)	—			—			(38		)
Proceeds from asset sales	—			3			—			—			3
Intercompany notes, net	(65		)	—			—			65			—
Net cash used in investing activities	(65		)	(269		)	(9		)	65			(278		)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
Borrowings under revolving credit agreements	—			—			185			—			185
Repayments on revolving credit agreements	—			—			(184		)	—			(184		)
Repayments of debt	—			(1		)	—			—			(1		)
Proceeds from stock options exercised	14			—			—			—			14
Distributions to noncontrolling interest	—			—			(11		)	—			(11		)
Purchases of common stock	(31		)	—			—			—			(31		)
Excess tax benefits from stock-based compensation arrangements	—			4			—			—			4
Net intercompany borrowings (repayments)	—			15			50			(65		)	—
Borrowings from general partner	68			—			(68		)	—			—
Distributions to TLLP unitholders and general partner	5			6			(11		)	—			—
Net cash from (used in) financing activities	56			24			(39		)	(65		)	(24		)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	—			472			(50		)	—			422
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	—			805			95			—			900
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—		$	1,277		$	45		$	—		$	1,322

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Commitments and Contingencies, Washington Refinery Fire (Details) (Washington Refinery Fire, USD $) In Millions, unless otherwise specified	1 Months Ended		3 Months Ended
	Oct. 31, 2010	Apr. 30, 2010 employees	Jun. 30, 2013
Washington Refinery Fire
Loss Contingencies
Loss contingency, period of occurrence			4/1/2010
Number of fatally injured employees in the refinery incident (employees)		7
Fines and penalties assessed	$ 2.4

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Fair Value Measurements (Details) (USD $)	Jun. 30, 2013		Dec. 31, 2012
Fair Value Measurements
Gross derivative assets	$ 183,000,000		$ 95,000,000
Net derivative assets	91,000,000		27,000,000
Gross derivative liabilities	159,000,000		101,000,000
Net derivative liabilities	24,000,000		6,000,000
Derivative liabilities and RINs obligation	35,000,000		7,000,000
Cash collateral posted	43,000,000		27,000,000
Percent of trade receivables with balances outstanding greater than 90 days	1.00%
Percent of trade payables with balances outstanding greater than 90 days	1.00%
Carrying value of debt
Fair Value Measurements
Debt carrying value and fair value disclosures	3,300,000,000		1,600,000,000
Commodity Futures Contracts
Fair Value Measurements
Net derivative assets	87,000,000		27,000,000
Net derivative liabilities	20,000,000		5,000,000
Commodity Forward Contracts
Fair Value Measurements
Net derivative assets	4,000,000
Net derivative liabilities	4,000,000		1,000,000
RINs Obligation
Fair Value Measurements
RINs obligation	11,000,000		1,000,000
Level 1
Fair Value Measurements
Gross derivative assets	172,000,000		91,000,000
Derivative liabilities and RINs obligation	150,000,000		96,000,000
Level 1 | Commodity Futures Contracts
Fair Value Measurements
Gross derivative assets	172,000,000		91,000,000
Gross derivative liabilities	150,000,000		96,000,000
Level 1 | Commodity Forward Contracts
Fair Value Measurements
Gross derivative assets	0
Gross derivative liabilities	0		0
Level 1 | RINs Obligation
Fair Value Measurements
RINs obligation	0		0
Level 2
Fair Value Measurements
Gross derivative assets	11,000,000		4,000,000
Derivative liabilities and RINs obligation	20,000,000		6,000,000
Level 2 | Fair value of debt
Fair Value Measurements
Debt carrying value and fair value disclosures	3,400,000,000		1,700,000,000
Level 2 | Commodity Futures Contracts
Fair Value Measurements
Gross derivative assets	7,000,000		4,000,000
Gross derivative liabilities	5,000,000		4,000,000
Level 2 | Commodity Forward Contracts
Fair Value Measurements
Gross derivative assets	4,000,000
Gross derivative liabilities	4,000,000		1,000,000
Level 2 | RINs Obligation
Fair Value Measurements
RINs obligation	11,000,000		1,000,000
Level 3
Fair Value Measurements
Gross derivative assets	0		0
Derivative liabilities and RINs obligation	0		0
Level 3 | Commodity Futures Contracts
Fair Value Measurements
Gross derivative assets	0		0
Gross derivative liabilities	0		0
Level 3 | Commodity Forward Contracts
Fair Value Measurements
Gross derivative assets	0
Gross derivative liabilities	0		0
Level 3 | RINs Obligation
Fair Value Measurements
RINs obligation	0		0
Netting and Collateral (a)
Fair Value Measurements
Derivative asset amount offset against collateral and netting arrangements	(92,000,000)	[1]	(68,000,000)	[1]
Derivative liabilities and RINs obligation	(135,000,000)	[1]	(95,000,000)	[1]
Netting and Collateral (a) | Commodity Futures Contracts
Fair Value Measurements
Derivative asset amount offset against collateral and netting arrangements	(92,000,000)	[1]	(68,000,000)	[1]
Derivative liability amount offset against collateral and netting arrangements	(135,000,000)	[1]	(95,000,000)	[1]
Netting and Collateral (a) | Commodity Forward Contracts
Fair Value Measurements
Derivative asset amount offset against collateral and netting arrangements	0	[1]
Derivative liability amount offset against collateral and netting arrangements	0	[1]	0	[1]
Netting and Collateral (a) | RINs Obligation
Fair Value Measurements
RINs obligation	$ 0	[1]	$ 0	[1]

[1] Represents the impact of netting assets, liabilities and cash collateral when a legal right of offset exists. As of June 30, 2013 and December 31, 2012, cash collateral amounts of $43 million and $27 million, respectively, are netted with mark-to-market derivative assets.

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Benefit Plans (Notes)

6 Months Ended

Jun. 30, 2013

Compensation and Retirement Disclosure [Abstract]

BENEFIT PLANS

BENEFIT PLANS

Tesoro sponsors the following four defined benefit pension plans: the funded qualified employee retirement plan, the unfunded nonqualified executive security plan, the unfunded nonqualified restoration retirement plan and the unfunded nonqualified supplemental executive retirement plan. Although our funded employee retirement plan fully meets all funding requirements under applicable laws and regulations, we voluntarily contributed $24 million during the six months ended June 30, 2013 to improve the funded status of the plan.

Tesoro also provides health care benefits to retirees who met certain service requirements and were participating in our group health insurance program at retirement.

As a result of the Carson Acquisition and the planned sale of our Hawaii Business, we remeasured our pension and other postretirement benefit obligations during the second quarter of 2013. The discount rates used to determine the pension and postretirement obligations, and the related net periodic benefit costs for the remainder of 2013, are 4.65% and 3.01%, respectively, compared to discount rates of 4.06% and 2.82%, respectively, used at December 31, 2012. We determine the discount rate primarily by reference to the effective yields on high quality corporate bonds that have a comparable cash flow pattern to the expected payments to be made under our plans. The remeasurement resulted in a $125 million decrease in pension and other postretirement liabilities during the second quarter of 2013. The benefit of this remeasurement will be amortized into income through 2023. The remeasurement for pension and other postretirement benefits did not have a material impact on our net periodic benefit expense during the three or six months ended June 30, 2013.

The components of pension and other postretirement benefit expense (income), including amounts related to discontinued operations, included in the condensed statements of consolidated operations for the three and six months ended June 30, 2013 and 2012 were (in millions):

	Pension Benefits
	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Service cost	$	6		$	7		$	14		$	14
Interest cost	6			8			13			15
Expected return on plan assets	(6		)	(6		)	(12		)	(12		)
Recognized net actuarial loss	6			5			13			11
Net Periodic Benefit Expense	$	12		$	14		$	28		$	28
	Other Postretirement Benefits
	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Service cost	$	2		$	1		$	3		$	2
Interest cost	—			1			1			2
Amortization of prior service credit	(10		)	(10		)	(19		)	(19		)
Recognized net actuarial loss	3			3			5			6
Net Periodic Benefit Income	$	(5	)	$	(5	)	$	(10	)	$	(9	)

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Tesoro Logistics LP Tesoro Logistics LP, Ownership Interest (Details)	0 Months Ended	6 Months Ended
	Jan. 14, 2013	Jun. 30, 2013
Variable Interest Entity
Percentage ownership of Tesoro Logistics LP		40.00%
Limited partner common units outstanding (units)		2,729,476
Subordinated units outstanding (units)		15,254,890
General Partner
Variable Interest Entity
Percentage ownership of Tesoro Logistics LP	2.00%	2.00%
General partner units outstanding (units)		958,587

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Condensed Consolidating Financial Information, Balance Sheet (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012	Dec. 31, 2011
Current Assets:
Cash and cash equivalents	$ 428	$ 1,639	$ 1,322	$ 900
Receivables, less allowance for doubtful accounts	1,787	1,126
Short-term receivables from affiliates	0	0
Inventories	2,373	1,338
Prepayments	471	54
Other current assets	265	142
Current assets related to discontinued operations	463	337
Total Current Assets	5,787	4,636
Net Property, Plant and Equipment	6,739	5,232
Investment in Subsidiaries	0	0
Long-Term Receivables from Affiliates	0	0
Other Noncurrent Assets, Net
Acquired intangibles, net	322	214
Other noncurrent assets, net	821	602
Noncurrent assets related to discontinued operations	0	18
Total Other Noncurrent Assets, Net	1,143	834
Total Assets	13,669	10,702
Current Liabilities:
Accounts payable	2,490	2,196
Other current liabilities	823	625
Short-term payables to affiliates	0	0
Current liabilities related to discontinued operations	58	60
Total Current Liabilities	3,371	2,881
Long-Term Payables to Affiliates	0	0
Deferred Income Taxes	942	850
Other Noncurrent Liabilities	678	644
Debt	3,358	1,585
Noncurrent liabilities related to discontinued operations	0	5
Equity-Tesoro Corporation	4,442	4,251
Equity-Noncontrolling Interest	878	486
Total Liabilities and Equity (Deficit)	13,669	10,702
Parent
Current Assets:
Cash and cash equivalents	0	0	0	0
Receivables, less allowance for doubtful accounts	1	1
Short-term receivables from affiliates	0	0
Inventories	0	0
Prepayments	59	17
Other current assets	119	114
Current assets related to discontinued operations	0	0
Total Current Assets	179	132
Net Property, Plant and Equipment	0	0
Investment in Subsidiaries	5,346	5,041
Long-Term Receivables from Affiliates	3,632	1,846
Other Noncurrent Assets, Net
Acquired intangibles, net	0	0
Other noncurrent assets, net	62	47
Noncurrent assets related to discontinued operations	0	0
Total Other Noncurrent Assets, Net	62	47
Total Assets	9,219	7,066
Current Liabilities:
Accounts payable	2	1
Other current liabilities	193	163
Short-term payables to affiliates	0	0
Current liabilities related to discontinued operations	0	0
Total Current Liabilities	195	164
Long-Term Payables to Affiliates	0	0
Deferred Income Taxes	942	850
Other Noncurrent Liabilities	345	475
Debt	3,295	1,326
Noncurrent liabilities related to discontinued operations	0	0
Equity-Tesoro Corporation	4,442	4,251
Equity-Noncontrolling Interest	0	0
Total Liabilities and Equity (Deficit)	9,219	7,066
Guarantor Subsidiaries
Current Assets:
Cash and cash equivalents	323	1,244	1,277	805
Receivables, less allowance for doubtful accounts	1,607	1,038
Short-term receivables from affiliates	0	0
Inventories	1,920	1,091
Prepayments	414	36
Other current assets	136	25
Current assets related to discontinued operations	463	337
Total Current Assets	4,863	3,771
Net Property, Plant and Equipment	5,607	4,873
Investment in Subsidiaries	96	(200)
Long-Term Receivables from Affiliates	0	0
Other Noncurrent Assets, Net
Acquired intangibles, net	322	214
Other noncurrent assets, net	635	505
Noncurrent assets related to discontinued operations	0	18
Total Other Noncurrent Assets, Net	957	737
Total Assets	11,523	9,181
Current Liabilities:
Accounts payable	2,203	2,029
Other current liabilities	595	444
Short-term payables to affiliates	31	47
Current liabilities related to discontinued operations	58	60
Total Current Liabilities	2,887	2,580
Long-Term Payables to Affiliates	3,231	1,667
Deferred Income Taxes	0	0
Other Noncurrent Liabilities	327	169
Debt	14	15
Noncurrent liabilities related to discontinued operations	0	5
Equity-Tesoro Corporation	5,064	4,745
Equity-Noncontrolling Interest	0	0
Total Liabilities and Equity (Deficit)	11,523	9,181
Non- Guarantors
Current Assets:
Cash and cash equivalents	105	395	45	95
Receivables, less allowance for doubtful accounts	180	87
Short-term receivables from affiliates	31	47
Inventories	453	247
Prepayments	2	1
Other current assets	10	3
Current assets related to discontinued operations	0	0
Total Current Assets	781	780
Net Property, Plant and Equipment	1,132	359
Investment in Subsidiaries	1,404	159
Long-Term Receivables from Affiliates	0	0
Other Noncurrent Assets, Net
Acquired intangibles, net	0	0
Other noncurrent assets, net	1,008	160
Noncurrent assets related to discontinued operations	0	0
Total Other Noncurrent Assets, Net	1,008	160
Total Assets	4,325	1,458
Current Liabilities:
Accounts payable	285	166
Other current liabilities	40	18
Short-term payables to affiliates	0	0
Current liabilities related to discontinued operations	0	0
Total Current Liabilities	325	184
Long-Term Payables to Affiliates	401	179
Deferred Income Taxes	0	0
Other Noncurrent Liabilities	6	0
Debt	933	354
Noncurrent liabilities related to discontinued operations	0	0
Equity-Tesoro Corporation	1,782	255
Equity-Noncontrolling Interest	878	486
Total Liabilities and Equity (Deficit)	4,325	1,458
Eliminations
Current Assets:
Cash and cash equivalents	0	0	0	0
Receivables, less allowance for doubtful accounts	(1)	0
Short-term receivables from affiliates	(31)	(47)
Inventories	0	0
Prepayments	(4)	0
Other current assets	0	0
Current assets related to discontinued operations	0	0
Total Current Assets	(36)	(47)
Net Property, Plant and Equipment	0	0
Investment in Subsidiaries	(6,846)	(5,000)
Long-Term Receivables from Affiliates	(3,632)	(1,846)
Other Noncurrent Assets, Net
Acquired intangibles, net	0	0
Other noncurrent assets, net	(884)	(110)
Noncurrent assets related to discontinued operations	0	0
Total Other Noncurrent Assets, Net	(884)	(110)
Total Assets	(11,398)	(7,003)
Current Liabilities:
Accounts payable	0	0
Other current liabilities	(5)	0
Short-term payables to affiliates	(31)	(47)
Current liabilities related to discontinued operations	0	0
Total Current Liabilities	(36)	(47)
Long-Term Payables to Affiliates	(3,632)	(1,846)
Deferred Income Taxes	0	0
Other Noncurrent Liabilities	0	0
Debt	(884)	(110)
Noncurrent liabilities related to discontinued operations	0	0
Equity-Tesoro Corporation	(6,846)	(5,000)
Equity-Noncontrolling Interest	0	0
Total Liabilities and Equity (Deficit)	$ (11,398)	$ (7,003)

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Derivative Instruments, Derivative Assets and Liabilities (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2013		Dec. 31, 2012
Derivative Assets (Liabilities), at Fair Value, Net, by Balance Sheet Classification
Derivative maturity period (years)	2 years
Derivatives, Fair Value
Gross derivative assets	$ 183		$ 95
Gross derivative liabilities	159		101
Net derivative assets	91		27
Net derivative liabilities	24		6
Derivative, Collateral
Cash collateral outstanding	43		27
Commodity Futures Contracts | Prepayments and other current assets
Derivatives, Fair Value
Gross derivative assets	152		76
Gross derivative liabilities	140		83
Commodity Futures Contracts | Current assets related to discontinued operations
Derivatives, Fair Value
Gross derivative assets	27		19
Gross derivative liabilities	15		17
Commodity Forward Contracts | Receivables
Derivatives, Fair Value
Gross derivative assets	4		0
Gross derivative liabilities	4		0
Commodity Forward Contracts | Accounts payable
Derivatives, Fair Value
Gross derivative assets	0		0
Gross derivative liabilities	0		1
Less: Counterparty Netting and Cash Collateral (a)
Derivatives, Fair Value
Derivative asset amount offset against collateral and netting arrangements	(92)	[1]	(68)	[1]
Derivative liability amount offset against collateral and netting arrangements	$ (135)	[1]	$ (95)	[1]

[1] As of June 30, 2013 and December 31, 2012, cash collateral amounts of $43 million and $27 million, respectively, are netted with mark-to-market derivative assets.

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Benefit Plans (Tables)

6 Months Ended

Jun. 30, 2013

Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract]

Schedule of Defined Benefit Plans Disclosures

The components of pension and other postretirement benefit expense (income), including amounts related to discontinued operations, included in the condensed statements of consolidated operations for the three and six months ended June 30, 2013 and 2012 were (in millions):

	Pension Benefits
	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Service cost	$	6		$	7		$	14		$	14
Interest cost	6			8			13			15
Expected return on plan assets	(6		)	(6		)	(12		)	(12		)
Recognized net actuarial loss	6			5			13			11
Net Periodic Benefit Expense	$	12		$	14		$	28		$	28
	Other Postretirement Benefits
	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Service cost	$	2		$	1		$	3		$	2
Interest cost	—			1			1			2
Amortization of prior service credit	(10		)	(10		)	(19		)	(19		)
Recognized net actuarial loss	3			3			5			6
Net Periodic Benefit Income	$	(5	)	$	(5	)	$	(10	)	$	(9	)

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Derivative Instruments (Policies)

6 Months Ended

Jun. 30, 2013

General Discussion of Derivative Instruments and Hedging Activities [Abstract]

Derivatives, policy

The accounting for changes in the fair value of a commodity derivative depends on whether the derivative has been designated in a hedging relationship and whether we have elected the normal purchases and normal sales exception. We did not designate any of our derivatives for hedge accounting during the three and six months ended June 30, 2013 and 2012, respectively. The accounting for the change in fair value can be summarized as follows:

Derivative Treatment	Accounting Method
Normal purchases and normal sales exception	Accrual accounting
Designated in qualifying hedging relationship	Hedge accounting
All other derivatives	Mark-to-market accounting

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Fair Value Measurements (Policies)

6 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

Fair value of financial instruments policy

We classify financial assets and financial liabilities into the following fair value hierarchy:

• level 1 - valued based on quoted prices in active markets for identical assets and liabilities;

• level 2 - valued based on quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability; and

• level 3 - valued based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

We measure fair value using level 1 inputs, when available, because they provide the most reliable evidence of fair value. Derivative instruments and our Renewable Identification Numbers (“RINs”) are our only financial assets and liabilities measured at fair value on a recurring basis.

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Acquisitions and Other Changes in Operations, Acquisitions (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended		0 Months Ended	6 Months Ended	0 Months Ended		1 Months Ended	6 Months Ended	0 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 19, 2013 Northwest Products System	Jun. 30, 2013 Northwest Products System	Jun. 01, 2013 BP's Southern California Refining and Marketing Business stores	May 30, 2013 BP's Southern California Refining and Marketing Business	Dec. 31, 2012 BP's Southern California Refining and Marketing Business	Jun. 30, 2013 BP's Southern California Refining and Marketing Business	Jun. 01, 2013 Carson Terminal Assets	May 30, 2013 Carson Terminal Assets	Jun. 30, 2013 Carson Terminal Assets	Jun. 01, 2013 Marketing and storage terminal facilities terminals	Jun. 30, 2013 California Region refineries
Business Acquisition
Date of acquisition				Jun. 19, 2013				Jun. 01, 2013			Jun. 01, 2013
Number of stations (stations)					800
Watson Cogeneration Facility ownership percentage					51.00%
Purchase price			$ 355		$ 2,420				$ 640
Inventories					1,100			1,100
Advance payments made for acquisition			40		127		90
Cash paid for acquisition					552
Borrowings on Revolving Credit Facility	2,068	185				700
Borrowing on Term Loan Facility for acquisition						500
Cash received from TLLP	$ 2	$ 3								$ 544
Number of assets (assets)												6
Number of refineries (refineries)													2

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

Schedule of fair value, assets and liabilities measured on recurring basis

Financial assets and liabilities recognized at fair value in our condensed consolidated balance sheets by level within the fair value hierarchy were as follows (in millions):

	Level 1		Level 2		Level 3		Netting and Collateral (a)			Total as of June 30, 2013
Assets:
Commodity Futures Contracts	$	172	$	7	$	—	$	(92	)	$	87
Commodity Forward Contracts	—		4		—		—			4
Total Assets	$	172	$	11	$	—	$	(92	)	$	91
Liabilities:
Commodity Futures Contracts	$	150	$	5	$	—	$	(135	)	$	20
Commodity Forward Contracts	—		4		—		—			4
RINs Obligation	—		11		—		—			11
Total Liabilities	$	150	$	20	$	—	$	(135	)	$	35

	Level 1		Level 2		Level 3		Netting and Collateral (a)			Total as of December 31, 2012
Assets:
Commodity Futures Contracts	$	91	$	4	$	—	$	(68	)	$	27
Total Assets	$	91	$	4	$	—	$	(68	)	$	27
Liabilities:
Commodity Futures Contracts	$	96	$	4	$	—	$	(95	)	$	5
Commodity Forward Contracts	—		1		—		—			1
RINs Obligation	—		1		—		—			1
Total Liabilities	$	96	$	6	$	—	$	(95	)	$	7

________________

(a) Represents the impact of netting assets, liabilities and cash collateral when a legal right of offset exists. As of June 30, 2013 and December 31, 2012, cash collateral amounts of $43 million and $27 million, respectively, are netted with mark-to-market derivative assets.

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2013

Stockholders' Equity Attributable to Parent [Abstract]

Stockholders' equity and noncontrolling interest

Changes to equity during the six months ended June 30, 2013 are presented below (in millions):

	Tesoro Corporation Stockholders’ Equity			Noncontrolling  Interest			Total Equity
Balance at December 31, 2012	$	4,251		$	486		$	4,737
Net earnings	320			22			342
Other comprehensive income	73			—			73
Shares issued for equity-based compensation awards	69			—			69
Amortization of equity settled awards	20			—			20
Excess tax benefits from stock-based compensation arrangements, net	9			—			9
Purchases of common stock	(241		)	—			(241		)
Dividend payments	(55		)	—			(55		)
Net proceeds from issuance of Tesoro Logistics LP common units	(6		)	398			392
Distributions to noncontrolling interest	—			(28		)	(28		)
Other	2			—			2
Balance at June 30, 2013	$	4,442		$	878		$	5,320

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Tesoro Logistics LP Tesoro Logistics LP, Acquisitions (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended		0 Months Ended		6 Months Ended	0 Months Ended	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 01, 2013 Carson Terminal Assets	May 30, 2013 Carson Terminal Assets	Jun. 30, 2013 Carson Terminal Assets	Jun. 19, 2013 Northwest Products System	Jun. 30, 2013 Northwest Products System	Jun. 19, 2013 Common carrier pipeline pipelines	Jun. 19, 2013 Jet fuel pipeline pipelines	Jun. 19, 2013 Refined products terminals terminals
Business Acquisition
Date of acquisition					Jun. 01, 2013		Jun. 19, 2013
Purchase price			$ 640			$ 355
Number of assets (assets)								1	1	3
Advance payments made for acquisition						40
Property, plant and equipment						358
Goodwill						9
Other noncurrent assets, net						5
Environmental liabilities assumed						17	17
Chevron recovery time frame (years)						P2Y
Cash received from TLLP	2	3		544
Fair value of TLLP equity issuance			$ 96

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Discontinued Operations Discontinued Operations (Tables)

6 Months Ended

Jun. 30, 2013

Discontinued Operations and Disposal Groups [Abstract]

Schedule of disposal groups, including discontinued operations, income statement, balance sheet and additional disclosures

Revenues and earnings (loss) before and after tax from the discontinued Hawaii Business for the three and six months ended June 30, 2013 and 2012 were as follows:

	Three Months Ended June 30,					Six Months Ended June 30,
	2013			2012		2013			2012
	(In millions, except per share amounts)
Revenues	$	642		$	772	$	1,451		$	1,585
Earnings (loss) from discontinued operations before tax	$	(16	)	$	37	$	(17	)	$	15
Income tax expense (benefit)	(5		)	13		(5		)	5
Earnings (loss) from discontinued operations, net of tax	$	(11	)	$	24	$	(12	)	$	10

The following assets and liabilities relate to the discontinued Hawaii Business as of June 30, 2013 and December 31, 2012:

	June 30, 2013		December 31, 2012
	(In millions, except per share amounts)
Assets:
Receivables, less allowance for doubtful accounts	$	80	$	95
Inventories	362		240
Prepayments and other current assets	2		2
Total current assets related to discontinued operations	444		337
Net property, plant and equipment	14		13
Other noncurrent assets, net	5		5
Total assets related to discontinued operations	$	463	$	355
Liabilities:
Accounts payable	$	15	$	17
Other current liabilities	38		43
Total current liabilities related to discontinued operations	53		60
Other noncurrent liabilities	3		3
Debt	2		2
Total liabilities related to discontinued operations	$	58	$	65

Cash flows related to discontinued Hawaii Business have been combined with the cash flows from continuing operations in the condensed statements of consolidated cash flows for both periods presented and cash flows from operating and investing activities are summarized as follows (in millions):

	Six Months Ended June 30,
	2013			2012
Cash Flows From (Used in):
Operating activities	$	192		$	75
Investing activities	(2		)	(10		)

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Commitments and Contingencies, Tax Matters (Details)	6 Months Ended
	Jun. 30, 2013
Commitments and Contingencies Disclosure [Abstract]
Significant change in unrecognized tax benefits	We do not expect our unrecognized tax benefits to change significantly over the next twelve months.

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Stock-Based Compensation (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Stock-Based Compensation Arrangement by Stock-based Payment Award
Stock-based compensation expense (benefit)	$ (5)	$ 0	$ 47	$ 21
Income tax benefit (expense) for stock-based compensation arrangements	(3)	(1)	17	7
Tax benefit realized from exercise of stock-based compensation arrangements	21	4	38	14
Stock appreciation rights
Stock-Based Compensation Arrangement by Stock-based Payment Award
Stock-based compensation expense (benefit)	(15)	(9)	24	3
Performance share awards
Stock-Based Compensation Arrangement by Stock-based Payment Award
Stock-based compensation expense (benefit)	2	2	10	4
Market stock units
Stock-Based Compensation Arrangement by Stock-based Payment Award
Stock-based compensation expense (benefit)	4	3	8	6
Other stock-based awards
Stock-Based Compensation Arrangement by Stock-based Payment Award
Stock-based compensation expense (benefit)	$ 4	$ 4	$ 5	$ 8

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Benefit Plans (Details) (USD $) In Millions, unless otherwise specified	1 Months Ended	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2013 plans	Jun. 30, 2013 plans	Jun. 30, 2012	Jun. 30, 2013 plans	Jun. 30, 2012	Dec. 31, 2012
General Discussion of Pension Plan
Decrease in pension and postretirement obligations		$ 125
Pension Benefits
General Discussion of Pension Plan
Number of defined benefit plans sponsored (plans)	4	4		4
Defined benefit plan, discount rate assumptions	4.65%					4.06%
Pension Contributions
Employer contributions to employee retirement plan				24
Components of Net Periodic Benefit Expense and Other Postretirement Expense (Income):
Service cost		6	7	14	14
Interest cost		6	8	13	15
Expected return on plan assets		(6)	(6)	(12)	(12)
Recognized net actuarial loss		6	5	13	11
Net Periodic Benefit Expense (Income)		12	14	28	28
Other Postretirement Benefits
General Discussion of Pension Plan
Defined benefit plan, discount rate assumptions	3.01%					2.82%
Components of Net Periodic Benefit Expense and Other Postretirement Expense (Income):
Service cost		2	1	3	2
Interest cost		0	1	1	2
Amortization of prior service credit		(10)	(10)	(19)	(19)
Recognized net actuarial loss		3	3	5	6
Net Periodic Benefit Expense (Income)		$ (5)	$ (5)	$ (10)	$ (9)

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Operating Segments (Tables)

6 Months Ended

Jun. 30, 2013

Segment Reporting [Abstract]

Schedule of segment reporting information, by segment

Segment information related to continuing operations is as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
	(In millions)
Revenues
Refining:
Refined products	$	8,146		$	7,026		$	14,890		$	13,791
Crude oil and other	603			133			1,076			287
Retail:
Fuel (a)	2,218			1,457			3,725			2,713
Merchandise and other	59			54			107			100
Intersegment sales from Refining to Retail	(2,129		)	(1,337		)	(3,554		)	(2,551		)
Total Revenues	$	8,897		$	7,333		$	16,244		$	14,340
Segment Operating Income
Refining (b)	$	395		$	610		$	678		$	823
Retail (b)	25			72			40			67
Total Segment Operating Income	420			682			718			890
Corporate and unallocated costs (c)	(56		)	(38		)	(161		)	(90		)
Operating Income	364			644			557			800
Interest and financing costs, net	(33		)	(34		)	(63		)	(70		)
Interest income	—			—			1			1
Other income (expense), net (d)	56			(19		)	55			(19		)
Earnings Before Income Taxes	$	387		$	591		$	550		$	712
Depreciation and Amortization Expense
Refining	$	97		$	87		$	189		$	172
Retail	9			9			17			18
Corporate	5			6			10			8
Total Depreciation and Amortization Expense	$	111		$	102		$	216		$	198
Capital Expenditures
Refining	$	156		$	116		$	265		$	203
Retail	9			23			16			31
Corporate	5			3			8			6
Total Capital Expenditures	$	170		$	142		$	289		$	240

________________

(a) Federal and state motor fuel taxes on sales by our retail segment are included in both revenues and cost of sales in our condensed statements of consolidated operations. These taxes totaled $143 million and $107 million for the three months ended June 30, 2013 and 2012, respectively, and $272 million and $200 million for the six months ended June 30, 2013 and 2012, respectively.

(b) Our refining segment uses RINs to satisfy its obligations under the Renewable Fuels Standard, in addition to physically blending required biofuels. Beginning in late 2012, we began to transfer the ownership of the biofuels to the retail segment prior to blending which resulted in a discount in the price paid by the retail segment for biofuels by the market value of RINs (“RINs Transfer Price Adjustment”). During 2012, the market price of RINs resulted in an immaterial impact to the segments. Effective April 1, 2013, we changed our intersegment pricing methodology and no longer reduce the amount retail pays for the biofuels by the market value of the RINs which we believe more closely approximates market rates during the period.  As a result, we conformed our segment presentation and reclassified $15 million of the RINs Transfer Price Adjustment related to the three months ended March 31, 2013 during the three months ended June 30, 2013 from our retail segment to our refining segment.  This resulted in a decrease in retail segment operating income and an increase in refining segment operating income for the three months ended June 30, 2013.

(c) Includes stock-based compensation benefit of $4 million for the three months ended June 30, 2013 and expense of $44 million and $19 million for the six months ended June 30, 2013 and 2012, respectively. The significant impact to stock-based compensation expense during the six months ended June 30, 2013 compared to the prior period is primarily a result of changes in Tesoro’s stock price during the three and six months ended June 30, 2013 as compared to the three and six months ended June 30, 2012. Also includes transaction and integration costs related to the Carson Acquisition and TLLP’s purchase of the Northwest Products System of $19 million and $33 million for the three and six months ended June 30, 2013, respectively.

(d) Includes $54 million in refunds from a settlement of a rate proceeding from the CPUC for the three and six months ended June 30, 2013. Also includes $18 million in accruals related to certain legal matters partially offset by receipts associated with the settlement of a pipeline rate proceeding for the three and six months ended June 30, 2012.

	June 30, 2013		December 31, 2012
	(In millions)
Identifiable Assets Related to Continuing Operations:
Refining	$	11,656	$	8,010
Retail	790		716
Corporate	760		1,621
Total Assets	$	13,206	$	10,347

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Commitments and Contingencies Commitments and Contingencies, Contractual Commitments (Details) (USD $)	6 Months Ended
	Jun. 30, 2013 agreements
Carson Refinery Operating Lease Commitments
Future lease payments, remainder of 2013	$ 16,000,000
Future lease payments, 2014	17,000,000
Future lease payments, 2015	12,000,000
Future lease payments, 2016	9,000,000
Future lease payments, 2017	8,000,000
Future lease payments, after 2017	50,000,000
Purchase Obligations and Other Commitments
Minimum annual payments due under take-or-pay arrangements	37,000,000
Crude agreements (agreements)	1
Crude oil commitments
Purchase Obligations and Other Commitments
Term of commitments (years)	P1Y
Price per barrel under commitments	99
Minimum payments, remainder of 2013	909,000,000
Minimum payments, 2014	$ 1,300,000,000

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Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of presentation and significant accounting policies

We prepare our condensed consolidated financial statements in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts and disclosures of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented.

Use of estimates policy

We review our estimates on an ongoing basis, based on currently available information. Changes in facts and circumstances may result in revised estimates and actual results could differ from those estimates. The results of operations for any interim period are not necessarily indicative of results for the full year. Certain prior year balances have been aggregated or disaggregated in order to conform to the current year presentation.

Consolidation of variable interest entity policy

Our consolidated financial statements include TLLP, a variable interest entity. As the general partner of TLLP, we have the sole ability to direct the activities of TLLP that most significantly impact its economic performance. We are also considered to be the primary beneficiary for accounting purposes and are TLLP’s primary customer.

Discontinued operations policy

We ceased refining operations at our Hawaii refinery and subsequently entered into an agreement to sell all of our interest in Tesoro Hawaii, LLC during the second quarter of 2013. As such, the results of operations and related assets and liabilities of the Hawaii refinery, retail stations and associated logistics assets (“Hawaii Business”) have been classified as discontinued operations in these condensed consolidated financial statements and accompanying footnotes for all periods presented. See Note D for additional information. Unless otherwise noted, the information in the notes to the condensed consolidated financial statements relates to our continuing operations.

Equity method investments policy

Investments where we have the ability to exercise significant influence, but do not have control, are accounted for under the equity method of accounting and are included in other noncurrent assets in our condensed consolidated balance sheets. Our judgment regarding the level of influence over an equity method investment includes considering key factors such as our ownership interest, participation in policy-making and other significant decisions and material intercompany transactions. Under this method of accounting, our share of the net earnings or losses of the investee is included in other income (expense) in our condensed statements of consolidated operations. We evaluate our equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, a loss is recorded in earnings in the current period.

New accounting standards

Presentation of Comprehensive Income

The Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) in February 2013 that provides entities the option of presenting information related to reclassification adjustments on the face of the financial statements or in the notes to the financial statements for items that are reclassified from other comprehensive income to net income in the statement where those components are presented. The requirements from the new ASU are effective for interim and annual periods beginning after December 15, 2012. The adoption of this ASU did not have a material impact on our condensed consolidated financial statements.

Fair Value Measurements and Disclosures

The FASB issued an ASU in December 2011, which requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of these arrangements on its financial position. The guidance requires entities to disclose both gross and net information about both instruments and transactions eligible for offset in the balance sheet and instruments and transactions subject to an agreement similar to a master netting arrangement. In January 2013, the FASB amended and clarified the scope of the disclosures to include only derivative instruments, repurchase agreements and securities lending transactions. The provisions for this ASU are effective for interim and annual reporting periods beginning on January 1, 2013. The adoption of this ASU did not have a material impact on our condensed consolidated financial statements.

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Condensed Statements of Consolidated Comprehensive Income (Unaudited) Condensed Statements of Consolidated Comprehensive Income (Unaudited) (Parentheticals) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Statement of Comprehensive Income [Abstract]
Tax expense related to pension and other benefit liability adjustments	$ 48	$ 0	$ 48	$ 0

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Basis of Presentation (Notes)

6 Months Ended

Jun. 30, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION

BASIS OF PRESENTATION

As used in this report, the terms “Tesoro,” “we,” “us” or “our” may refer to Tesoro Corporation, one or more of its consolidated subsidiaries or all of them taken as a whole. The words “we,” “us” or “our” generally include Tesoro Logistics LP (“TLLP”) and its subsidiaries as consolidated subsidiaries of Tesoro Corporation with certain exceptions where there are transactions or obligations between TLLP and Tesoro Corporation or its other subsidiaries. When used in descriptions of agreements and transactions, “TLLP” or the “Partnership” refers to TLLP and its consolidated subsidiaries.

The interim condensed consolidated financial statements and notes thereto of Tesoro Corporation and its subsidiaries have been prepared by management without audit according to the rules and regulations of the Securities and Exchange Commission (“SEC”). The accompanying condensed consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary for a fair presentation of results for the periods presented. Such adjustments are of a normal recurring nature, unless otherwise disclosed.

The consolidated balance sheet at December 31, 2012 has been condensed from the audited consolidated financial statements at that date. Certain information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to the SEC’s rules and regulations. However, management believes that the disclosures presented herein are adequate to present the information fairly. The accompanying condensed consolidated financial statements and notes should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2012.

We prepare our condensed consolidated financial statements in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts and disclosures of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. We review our estimates on an ongoing basis, based on currently available information. Changes in facts and circumstances may result in revised estimates and actual results could differ from those estimates. The results of operations for any interim period are not necessarily indicative of results for the full year. Certain prior year balances have been aggregated or disaggregated in order to conform to the current year presentation.

We ceased refining operations at our Hawaii refinery and subsequently entered into an agreement to sell all of our interest in Tesoro Hawaii, LLC during the second quarter of 2013. As such, the results of operations and related assets and liabilities of the Hawaii refinery, retail stations and associated logistics assets (“Hawaii Business”) have been classified as discontinued operations in these condensed consolidated financial statements and accompanying footnotes for all periods presented. See Note D for additional information. Unless otherwise noted, the information in the notes to the condensed consolidated financial statements relates to our continuing operations.

The accompanying financial statements include the results of operations of our Carson refinery and related assets and retail stations since the acquisition on June 1, 2013. See Note B for additional information relating to this acquisition.

Our consolidated financial statements include TLLP, a variable interest entity. As the general partner of TLLP, we have the sole ability to direct the activities of TLLP that most significantly impact its economic performance. We are also considered to be the primary beneficiary for accounting purposes and are TLLP’s primary customer. Under our long-term transportation agreements with TLLP, transactions with us accounted for 90% and 91% of TLLP’s total revenues for the three and six months ended June 30, 2013, respectively. As TLLP does not derive a significant amount of revenue from third parties, there is limited risk to Tesoro associated with TLLP’s operations. However, in the event TLLP incurs a loss, our operating results will reflect TLLP’s loss, net of intercompany eliminations, to the extent of our ownership interest in TLLP. See Note C for additional information relating to TLLP.

Significant Accounting Policies

Investments–Equity Method and Joint Ventures

Investments where we have the ability to exercise significant influence, but do not have control, are accounted for under the equity method of accounting and are included in other noncurrent assets in our condensed consolidated balance sheets. Our judgment regarding the level of influence over an equity method investment includes considering key factors such as our ownership interest, participation in policy-making and other significant decisions and material intercompany transactions. Under this method of accounting, our share of the net earnings or losses of the investee is included in other income (expense) in our condensed statements of consolidated operations. We evaluate our equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, a loss is recorded in earnings in the current period.

Effective April 22, 2013, we entered into an equally owned joint venture (“Tesoro Savage Petroleum Terminal LLC”) with Savage Companies to construct, own and operate a unit train unloading and marine loading terminal at the Port of Vancouver, Washington, subject to approval by regulatory agencies. Our investment in Tesoro Savage Petroleum Terminal LLC totaled $2 million as of June 30, 2013. Additionally, on June 1, 2013, in connection with the closing of the acquisition of our Carson refinery and related assets and retail stations, we acquired a 51% joint venture in the Watson cogeneration facility located near the Carson refinery. We account for the Company’s interest in both joint ventures using the equity method of accounting.

New Accounting Standards and Disclosures

Presentation of Comprehensive Income

The Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) in February 2013 that provides entities the option of presenting information related to reclassification adjustments on the face of the financial statements or in the notes to the financial statements for items that are reclassified from other comprehensive income to net income in the statement where those components are presented. The requirements from the new ASU are effective for interim and annual periods beginning after December 15, 2012. The adoption of this ASU did not have a material impact on our condensed consolidated financial statements.

Fair Value Measurements and Disclosures

The FASB issued an ASU in December 2011, which requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of these arrangements on its financial position. The guidance requires entities to disclose both gross and net information about both instruments and transactions eligible for offset in the balance sheet and instruments and transactions subject to an agreement similar to a master netting arrangement. In January 2013, the FASB amended and clarified the scope of the disclosures to include only derivative instruments, repurchase agreements and securities lending transactions. The provisions for this ASU are effective for interim and annual reporting periods beginning on January 1, 2013. The adoption of this ASU did not have a material impact on our condensed consolidated financial statements.

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Discontinued Operations Discontinued Operations (Notes)

6 Months Ended

Jun. 30, 2013

Discontinued Operations and Disposal Groups [Abstract]

DISCONTINUED OPERATIONS

DISCONTINUED OPERATIONS

Hawaii Business

On June 17, 2013, we entered into an agreement with a subsidiary of Par Petroleum Corporation (“Par Petroleum”), to sell all of our interest in Tesoro Hawaii, LLC, which owns and operates our 94 Mbpd Hawaii refinery, retail stations and associated logistics assets for an agreed upon sales price of $75 million, plus the market value of inventory and other working capital at closing. Additional consideration includes an earnout arrangement payable over three years for an aggregate amount of up to $40 million based on consolidated gross margins. Because we had previously ceased refining operations at our Hawaii refinery, the agreement requires that we restart the refinery before the closing of the transaction. We have also agreed to indemnify the purchaser for up to $15 million of environmental remediation costs related to the Hawaii Business, subject to limitations described in the purchase agreement. Any income related to the earnout arrangement will not be recorded until it is considered realizable. We recently received Federal Trade Commission clearance for the transaction, and expect to complete the sale in the third quarter of 2013, subject to customary closing conditions.

The assets and liabilities related to the Hawaii Business as of June 30, 2013 and December 31, 2012 have been presented in the condensed consolidated balance sheets as “assets related to discontinued operations” and “liabilities related to discontinued operations,” respectively, as a result of our agreement with Par Petroleum to sell the business. Also, the results of operations for this business have been presented as discontinued operations in the condensed statements of consolidated operations for the three and six months ended June 30, 2013.

We recognized $248 million of impairment charges related to the Hawaii Business in the fourth quarter of 2012, which included $20 million related to estimated costs for asset retirement obligations (“AROs”). Par Petroleum has agreed to assume any AROs upon close of the transaction; therefore, we no longer expect to incur any removal or other closure costs for this business. We adjusted the AROs downward $14 million related to our Hawaii refinery, which is included in earnings from discontinued operations in the condensed statements of consolidated operations for the three and six months ended June 30, 2013 and 2012.

Revenues and earnings (loss) before and after tax from the discontinued Hawaii Business for the three and six months ended June 30, 2013 and 2012 were as follows:

	Three Months Ended June 30,					Six Months Ended June 30,
	2013			2012		2013			2012
	(In millions, except per share amounts)
Revenues	$	642		$	772	$	1,451		$	1,585
Earnings (loss) from discontinued operations before tax	$	(16	)	$	37	$	(17	)	$	15
Income tax expense (benefit)	(5		)	13		(5		)	5
Earnings (loss) from discontinued operations, net of tax	$	(11	)	$	24	$	(12	)	$	10

The following assets and liabilities relate to the discontinued Hawaii Business as of June 30, 2013 and December 31, 2012:

	June 30, 2013		December 31, 2012
	(In millions, except per share amounts)
Assets:
Receivables, less allowance for doubtful accounts	$	80	$	95
Inventories	362		240
Prepayments and other current assets	2		2
Total current assets related to discontinued operations	444		337
Net property, plant and equipment	14		13
Other noncurrent assets, net	5		5
Total assets related to discontinued operations	$	463	$	355
Liabilities:
Accounts payable	$	15	$	17
Other current liabilities	38		43
Total current liabilities related to discontinued operations	53		60
Other noncurrent liabilities	3		3
Debt	2		2
Total liabilities related to discontinued operations	$	58	$	65

Cash flows related to discontinued Hawaii Business have been combined with the cash flows from continuing operations in the condensed statements of consolidated cash flows for both periods presented and cash flows from operating and investing activities are summarized as follows (in millions):

	Six Months Ended June 30,
	2013			2012
Cash Flows From (Used in):
Operating activities	$	192		$	75
Investing activities	(2		)	(10		)

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Stock-Based Compensation Stock-Based Compensation, Stock Appreciation Rights (Details) (Stock appreciation rights, USD $) In Millions, except Share data, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Stock appreciation rights
Stock-Based Compensation Arrangement by Stock-based Payment Award
Awards granted (shares)	0
Cash paid to settle awards	$ 30	$ 9
Exercised (shares)	1,300,000	700,000
Accrued stock appreciation rights	$ 72		$ 79

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Acquisitions and Other Changes in Operations (Notes)

6 Months Ended

Jun. 30, 2013

Business Combinations [Abstract]

ACQUISITIONS AND OTHER CHANGES IN OPERATIONS

ACQUISITIONS AND OTHER CHANGES IN OPERATIONS

TLLP Acquisition of the Northwest Products System

On June 19, 2013, TLLP completed its acquisition of Chevron Pipe Line Company’s and Northwest Terminalling Company’s (collectively, “Chevron”) northwest products system (the “Northwest Products System”). For additional information regarding the acquisition, see Note C.

Hawaii Business

On June 17, 2013, we entered into an agreement to sell our Hawaii Business. For additional information regarding the probable sale of our Hawaii Business, see Note D.

Carson Acquisition

On June 1, 2013, we acquired from BP West Coast Products, LLC and other affiliated sellers BP’s integrated Southern California refining, marketing and logistics business (the “Carson Acquisition”). The acquired assets include the 266 thousand barrel per day (“Mbpd”) Carson refinery located adjacent to our Wilmington refinery, related marine terminals, land terminals and pipelines. The assets also include the ARCO^® brand and associated registered trademarks, as well as a master franchisee license for the ampm^® convenience store brand and the supply rights to more than 800 branded dealer-operated and branded wholesale stations in central and southern California, Nevada and Arizona. Additionally, we acquired an anode coke calcining operation and a 51% ownership in the Watson cogeneration facility, both located near the Carson refinery. In conjunction with the acquisition, we also assumed certain environmental liabilities, primarily remediation obligations. For additional information regarding the assumed environmental remediation obligations and other contractual commitments assumed, see Note L.

The purchase price of these assets was $2.42 billion, including petroleum and non-hydrocarbon inventories of $1.1 billion (subject to post-closing adjustments). The amount paid at closing was reduced by advance deposits paid by the Company of $127 million, of which $90 million was paid in December 2012 upon execution of the purchase and sale agreement. We financed the transaction with $552 million in cash, $700 million borrowed on our revolving credit facility and $500 million borrowed under our term loan credit facility. The remaining $544 million was funded with cash received from TLLP to fund a portion of its acquisition of six marketing and storage terminal facilities in southern California (the “Carson Terminal Assets”) that occurred directly after the Carson Acquisition. TLLP funded the acquisition with borrowings under its senior secured revolving credit agreement (the “TLLP Revolving Credit Facility”). For additional information regarding the Carson Terminal Assets, see Note C.

The Carson Acquisition is consistent with our business strategy and provides an opportunity to combine two west coast refining, marketing and logistics businesses resulting in a more efficient integrated refining, marketing and logistics system.

The purchase price allocation for the Carson Acquisition is preliminary and has been allocated based on estimated fair values of the assets acquired and liabilities assumed at the acquisition date, pending the completion of an independent valuation and the assessment of environmental contingencies and other information as it becomes available to us.  Additionally, certain working capital amounts will be updated upon receipt of the final closing statement. The purchase price allocation adjustments can be made through the end of Tesoro’s measurement period, which is not to exceed one year from the acquisition date.

Included in our preliminary purchase price allocation are values for all of the assets acquired in the Carson Acquisition, including $100 million specifically identified for our 51% interest in the Watson cogeneration facility and $400 million for the Carson Terminal Assets that TLLP acquired from us.  However, certain valuations and other studies have yet to commence or progress to a state where there is sufficient information for a definitive measurement, including estimates for other refining, logistics and retail property, plant and equipment values and values for certain intangible assets. 

As of June 30, 2013, the asset amounts noted in the table below have been included in the refining segment assets and will be included in the appropriate segment in future periods when more information is available. Although the finalization of the appraisal and full evaluation of the liabilities will result in changes in the valuation of assets acquired and liabilities assumed, we believe these changes will not have a material impact on our financial position, results of operations or liquidity. The table below presents the preliminary purchase price allocation (in millions):

Receivables	$	234
Inventories	1,100
Prepayments and other current assets	68
Property, plant and equipment	1,023
Acquired intangible assets, net	114
Other noncurrent assets, net	101
Other current liabilities	(12		)
Other noncurrent liabilities	(171		)
Debt	(34		)
Total purchase price	$	2,423

The acquired intangible assets include air emission credits, which are subject to amortization and have preliminary estimated useful lives of 15 years. Our 51% interest in the Watson cogeneration facility acquired in the transaction is accounted for using the equity method of accounting and is included in other noncurrent assets. Other noncurrent liabilities include $169 million of environmental remediation liabilities assumed in the Carson Acquisition including $101 million and $68 million associated with our refining and retail segments, respectively.

We have not provided disclosure of revenues and net earnings associated with the Carson Acquisition, commencing on June 1, 2013, included in our condensed statements of consolidated operations. Financial information, including the revenues and net earnings, for the Carson refinery operations for the period are not available. We are in the process of integrating the operations of our existing Wilmington refinery with the acquired Carson refinery and are operating and accounting for them as a combined facility, including the purchases and sales of crude oil and refined products. Refined products produced from the refining processing units are transported through common logistics assets and cannot be identified as Carson refinery production versus Wilmington refinery production. As a result, revenues and related cost of sales from products delivered through these common assets are unidentifiable to a specific refinery. Therefore, it is impracticable to provide this information.

While we do not have revenue and net earnings information specific to assets acquired in the Carson Acquisition, certain financial information is available for the California region operations, which includes the 266 Mbpd Carson refinery, the 97 Mbpd Wilmington refinery, the 166 Mbpd Martinez refinery and related retail and logistics operations. Total gross margin and operating income for the California region operations were $264 million and $100 million, respectively, from June 1, 2013 through June 30, 2013.

The following pro forma financial information presents our consolidated results assuming the Carson Acquisition occurred on January 1, 2012. The pro forma financial information is not necessarily indicative of the results of future operations.

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(In millions, except per share amounts)
Revenues	$	11,425	$	11,125	$	22,153	$	21,971
Net Earnings attributable to Tesoro Corporation Stockholders	239		508		415		586
Basic Earnings Per Share from Continuing Operations	1.84		3.47		3.13		4.13
Diluted Earnings Per Share from Continuing Operations	1.81		3.44		3.07		4.08

During the three and six months ended June 30, 2013, we incurred transaction and integration costs of approximately $18 million and $30 million, respectively, related to the Carson Acquisition, which are included in selling, general and administrative expenses in our condensed statements of consolidated operations.

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2013

Share-based Compensation [Abstract]

Summary of stock-based compensation expense

Stock-based compensation expense (benefit), including amounts related to discontinued operations, included in our condensed statements of consolidated operations was as follows (in millions):    

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013		2012
Stock appreciation rights	$	(15	)	$	(9	)	$	24	$	3
Performance share awards	2			2			10		4
Market stock units	4			3			8		6
Other stock-based awards	4			4			5		8
Total Stock-Based Compensation Expense (Benefit)	$	(5	)	$	—		$	47	$	21

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Property, Plant and Equipment Property, Plant and Equipment (Policies)

6 Months Ended

Jun. 30, 2013

Property, Plant and Equipment [Abstract]

Interest capitalization policy

We capitalize interest as part of the cost of major projects during the construction period.

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Schedule of earnings per share, basic and diluted

Share calculations are presented below (in millions):

	Three Months Ended June 30,		Six Months Ended June 30,
	2013	2012	2013	2012
Weighted average common shares outstanding	135.8	139.6	136.4	139.5
Common stock equivalents	2.4	0.9	2.5	1.7
Total diluted shares	138.2	140.5	138.9	141.2

Schedule of antidilutive securities

Potentially dilutive common stock equivalents are excluded from the calculation of diluted earnings per share if the effect of including such securities in the calculation would have been anti-dilutive. Anti-dilutive securities were as follows (in millions):

	Three Months Ended June 30,		Six Months Ended June 30,
	2013	2012	2013	2012
Stock options	0.1	2.8	0.2	2.9

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Stockholders' Equity Stockholders' Equity, Share Repurchases and Dividends (Details) (USD $) Share data in Millions, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended		0 Months Ended	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Aug. 01, 2013 Dividend declared	Jun. 30, 2013 Dividend declared	Jun. 30, 2013 $500 million share repurchase program	Jun. 30, 2013 Anti-dilutive share repurchase program
Share repurchase program, authorized amount							$ 500,000,000
Number of shares purchased (shares)							3.8	0.6
Share repurchases, value			$ 241,000,000				$ 200,000,000	$ 36,000,000
Dividends payable, date declared						Aug. 01, 2013
Dividends declared (dollars per share)	$ 0.20	$ 0	$ 0.40	$ 0	$ 0.25
Dividends, date to be paid						Sep. 13, 2013
Dividends, date of record						Aug. 30, 2013

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Property, Plant and Equipment (Tables)

6 Months Ended

Jun. 30, 2013

Property, Plant and Equipment [Abstract]

Property, plant and equipment

Property, plant and equipment, at cost, is as follows (in millions):

	June 30, 2013			December 31, 2012
Refining	$	7,885		$	6,268
Retail	721			712
Corporate	228			226
Property, plant and equipment, at cost	8,834			7,206
Accumulated depreciation	(2,095		)	(1,974		)
Net property, plant and equipment	$	6,739		$	5,232

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Stockholders' Equity, Changes to Equity (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Total Equity
Balance at December 31, 2012			$ 4,737
Net earnings	238	393	342	455
Other comprehensive income	73	0	73	0
Shares issued for equity-based compensation awards			69
Amortization of equity settled awards			20
Excess tax benefits from stock-based compensation arrangements, net			9
Purchases of common stock			(241)
Dividend payments			(55)
Net proceeds from issuance of Tesoro Logistics LP common units			392
Distributions to noncontrolling interest			(28)
Other			2
Balance at June 30, 2013	5,320		5,320		4,737
Shares issued for equity-based compensation plans (shares)			2.0		1.9
Tesoro Corporation Stockholders’ Equity
Total Equity
Balance at December 31, 2012			4,251
Net earnings			320
Other comprehensive income			73
Shares issued for equity-based compensation awards			69
Amortization of equity settled awards			20
Excess tax benefits from stock-based compensation arrangements, net			9
Purchases of common stock			(241)
Dividend payments			(55)
Net proceeds from issuance of Tesoro Logistics LP common units			(6)
Distributions to noncontrolling interest			0
Other			2
Balance at June 30, 2013	4,442		4,442
Noncontrolling Interest
Total Equity
Balance at December 31, 2012			486
Net earnings			22
Other comprehensive income			0
Shares issued for equity-based compensation awards			0
Amortization of equity settled awards			0
Excess tax benefits from stock-based compensation arrangements, net			0
Purchases of common stock			0
Dividend payments			0
Net proceeds from issuance of Tesoro Logistics LP common units			398
Distributions to noncontrolling interest			(28)
Other			0
Balance at June 30, 2013	$ 878		$ 878

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Inventories (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Inventory Disclosure [Abstract]
Domestic crude oil and refined products	$ 1,751,000,000	$ 957,000,000
Foreign subsidiary crude oil	454,000,000	246,000,000
Materials and supplies	112,000,000	83,000,000
Oxygenates and by-products	41,000,000	38,000,000
Merchandise	15,000,000	14,000,000
Total Inventories	2,373,000,000	1,338,000,000
Excess of replacement or current costs over stated LIFO value	$ 1,800,000,000	$ 1,300,000,000

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Tesoro Logistics LP, Equity Issuance (Details) (USD $) In Millions, except Share data, unless otherwise specified	0 Months Ended	6 Months Ended
	Jan. 14, 2013	Jun. 30, 2013
Variable Interest Entity
Common units issued in offering (units)	9,775,000
Price per unit (dollars per unit)	$ 41.70
Net proceeds from issuance of units	$ 392
Percentage ownership of Tesoro Logistics LP		40.00%
General Partner
Variable Interest Entity
Price per unit (dollars per unit)	$ 41.70
General partners' capital account, units issued (units)	199,490
Percentage ownership of Tesoro Logistics LP	2.00%	2.00%

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Basis of Presentation Basis of Presentation (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2013 Tesoro Savage Petroleum Terminal LLC	Apr. 22, 2013 Tesoro Savage Petroleum Terminal LLC	Jun. 01, 2013 Watson Cogeneration Facility
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Percentage of TLLP's revenues from Tesoro	90.00%	91.00%
Schedule of Equity Method Investments
Joint venture ownership percentage					50.00%	51.00%
Investment in Tesoro Savage Petroleum Terminal LLC	$ 0	$ 0	$ 0	$ 2

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Condensed Consolidated Balance Sheets (Unaudited) (USD $) In Millions, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
CURRENT ASSETS
Cash and cash equivalents	$ 428	$ 1,639
Receivables, less allowance for doubtful accounts	1,787	1,126
Inventories	2,373	1,338
Prepayments	471	54
Other current assets	265	142
Current assets related to discontinued operations	463	337
Total Current Assets	5,787	4,636
NET PROPERTY, PLANT AND EQUIPMENT	6,739	5,232
OTHER NONCURRENT ASSETS, NET
Acquired intangibles, net	322	214
Other noncurrent assets, net	821	602
Noncurrent assets related to discontinued operations	0	18
Total Other Noncurrent Assets, Net	1,143	834
Total Assets	13,669	10,702
CURRENT LIABILITIES
Accounts payable	2,490	2,196
Other current liabilities	823	625
Current liabilities related to discontinued operations	58	60
Total Current Liabilities	3,371	2,881
DEFERRED INCOME TAXES	942	850
OTHER NONCURRENT LIABILITIES	678	644
DEBT	3,358	1,585
NONCURRENT LIABILITIES RELATED TO DISCONTINUED OPERATIONS	0	5
COMMITMENTS AND CONTINGENCIES (Note L)
TESORO CORPORATION STOCKHOLDERS’ EQUITY
Common stock, par value $0.16 2/3; authorized 200,000,000 shares; 154,540,056 shares issued (152,579,955 in 2012)	26	25
Preferred stock, no par value; authorized 5,000,000 shares; 0 shares issued	0	0
Additional paid-in capital	1,163	1,070
Retained earnings	3,914	3,649
Treasury stock, 18,925,496 common shares (14,417,533 in 2012), at cost	(597)	(356)
Accumulated other comprehensive loss	(64)	(137)
Total Tesoro Corporation Stockholders’ Equity	4,442	4,251
NONCONTROLLING INTEREST	878	486
Total Equity	5,320	4,737
Total Liabilities and Equity (Deficit)	$ 13,669	$ 10,702

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Fair Value Measurements (Notes)

6 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

We classify financial assets and financial liabilities into the following fair value hierarchy:

• level 1 - valued based on quoted prices in active markets for identical assets and liabilities;

• level 2 - valued based on quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability; and

• level 3 - valued based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

We measure fair value using level 1 inputs, when available, because they provide the most reliable evidence of fair value. Derivative instruments and our Renewable Identification Numbers (“RINs”) are our only financial assets and liabilities measured at fair value on a recurring basis. We did not have any financial assets or liabilities classified as level 3 at June 30, 2013 or December 31, 2012. See Note H for further information on the Company’s derivative instruments.

Our derivative instruments consist primarily of options (“Options”), exchange-traded futures (“Futures Contracts”), over-the-counter swaps and options (“OTC Swap Contracts” and “OTC Option Contracts,” respectively), and physical commodity forward purchase and sale contracts (“Forward Contracts”). Options are valued using quoted prices from exchanges and are categorized in level 1 of the fair value hierarchy. Futures Contracts are valued based on quoted prices from exchanges and are categorized in level 1 or level 2 of the fair value hierarchy based on the liquidity of the instrument. OTC Swap Contracts, OTC Option Contracts and Forward Contracts are valued using third-party broker quotes, industry pricing services and price curves derived from commodity exchange postings, with consideration of counterparty credit risk. These quotes are corroborated with market data and are categorized in level 2 of the fair value hierarchy.

Our RINs obligation represents our period-end deficit for the purchase of RINs to satisfy the requirement to blend biofuels into the products we have produced.  Our RINs obligation is based on our RINs deficit and the price of those RINs as of the balance sheet date.  Our RINs obligation is categorized in level 2 of the fair value hierarchy and is measured at fair value using the market approach based on quoted prices from an independent pricing service.

Financial assets and liabilities recognized at fair value in our condensed consolidated balance sheets by level within the fair value hierarchy were as follows (in millions):

	Level 1		Level 2		Level 3		Netting and Collateral (a)			Total as of June 30, 2013
Assets:
Commodity Futures Contracts	$	172	$	7	$	—	$	(92	)	$	87
Commodity Forward Contracts	—		4		—		—			4
Total Assets	$	172	$	11	$	—	$	(92	)	$	91
Liabilities:
Commodity Futures Contracts	$	150	$	5	$	—	$	(135	)	$	20
Commodity Forward Contracts	—		4		—		—			4
RINs Obligation	—		11		—		—			11
Total Liabilities	$	150	$	20	$	—	$	(135	)	$	35

	Level 1		Level 2		Level 3		Netting and Collateral (a)			Total as of December 31, 2012
Assets:
Commodity Futures Contracts	$	91	$	4	$	—	$	(68	)	$	27
Total Assets	$	91	$	4	$	—	$	(68	)	$	27
Liabilities:
Commodity Futures Contracts	$	96	$	4	$	—	$	(95	)	$	5
Commodity Forward Contracts	—		1		—		—			1
RINs Obligation	—		1		—		—			1
Total Liabilities	$	96	$	6	$	—	$	(95	)	$	7

________________

(a) Represents the impact of netting assets, liabilities and cash collateral when a legal right of offset exists. As of June 30, 2013 and December 31, 2012, cash collateral amounts of $43 million and $27 million, respectively, are netted with mark-to-market derivative assets.

Certain of our derivative contracts, under master netting arrangements, include both asset and liability positions. We have elected to offset both the fair value amounts and any related cash collateral amounts recognized for multiple derivative instruments executed with the same counterparty when there is a legally enforceable right and an intention to settle net or simultaneously.

We believe the carrying value of our other financial instruments, including cash and cash equivalents, receivables, accounts payable and certain accrued liabilities approximate fair value. Our fair value assessment incorporates a variety of considerations, including:

• the short term duration of the instruments (less than one percent of our trade receivables and payables are outstanding for greater than 90 days); and

• the expected future insignificance of bad debt expense, which includes an evaluation of counterparty credit risk.

The borrowings under the Tesoro Corporation revolving credit facility (the “Revolving Credit Facility”), the TLLP Revolving Credit Facility and our term loan credit facility agreement (the “Term Loan Facility”), which include variable interest rates, approximate fair value. The fair value of our senior notes is based on prices from recent trade activity and is categorized in level 2 of the fair value hierarchy. The carrying value and fair value of our debt at June 30, 2013 were approximately $3.3 billion and $3.4 billion, respectively. The carrying value and fair value of our debt at December 31, 2012 were approximately $1.6 billion and $1.7 billion, respectively.

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Condensed Consolidated Balance Sheets (Unaudited) Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) (USD $)	Jun. 30, 2013	Dec. 31, 2012
TESORO CORPORATION STOCKHOLDERS’ EQUITY
Common stock, par value (dollar per share)	$ 0.167	$ 0.167
Common stock, authorized shares (shares)	200,000,000	200,000,000
Common stock, shares issued (shares)	154,540,056	152,579,955
Preferred stock, par value (dollar per share)	$ 0	$ 0
Preferred stock, authorized shares (shares)	5,000,000	5,000,000
Preferred stock, shares issued (shares)	0	0
Treasury stock, common shares (shares)	18,925,496	14,417,533

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Derivative Instruments, Derivative Gains and Losses (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Derivative Instruments, Gain (Loss)
Gain (loss) recognized in income on derivatives	$ 6	$ 54	$ (24)	$ 34
Revenues
Derivative Instruments, Gain (Loss)
Gain (loss) recognized in income on derivatives	9	31	10	21
Cost of sales
Derivative Instruments, Gain (Loss)
Gain (loss) recognized in income on derivatives	2	24	(20)	28
Other expense, net
Derivative Instruments, Gain (Loss)
Gain (loss) recognized in income on derivatives	(2)	(2)	(4)	(1)
Net earnings (loss) from discontinued operations
Derivative Instruments, Gain (Loss)
Gain (loss) recognized in income on derivatives	(3)	1	(10)	(14)
Commodity Futures Contracts
Derivative Instruments, Gain (Loss)
Gain (loss) recognized in income on derivatives	10	50	(16)	38
Commodity OTC Swap Contracts
Derivative Instruments, Gain (Loss)
Gain (loss) recognized in income on derivatives	0	0	0	(6)
Commodity Forward Contracts
Derivative Instruments, Gain (Loss)
Gain (loss) recognized in income on derivatives	(2)	6	(4)	3
Foreign Currency Forward Contracts
Derivative Instruments, Gain (Loss)
Gain (loss) recognized in income on derivatives	$ (2)	$ (2)	$ (4)	$ (1)

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Condensed Statements of Consolidated Operations (Unaudited) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2013		Jun. 30, 2012		Jun. 30, 2013		Jun. 30, 2012
Income Statement [Abstract]
REVENUES (a)	$ 8,897		$ 7,333		$ 16,244		$ 14,340
COSTS AND EXPENSES:
Cost of sales (a)	7,909		6,194		14,472		12,571
Operating expenses	441		342		809		655
Selling, general and administrative expenses	64		45		175		104
Depreciation and amortization expense	111		102		216		198
Loss on asset disposals and impairments	8		6		15		12
OPERATING INCOME (LOSS)	364		644		557		800
Interest and financing costs, net	(33)		(34)		(63)		(70)
Interest income	0		0		1		1
Other income (expense), net	56	[1]	(19)	[1]	55	[1]	(19)	[1]
EARNINGS BEFORE INCOME TAXES	387		591		550		712
Income tax expense	138	[2]	222	[2]	196	[2]	267	[3]
NET EARNINGS FROM CONTINUING OPERATIONS	249		369		354		445
Earnings (loss) from discontinued operations, net of tax	(11)		24		(12)		10
NET EARNINGS	238		393		342		455
Less: Net earnings from continuing operations attributable to noncontrolling interest	11		6		22		12
NET EARNINGS ATTRIBUTABLE TO TESORO CORPORATION	227		387		320		443
NET EARNINGS (LOSS) ATTRIBUTABLE TO TESORO CORPORATION
Continuing operations	238		363		332		433
Discontinued operations	(11)		24		(12)		10
NET EARNINGS ATTRIBUTABLE TO TESORO CORPORATION	227		387		320		443
NET EARNINGS (LOSS) PER SHARE - BASIC:
Continuing operations	$ 1.75		$ 2.60		$ 2.44		$ 3.11
Discontinued operations	$ (0.08)		$ 0.17		$ (0.09)		$ 0.07
Total	$ 1.67		$ 2.77		$ 2.35		$ 3.18
Weighted average common shares outstanding - Basic	135.8		139.6		136.4		139.5
NET EARNINGS (LOSS) PER SHARE - DILUTED:
Continuing operations	$ 1.72		$ 2.58		$ 2.39		$ 3.07
Discontinued operations	$ (0.08)		$ 0.17		$ (0.09)		$ 0.07
Total	$ 1.64		$ 2.75		$ 2.30		$ 3.14
Weighted average common shares outstanding - Diluted	138.2		140.5		138.9		141.2
DIVIDENDS PER SHARE	$ 0.20		$ 0		$ 0.40		$ 0
SUPPLEMENTAL INFORMATION:
(a) Includes excise taxes collected by our retail segment	$ 143		$ 107		$ 272		$ 200

[1] Includes $54 million in refunds from a settlement of a rate proceeding from the CPUC for the three and six months ended June 30, 2013. Also includes $18 million in accruals related to certain legal matters partially offset by receipts associated with the settlement of a pipeline rate proceeding for the three and six months ended June 30, 2012.

[2] The income tax expense (benefit) reflected in each column does not include any tax effect of the equity in earnings from corporate subsidiaries, but does include the tax effect of the corporate partners’ share of partnership income.

[3] The income tax expense reflected in each column does not include any tax effect of the equity in earnings from corporate subsidiaries, but does include the tax effect of the corporate partners’ share of partnership income.

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Tesoro Logistics LP, Agreements (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2013
Long-term Purchase Commitment
Omnibus or administrative fees	$ 4
Operational service fees	$ 4
Various pipeline transportation, trucking, terminal distribution and storage services agreements
Long-term Purchase Commitment
Agreement time period	2016 through 2023
Number of contract renewals (renewals)	2
Contract renewal terms
Long-term Purchase Commitment
Agreement time period	five-year

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Condensed Consolidating Financial Information, Statement of Operations and Comprehensive Income (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2013		Jun. 30, 2012		Jun. 30, 2013		Jun. 30, 2012
Condensed Financial Statements, captions
REVENUES	$ 8,897		$ 7,333		$ 16,244		$ 14,340
COSTS AND EXPENSES:
Cost of sales	7,909		6,194		14,472		12,571
Operating, selling, general and administrative expenses	505		387		984		759
Depreciation and amortization expense	111		102		216		198
Loss on asset disposals and impairments	8		6		15		12
OPERATING INCOME (LOSS)	364		644		557		800
Equity in earnings (loss) of subsidiaries	0		0		0		0
Interest and financing costs, net	(33)		(34)		(63)		(70)
Interest income	0		0		1		1
Other income (expense), net	56	[1]	(19)	[1]	55	[1]	(19)	[1]
EARNINGS BEFORE INCOME TAXES	387		591		550		712
Income tax expense (benefit) (a)	138	[2]	222	[2]	196	[2]	267	[3]
NET EARNINGS FROM CONTINUING OPERATIONS	249		369		354		445
Earnings (loss) from discontinued operations, net of tax	(11)		24		(12)		10
NET EARNINGS	238		393		342		455
Less: Net earnings from continuing operations attributable to noncontrolling interest	11		6		22		12
NET EARNINGS ATTRIBUTABLE TO TESORO CORPORATION	227		387		320		443
COMPREHENSIVE INCOME
Total comprehensive income	311		393		415		455
Less: Noncontrolling interest in comprehensive income	11		6		22		12
COMPREHENSIVE INCOME ATTRIBUTABLE TO TESORO CORPORATION	300		387		393		443
Parent
Condensed Financial Statements, captions
REVENUES	0		0		0		0
COSTS AND EXPENSES:
Cost of sales	0		0		0		0
Operating, selling, general and administrative expenses	6		3		7		5
Depreciation and amortization expense	0		0		0		0
Loss on asset disposals and impairments	0		0		0		0
OPERATING INCOME (LOSS)	(6)		(3)		(7)		(5)
Equity in earnings (loss) of subsidiaries	234		391		330		450
Interest and financing costs, net	(4)		(1)		(6)		(2)
Interest income	0		0		0		0
Other income (expense), net	0		0		0		0
EARNINGS BEFORE INCOME TAXES	224		387		317		443
Income tax expense (benefit) (a)	(3)	[2]	0	[2]	(3)	[2]	0	[3]
NET EARNINGS FROM CONTINUING OPERATIONS	227		387		320		443
Earnings (loss) from discontinued operations, net of tax	0		0		0		0
NET EARNINGS	227		387		320		443
Less: Net earnings from continuing operations attributable to noncontrolling interest	0		0		0		0
NET EARNINGS ATTRIBUTABLE TO TESORO CORPORATION	227		387		320		443
COMPREHENSIVE INCOME
Total comprehensive income	300		387		393		443
Less: Noncontrolling interest in comprehensive income	0		0		0		0
COMPREHENSIVE INCOME ATTRIBUTABLE TO TESORO CORPORATION	300		387		393		443
Guarantor Subsidiaries
Condensed Financial Statements, captions
REVENUES	10,446		8,996		19,589		17,816
COSTS AND EXPENSES:
Cost of sales	9,515		7,899		17,940		16,120
Operating, selling, general and administrative expenses	466		365		916		717
Depreciation and amortization expense	103		98		203		191
Loss on asset disposals and impairments	8		6		12		11
OPERATING INCOME (LOSS)	354		628		518		777
Equity in earnings (loss) of subsidiaries	12		13		6		0
Interest and financing costs, net	(26)		(31)		(51)		(64)
Interest income	0		0		1		1
Other income (expense), net	53		(19)		52		(19)
EARNINGS BEFORE INCOME TAXES	393		591		526		695
Income tax expense (benefit) (a)	141	[2]	224	[2]	196	[2]	267	[3]
NET EARNINGS FROM CONTINUING OPERATIONS	252		367		330		428
Earnings (loss) from discontinued operations, net of tax	(11)		24		(12)		10
NET EARNINGS	241		391		318		438
Less: Net earnings from continuing operations attributable to noncontrolling interest	0		0		0		0
NET EARNINGS ATTRIBUTABLE TO TESORO CORPORATION	241		391		318		438
COMPREHENSIVE INCOME
Total comprehensive income	241		391		318		438
Less: Noncontrolling interest in comprehensive income	0		0		0		0
COMPREHENSIVE INCOME ATTRIBUTABLE TO TESORO CORPORATION	241		391		318		438
Non- Guarantors
Condensed Financial Statements, captions
REVENUES	1,081		642		1,903		1,238
COSTS AND EXPENSES:
Cost of sales	1,024		600		1,780		1,165
Operating, selling, general and administrative expenses	33		19		61		37
Depreciation and amortization expense	8		4		13		7
Loss on asset disposals and impairments	0		0		3		1
OPERATING INCOME (LOSS)	16		19		46		28
Equity in earnings (loss) of subsidiaries	46		10		90		41
Interest and financing costs, net	(7)		(3)		(12)		(6)
Interest income	4		1		6		2
Other income (expense), net	3		0		3		0
EARNINGS BEFORE INCOME TAXES	62		27		133		65
Income tax expense (benefit) (a)	0	[2]	(2)	[2]	3	[2]	0	[3]
NET EARNINGS FROM CONTINUING OPERATIONS	62		29		130		65
Earnings (loss) from discontinued operations, net of tax	0		0		0		0
NET EARNINGS	62		29		130		65
Less: Net earnings from continuing operations attributable to noncontrolling interest	11		6		22		12
NET EARNINGS ATTRIBUTABLE TO TESORO CORPORATION	51		23		108		53
COMPREHENSIVE INCOME
Total comprehensive income	62		29		130		65
Less: Noncontrolling interest in comprehensive income	11		6		22		12
COMPREHENSIVE INCOME ATTRIBUTABLE TO TESORO CORPORATION	51		23		108		53
Eliminations
Condensed Financial Statements, captions
REVENUES	(2,630)		(2,305)		(5,248)		(4,714)
COSTS AND EXPENSES:
Cost of sales	(2,630)		(2,305)		(5,248)		(4,714)
Operating, selling, general and administrative expenses	0		0		0		0
Depreciation and amortization expense	0		0		0		0
Loss on asset disposals and impairments	0		0		0		0
OPERATING INCOME (LOSS)	0		0		0		0
Equity in earnings (loss) of subsidiaries	(292)		(414)		(426)		(491)
Interest and financing costs, net	4		1		6		2
Interest income	(4)		(1)		(6)		(2)
Other income (expense), net	0		0		0		0
EARNINGS BEFORE INCOME TAXES	(292)		(414)		(426)		(491)
Income tax expense (benefit) (a)	0	[2]	0	[2]	0	[2]	0	[3]
NET EARNINGS FROM CONTINUING OPERATIONS	(292)		(414)		(426)		(491)
Earnings (loss) from discontinued operations, net of tax	0		0		0		0
NET EARNINGS	(292)		(414)		(426)		(491)
Less: Net earnings from continuing operations attributable to noncontrolling interest	0		0		0		0
NET EARNINGS ATTRIBUTABLE TO TESORO CORPORATION	(292)		(414)		(426)		(491)
COMPREHENSIVE INCOME
Total comprehensive income	(292)		(414)		(426)		(491)
Less: Noncontrolling interest in comprehensive income	0		0		0		0
COMPREHENSIVE INCOME ATTRIBUTABLE TO TESORO CORPORATION	$ (292)		$ (414)		$ (426)		$ (491)

[1] Includes $54 million in refunds from a settlement of a rate proceeding from the CPUC for the three and six months ended June 30, 2013. Also includes $18 million in accruals related to certain legal matters partially offset by receipts associated with the settlement of a pipeline rate proceeding for the three and six months ended June 30, 2012.

[2] The income tax expense (benefit) reflected in each column does not include any tax effect of the equity in earnings from corporate subsidiaries, but does include the tax effect of the corporate partners’ share of partnership income.

[3] The income tax expense reflected in each column does not include any tax effect of the equity in earnings from corporate subsidiaries, but does include the tax effect of the corporate partners’ share of partnership income.

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Supplemental Cash Flow Information Supplemental Cash Flow Information (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Supplemental Cash Flow Elements [Abstract]
Assets received for deposits paid in prior period	$ 130	$ 0
Interest paid, net of capitalized interest	43	50
Income taxes paid, net	95	1
Capital expenditures included in accounts payable	$ 73	$ 52

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Acquisitions and Other Changes in Operations Acquisitions and Other Changes in Operations (Tables)

6 Months Ended

Jun. 30, 2013

Business Combinations [Abstract]

Schedule of recognized identified assets acquired and liabilities assumed

The table below presents the preliminary purchase price allocation (in millions):

Receivables	$	234
Inventories	1,100
Prepayments and other current assets	68
Property, plant and equipment	1,023
Acquired intangible assets, net	114
Other noncurrent assets, net	101
Other current liabilities	(12		)
Other noncurrent liabilities	(171		)
Debt	(34		)
Total purchase price	$	2,423

Business acquisition, pro forma information

The following pro forma financial information presents our consolidated results assuming the Carson Acquisition occurred on January 1, 2012. The pro forma financial information is not necessarily indicative of the results of future operations.

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(In millions, except per share amounts)
Revenues	$	11,425	$	11,125	$	22,153	$	21,971
Net Earnings attributable to Tesoro Corporation Stockholders	239		508		415		586
Basic Earnings Per Share from Continuing Operations	1.84		3.47		3.13		4.13
Diluted Earnings Per Share from Continuing Operations	1.81		3.44		3.07		4.08

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Operating Segments (Notes)

6 Months Ended

Jun. 30, 2013

Segment Reporting [Abstract]

OPERATING SEGMENTS

OPERATING SEGMENTS

The Company’s revenues are derived from two operating segments, refining and retail. Excluding the Hawaii refinery, we own and operate six petroleum refineries located in California, Washington, Alaska, North Dakota and Utah. These refineries manufacture gasoline and gasoline blendstocks, jet fuel, diesel fuel, residual fuel oil and other refined products. We sell these refined products, together with refined products purchased from third parties, at wholesale through terminal facilities and other locations. Our refining segment also sells refined products to unbranded marketers and opportunistically exports refined products to foreign markets. Excluding the Hawaii Business, our retail segment sells gasoline, diesel fuel and convenience store items through company-operated retail stations and branded jobber/dealers in 17 states. See Note B for additional information regarding the changes in our assets during the second quarter of 2013. We do not have significant operations in foreign countries. Therefore, revenue generated and long-lived assets located in foreign countries are not material to our operations.

We evaluate the performance of our segments based primarily on segment operating income. Segment operating income includes those revenues and expenses that are directly attributable to management of the respective segment. Intersegment sales from refining to retail are made at prevailing market rates. Income taxes, other expense, net, interest income, net interest and financing costs, corporate depreciation and corporate general and administrative expenses are excluded from segment operating income. Identifiable assets are those used by the segments, whereas corporate assets are principally cash and other assets that are not associated with a specific operating segment.

As discussed in Note B, certain valuations and other studies have yet to commence or progress to a state where there is sufficient information for a definitive measurement, including estimates for other refining, logistics and retail property, plant and equipment values and values for certain intangible assets.  As of June 30, 2013, these amounts have been included in the refining segment assets and will be included in the appropriate segment in future periods when more information is available.

Segment information related to continuing operations is as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
	(In millions)
Revenues
Refining:
Refined products	$	8,146		$	7,026		$	14,890		$	13,791
Crude oil and other	603			133			1,076			287
Retail:
Fuel (a)	2,218			1,457			3,725			2,713
Merchandise and other	59			54			107			100
Intersegment sales from Refining to Retail	(2,129		)	(1,337		)	(3,554		)	(2,551		)
Total Revenues	$	8,897		$	7,333		$	16,244		$	14,340
Segment Operating Income
Refining (b)	$	395		$	610		$	678		$	823
Retail (b)	25			72			40			67
Total Segment Operating Income	420			682			718			890
Corporate and unallocated costs (c)	(56		)	(38		)	(161		)	(90		)
Operating Income	364			644			557			800
Interest and financing costs, net	(33		)	(34		)	(63		)	(70		)
Interest income	—			—			1			1
Other income (expense), net (d)	56			(19		)	55			(19		)
Earnings Before Income Taxes	$	387		$	591		$	550		$	712
Depreciation and Amortization Expense
Refining	$	97		$	87		$	189		$	172
Retail	9			9			17			18
Corporate	5			6			10			8
Total Depreciation and Amortization Expense	$	111		$	102		$	216		$	198
Capital Expenditures
Refining	$	156		$	116		$	265		$	203
Retail	9			23			16			31
Corporate	5			3			8			6
Total Capital Expenditures	$	170		$	142		$	289		$	240

________________

(a) Federal and state motor fuel taxes on sales by our retail segment are included in both revenues and cost of sales in our condensed statements of consolidated operations. These taxes totaled $143 million and $107 million for the three months ended June 30, 2013 and 2012, respectively, and $272 million and $200 million for the six months ended June 30, 2013 and 2012, respectively.

(b) Our refining segment uses RINs to satisfy its obligations under the Renewable Fuels Standard, in addition to physically blending required biofuels. Beginning in late 2012, we began to transfer the ownership of the biofuels to the retail segment prior to blending which resulted in a discount in the price paid by the retail segment for biofuels by the market value of RINs (“RINs Transfer Price Adjustment”). During 2012, the market price of RINs resulted in an immaterial impact to the segments. Effective April 1, 2013, we changed our intersegment pricing methodology and no longer reduce the amount retail pays for the biofuels by the market value of the RINs which we believe more closely approximates market rates during the period.  As a result, we conformed our segment presentation and reclassified $15 million of the RINs Transfer Price Adjustment related to the three months ended March 31, 2013 during the three months ended June 30, 2013 from our retail segment to our refining segment.  This resulted in a decrease in retail segment operating income and an increase in refining segment operating income for the three months ended June 30, 2013.

(c) Includes stock-based compensation benefit of $4 million for the three months ended June 30, 2013 and expense of $44 million and $19 million for the six months ended June 30, 2013 and 2012, respectively. The significant impact to stock-based compensation expense during the six months ended June 30, 2013 compared to the prior period is primarily a result of changes in Tesoro’s stock price during the three and six months ended June 30, 2013 as compared to the three and six months ended June 30, 2012. Also includes transaction and integration costs related to the Carson Acquisition and TLLP’s purchase of the Northwest Products System of $19 million and $33 million for the three and six months ended June 30, 2013, respectively.

(d) Includes $54 million in refunds from a settlement of a rate proceeding from the CPUC for the three and six months ended June 30, 2013. Also includes $18 million in accruals related to certain legal matters partially offset by receipts associated with the settlement of a pipeline rate proceeding for the three and six months ended June 30, 2012.

	June 30, 2013		December 31, 2012
	(In millions)
Identifiable Assets Related to Continuing Operations:
Refining	$	11,656	$	8,010
Retail	790		716
Corporate	760		1,621
Total Assets	$	13,206	$	10,347

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Condensed Consolidating Financial Information (Tables)

6 Months Ended

Jun. 30, 2013

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Consolidating Statement of Operations and Comprehensive Income

Condensed Consolidating Statement of Operations and

Comprehensive Income for the Three Months EndedJune 30, 2013

(In millions)

	Parent			Guarantor Subsidiaries			Non- Guarantors			Eliminations			Consolidated
REVENUES	$	—		$	10,446		$	1,081		$	(2,630	)	$	8,897
COSTS AND EXPENSES:
Cost of sales	—			9,515			1,024			(2,630		)	7,909
Operating, selling, general and administrative expenses	6			466			33			—			505
Depreciation and amortization expense	—			103			8			—			111
Loss on asset disposals and impairments	—			8			—			—			8
OPERATING INCOME (LOSS)	(6		)	354			16			—			364
Equity in earnings of subsidiaries	234			12			46			(292		)	—
Interest and financing costs, net	(4		)	(26		)	(7		)	4			(33		)
Interest income	—			—			4			(4		)	—
Other income, net	—			53			3			—			56
EARNINGS BEFORE INCOME TAXES	224			393			62			(292		)	387
Income tax expense (benefit) (a)	(3		)	141			—			—			138
NET EARNINGS FROM CONTINUING OPERATIONS	227			252			62			(292		)	249
Loss from discontinued operations, net of tax	—			(11		)	—			—			(11		)
NET EARNINGS	227			241			62			(292		)	238
Less: Net earnings from continuing operations attributable to noncontrolling interest	—			—			11			—			11
NET EARNINGS ATTRIBUTABLE TO TESORO CORPORATION	$	227		$	241		$	51		$	(292	)	$	227
COMPREHENSIVE INCOME
Total comprehensive income	$	300		$	241		$	62		$	(292	)	$	311
Less: Noncontrolling interest in comprehensive income	—			—			11			—			11
COMPREHENSIVE INCOME ATTRIBUTABLE TO TESORO CORPORATION	$	300		$	241		$	51		$	(292	)	$	300

_______________

(a) The income tax expense (benefit) reflected in each column does not include any tax effect of the equity in earnings from corporate subsidiaries, but does include the tax effect of the corporate partners’ share of partnership income.

Condensed Consolidating Statement of Operations and

Comprehensive Income for the Three Months EndedJune 30, 2012

(In millions)

	Parent			Guarantor Subsidiaries			Non- Guarantors			Eliminations			Consolidated
REVENUES	$	—		$	8,996		$	642		$	(2,305	)	$	7,333
COSTS AND EXPENSES:
Cost of sales	—			7,899			600			(2,305		)	6,194
Operating, selling, general and administrative expenses	3			365			19			—			387
Depreciation and amortization expense	—			98			4			—			102
Loss on asset disposals and impairments	—			6			—			—			6
OPERATING INCOME (LOSS)	(3		)	628			19			—			644
Equity in earnings of subsidiaries	391			13			10			(414		)	—
Interest and financing costs, net	(1		)	(31		)	(3		)	1			(34		)
Interest income	—			—			1			(1		)	—
Other expense, net	—			(19		)	—			—			(19		)
EARNINGS BEFORE INCOME TAXES	387			591			27			(414		)	591
Income tax expense (benefit) (a)	—			224			(2		)	—			222
NET EARNINGS FROM CONTINUING OPERATIONS	387			367			29			(414		)	369
Earnings from discontinued operations, net of tax	—			24			—			—			24
NET EARNINGS	387			391			29			(414		)	393
Less: Net earnings from continuing operations attributable to noncontrolling interest	—			—			6			—			6
NET EARNINGS ATTRIBUTABLE TO TESORO CORPORATION	$	387		$	391		$	23		$	(414	)	$	387
COMPREHENSIVE INCOME
Total comprehensive income	$	387		$	391		$	29		$	(414	)	$	393
Less: Noncontrolling interest in comprehensive income	—			—			6			—			6
COMPREHENSIVE INCOME ATTRIBUTABLE TO TESORO CORPORATION	$	387		$	391		$	23		$	(414	)	$	387

_______________

(a) The income tax expense (benefit) reflected in each column does not include any tax effect of the equity in earnings from corporate subsidiaries, but does include the tax effect of the corporate partners’ share of partnership income.

Condensed Consolidating Statement of Operations and

Comprehensive Income for the Six Months EndedJune 30, 2013

(In millions)

	Parent			Guarantor Subsidiaries			Non- Guarantors			Eliminations			Consolidated
REVENUES	$	—		$	19,589		$	1,903		$	(5,248	)	$	16,244
COSTS AND EXPENSES:
Cost of sales	—			17,940			1,780			(5,248		)	14,472
Operating, selling, general and administrative expenses	7			916			61			—			984
Depreciation and amortization expense	—			203			13			—			216
Loss on asset disposals and impairments	—			12			3			—			15
OPERATING INCOME (LOSS)	(7		)	518			46			—			557
Equity in earnings of subsidiaries	330			6			90			(426		)	—
Interest and financing costs, net	(6		)	(51		)	(12		)	6			(63		)
Interest income	—			1			6			(6		)	1
Other income, net	—			52			3			—			55
EARNINGS BEFORE INCOME TAXES	317			526			133			(426		)	550
Income tax expense (benefit) (a)	(3		)	196			3			—			196
NET EARNINGS FROM CONTINUING OPERATIONS	320			330			130			(426		)	354
Loss from discontinued operations, net of tax	—			(12		)	—			—			(12		)
NET EARNINGS	320			318			130			(426		)	342
Less: Net earnings from continuing operations attributable to noncontrolling interest	—			—			22			—			22
NET EARNINGS ATTRIBUTABLE TO TESORO CORPORATION	$	320		$	318		$	108		$	(426	)	$	320
COMPREHENSIVE INCOME
Total comprehensive income	$	393		$	318		$	130		$	(426	)	$	415
Less: Noncontrolling interest in comprehensive income	—			—			22			—			22
COMPREHENSIVE INCOME ATTRIBUTABLE TO TESORO CORPORATION	$	393		$	318		$	108		$	(426	)	$	393

_______________

(a) The income tax expense (benefit) reflected in each column does not include any tax effect of the equity in earnings from corporate subsidiaries, but does include the tax effect of the corporate partners’ share of partnership income.

Condensed Consolidating Statement of Operations and

Comprehensive Income for the Six Months EndedJune 30, 2012

(In millions)

	Parent			Guarantor Subsidiaries			Non- Guarantors			Eliminations			Consolidated
REVENUES	$	—		$	17,816		$	1,238		$	(4,714	)	$	14,340
COSTS AND EXPENSES:
Cost of sales	—			16,120			1,165			(4,714		)	12,571
Operating, selling, general and administrative expenses	5			717			37			—			759
Depreciation and amortization expense	—			191			7			—			198
Loss on asset disposals and impairments	—			11			1			—			12
OPERATING INCOME (LOSS)	(5		)	777			28			—			800
Equity in earnings of subsidiaries	450			—			41			(491		)	—
Interest and financing costs, net	(2		)	(64		)	(6		)	2			(70		)
Interest income	—			1			2			(2		)	1
Other expense, net	—			(19		)	—			—			(19		)
EARNINGS BEFORE INCOME TAXES	443			695			65			(491		)	712
Income tax expense (a)	—			267			—			—			267
NET EARNINGS FROM CONTINUING OPERATIONS	443			428			65			(491		)	445
Earnings from discontinued operations, net of tax	—			10			—			—			10
NET EARNINGS	443			438			65			(491		)	455
Less: Net earnings from continuing operations attributable to noncontrolling interest	—			—			12			—			12
NET EARNINGS ATTRIBUTABLE TO TESORO CORPORATION	$	443		$	438		$	53		$	(491	)	$	443
COMPREHENSIVE INCOME
Total comprehensive income	$	443		$	438		$	65		$	(491	)	$	455
Less: Noncontrolling interest in comprehensive income	—			—			12			—			12
COMPREHENSIVE INCOME ATTRIBUTABLE TO TESORO CORPORATION	$	443		$	438		$	53		$	(491	)	$	443

_______________

(a) The income tax expense reflected in each column does not include any tax effect of the equity in earnings from corporate subsidiaries, but does include the tax effect of the corporate partners’ share of partnership income.

Condensed Consolidating Balance Sheet

With the exception of affiliate balances, which are eliminated upon consolidation, and their impact on equity, the TLLP condensed consolidated balance sheets as of June 30, 2013 and December 31, 2012, as presented below, are included in the condensed consolidated balance sheets of Tesoro Corporation.

	June 30, 2013		December 31, 2012
	(In millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	76	$	19
Receivables
Trade	2		—
Affiliate	25		18
Prepayments	1		1
Other current assets	5		—
Total Current Assets	109		38
NET, PROPERTY, PLANT AND EQUIPMENT	1,053		274
DEPOSITS	—		40
GOODWILL	9		—
OTHER NONCURRENT ASSETS	17		11
Total Assets	$	1,188	$	363
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable
Trade	$	15	$	9
Affiliate	9		7
Deferred revenue - affiliate	2		2
Accrued interest and financing costs	5		6
Other current liabilities	17		3
Total Current Liabilities	48		27
OTHER NONCURRENT LIABILITIES	5		—
DEBT	903		354
EQUITY (DEFICIT)	232		(18		)
Total Liabilities and Equity (Deficit)	$	1,188	$	363

Condensed Consolidating Balance Sheet as of June 30, 2013

(In millions)

	Parent		Guarantor Subsidiaries		Non- Guarantors		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	—	$	323	$	105	$	—		$	428
Receivables, less allowance for doubtful accounts	1		1,607		180		(1		)	1,787
Short-term receivables from affiliates	—		—		31		(31		)	—
Inventories	—		1,920		453		—			2,373
Prepayments	59		414		2		(4		)	471
Other current assets	119		136		10		—			265
Current assets related to discontinued operations	—		463		—		—			463
Total Current Assets	179		4,863		781		(36		)	5,787
Net Property, Plant and Equipment	—		5,607		1,132		—			6,739
Investment in Subsidiaries	5,346		96		1,404		(6,846		)	—
Long-Term Receivables from Affiliates	3,632		—		—		(3,632		)	—
Other Noncurrent Assets, Net:
Acquired intangibles, net	—		322		—		—			322
Other noncurrent assets, net	62		635		1,008		(884		)	821
Noncurrent assets related to discontinued operations	—		—		—		—			—
Total Other Noncurrent Assets, Net	62		957		1,008		(884		)	1,143
Total Assets	$	9,219	$	11,523	$	4,325	$	(11,398	)	$	13,669
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	2	$	2,203	$	285	$	—		$	2,490
Other current liabilities	193		595		40		(5		)	823
Short-term payables to affiliates	—		31		—		(31		)	—
Current liabilities related to discontinued operations	—		58		—		—			58
Total Current Liabilities	195		2,887		325		(36		)	3,371
Long-Term Payables to Affiliates	—		3,231		401		(3,632		)	—
Deferred Income Taxes	942		—		—		—			942
Other Noncurrent Liabilities	345		327		6		—			678
Debt	3,295		14		933		(884		)	3,358
Noncurrent liabilities related to discontinued operations	—		—		—		—			—
Equity-Tesoro Corporation	4,442		5,064		1,782		(6,846		)	4,442
Equity-Noncontrolling Interest	—		—		878		—			878
Total Liabilities and Equity	$	9,219	$	11,523	$	4,325	$	(11,398	)	$	13,669

Condensed Consolidating Balance Sheet as of December 31, 2012

(In millions)

	Parent		Guarantor Subsidiaries			Non- Guarantors		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	—	$	1,244		$	395	$	—		$	1,639
Receivables, less allowance for doubtful accounts	1		1,038			87		—			1,126
Short-term receivables from affiliates	—		—			47		(47		)	—
Inventories	—		1,091			247		—			1,338
Prepayments	17		36			1		—			54
Other current assets	114		25			3		—			142
Current assets related to discontinued operations	—		337			—		—			337
Total Current Assets	132		3,771			780		(47		)	4,636
Net Property, Plant and Equipment	—		4,873			359		—			5,232
Investment in Subsidiaries	5,041		(200		)	159		(5,000		)	—
Long-Term Receivables from Affiliates	1,846		—			—		(1,846		)	—
Other Noncurrent Assets, Net:
Acquired intangibles, net	—		214			—		—			214
Other noncurrent assets, net	47		505			160		(110		)	602
Noncurrent assets related to discontinued operations	—		18			—		—			18
Total Other Noncurrent Assets, Net	47		737			160		(110		)	834
Total Assets	$	7,066	$	9,181		$	1,458	$	(7,003	)	$	10,702
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	1	$	2,029		$	166	$	—		$	2,196
Other current liabilities	163		444			18		—			625
Short-term payables to affiliates	—		47			—		(47		)	—
Current liabilities related to discontinued operations	—		60			—		—			60
Total Current Liabilities	164		2,580			184		(47		)	2,881
Long-Term Payables to Affiliates	—		1,667			179		(1,846		)	—
Deferred Income Taxes	850		—			—		—			850
Other Noncurrent Liabilities	475		169			—		—			644
Debt	1,326		15			354		(110		)	1,585
Noncurrent liabilities related to discontinued operations	—		5			—		—			5
Equity-Tesoro Corporation	4,251		4,745			255		(5,000		)	4,251
Equity-Noncontrolling Interest	—		—			486		—			486
Total Liabilities and Equity	$	7,066	$	9,181		$	1,458	$	(7,003	)	$	10,702

Condensed Consolidating Statement of Cash Flows

Condensed Consolidating Statement of Cash Flows for the Six Months EndedJune 30, 2013

(In millions)

	Parent			Guarantor Subsidiaries			Non- Guarantors			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash used in operating activities	$	(14	)	$	(22	)	$	(125	)	$	—		$	(161	)
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
Capital expenditures	—			(266		)	(27		)	—			(293		)
Proceeds from asset sales	—			—			2			—			2
Investment in joint venture	—			(2		)	—			—			(2		)
Acquisitions	—			(1,870		)	(778		)	—			(2,648		)
Advance payments received for sale of assets	—			25			—			—			25
Intercompany notes, net	(1,719		)	—			—			1,719			—
Net cash used in investing activities	(1,719		)	(2,113		)	(803		)	1,719			(2,916		)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
Borrowings under revolving credit agreements	1,524			—			544			—			2,068
Borrowings under term loan credit agreement	500			—			—			—			500
Repayments on revolving credit agreements	(824		)	—			—			—			(824		)
Repayments of debt	—			(2		)	—			—			(2		)
Dividend payments	(55		)	—			—			—			(55		)
Proceeds from stock options exercised	68			—			—			—			68
Distributions to noncontrolling interest	—			—			(28		)	—			(28		)
Purchases of common stock	(241		)	—			—			—			(241		)
Net proceeds from issuance of Tesoro Logistics LP common units	—			—			392			—			392
Excess tax benefits from stock-based compensation arrangements	—			11			—			—			11
Net intercompany borrowings (repayments)	—			1,197			522			(1,719		)	—
Borrowings from general partner	774			—			(774		)	—			—
Distributions to TLLP unitholders and general partner	7			8			(15		)	—			—
Financing costs and other	(20		)	—			(3		)	—			(23		)
Net cash from financing activities	1,733			1,214			638			(1,719		)	1,866
DECREASE IN CASH AND CASH EQUIVALENTS	—			(921		)	(290		)	—			(1,211		)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	—			1,244			395			—			1,639
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—		$	323		$	105		$	—		$	428

Condensed Consolidating Statement of Cash Flows for the Six Months EndedJune 30, 2012

(In millions)

	Parent			Guarantor Subsidiaries			Non- Guarantors			Eliminations			Consolidated
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net cash from (used in) operating activities	$	9		$	717		$	(2	)	$	—		$	724
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
Capital expenditures	—			(234		)	(9		)	—			(243		)
Acquisitions	—			(38		)	—			—			(38		)
Proceeds from asset sales	—			3			—			—			3
Intercompany notes, net	(65		)	—			—			65			—
Net cash used in investing activities	(65		)	(269		)	(9		)	65			(278		)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
Borrowings under revolving credit agreements	—			—			185			—			185
Repayments on revolving credit agreements	—			—			(184		)	—			(184		)
Repayments of debt	—			(1		)	—			—			(1		)
Proceeds from stock options exercised	14			—			—			—			14
Distributions to noncontrolling interest	—			—			(11		)	—			(11		)
Purchases of common stock	(31		)	—			—			—			(31		)
Excess tax benefits from stock-based compensation arrangements	—			4			—			—			4
Net intercompany borrowings (repayments)	—			15			50			(65		)	—
Borrowings from general partner	68			—			(68		)	—			—
Distributions to TLLP unitholders and general partner	5			6			(11		)	—			—
Net cash from (used in) financing activities	56			24			(39		)	(65		)	(24		)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	—			472			(50		)	—			422
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	—			805			95			—			900
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—		$	1,277		$	45		$	—		$	1,322

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Operating Segments, Results (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended				6 Months Ended					3 Months Ended		6 Months Ended			3 Months Ended				6 Months Ended				3 Months Ended		6 Months Ended			3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended				6 Months Ended				3 Months Ended		6 Months Ended			3 Months Ended				6 Months Ended				3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended			1 Months Ended	3 Months Ended	6 Months Ended
	Jun. 30, 2013		Jun. 30, 2012		Jun. 30, 2013		Jun. 30, 2012		Dec. 31, 2012	Jun. 30, 2013 Continuing Operations	Jun. 30, 2012 Continuing Operations	Jun. 30, 2013 Continuing Operations	Jun. 30, 2012 Continuing Operations	Dec. 31, 2012 Continuing Operations	Jun. 30, 2013 Refining:		Jun. 30, 2012 Refining:		Jun. 30, 2013 Refining:		Jun. 30, 2012 Refining:		Jun. 30, 2013 Refining: Continuing Operations	Jun. 30, 2012 Refining: Continuing Operations	Jun. 30, 2013 Refining: Continuing Operations	Jun. 30, 2012 Refining: Continuing Operations	Dec. 31, 2012 Refining: Continuing Operations	Jun. 30, 2013 Refined products	Jun. 30, 2012 Refined products	Jun. 30, 2013 Refined products	Jun. 30, 2012 Refined products	Jun. 30, 2013 Crude oil and other	Jun. 30, 2012 Crude oil and other	Jun. 30, 2013 Crude oil and other	Jun. 30, 2012 Crude oil and other	Jun. 30, 2013 Retail:		Jun. 30, 2012 Retail:		Jun. 30, 2013 Retail:		Jun. 30, 2012 Retail:		Jun. 30, 2013 Retail: Continuing Operations	Jun. 30, 2012 Retail: Continuing Operations	Jun. 30, 2013 Retail: Continuing Operations	Jun. 30, 2012 Retail: Continuing Operations	Dec. 31, 2012 Retail: Continuing Operations	Jun. 30, 2013 Fuel (a)		Jun. 30, 2012 Fuel (a)		Jun. 30, 2013 Fuel (a)		Jun. 30, 2012 Fuel (a)		Jun. 30, 2013 Merchandise and other	Jun. 30, 2012 Merchandise and other	Jun. 30, 2013 Merchandise and other	Jun. 30, 2012 Merchandise and other	Jun. 30, 2013 Intersegment sales from Refining to Retail	Jun. 30, 2012 Intersegment sales from Refining to Retail	Jun. 30, 2013 Intersegment sales from Refining to Retail	Jun. 30, 2012 Intersegment sales from Refining to Retail	Jun. 30, 2013 Corporate	Jun. 30, 2012 Corporate	Jun. 30, 2013 Corporate	Jun. 30, 2012 Corporate	Jun. 30, 2013 Corporate Continuing Operations	Jun. 30, 2012 Corporate Continuing Operations	Jun. 30, 2013 Corporate Continuing Operations	Jun. 30, 2012 Corporate Continuing Operations	Dec. 31, 2012 Corporate Continuing Operations	Jun. 30, 2013 CPCU	Jun. 30, 2013 CPCU	Jun. 30, 2013 CPCU
Segment Reporting Information
Revenues																												$ 8,146	$ 7,026	$ 14,890	$ 13,791	$ 603	$ 133	$ 1,076	$ 287														$ 2,218	[1]	$ 1,457	[1]	$ 3,725	[1]	$ 2,713	[1]	$ 59	$ 54	$ 107	$ 100	$ (2,129)	$ (1,337)	$ (3,554)	$ (2,551)
Total Revenues	8,897		7,333		16,244		14,340
OPERATING INCOME (LOSS)	364		644		557		800								395	[2]	610	[2]	678	[2]	823	[2]														25	[2]	72	[2]	40	[2]	67	[2]
Reconciliation of Operating Income from Segments to Consolidated
Total Segment Operating Income	420		682		718		890
Corporate and unallocated costs (c)	(56)	[3]	(38)	[3]	(161)	[3]	(90)	[3]
Segment Reporting Information, Income before Income Taxes
Interest and financing costs, net	(33)		(34)		(63)		(70)
Interest income	0		0		1		1
Other income (expense), net (d)	56	[4]	(19)	[4]	55	[4]	(19)	[4]
EARNINGS BEFORE INCOME TAXES	387		591		550		712
Segment Reporting, Disclosure of Other Information about Entity's Reportable Segments
Depreciation and Amortization Expense	111		102		216		198								97		87		189		172															9		9		17		18																							5	6	10	8
Capital Expenditures										170	142	289	240										156	116	265	203																		9	23	16	31																						5	3	8	6
Identifiable Assets	13,669				13,669				10,702	13,206		13,206		10,347									11,656		11,656		8,010																	790		790		716																					760		760		1,621
Table Footnotes
Federal and state motor fuel taxes on sales by our retail segment	143		107		272		200
Reclassification between segments	15
Stock-based compensation expense (benefit)	(5)		0		47		21																																																										(4)		44	19
Transactions costs	19				33
Other income recognized for legal matters																																																																										$ 54	$ 54	$ 54
Other net expense disclosure	18				18

[1] Federal and state motor fuel taxes on sales by our retail segment are included in both revenues and cost of sales in our condensed statements of consolidated operations. These taxes totaled $143 million and $107 million for the three months ended June 30, 2013 and 2012, respectively, and $272 million and $200 million for the six months ended June 30, 2013 and 2012, respectively.

[2] Our refining segment uses RINs to satisfy its obligations under the Renewable Fuels Standard, in addition to physically blending required biofuels. Beginning in late 2012, we began to transfer the ownership of the biofuels to the retail segment prior to blending which resulted in a discount in the price paid by the retail segment for biofuels by the market value of RINs (“RINs Transfer Price Adjustment”). During 2012, the market price of RINs resulted in an immaterial impact to the segments. Effective April 1, 2013, we changed our intersegment pricing methodology and no longer reduce the amount retail pays for the biofuels by the market value of the RINs which we believe more closely approximates market rates during the period. As a result, we conformed our segment presentation and reclassified $15 million of the RINs Transfer Price Adjustment related to the three months ended March 31, 2013 during the three months ended June 30, 2013 from our retail segment to our refining segment. This resulted in a decrease in retail segment operating income and an increase in refining segment operating income for the three months ended June 30, 2013.

[3] Includes stock-based compensation benefit of $4 million for the three months ended June 30, 2013 and expense of $44 million and $19 million for the six months ended June 30, 2013 and 2012, respectively. The significant impact to stock-based compensation expense during the six months ended June 30, 2013 compared to the prior period is primarily a result of changes in Tesoro’s stock price during the three and six months ended June 30, 2013 as compared to the three and six months ended June 30, 2012. Also includes transaction and integration costs related to the Carson Acquisition and TLLP’s purchase of the Northwest Products System of $19 million and $33 million for the three and six months ended June 30, 2013, respectively.

[4] Includes $54 million in refunds from a settlement of a rate proceeding from the CPUC for the three and six months ended June 30, 2013. Also includes $18 million in accruals related to certain legal matters partially offset by receipts associated with the settlement of a pipeline rate proceeding for the three and six months ended June 30, 2012.

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Earnings Per Share (Details) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Earnings Per Share [Abstract]
Weighted average common shares outstanding	135.8	139.6	136.4	139.5
Common stock equivalents	2.4	0.9	2.5	1.7
Total diluted shares	138.2	140.5	138.9	141.2
Stock options (shares)	0.1	2.8	0.2	2.9

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Commitments and Contingencies Commitments and Contingencies, Rollforward (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2013 BP's Southern California Refining and Marketing Business	Jun. 30, 2013 Northwest Products System	Jun. 19, 2013 Northwest Products System
Loss Contingencies
Balance at December 31, 2012	$ 85
Additions, net	2
Environmental liabilities assumed with acqusitions		169	17	17
Expenditures	(4)
Balance at June 30, 3013	$ 269

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Commitments and Contingencies Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Schedule of Environmental Loss Contingencies

Changes in our environmental liabilities for the six months ended June 30, 2013, were as follows (in millions):

Balance at December 31, 2012	$	85
Additions, net	2
Liabilities assumed in the Carson Acquisition	169
Liabilities assumed in the Northwest Products System Acquisition	17
Expenditures	(4		)
Balance at June 30, 2013	$	269

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Derivative Instruments (Tables)

6 Months Ended

Jun. 30, 2013

General Discussion of Derivative Instruments and Hedging Activities [Abstract]

Schedule of derivative instruments in Balance Sheet, fair value

The following table presents the fair value (in millions) of our derivative instruments as of June 30, 2013 and December 31, 2012. The fair value amounts below are presented on a gross basis and do not reflect the netting of asset and liability positions permitted under the terms of our master netting arrangements including cash collateral on deposit with, or received from, brokers. We have elected to offset the recognized fair value amounts for multiple derivative instruments executed with the same counterparty in our financial statements when a legal right of offset exists. As a result, the asset and liability amounts below will not agree with the amounts presented in our condensed consolidated balance sheets.

		Derivative Assets						Derivative Liabilities
	Balance Sheet Location	June 30, 2013			December 31, 2012			June 30, 2013			December 31, 2012
Commodity Futures Contracts	Prepayments and other current assets	$	152		$	76		$	140		$	83
Commodity Futures Contracts	Current assets related to discontinued operations	27			19			15			17
Commodity Forward Contracts	Receivables	4			—			4			—
Commodity Forward Contracts	Accounts payable	—			—			—			1
Total Gross Mark-to-Market Derivatives		183			95			159			101
Less: Counterparty Netting and Cash Collateral (a)		(92		)	(68		)	(135		)	(95		)
Total Net Fair Value of Derivatives		$	91		$	27		$	24		$	6

________________

(a) As of June 30, 2013 and December 31, 2012, cash collateral amounts of $43 million and $27 million, respectively, are netted with mark-to-market derivative assets.

Schedule of mark-to-market derivatives

Gains (losses) for our mark-to market derivatives for the three and six months ended June 30, 2013 and 2012, were as follows (in millions):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Commodity Futures Contracts	$	10		$	50		$	(16	)	$	38
Commodity OTC Swap Contracts	—			—			—			(6		)
Commodity Forward Contracts	(2		)	6			(4		)	3
Foreign Currency Forward Contracts	(2		)	(2		)	(4		)	(1		)
Total Gain (Loss) on Mark-to-Market Derivatives	$	6		$	54		$	(24	)	$	34

The income statement location of gains (losses) for our mark-to market derivatives above were as follows (in millions):

	Three Months Ended June 30,						Six Months Ended June 30,
Income Statement Location:	2013			2012			2013			2012
Revenues	$	9		$	31		$	10		$	21
Cost of sales	2			24			(20		)	28
Other expense, net	(2		)	(2		)	(4		)	(1		)
Net earnings (loss) from discontinued operations	(3		)	1			(10		)	(14		)
Total Gain (Loss) on Mark-to-Market Derivatives	$	6		$	54		$	(24	)	$	34

Schedule of open long (short) positions

The information below presents the net volume of outstanding commodity contracts by type of instrument and year of maturity as of June 30, 2013 (volumes in thousands of barrels):

Mark-to-Market Derivatives
Derivative instrument and Year of maturity	Long (Short) Contract Volumes
Futures
2013	537
2014	(100)
OTC Swaps
2013	500
Forwards
2013	548

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Debt (Tables)

6 Months Ended

Jun. 30, 2013

Debt Disclosure [Abstract]

Schedule of Debt

Our total debt balance at June 30, 2013 and December 31, 2012 was as follows (in millions):

	June 30, 2013		December 31, 2012
Total Debt	$	3,367	$	1,588
Less: Current maturities	9		3
Debt, less current maturities	$	3,358	$	1,585

Schedule of Line of Credit Facilities

We had available capacity under our credit agreements as follows at June 30, 2013 (in millions):

	Total Capacity		Amount Borrowed as of June 30, 2013		Outstanding Letters of Credit		Available Capacity		Expiration
Tesoro Corporation Revolving Credit Facility (a)	$	3,000	$	700	$	782	$	1,518	January 4, 2018
TLLP Revolving Credit Facility	575		544		—		31		December 31, 2017
Term Loan Credit Facility	500		499		—		—		May 30, 2016
Letter of Credit Facilities	1,362		—		336		1,026
Total credit agreements	$	5,437	$	1,743	$	1,118	$	2,575

________________

(a) Borrowing base is the lesser of the amount of the periodically adjusted borrowing base or the agreement’s total capacity.

As of June 30, 2013, our credit facilities were subject to the following expenses and fees:

Credit Facility	30 day Eurodollar (LIBOR) Rate	Eurodollar Margin	Base Rate	Base Rate Margin	Commitment Fee (unused portion)
Tesoro Corporation Revolving Credit Facility ($3.0 billion) (b)	0.19%	1.50%	3.25%	0.50%	0.375%
TLLP Revolving Credit Facility ($575 million) (c)	0.19%	2.00%	3.25%	1.00%	0.375%

________________

(b) We can elect the interest rate to apply to the Revolving Credit Facility between a base rate plus the base rate margin, or a Eurodollar rate, for the applicable term, plus, the Eurodollar margin at the time of the borrowing. The applicable margin varies based on the Revolving Credit Facility’s credit ratings. Letters of credit outstanding under the Revolving Credit Facility incur fees at the Eurodollar margin rate. We also incur commitment fees for the unused portion of the Revolving Credit Facility at an annual rate.

(c) TLLP can elect the interest rate to apply to the TLLP Revolving Credit Facility between a base rate plus the base rate margin, or a Eurodollar rate, for the applicable term, plus, the Eurodollar margin at the time of the borrowing. The applicable margin varies based upon a certain leverage ratio, as defined by the TLLP Revolving Credit Facility. TLLP incurs commitment fees for the unused portion of the TLLP Revolving Credit Facility at an annual rate.

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Inventories (Notes)

6 Months Ended

Jun. 30, 2013

Inventory Disclosure [Abstract]

INVENTORIES

INVENTORIES

Components of inventories were as follows (in millions):

	June 30, 2013		December 31, 2012
Domestic crude oil and refined products	$	1,751	$	957
Foreign subsidiary crude oil	454		246
Materials and supplies	112		83
Oxygenates and by-products	41		38
Merchandise	15		14
Total Inventories	$	2,373	$	1,338

The total carrying value of our crude oil and refined product inventories was less than replacement cost by approximately $1.8 billion and $1.3 billion at June 30, 2013 and December 31, 2012, respectively. See Note B for more information regarding the inventory acquired in the Carson Acquisition.

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Property, Plant and Equipment (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Property Plant and Equipment, at cost
Property, plant and equipment, at cost	$ 8,834		$ 8,834		$ 7,206
Accumulated depreciation	(2,095)		(2,095)		(1,974)
Net property, plant and equipment	6,739		6,739		5,232
Capitalized interest	5	4	9	8
Refining
Property Plant and Equipment, at cost
Property, plant and equipment, at cost	7,885		7,885		6,268
Retail
Property Plant and Equipment, at cost
Property, plant and equipment, at cost	721		721		712
Corporate
Property Plant and Equipment, at cost
Property, plant and equipment, at cost	$ 228		$ 228		$ 226

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Tesoro Logistics LP (Tables)

6 Months Ended

Jun. 30, 2013

Variable Interest Entity, Measure of Activity [Abstract]

Subsidiary balance sheet

With the exception of affiliate balances, which are eliminated upon consolidation, and their impact on equity, the TLLP condensed consolidated balance sheets as of June 30, 2013 and December 31, 2012, as presented below, are included in the condensed consolidated balance sheets of Tesoro Corporation.

	June 30, 2013		December 31, 2012
	(In millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	76	$	19
Receivables
Trade	2		—
Affiliate	25		18
Prepayments	1		1
Other current assets	5		—
Total Current Assets	109		38
NET, PROPERTY, PLANT AND EQUIPMENT	1,053		274
DEPOSITS	—		40
GOODWILL	9		—
OTHER NONCURRENT ASSETS	17		11
Total Assets	$	1,188	$	363
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable
Trade	$	15	$	9
Affiliate	9		7
Deferred revenue - affiliate	2		2
Accrued interest and financing costs	5		6
Other current liabilities	17		3
Total Current Liabilities	48		27
OTHER NONCURRENT LIABILITIES	5		—
DEBT	903		354
EQUITY (DEFICIT)	232		(18		)
Total Liabilities and Equity (Deficit)	$	1,188	$	363

Condensed Consolidating Balance Sheet as of June 30, 2013

(In millions)

	Parent		Guarantor Subsidiaries		Non- Guarantors		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	—	$	323	$	105	$	—		$	428
Receivables, less allowance for doubtful accounts	1		1,607		180		(1		)	1,787
Short-term receivables from affiliates	—		—		31		(31		)	—
Inventories	—		1,920		453		—			2,373
Prepayments	59		414		2		(4		)	471
Other current assets	119		136		10		—			265
Current assets related to discontinued operations	—		463		—		—			463
Total Current Assets	179		4,863		781		(36		)	5,787
Net Property, Plant and Equipment	—		5,607		1,132		—			6,739
Investment in Subsidiaries	5,346		96		1,404		(6,846		)	—
Long-Term Receivables from Affiliates	3,632		—		—		(3,632		)	—
Other Noncurrent Assets, Net:
Acquired intangibles, net	—		322		—		—			322
Other noncurrent assets, net	62		635		1,008		(884		)	821
Noncurrent assets related to discontinued operations	—		—		—		—			—
Total Other Noncurrent Assets, Net	62		957		1,008		(884		)	1,143
Total Assets	$	9,219	$	11,523	$	4,325	$	(11,398	)	$	13,669
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	2	$	2,203	$	285	$	—		$	2,490
Other current liabilities	193		595		40		(5		)	823
Short-term payables to affiliates	—		31		—		(31		)	—
Current liabilities related to discontinued operations	—		58		—		—			58
Total Current Liabilities	195		2,887		325		(36		)	3,371
Long-Term Payables to Affiliates	—		3,231		401		(3,632		)	—
Deferred Income Taxes	942		—		—		—			942
Other Noncurrent Liabilities	345		327		6		—			678
Debt	3,295		14		933		(884		)	3,358
Noncurrent liabilities related to discontinued operations	—		—		—		—			—
Equity-Tesoro Corporation	4,442		5,064		1,782		(6,846		)	4,442
Equity-Noncontrolling Interest	—		—		878		—			878
Total Liabilities and Equity	$	9,219	$	11,523	$	4,325	$	(11,398	)	$	13,669

Condensed Consolidating Balance Sheet as of December 31, 2012

(In millions)

	Parent		Guarantor Subsidiaries			Non- Guarantors		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	—	$	1,244		$	395	$	—		$	1,639
Receivables, less allowance for doubtful accounts	1		1,038			87		—			1,126
Short-term receivables from affiliates	—		—			47		(47		)	—
Inventories	—		1,091			247		—			1,338
Prepayments	17		36			1		—			54
Other current assets	114		25			3		—			142
Current assets related to discontinued operations	—		337			—		—			337
Total Current Assets	132		3,771			780		(47		)	4,636
Net Property, Plant and Equipment	—		4,873			359		—			5,232
Investment in Subsidiaries	5,041		(200		)	159		(5,000		)	—
Long-Term Receivables from Affiliates	1,846		—			—		(1,846		)	—
Other Noncurrent Assets, Net:
Acquired intangibles, net	—		214			—		—			214
Other noncurrent assets, net	47		505			160		(110		)	602
Noncurrent assets related to discontinued operations	—		18			—		—			18
Total Other Noncurrent Assets, Net	47		737			160		(110		)	834
Total Assets	$	7,066	$	9,181		$	1,458	$	(7,003	)	$	10,702
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	1	$	2,029		$	166	$	—		$	2,196
Other current liabilities	163		444			18		—			625
Short-term payables to affiliates	—		47			—		(47		)	—
Current liabilities related to discontinued operations	—		60			—		—			60
Total Current Liabilities	164		2,580			184		(47		)	2,881
Long-Term Payables to Affiliates	—		1,667			179		(1,846		)	—
Deferred Income Taxes	850		—			—		—			850
Other Noncurrent Liabilities	475		169			—		—			644
Debt	1,326		15			354		(110		)	1,585
Noncurrent liabilities related to discontinued operations	—		5			—		—			5
Equity-Tesoro Corporation	4,251		4,745			255		(5,000		)	4,251
Equity-Noncontrolling Interest	—		—			486		—			486
Total Liabilities and Equity	$	7,066	$	9,181		$	1,458	$	(7,003	)	$	10,702

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Supplemental Cash Flow Information Supplemental Cash Flow Information (Tables)

6 Months Ended

Jun. 30, 2013

Supplemental Cash Flow Elements [Abstract]

Supplemental cash flow disclosures

Supplemental cash flow disclosures are as follows (in millions):

	Six Months Ended June 30,
	2013		2012
Assets received for deposits paid in prior period	$	130	$	—
Interest paid, net of capitalized interest	43		50
Income taxes paid, net	95		1

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Debt (Notes)

6 Months Ended

Jun. 30, 2013

Debt Disclosure [Abstract]

DEBT

DEBT

Our total debt balance at June 30, 2013 and December 31, 2012 was as follows (in millions):

	June 30, 2013		December 31, 2012
Total Debt	$	3,367	$	1,588
Less: Current maturities	9		3
Debt, less current maturities	$	3,358	$	1,585

6.125% TLLP Senior Notes due 2021

Effective August 1, 2013, TLLP completed a private offering of $550 million aggregate principal amount of 6.125% Senior Notes due 2021 (the “TLLP Notes”).  The proceeds of this offering were used to repay the amounts outstanding under the TLLP Revolving Credit Facility, which amounts were used to fund a portion of the Carson Terminal Assets Acquisition, and to pay a portion of the fees and expenses related to the offering of the TLLP Notes. The TLLP Notes have no sinking fund requirements. TLLP may redeem some or all of the TLLP Notes, prior to October 15, 2016, at a make-whole price plus accrued and unpaid interest and Special Interest, if any. On or after October 15, 2016, the TLLP Notes may be redeemed at premiums equal to 104.594% through October 15, 2017; 103.063% from October 15, 2017 through October 15, 2018; 101.531% from October 15, 2018 through October 15, 2019; and at par thereafter, plus accrued and unpaid interest in all circumstances. TLLP has the right to redeem up to 35% of the aggregate principal amount at 106.125% percent of face value with proceeds from certain equity issuances through October 15, 2016.

The TLLP Notes also contain customary terms, events of default and covenants for an issuance of non-investment debt grade securities. The TLLP Notes due 2021 are unsecured and guaranteed by all of TLLP’s domestic subsidiaries, except Tesoro Logistics Finance Corp., the co-issuer of the TLLP Notes, and are non-recourse to Tesoro, except for TLGP.

Credit Facilities Overview

We had available capacity under our credit agreements as follows at June 30, 2013 (in millions):

	Total Capacity		Amount Borrowed as of June 30, 2013		Outstanding Letters of Credit		Available Capacity		Expiration
Tesoro Corporation Revolving Credit Facility (a)	$	3,000	$	700	$	782	$	1,518	January 4, 2018
TLLP Revolving Credit Facility	575		544		—		31		December 31, 2017
Term Loan Credit Facility	500		499		—		—		May 30, 2016
Letter of Credit Facilities	1,362		—		336		1,026
Total credit agreements	$	5,437	$	1,743	$	1,118	$	2,575

________________

(a) Borrowing base is the lesser of the amount of the periodically adjusted borrowing base or the agreement’s total capacity.

As of June 30, 2013, our credit facilities were subject to the following expenses and fees:

Credit Facility	30 day Eurodollar (LIBOR) Rate	Eurodollar Margin	Base Rate	Base Rate Margin	Commitment Fee (unused portion)
Tesoro Corporation Revolving Credit Facility ($3.0 billion) (b)	0.19%	1.50%	3.25%	0.50%	0.375%
TLLP Revolving Credit Facility ($575 million) (c)	0.19%	2.00%	3.25%	1.00%	0.375%

________________

(b) We can elect the interest rate to apply to the Revolving Credit Facility between a base rate plus the base rate margin, or a Eurodollar rate, for the applicable term, plus, the Eurodollar margin at the time of the borrowing. The applicable margin varies based on the Revolving Credit Facility’s credit ratings. Letters of credit outstanding under the Revolving Credit Facility incur fees at the Eurodollar margin rate. We also incur commitment fees for the unused portion of the Revolving Credit Facility at an annual rate.

(c) TLLP can elect the interest rate to apply to the TLLP Revolving Credit Facility between a base rate plus the base rate margin, or a Eurodollar rate, for the applicable term, plus, the Eurodollar margin at the time of the borrowing. The applicable margin varies based upon a certain leverage ratio, as defined by the TLLP Revolving Credit Facility. TLLP incurs commitment fees for the unused portion of the TLLP Revolving Credit Facility at an annual rate.

Tesoro Corporation Revolving Credit Facility

Effective January 4, 2013, we entered into the Sixth Amended and Restated Credit Agreement, which permitted us to increase the capacity of our Revolving Credit Facility to an aggregate of $3.0 billion, on May 21, 2013 (“Increase Effective Date”). Additionally, the agreement allows for us to request that the capacity be increased up to an aggregate of $4.0 billion, subject to receiving increased commitments from the lenders; however, we must offer to reduce the commitments by at least $500 million on or prior to the 18 month anniversary of the Increase Effective Date and by an additional $500 million on or prior to the two year anniversary of the Increase Effective Date. On May 30, 2013, we borrowed $700 million at an initial rate of 1.69%, per annum, under the Revolving Credit Facility to fund a portion of the Carson Acquisition.

At June 30, 2013, our Revolving Credit Facility provided for borrowings (including letters of credit) up to the lesser of the amount of a periodically adjusted borrowing base of approximately $3.7 billion, consisting of Tesoro’s eligible cash and cash equivalents, receivables and petroleum inventories, net of the standard reserve as defined, or the Revolving Credit Facility’s total capacity of$3.0 billion.

TLLP Revolving Credit Facility

Effective January 4, 2013, TLLP amended and restated the TLLP Revolving Credit Facility to increase commitments under the facility from $300 million to $500 million and to allow TLLP to request that the loan availability be increased up to an aggregate of $650 million, subject to receiving increased commitments from the lenders.

Effective May 22, 2013, TLLP further amended the TLLP Revolving Credit Facility to increase the total revolving loan availability from $500 million to $575 million and to modify the definition of Consolidated EBITDA and the calculation of the Consolidated Leverage Ratio. On May 30, 2013, TLLP borrowed $544 million at an initial rate of 2.19%, per annum, under the TLLP Revolving Credit Facility to partially fund its acquisition of the Carson Terminal Assets from Tesoro on June 1, 2013.

The TLLP Revolving Credit Facility is non-recourse to Tesoro, except for TLGP, and is guaranteed by all of TLLP’s subsidiaries and secured by substantially all of TLLP’s assets. Borrowings are available under the TLLP Revolving Credit Facility up to the total loan availability of the facility.

Term Loan Credit Facility

We borrowed $500 million under our Term Loan Facility on May 30, 2013, at an initial rate of 2.52%, which was used to fund a portion of the Carson Acquisition. The obligations under the Term Loan Facility are secured by all equity interests of Tesoro Refining & Marketing Company LLC and Tesoro Alaska Company, the Tesoro and USA Gasoline trademarks and those trademarks containing the name “ARCO” acquired in the Carson Acquisition and junior liens on certain assets.

The Term Loan Facility matures three years from the initial borrowing. The Term Loan Facility is subject to equal quarterly payments in an amount equal to 1.00% per annum of the initial borrowing with the final payment of all amounts outstanding due on May 30, 2016, the maturity date.

Letter of Credit Agreements

The Revolving Credit Facility allows us to obtain letters of credit under separate letter of credit agreements for foreign crude oil purchases. As of June 30, 2013, our six separate uncommitted letter of credit agreements had $336 million outstanding. Capacity under these letter of credit agreements is available on an uncommitted basis and can be terminated by either party, at any time.

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Stock-Based Compensation Stock-Based Compensation, Performance Share Awards and Market Stock Units (Details) (USD $)	6 Months Ended
	Jun. 30, 2013
Performance share awards
Stock-Based Compensation Arrangement by Stock-based Payment Award
Award requisite service period (years)	3 years
Award vesting period (years)	3 years
Awards granted (shares)	200,000
Weighted average grant date fair value (dollars per share)	$ 53.75
Performance share awards | Minimum
Stock-Based Compensation Arrangement by Stock-based Payment Award
Vesting percentages of stock based compensation arrangements (percent)	0.00%
Performance share awards | Maximum
Stock-Based Compensation Arrangement by Stock-based Payment Award
Vesting percentages of stock based compensation arrangements (percent)	200.00%
Market stock units
Stock-Based Compensation Arrangement by Stock-based Payment Award
Award requisite service period (years)	3 years
Award vesting period (years)	3 years
Awards granted (shares)	500,000
Weighted average grant date fair value (dollars per share)	$ 65.96
Market condition percentage (percent)	50.00%
Market stock units | Minimum
Stock-Based Compensation Arrangement by Stock-based Payment Award
Vesting percentages of stock based compensation arrangements (percent)	50.00%
Market stock units | Maximum
Stock-Based Compensation Arrangement by Stock-based Payment Award
Vesting percentages of stock based compensation arrangements (percent)	200.00%

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Earnings Per Share (Notes)

6 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

EARNINGS PER SHARE

EARNINGS PER SHARE

We compute basic earnings per share by dividing net earnings attributable to Tesoro Corporation stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share include the effects of potentially dilutive shares outstanding during the period.

Share calculations are presented below (in millions):

	Three Months Ended June 30,		Six Months Ended June 30,
	2013	2012	2013	2012
Weighted average common shares outstanding	135.8	139.6	136.4	139.5
Common stock equivalents	2.4	0.9	2.5	1.7
Total diluted shares	138.2	140.5	138.9	141.2

Potentially dilutive common stock equivalents are excluded from the calculation of diluted earnings per share if the effect of including such securities in the calculation would have been anti-dilutive. Anti-dilutive securities were as follows (in millions):

	Three Months Ended June 30,		Six Months Ended June 30,
	2013	2012	2013	2012
Stock options	0.1	2.8	0.2	2.9

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Condensed Statements of Consolidated Cash Flows (Unaudited) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net Earnings	$ 342	$ 455
Adjustments to reconcile net earnings to net cash from (used in) operating activities:
Depreciation and amortization expense	218	212
Amortization of debt issuance costs and discounts	6	6
Loss on asset disposals and impairments	1	12
Stock-based compensation expense	47	21
Deferred income taxes	42	146
Excess tax benefits from stock-based compensation arrangements	(11)	(4)
Deferred charges	(277)	(192)
Other changes in noncurrent assets and liabilities	(29)	(13)
Changes in current assets and current liabilities:
Receivables	(422)	110
Inventories	(57)	(13)
Prepayments and other	(462)	55
Accounts payable and accrued liabilities	441	(71)
Net cash from (used in) operating activities	(161)	724
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
Capital expenditures	(293)	(243)
Proceeds from asset sales	2	3
Investment in joint venture	(2)	0
Acquisitions	(2,648)	(38)
Advance payments received for sale of assets	25	0
Net cash used in investing activities	(2,916)	(278)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
Borrowings under revolving credit agreements	2,068	185
Borrowings under term loan credit agreement	500	0
Repayments on revolving credit agreements	(824)	(184)
Repayments of debt	(2)	(1)
Dividend payments	(55)	0
Proceeds from stock options exercised	68	14
Net proceeds from issuance of Tesoro Logistics LP common units	392	0
Distributions to noncontrolling interest	(28)	(11)
Purchases of common stock	(241)	(31)
Excess tax benefits from stock-based compensation arrangements	11	4
Financing costs and other	(23)	0
Net cash from (used in) financing activities	1,866	(24)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(1,211)	422
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	1,639	900
CASH AND CASH EQUIVALENTS, END OF PERIOD	$ 428	$ 1,322

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Tesoro Logistics LP, Balance Sheet (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012	Dec. 31, 2011
CURRENT ASSETS
Cash and cash equivalents	$ 428	$ 1,639	$ 1,322	$ 900
Receivables
Trade	1,787	1,126
Affiliate	0	0
Other current assets	265	142
Total Current Assets	5,787	4,636
NET, PROPERTY, PLANT AND EQUIPMENT	6,739	5,232
OTHER NONCURRENT ASSETS	1,143	834
Total Assets	13,669	10,702
Accounts payable
Affiliate	0	0
Other current liabilities	823	625
Total Current Liabilities	3,371	2,881
OTHER NONCURRENT LIABILITIES	678	644
DEBT	3,358	1,585
Total Liabilities and Equity (Deficit)	13,669	10,702
Tesoro Logistics LP
CURRENT ASSETS
Cash and cash equivalents	76	19
Receivables
Trade	2	0
Affiliate	25	18
Prepayments	1	1
Other current assets	5	0
Total Current Assets	109	38
NET, PROPERTY, PLANT AND EQUIPMENT	1,053	274
DEPOSITS	0	40
GOODWILL	9	0
OTHER NONCURRENT ASSETS	17	11
Total Assets	1,188	363
Accounts payable
Trade	15	9
Affiliate	9	7
Deferred revenue - affiliate	2	2
Accrued interest and financing costs	5	6
Other current liabilities	17	3
Total Current Liabilities	48	27
OTHER NONCURRENT LIABILITIES	5	0
DEBT	903	354
EQUITY (DEFICIT)	232	(18)
Total Liabilities and Equity (Deficit)	$ 1,188	$ 363

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Acquisitions and Other Changes in Operations Acquisitions and Other Changes in Operations, Carson (Details) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended		3 Months Ended				6 Months Ended				3 Months Ended				6 Months Ended				1 Months Ended					3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013 Refining		Jun. 30, 2012 Refining		Jun. 30, 2013 Refining		Jun. 30, 2012 Refining		Jun. 30, 2013 Retail		Jun. 30, 2012 Retail		Jun. 30, 2013 Retail		Jun. 30, 2012 Retail		Jun. 30, 2013 California Region	Jun. 30, 2013 Wilmington refinery	Jun. 30, 2013 Martinez refinery	Jun. 30, 2013 Watson cogeneration facility	Jun. 30, 2013 Marketing and storage terminal facilities	Jun. 30, 2013 BP's Southern California Refining and Marketing Business	Jun. 30, 2012 BP's Southern California Refining and Marketing Business	Jun. 30, 2013 BP's Southern California Refining and Marketing Business	Jun. 30, 2012 BP's Southern California Refining and Marketing Business	Jun. 01, 2013 BP's Southern California Refining and Marketing Business	Jun. 30, 2013 BP's Southern California Refining and Marketing Business Refining	Jun. 30, 2013 BP's Southern California Refining and Marketing Business Retail	Jun. 01, 2013 BP's Southern California Refining and Marketing Business Carson refinery
Business Combination, Description
Watson Cogeneration Facility ownership percentage																														51.00%
Environmental liabilities assumed																										$ 169		$ 169			$ 101	$ 68
Acquired intangibles, estimated useful lives (years)																												15 years
Capacity (Mbpd)																						97	166										266
Refining gross margin for California Region																					264
Operating income for California Region	364	644	557	800	395	[1]	610	[1]	678	[1]	823	[1]	25	[1]	72	[1]	40	[1]	67	[1]	100
Transactions costs	19		33																							18		30
Carson Purchase Price Allocation
Receivables																										234		234
Inventories																										1,100		1,100		1,100
Prepayments and other current assets																										68		68
Property, plant and equipment																									400	1,023		1,023
Acquired intangible assets, net																										114		114
Other noncurrent assets, net																								100		101		101
Other current liabilities																										(12)		(12)
Other noncurrent liabilities																										(171)		(171)
Debt																										(34)		(34)
Total purchase price																										2,423		2,423
Carson Pro Forma Information
Revenues																										11,425	11,125	22,153	21,971
Net Earnings attributable to Tesoro Corporation Stockholders																										$ 239	$ 508	$ 415	$ 586
Basic Earnings Per Share from Continuing Operations																										$ 1.84	$ 3.47	$ 3.13	$ 4.13
Diluted Earnings Per Share from Continuing Operations																										$ 1.81	$ 3.44	$ 3.07	$ 4.08
Disclosure of revenues and net earnings associated with Carson impracticable																												Financial information, including the revenues and net earnings, for the Carson refinery operations for the period are not available. We are in the process of integrating the operations of our existing Wilmington refinery with the acquired Carson refinery and are operating and accounting for them as a combined facility, including the purchases and sales of crude oil and refined products. Refined products produced from the refining processing units are transported through common logistics assets and cannot be identified as Carson refinery production versus Wilmington refinery production. As a result, revenues and related cost of sales from products delivered through these common assets are unidentifiable to a specific refinery. Therefore, it is impracticable to provide this information.

[1] Our refining segment uses RINs to satisfy its obligations under the Renewable Fuels Standard, in addition to physically blending required biofuels. Beginning in late 2012, we began to transfer the ownership of the biofuels to the retail segment prior to blending which resulted in a discount in the price paid by the retail segment for biofuels by the market value of RINs (“RINs Transfer Price Adjustment”). During 2012, the market price of RINs resulted in an immaterial impact to the segments. Effective April 1, 2013, we changed our intersegment pricing methodology and no longer reduce the amount retail pays for the biofuels by the market value of the RINs which we believe more closely approximates market rates during the period. As a result, we conformed our segment presentation and reclassified $15 million of the RINs Transfer Price Adjustment related to the three months ended March 31, 2013 during the three months ended June 30, 2013 from our retail segment to our refining segment. This resulted in a decrease in retail segment operating income and an increase in refining segment operating income for the three months ended June 30, 2013.

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Inventories (Tables)

6 Months Ended

Jun. 30, 2013

Inventory Disclosure [Abstract]

Schedule of inventory, current

Components of inventories were as follows (in millions):

	June 30, 2013		December 31, 2012
Domestic crude oil and refined products	$	1,751	$	957
Foreign subsidiary crude oil	454		246
Materials and supplies	112		83
Oxygenates and by-products	41		38
Merchandise	15		14
Total Inventories	$	2,373	$	1,338

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Condensed Consolidating Financial Information, Cash Flows (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net cash from (used in) operating activities	$ (161)	$ 724
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
Capital expenditures	(293)	(243)
Proceeds from asset sales	2	3
Investment in joint venture	(2)	0
Acquisitions	(2,648)	(38)
Advance payments received for sale of assets	25	0
Intercompany notes, net	0	0
Net cash used in investing activities	(2,916)	(278)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
Borrowings under revolving credit agreements	2,068	185
Borrowings under term loan credit agreement	500	0
Repayments on revolving credit agreements	(824)	(184)
Repayments of debt	(2)	(1)
Dividend payments	(55)	0
Proceeds from stock options exercised	68	14
Distributions to noncontrolling interest	(28)	(11)
Purchases of common stock	(241)	(31)
Net proceeds from issuance of Tesoro Logistics LP common units	392	0
Excess tax benefits from stock-based compensation arrangements	11	4
Net intercompany borrowings (repayments)	0	0
Borrowings from general partner	0	0
Distributions to TLLP unitholders and general partner	0	0
Financing costs and other	(23)	0
Net cash from (used in) financing activities	1,866	(24)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(1,211)	422
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	1,639	900
CASH AND CASH EQUIVALENTS, END OF PERIOD	428	1,322
Parent
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net cash from (used in) operating activities	(14)	9
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
Capital expenditures	0	0
Proceeds from asset sales	0	0
Investment in joint venture	0
Acquisitions	0	0
Advance payments received for sale of assets	0
Intercompany notes, net	(1,719)	(65)
Net cash used in investing activities	(1,719)	(65)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
Borrowings under revolving credit agreements	1,524	0
Borrowings under term loan credit agreement	500
Repayments on revolving credit agreements	(824)	0
Repayments of debt	0	0
Dividend payments	(55)
Proceeds from stock options exercised	68	14
Distributions to noncontrolling interest	0	0
Purchases of common stock	(241)	(31)
Net proceeds from issuance of Tesoro Logistics LP common units	0
Excess tax benefits from stock-based compensation arrangements	0	0
Net intercompany borrowings (repayments)	0	0
Borrowings from general partner	774	68
Distributions to TLLP unitholders and general partner	7	5
Financing costs and other	(20)
Net cash from (used in) financing activities	1,733	56
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	0	0
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	0	0
CASH AND CASH EQUIVALENTS, END OF PERIOD	0	0
Guarantor Subsidiaries
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net cash from (used in) operating activities	(22)	717
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
Capital expenditures	(266)	(234)
Proceeds from asset sales	0	3
Investment in joint venture	(2)
Acquisitions	(1,870)	(38)
Advance payments received for sale of assets	25
Intercompany notes, net	0	0
Net cash used in investing activities	(2,113)	(269)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
Borrowings under revolving credit agreements	0	0
Borrowings under term loan credit agreement	0
Repayments on revolving credit agreements	0	0
Repayments of debt	(2)	(1)
Dividend payments	0
Proceeds from stock options exercised	0	0
Distributions to noncontrolling interest	0	0
Purchases of common stock	0	0
Net proceeds from issuance of Tesoro Logistics LP common units	0
Excess tax benefits from stock-based compensation arrangements	11	4
Net intercompany borrowings (repayments)	1,197	15
Borrowings from general partner	0	0
Distributions to TLLP unitholders and general partner	8	6
Financing costs and other	0
Net cash from (used in) financing activities	1,214	24
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(921)	472
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	1,244	805
CASH AND CASH EQUIVALENTS, END OF PERIOD	323	1,277
Non- Guarantors
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net cash from (used in) operating activities	(125)	(2)
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
Capital expenditures	(27)	(9)
Proceeds from asset sales	2	0
Investment in joint venture	0
Acquisitions	(778)	0
Advance payments received for sale of assets	0
Intercompany notes, net	0	0
Net cash used in investing activities	(803)	(9)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
Borrowings under revolving credit agreements	544	185
Borrowings under term loan credit agreement	0
Repayments on revolving credit agreements	0	(184)
Repayments of debt	0	0
Dividend payments	0
Proceeds from stock options exercised	0	0
Distributions to noncontrolling interest	(28)	(11)
Purchases of common stock	0	0
Net proceeds from issuance of Tesoro Logistics LP common units	392
Excess tax benefits from stock-based compensation arrangements	0	0
Net intercompany borrowings (repayments)	522	50
Borrowings from general partner	(774)	(68)
Distributions to TLLP unitholders and general partner	(15)	(11)
Financing costs and other	(3)
Net cash from (used in) financing activities	638	(39)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(290)	(50)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	395	95
CASH AND CASH EQUIVALENTS, END OF PERIOD	105	45
Eliminations
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net cash from (used in) operating activities	0	0
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
Capital expenditures	0	0
Proceeds from asset sales	0	0
Investment in joint venture	0
Acquisitions	0	0
Advance payments received for sale of assets	0
Intercompany notes, net	1,719	65
Net cash used in investing activities	1,719	65
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
Borrowings under revolving credit agreements	0	0
Borrowings under term loan credit agreement	0
Repayments on revolving credit agreements	0	0
Repayments of debt	0	0
Dividend payments	0
Proceeds from stock options exercised	0	0
Distributions to noncontrolling interest	0	0
Purchases of common stock	0	0
Net proceeds from issuance of Tesoro Logistics LP common units	0
Excess tax benefits from stock-based compensation arrangements	0	0
Net intercompany borrowings (repayments)	(1,719)	(65)
Borrowings from general partner	0	0
Distributions to TLLP unitholders and general partner	0	0
Financing costs and other	0
Net cash from (used in) financing activities	(1,719)	(65)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	0	0
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	0	0
CASH AND CASH EQUIVALENTS, END OF PERIOD	$ 0	$ 0

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Commitments and Contingencies, Environmental Liabilities (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2004 entities	Dec. 31, 2012
Environmental Liabilities
Environmental liability accrual	$ 269		$ 85
Environmental insurance coverage ceiling	190
Self-insurance deductible	50
Number of previous owners (owners)		2
Martinez refinery
Environmental Liabilities
Environmental liability accrual	55		54
Accrual for cost-share agreement	$ 46
Cost-share arrangement percentage responsible	75.00%

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Derivative Instruments, Open Positions (Details)	6 Months Ended
	Jun. 30, 2013
Derivative
Open positions maturity period (years)	2 years
Futures | 2013
Derivative
Long (short) contract volumes (thousands of barrels)	537
Futures | 2014
Derivative
Long (short) contract volumes (thousands of barrels)	(100)
OTC Swaps | 2013
Derivative
Long (short) contract volumes (thousands of barrels)	500
Forwards | 2013
Derivative
Long (short) contract volumes (thousands of barrels)	548

XML

Commitments and Contingencies (Notes)

6 Months Ended

Jun. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Environmental and Tax Matters

We are a party to various litigation and contingent loss situations, including environmental and income tax matters, arising in the ordinary course of business. Although we cannot predict the ultimate outcomes of these matters with certainty, we have accrued for the estimated liabilities when appropriate. We believe that the outcome of these matters will not have a material impact on our liquidity or financial position, although the resolution of certain of these matters could have a material impact on our interim or annual results of operations. Additionally, if applicable, we accrue receivables for probable third-party recoveries.

We are subject to extensive federal, state and local environmental laws and regulations. These laws, which change frequently, regulate the discharge of materials into the environment and may require us to remove or mitigate the environmental effects of the disposal or release of petroleum or chemical substances at various sites, install additional controls or make other modifications to certain emission sources, equipment or facilities.

We are subject to extensive federal, state and foreign tax laws and regulations. Newly enacted tax laws and regulations, and changes in existing tax laws and regulations, could result in increased expenditures in the future. We are also subject to audits by federal, state and foreign taxing authorities in the normal course of business. It is possible that tax audits could result in claims against us in excess of recorded liabilities. We believe that resolution of any such claim(s) would not have a material impact on our financial position, results of operations or liquidity. We do not expect our unrecognized tax benefits to change significantly over the next twelve months.

Environmental Liabilities

We are incurring and expect to continue to incur expenses for environmental liabilities at a number of currently and previously owned or operated refining, pipeline, terminal and retail station properties. We have accrued liabilities for these expenses and believe these accruals are adequate based on current information and projections that can be reasonably estimated. Our environmental accruals are based on estimates including engineering assessments, and it is possible that our projections will change and that additional costs will be recorded as more information becomes available. Changes in our environmental liabilities for the six months ended June 30, 2013, were as follows (in millions):

Balance at December 31, 2012	$	85
Additions, net	2
Liabilities assumed in the Carson Acquisition	169
Liabilities assumed in the Northwest Products System Acquisition	17
Expenditures	(4		)
Balance at June 30, 2013	$	269

The environmental remediation liabilities assumed in the Carson Acquisition include amounts estimated for site cleanup activities and monitoring activities arising from operations at the Carson refinery, certain terminals and pipelines, and retail stations prior to our acquisition on June 1, 2013. These estimates for environmental liabilities are based on third-party assessments and available information. It is possible these estimates will change as additional information becomes available.

Our environmental liabilities also include $55 million at June 30, 2013 and $54 million at December 31, 2012, related to amounts estimated for site cleanup activities assumed from a prior owner, arising from operations at our Martinez refinery prior to August 2000. Of the $55 million accrued, approximately $46 million is subject to a cost-share agreement where we are responsible for 75% of the expenditures. We cannot reasonably determine the full extent of remedial activities that may be required at the Martinez refinery. Therefore, it is possible that we will identify additional investigation and remediation costs as more information becomes available. We have filed insurance claims under environmental insurance policies. These policies provide coverage up to $190 million for expenditures in excess of $50 million in self-insurance, but the insurer has challenged coverage and filed a declaratory relief action in federal court. We have not recognized possible insurance recoveries related to this matter.

We have investigated conditions at certain active wastewater treatment units at our Martinez refinery.  The investigation was driven by an order received in 2004 from the San Francisco Bay Regional Water Quality Control Board. The order named us as well as two previous owners of the Martinez refinery.  We cannot currently estimate the amount of the ultimate resolution of the order, but we believe it will not have a material adverse impact on our financial position, results of operations or liquidity.

Washington Refinery Fire

The naphtha hydrotreater unit at our Washington refinery was involved in a fire in April 2010, which fatally injured seven employees and rendered the unit inoperable. The Washington State Department of Labor & Industries (“L&I”), the U.S. Chemical Safety and Hazard Investigation Board and the U.S. Environmental Protection Agency (“EPA”) initiated separate investigations of the incident. L&I completed its investigation in October 2010, issued citations and assessed a $2.4 million fine, which we appealed. L&I reassumed jurisdiction of the citation and affirmed the allegations in December 2010. We disagree with L&I’s characterizations of operations at our Washington refinery and believe, based on available evidence and scientific reviews, that many of the agency’s conclusions are mistaken. We filed an appeal of the citation in January 2011.

We filed business interruption insurance and property damage insurance claims related to down time from this incident. Certain business interruption claims remain open as of June 30, 2013.

Other Matters

In the ordinary course of business, we become party to lawsuits, administrative proceedings and governmental investigations, including environmental, regulatory and other matters. Large, and sometimes unspecified, damages or penalties may be sought from us in some matters. We have not established accruals for these matters unless a loss is probable, and the amount of loss is currently estimable. On the basis of existing information, we believe that the resolution of these matters, individually or in the aggregate, will not have a material adverse impact on our liquidity or financial position, although the resolution of certain of these matters could have a material impact on our interim or annual results of operations.

Legal

In 2007, we obtained a ruling from the California Public Utilities Commission (“CPUC”) that an intrastate crude oil pipeline, which transports heated crude oil to our Martinez Refinery from the area around Bakersfield, California, was a common carrier subject to the jurisdiction of the CPUC.  Since that time, we have participated in rate proceedings to determine an appropriate rate structure for this pipeline.  In May 2013, the CPUC issued final orders establishing just and reasonable rates for the pipeline for the period between April 1, 2005 and June 30, 2011 and held that we were entitled to receive refunds, including interest.  In accordance with this ruling, we received a refund of $54 million in June 2013, which is included in other income (expense), net in our condensed statements of consolidated operations.

We are a defendant, along with other manufacturing, supply and marketing defendants, in two remaining lawsuits alleging methyl tertiary butyl ether (“MTBE”) contamination in groundwater. The defendants are being sued for having manufactured MTBE and having manufactured, supplied and distributed gasoline containing MTBE. The plaintiffs in the remaining cases, all in California, are municipalities and governmental authorities. The plaintiffs allege, in part, that the defendants are liable for manufacturing or distributing a defective product. The suits generally seek individual, unquantified compensatory and punitive damages and attorney’s fees. We intend to vigorously assert our defenses against these claims. While we cannot currently estimate the final amount or timing of the resolution of these matters, we have established an accrual for them and believe that the outcome will not have a material impact on our financial position, results of operations or liquidity.

During 2009, Chevron filed a lawsuit against us claiming they are entitled to a share of the refunds we received in 2008 from the owners of the Trans-Alaska Pipeline System (“TAPS”). We received $50 million in 2008, net of contingent legal fees, for excessive intrastate rates charged by TAPS during 1997 through 2000 and the period of 2001 through June 2003. Chevron asserted that it is entitled to a share of its portion of the refunds for retroactive price adjustments under our previous crude oil contracts with them. The trial court judge granted Chevron’s motion for summary judgment and awarded them $16 million, including interest, in September 2010. We disagreed with the trial court and appealed the decision to the Alaska Supreme Court. In July 2013, the Alaska Supreme Court issued an order requiring the Superior Court to enter summary judgment in our favor. We had previously established an accrual for this matter, which will be reversed in the third quarter of 2013.

Environmental

The EPA has alleged that we have violated certain Clean Air Act regulations at our Alaska, Washington, Martinez, Hawaii and Utah refineries. We are continuing discussions of the EPA’s claims with the EPA and the U.S. Department of Justice (“DOJ”). We previously received a notice of violation (“NOV”) in March 2011 from the EPA alleging violations of Title V of the Clean Air Act at our Alaska refinery. The alleged violations in the NOV arise from a 2007 state of Alaska inspection and inspections by the EPA in 2008 and 2010. We also previously received NOVs in 2005 and 2008 alleging violations of the Clean Air Act at our Washington refinery. We are discussing all of these allegations with the EPA and DOJ. The ultimate resolution of these matters could require us to incur material capital expenditures and/or civil penalties. While we cannot currently estimate the amount or timing of the resolution of these matters and currently believe that the outcome will not have a material impact on our liquidity or financial position, the ultimate resolution could have a material impact on our interim or annual results of operations.

Contractual Commitments

In connection with the Carson Acquisition, we assumed various contractual commitments related to operating leases. Our assumed operating lease commitments include primarily refinery leases associated with the land, retail station sites, storage tanks and terminals. For the remainder of 2013, we expect to pay an estimated $16 million under these lease agreements, and for 2014, 2015, 2016 and 2017, we expect to pay $17 million, $12 million, $9 million and $8 million, respectively, under these agreements. Beyond 2017, lease payments associated with these agreements are estimated to total $50 million. We also assumed take-or-pay arrangements with third parties for the purchase of industrial gases, chemical processing services and essential utilities associated with the operation of the refinery. These agreements require minimum payments of approximately $37 million per year, and have various contract expiration dates.

We entered into one new crude supply arrangement associated with the Carson refinery with an initial term of one year. Prices under this agreement will fluctuate due to market responsive pricing provisions. To estimate our new commitments under this contract, we used actual market prices as of June 30, 2013 of $99 per barrel. For the remainder of 2013 and for 2014, we expect to pay approximately $909 million and $1.3 billion, respectively, under this agreement.

See our Annual Report on Form 10-K for additional information regarding our estimated contractual long-term commitments.

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Derivative Instruments (Notes)

6 Months Ended

Jun. 30, 2013

General Discussion of Derivative Instruments and Hedging Activities [Abstract]

DERIVATIVE INSTRUMENTS

DERIVATIVE INSTRUMENTS

The timing, direction and overall change in refined product prices versus crude oil prices impacts profit margins and has a significant impact on our earnings and cash flows. Consequently, we use non-trading derivative instruments to manage exposure to commodity price risks associated with the purchase or sale of feedstocks, refined products and energy supplies to or from the Company’s refineries, terminals, retail operations and customers. We also use non-trading derivative instruments to manage price risks associated with inventories above or below our target levels. To achieve our objectives, we use derivative instruments such as Options, Futures Contracts, OTC Swap Contracts, OTC Option Contracts and Forward Contracts, which had remaining maturity dates within two years as of June 30, 2013. We believe that there is minimal credit risk with respect to our counterparties.

We are also exposed to exchange rate fluctuations on our purchases of Canadian crude oil. We enter into Forward Contracts of Canadian dollars to manage these monthly exchange rate fluctuations.

The accounting for changes in the fair value of a commodity derivative depends on whether the derivative has been designated in a hedging relationship and whether we have elected the normal purchases and normal sales exception. We did not designate any of our derivatives for hedge accounting during the three and six months ended June 30, 2013 and 2012, respectively. The accounting for the change in fair value can be summarized as follows:

Derivative Treatment	Accounting Method
Normal purchases and normal sales exception	Accrual accounting
Designated in qualifying hedging relationship	Hedge accounting
All other derivatives	Mark-to-market accounting

The primary derivative instruments that we use have the following characteristics. Options provide the right, but not the obligation to buy or sell the commodity at a specified price in the future. Forward Contracts are agreements to buy or sell the commodity at a predetermined price at a specified future date.  Futures Contracts are standardized agreements, traded on a futures exchange, to buy or sell the commodity at a predetermined price at a specified future date. OTC Swap Contracts and OTC Option Contracts require cash settlement for the commodity based on the difference between a contracted fixed or floating price and the market price on the settlement date. Certain of these contracts require cash collateral if our liability position exceeds specified thresholds.

The following table presents the fair value (in millions) of our derivative instruments as of June 30, 2013 and December 31, 2012. The fair value amounts below are presented on a gross basis and do not reflect the netting of asset and liability positions permitted under the terms of our master netting arrangements including cash collateral on deposit with, or received from, brokers. We have elected to offset the recognized fair value amounts for multiple derivative instruments executed with the same counterparty in our financial statements when a legal right of offset exists. As a result, the asset and liability amounts below will not agree with the amounts presented in our condensed consolidated balance sheets.

		Derivative Assets						Derivative Liabilities
	Balance Sheet Location	June 30, 2013			December 31, 2012			June 30, 2013			December 31, 2012
Commodity Futures Contracts	Prepayments and other current assets	$	152		$	76		$	140		$	83
Commodity Futures Contracts	Current assets related to discontinued operations	27			19			15			17
Commodity Forward Contracts	Receivables	4			—			4			—
Commodity Forward Contracts	Accounts payable	—			—			—			1
Total Gross Mark-to-Market Derivatives		183			95			159			101
Less: Counterparty Netting and Cash Collateral (a)		(92		)	(68		)	(135		)	(95		)
Total Net Fair Value of Derivatives		$	91		$	27		$	24		$	6

________________

(a) As of June 30, 2013 and December 31, 2012, cash collateral amounts of $43 million and $27 million, respectively, are netted with mark-to-market derivative assets.

Gains (losses) for our mark-to market derivatives for the three and six months ended June 30, 2013 and 2012, were as follows (in millions):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Commodity Futures Contracts	$	10		$	50		$	(16	)	$	38
Commodity OTC Swap Contracts	—			—			—			(6		)
Commodity Forward Contracts	(2		)	6			(4		)	3
Foreign Currency Forward Contracts	(2		)	(2		)	(4		)	(1		)
Total Gain (Loss) on Mark-to-Market Derivatives	$	6		$	54		$	(24	)	$	34

The income statement location of gains (losses) for our mark-to market derivatives above were as follows (in millions):

	Three Months Ended June 30,						Six Months Ended June 30,
Income Statement Location:	2013			2012			2013			2012
Revenues	$	9		$	31		$	10		$	21
Cost of sales	2			24			(20		)	28
Other expense, net	(2		)	(2		)	(4		)	(1		)
Net earnings (loss) from discontinued operations	(3		)	1			(10		)	(14		)
Total Gain (Loss) on Mark-to-Market Derivatives	$	6		$	54		$	(24	)	$	34

Open Long (Short) Positions

All of our open positions are scheduled to mature within two years. The information below presents the net volume of outstanding commodity contracts by type of instrument and year of maturity as of June 30, 2013 (volumes in thousands of barrels):

Mark-to-Market Derivatives
Derivative instrument and Year of maturity	Long (Short) Contract Volumes
Futures
2013	537
2014	(100)
OTC Swaps
2013	500
Forwards
2013	548

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Commitments and Contingencies, Legal (Details) (USD $) In Millions, unless otherwise specified		1 Months Ended	12 Months Ended	1 Months Ended	3 Months Ended	6 Months Ended
	Jun. 30, 2013 MTBE Contaimination Litigation lawsuits	Sep. 29, 2010 TAPS Litigation	Dec. 31, 2008 TAPS Litigation	Jun. 30, 2013 CPCU	Jun. 30, 2013 CPCU	Jun. 30, 2013 CPCU
Other Matters
Remaining lawsuits (lawsuits)	2
Other income recognized for legal matters			$ 50	$ 54	$ 54	$ 54
Summary judgement awarded to Chevron		$ 16

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Supplemental Cash Flow Information Supplemental Cash Flow Information (Notes)

6 Months Ended

Jun. 30, 2013

Supplemental Cash Flow Elements [Abstract]

SUPPLEMENTAL CASH FLOW INFORMATION

SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow disclosures are as follows (in millions):

	Six Months Ended June 30,
	2013		2012
Assets received for deposits paid in prior period	$	130	$	—
Interest paid, net of capitalized interest	43		50
Income taxes paid, net	95		1

Capital expenditures included in accounts payable were $73 million and $52 million at June 30, 2013 and June 30, 2012, respectively.

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Stockholders' Equity (Notes)

6 Months Ended

Jun. 30, 2013

Stockholders' Equity Attributable to Parent [Abstract]

STOCKHOLDERS' EQUITY

STOCKHOLDERS’ EQUITY

See Note N for information relating to stock-based compensation. Changes to equity during the six months ended June 30, 2013 are presented below (in millions):

	Tesoro Corporation Stockholders’ Equity			Noncontrolling  Interest			Total Equity
Balance at December 31, 2012	$	4,251		$	486		$	4,737
Net earnings	320			22			342
Other comprehensive income	73			—			73
Shares issued for equity-based compensation awards	69			—			69
Amortization of equity settled awards	20			—			20
Excess tax benefits from stock-based compensation arrangements, net	9			—			9
Purchases of common stock	(241		)	—			(241		)
Dividend payments	(55		)	—			(55		)
Net proceeds from issuance of Tesoro Logistics LP common units	(6		)	398			392
Distributions to noncontrolling interest	—			(28		)	(28		)
Other	2			—			2
Balance at June 30, 2013	$	4,442		$	878		$	5,320

We issued approximately 2.0 million and 1.9 million shares primarily for stock option exercises under our equity-based compensation plans during the six months ended June 30, 2013 and the year ended December 31, 2012, respectively. 

Share Repurchase Programs

Under a $500 million share repurchase program authorized by our Board of Directors (the “Board”), management is permitted to purchase Tesoro common stock at its discretion in the open market. The authorization has no time limit and may be suspended or discontinued at any time. Under this program, we purchased approximately 3.8 million shares of our common stock for $200 million during the six months ended June 30, 2013.

In addition, we purchased over 0.6 million shares of our common stock for approximately $36 million during the six months ended June 30, 2013 under the existing program designed to offset the dilutive effect of outstanding and future stock-based compensation awards.

Cash Dividends

On August 1, 2013, our Board declared a quarterly cash dividend on common stock of $0.25 per share, payable on September 13, 2013 to shareholders of record on August 30, 2013.

Our Revolving Credit Facility, senior notes and Term Loan Facility each limit our ability to pay cash dividends or buy back our stock. The limitation in each of our debt agreements is based on limits on restricted payments (as defined in our debt agreements), which include dividends, purchases of our stock or voluntary prepayments of subordinate debt. The aggregate amount of restricted payments cannot exceed an amount defined in each of the debt agreements. The indentures for our senior notes also limit certain of our subsidiaries ability to make certain payments and distributions.

XML

Document and Entity Information	6 Months Ended
	Jun. 30, 2013	Jul. 31, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	TESORO CORP /NEW/
Entity Central Index Key	0000050104
Document Type	10-Q
Document Period End Date	Jun. 30, 2013
Amendment Flag	false
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		135,082,937

XML

Stock-Based Compensation (Notes)

6 Months Ended

Jun. 30, 2013

Share-based Compensation [Abstract]

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

Stock-based compensation expense (benefit), including amounts related to discontinued operations, included in our condensed statements of consolidated operations was as follows (in millions):    

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013		2012
Stock appreciation rights	$	(15	)	$	(9	)	$	24	$	3
Performance share awards	2			2			10		4
Market stock units	4			3			8		6
Other stock-based awards	4			4			5		8
Total Stock-Based Compensation Expense (Benefit)	$	(5	)	$	—		$	47	$	21

We have aggregated expenses for certain award types as they are not considered significant. The income tax effect recognized in the income statement for stock-based compensation was a $3 million and $1 million expense for the three months ended June 30, 2013 and 2012, respectively, and a $17 million and $7 million benefit for the six months ended June 30, 2013 and 2012, respectively. The reduction in current taxes payable recognized from tax deductions resulting from exercises and vestings under all of our stock-based compensation arrangements totaled $21 million and $4 million for the three months ended June 30, 2013 and 2012, respectively, and $38 million and $14 million for the six months ended June 30, 2013 and 2012, respectively.

Stock Appreciation Rights

A stock appreciation right (“SAR”) entitles an employee to receive cash in an amount equal to the excess of the fair market value of one share of common stock on the date of exercise over the grant price of the SAR. The fair value of each SAR is estimated at the end of each reporting period using the Black-Scholes option-pricing model. We have not granted any SARs since 2010. We paid cash of $30 million and $9 million to settle approximately 1.3 million and 0.7 million SARs that were exercised during the six months ended June 30, 2013 and 2012, respectively. We had $72 million and $79 million recorded in accrued liabilities associated with our SARs awards at June 30, 2013 and December 31, 2012, respectively.

Performance Share Awards

During the six months ended June 30, 2013, we granted 0.2 million performance share awards, including awards with performance and market conditions, at a weighted average grant date fair value of $53.75 per share.

Performance Conditions

We granted additional performance condition performance share awards under the 2011 Long-Term Incentive Plan (“2011 Plan”) during the first half of 2013. The vesting percentages of these equity awards, range from 0-200%, and are tied to performance conditions over a three-year period. These performance share awards vest at the end of the performance period. The fair value of performance share awards tied to performance measures is estimated using the market price of our common stock on the grant date. The estimated fair value of these performance share awards is amortized over a three-year vesting period using the straight-line method. The value of the award ultimately paid will be based on return on capital employed, which is measured against our performance peer group.

Market Conditions

We granted additional market condition performance share awards under the 2011 Plan during the first half of 2013. The vesting percentages of these equity awards range from 0-200% and are tied to market conditions over a three-year performance period. These performance share awards vest at the end of the performance period. The fair value of each performance share award is estimated on the grant date using a Monte Carlo simulation model. The estimated fair value of all market condition performance share awards is amortized over a three-year vesting period using the straight-line method. The value of the award ultimately paid will be based on relative total shareholder return, which is measured against our performance peer group and the S&P 500 Index.

Market Stock Units

We granted 0.5 million market stock units at a grant date fair value of $65.96 per unit under the 2011 Plan during the six months ended June 30, 2013. These market stock units vest at the end of a three-year performance period. The number of shares ultimately issued will be based on Tesoro’s stock price changes over the performance period. The market stock units’ potential payout can range from 50-200% of targeted award value, unless the average closing stock price at vesting has decreased more than 50% from the average closing stock price at the grant date, then no market stock units will be paid out. The fair value of each market stock unit is estimated on the grant date using a Monte Carlo simulation model. The estimated fair value of these market stock units is amortized over a three-year vesting period using the straight-line method.

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Debt, Credit Facilities (Details) (USD $)	6 Months Ended		0 Months Ended	6 Months Ended			0 Months Ended			0 Months Ended	3 Months Ended	6 Months Ended				0 Months Ended		3 Months Ended	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	May 30, 2013 Tesoro Corporation Revolving Credit Facility	Jun. 30, 2013 Tesoro Corporation Revolving Credit Facility		Jan. 04, 2013 Tesoro Corporation Revolving Credit Facility	Jan. 04, 2013 18 months provision	Jan. 04, 2013 Two year provision	Jun. 30, 2013 Letter of Credit Facilities agreements	May 30, 2013 TLLP Revolving Credit Facility	Jun. 30, 2013 TLLP Revolving Credit Facility	Jun. 30, 2013 TLLP Revolving Credit Facility	May 22, 2013 TLLP Revolving Credit Facility	Jan. 04, 2013 TLLP Revolving Credit Facility	Dec. 31, 2012 TLLP Revolving Credit Facility	May 30, 2013 Term Loan Credit Facility	Jan. 28, 2013 Term Loan Credit Facility	Jun. 30, 2013 Term Loan Credit Facility	Jun. 30, 2013 Term Loan Credit Facility
Credit Facility
Total capacity	$ 5,437,000,000			$ 3,000,000,000.00	[1]	$ 3,000,000,000			$ 1,362,000,000		$ 575,000,000	$ 575,000,000	$ 575,000,000	$ 500,000,000	$ 300,000,000			$ 500,000,000	$ 500,000,000
Maximum available capacity						4,000,000,000.0								650,000,000
Required decrease in commitments							500,000,000	500,000,000
Borrowings on Revolving Credit Facility	2,068,000,000	185,000,000	700,000,000							544,000,000
Adjusted borrowing base				3,700,000,000
Interest rate			1.69%							2.19%						2.52%
Maturity date				Jan. 04, 2018	[1]							Dec. 31, 2017							May 30, 2016
Borrowings on Term Loan Facility	500,000,000	0														500,000,000
Term Loan Facility, maturity date, description																	three years
Term Loan Facility, periodic payment percentage																	1.00%
Line of credit facility, collateral											The TLLP Revolving Credit Facility is non-recourse to Tesoro, except for TLGP, and is guaranteed by all of TLLP’s subsidiaries and secured by substantially all of TLLP’s assets. Borrowings are available under the TLLP Revolving Credit Facility up to the total loan availability of the facility.							The obligations under the Term Loan Facility are secured by all equity interests of Tesoro Refining & Marketing Company LLC and Tesoro Alaska Company, the Tesoro and USA Gasoline trademarks and those trademarks containing the name “ARCO” acquired in the Carson Acquisition and junior liens on certain assets.
Letters of credit, number of agreements (agreements)									6
Letters of credit, amount outstanding	$ 1,118,000,000			$ 782,000,000	[1]				$ 336,000,000		$ 0	$ 0						$ 0	$ 0

[1] Borrowing base is the lesser of the amount of the periodically adjusted borrowing base or the agreement’s total capacity.

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Debt, Overview (Details) (USD $)			6 Months Ended			6 Months Ended									6 Months Ended						3 Months Ended		0 Months Ended
	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2013 Tesoro Corporation Revolving Credit Facility (a)		Jan. 04, 2013 Tesoro Corporation Revolving Credit Facility (a)	Jun. 30, 2013 Tesoro Corporation Revolving Credit Facility (a) 30 day Eurodollar (LIBOR) Rate		Jun. 30, 2013 Tesoro Corporation Revolving Credit Facility (a) Base Rate		Jun. 30, 2013 TLLP Revolving Credit Facility		May 22, 2013 TLLP Revolving Credit Facility	Jan. 04, 2013 TLLP Revolving Credit Facility	Dec. 31, 2012 TLLP Revolving Credit Facility	Jun. 30, 2013 TLLP Revolving Credit Facility 30 day Eurodollar (LIBOR) Rate		Jun. 30, 2013 TLLP Revolving Credit Facility Base Rate		Jun. 30, 2013 Term Loan Credit Facility	Jun. 30, 2013 Letter of Credit Facilities	Jun. 30, 2013 6.125% Senior Notes Due 2021	Aug. 01, 2013 6.125% Senior Notes Due 2021	Aug. 01, 2013 6.125% Senior Notes Due 2021 Up through October 15, 2016	Aug. 01, 2013 6.125% Senior Notes Due 2021 On or after October 15, 2016 through October 15, 2017	Aug. 01, 2013 6.125% Senior Notes Due 2021 October 15, 2017 through October 15, 2018	Aug. 01, 2013 6.125% Senior Notes Due 2021 October 15, 2018 through October 15, 2019
Debt Instrument
Total Debt	$ 3,367,000,000	$ 1,588,000,000
Less: Current maturities	9,000,000	3,000,000
Debt, less current maturities	3,358,000,000	1,585,000,000
Debt instrument interest rate																						6.125%
Debt instrument, aggregate principal																						550,000,000
Redemption price, percentage																							106.125%	104.594%	103.063%	101.531%
Redemption price, percentage of principal amount																							35.00%
Collateral																					The TLLP Notes also contain customary terms, events of default and covenants for an issuance of non-investment debt grade securities. The TLLP Notes due 2021 are unsecured and guaranteed by all of TLLP’s domestic subsidiaries, except Tesoro Logistics Finance Corp., the co-issuer of the TLLP Notes due 2021, and are non-recourse to Tesoro, except for TLGP.
Credit agreements
Total Capacity	5,437,000,000		3,000,000,000.00	[1]	3,000,000,000					575,000,000		575,000,000	500,000,000	300,000,000					500,000,000	1,362,000,000
Amount Borrowed as of June 30, 2013	1,743,000,000		700,000,000	[1]						544,000,000									499,000,000	0
Outstanding Letters of Credit	1,118,000,000		782,000,000	[1]						0									0	336,000,000
Available Capacity	$ 2,575,000,000		$ 1,518,000,000	[1]						$ 31,000,000									$ 0	$ 1,026,000,000
Expiration			Jan. 04, 2018	[1]						Dec. 31, 2017									May 30, 2016
Expenses and Fees
Eurodollar or Base Rate						0.19%	[2]	3.25%	[2]						0.19%	[3]	3.25%	[3]
Eurodollar or Base Rate Margin						1.50%	[2]	0.50%	[2]						2.00%	[3]	1.00%	[3]
Commitment Fee (unused portion)			0.375%	[2]						0.375%	[3]

[1] Borrowing base is the lesser of the amount of the periodically adjusted borrowing base or the agreement’s total capacity.

[2] We can elect the interest rate to apply to the Revolving Credit Facility between a base rate plus the base rate margin, or a Eurodollar rate, for the applicable term, plus, the Eurodollar margin at the time of the borrowing. The applicable margin varies based on the Revolving Credit Facility’s credit ratings. Letters of credit outstanding under the Revolving Credit Facility incur fees at the Eurodollar margin rate. We also incur commitment fees for the unused portion of the Revolving Credit Facility at an annual rate.

[3] TLLP can elect the interest rate to apply to the TLLP Revolving Credit Facility between a base rate plus the base rate margin, or a Eurodollar rate, for the applicable term, plus, the Eurodollar margin at the time of the borrowing. The applicable margin varies based upon a certain leverage ratio, as defined by the TLLP Revolving Credit Facility. TLLP incurs commitment fees for the unused portion of the TLLP Revolving Credit Facility at an annual rate.