-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WW/0M9pJtdQBUuuA2wCKJPj/twyYVXfDTihN7K291fekXA1tR6fuVoNW22Pc8+yI 570SjQgw7kD8W50wJmi0zg== 0000950129-03-003025.txt : 20030602 0000950129-03-003025.hdr.sgml : 20030602 20030602172025 ACCESSION NUMBER: 0000950129-03-003025 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 19 FILED AS OF DATE: 20030602 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TESORO WASATCH LLC CENTRAL INDEX KEY: 0001232062 IRS NUMBER: 743009694 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-17 FILM NUMBER: 03728676 BUSINESS ADDRESS: STREET 1: 300 CONCORD PLAZA DR CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 BUSINESS PHONE: 2108283484 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TESORO AVIATION CO CENTRAL INDEX KEY: 0001161533 IRS NUMBER: 742922277 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-19 FILM NUMBER: 03728678 BUSINESS ADDRESS: STREET 1: 300 CONCORD PLAZA DRIVE CITY: SAN ANTONIO STATE: TX ZIP: 78216 BUSINESS PHONE: 2108288484 MAIL ADDRESS: STREET 1: 1200 OLIVER ST CITY: HOUSTON STATE: TX ZIP: 77007 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TESORO PETROLEUM CORP /NEW/ CENTRAL INDEX KEY: 0000050104 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 950862768 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783 FILM NUMBER: 03728675 BUSINESS ADDRESS: STREET 1: 300 CONCORD PLAZA DRIVE CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 BUSINESS PHONE: 2108288484 MAIL ADDRESS: STREET 1: 300 CONCORD PLAZA DRIVE CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TESORO MARINE SERVICE HOLDING CO CENTRAL INDEX KEY: 0001061683 IRS NUMBER: 742807425 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-05 FILM NUMBER: 03728663 BUSINESS ADDRESS: STREET 1: 300 CONCORD PLAZA DRIVE CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 BUSINESS PHONE: 2108288484 MAIL ADDRESS: STREET 1: 300 CONCORD PLAZA DRIVE CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TESORO VOSTOK CO CENTRAL INDEX KEY: 0001061684 IRS NUMBER: 742045147 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-04 FILM NUMBER: 03728662 BUSINESS ADDRESS: STREET 1: 300 CONCORD PLAZA DRIVE CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 BUSINESS PHONE: 2108288484 MAIL ADDRESS: STREET 1: 300 CONCORD PLAZA DRIVE CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TESORO FINANCIAL SERVICES HOLDING CO CENTRAL INDEX KEY: 0001066663 IRS NUMBER: 510377202 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-03 FILM NUMBER: 03728661 BUSINESS ADDRESS: STREET 1: 1105 N. MARKET ST. CITY: WILMINGTON STATE: DE ZIP: 19801 BUSINESS PHONE: 2108288484 MAIL ADDRESS: STREET 1: 300 N. CONCORD PLAZA DR CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TESORO GAS RESOURCES CO INC CENTRAL INDEX KEY: 0001066664 IRS NUMBER: 920150083 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-02 FILM NUMBER: 03728660 BUSINESS ADDRESS: STREET 1: 1105 N. MARKET ST CITY: WILMINGTON STATE: DE ZIP: 19801 BUSINESS PHONE: 2108288484 MAIL ADDRESS: STREET 1: 300 CONCORD PLAZA DR CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TESORO HAWAII CORP CENTRAL INDEX KEY: 0001066665 IRS NUMBER: 920150083 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-01 FILM NUMBER: 03728659 BUSINESS ADDRESS: STREET 1: 733 BISHOP ST. STREET 2: SUITE 2800 CITY: HONOLULU STATE: HI ZIP: 96813 BUSINESS PHONE: 2108288484 MAIL ADDRESS: STREET 1: 300 CONCORD PLZ DR CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FAR EAST MARITIME CO CENTRAL INDEX KEY: 0001144847 IRS NUMBER: 742886469 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-16 FILM NUMBER: 03728674 BUSINESS ADDRESS: STREET 1: 300 CONCORD PLAZA DR CITY: SAN ANTONIO STATE: TX ZIP: 68216-6999 BUSINESS PHONE: 2108288484 MAIL ADDRESS: STREET 1: 300 CONCORD PLAZA DR CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOLD STAR MARITIME CO CENTRAL INDEX KEY: 0001144848 IRS NUMBER: 742886462 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-15 FILM NUMBER: 03728673 BUSINESS ADDRESS: STREET 1: 300 CONCORD PLAZA DR CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 BUSINESS PHONE: 2108288484 MAIL ADDRESS: STREET 1: 300 CONCORD PLAZA DR CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VICTORY FINANCE CO CENTRAL INDEX KEY: 0001144849 IRS NUMBER: 510377203 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-14 FILM NUMBER: 03728672 BUSINESS ADDRESS: STREET 1: 1105 N. MARKET ST. CITY: WILMINGTON STATE: DE ZIP: 19801 BUSINESS PHONE: 2108288484 MAIL ADDRESS: STREET 1: 300 CONCORD PLAZA DR CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SMILEYS SUPER SERVICE INC CENTRAL INDEX KEY: 0001144851 IRS NUMBER: 990088611 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-13 FILM NUMBER: 03728671 BUSINESS ADDRESS: STREET 1: 733 BISHOP ST STREET 2: SUITE 2800 CITY: HONOLULU STATE: HI ZIP: 96813 BUSINESS PHONE: 2108288484 MAIL ADDRESS: STREET 1: 300 CONCORD PLAZA DR CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TESORO REFINING & MARKETING CO CENTRAL INDEX KEY: 0001144853 IRS NUMBER: 760489496 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-23 FILM NUMBER: 03728684 BUSINESS ADDRESS: STREET 1: 3450 S. 34TH WAY STREET 2: SUITE 100 CITY: AUBURN STATE: WA ZIP: 98001 BUSINESS PHONE: 2108288484 MAIL ADDRESS: STREET 1: 300 CONCORD PLAZA DR CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 FORMER COMPANY: FORMER CONFORMED NAME: TESORO WEST COAST CO DATE OF NAME CHANGE: 20010712 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TESORO TECHNOLOGY CO CENTRAL INDEX KEY: 0001144854 IRS NUMBER: 742521013 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-22 FILM NUMBER: 03728681 BUSINESS ADDRESS: STREET 1: 300 CONCORD PLAZA DR CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 BUSINESS PHONE: 2108288484 MAIL ADDRESS: STREET 1: 300 CONCORD PLAZA DR CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIGICOMP INC CENTRAL INDEX KEY: 0001061666 IRS NUMBER: 742521015 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-10 FILM NUMBER: 03728668 BUSINESS ADDRESS: STREET 1: 300 CONCORD PLAZA DRIVE CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 BUSINESS PHONE: 2108288484 MAIL ADDRESS: STREET 1: 300 CONCORD PLAZA DRIVE CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TESORO MARITIME CO CENTRAL INDEX KEY: 0001144857 IRS NUMBER: 742886466 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-21 FILM NUMBER: 03728680 BUSINESS ADDRESS: STREET 1: 300 CONCORD PLAZA DR CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 BUSINESS PHONE: 2108288484 MAIL ADDRESS: STREET 1: 300 CONCORD PLAZA DR CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TESORO HIGH PLAINS PIPELINE CO CENTRAL INDEX KEY: 0001158251 IRS NUMBER: 743009696 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-20 FILM NUMBER: 03728679 BUSINESS ADDRESS: STREET 1: 300 CONCORD PLAZA DRIVE CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 BUSINESS PHONE: 2108288484 MAIL ADDRESS: STREET 1: 1200 OLIVER ST CITY: HOUSTON STATE: TX ZIP: 77007 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TESORO TRADING CO CENTRAL INDEX KEY: 0001171377 IRS NUMBER: 753025497 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-18 FILM NUMBER: 03728677 BUSINESS ADDRESS: STREET 1: 300 CONCORD PLAZA DR CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 BUSINESS PHONE: 2108288484 MAIL ADDRESS: STREET 1: 300 CONCORD PLAZA DRIVE CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TESORO ALASKA CO CENTRAL INDEX KEY: 0000911614 IRS NUMBER: 741646130 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-12 FILM NUMBER: 03728670 BUSINESS ADDRESS: STREET 1: 300 CONCORD PLAZA DRIVE CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 BUSINESS PHONE: 2108288484 MAIL ADDRESS: STREET 1: 300 CONCORD PLAZA DRIVE CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 FORMER COMPANY: FORMER CONFORMED NAME: TESORO ALASKA PETROLEUM CO DATE OF NAME CHANGE: 19930903 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TESORO MARINE SERVICES LLC CENTRAL INDEX KEY: 0001061665 IRS NUMBER: 742766974 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-11 FILM NUMBER: 03728669 BUSINESS ADDRESS: STREET 1: 300 CONCORD PLAZA DRIVE CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 BUSINESS PHONE: 2108288484 MAIL ADDRESS: STREET 1: 300 CONCORD PLAZA DRIVE CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 FORMER COMPANY: FORMER CONFORMED NAME: TESORO MARINE SERVICES INC DATE OF NAME CHANGE: 19980512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TESORO NORTHSTORE CO CENTRAL INDEX KEY: 0001061668 IRS NUMBER: 920098209 STATE OF INCORPORATION: AK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-09 FILM NUMBER: 03728667 BUSINESS ADDRESS: STREET 1: 300 CONCORD PLAZA DRIVE CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 BUSINESS PHONE: 2108288484 MAIL ADDRESS: STREET 1: 300 CONCORD PLAZA DRIVE CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KENAI PIPE LINE CO CENTRAL INDEX KEY: 0001061672 IRS NUMBER: 946062891 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-08 FILM NUMBER: 03728666 BUSINESS ADDRESS: STREET 1: 300 CONCORD PLAZA DRIVE CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 BUSINESS PHONE: 2108288484 MAIL ADDRESS: STREET 1: 300 CONCORD PLAZA DRIVE CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TESORO ALASKA PIPELINE CO CENTRAL INDEX KEY: 0001061676 IRS NUMBER: 741839523 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-07 FILM NUMBER: 03728665 BUSINESS ADDRESS: STREET 1: 300 CONCORD PLAZA DRIVE CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 BUSINESS PHONE: 2108288484 MAIL ADDRESS: STREET 1: 300 CONCORD PLAZA DRIVE CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TESORO PETROLEUM CO INC CENTRAL INDEX KEY: 0001061678 IRS NUMBER: 742385513 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-06 FILM NUMBER: 03728664 BUSINESS ADDRESS: STREET 1: 300 CONCORD PLAZA DRIVE CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 BUSINESS PHONE: 2108288484 MAIL ADDRESS: STREET 1: 300 CONCORD PLAZA DRIVE CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 S-4 1 h05116sv4.txt TESORO PETROLEUM CORPORATION AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 2, 2003 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 TESORO PETROLEUM CORPORATION AND OTHER REGISTRANTS (SEE TABLE OF OTHER REGISTRANTS BELOW) (Exact name of registrant as specified in its charter) DELAWARE 2911 95-0862768 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification No.)
300 CONCORD PLAZA DRIVE JAMES C. REED, JR., ESQ. SAN ANTONIO, TEXAS 78216-6999 EXECUTIVE VICE PRESIDENT, (210) 828-8484 GENERAL COUNSEL AND SECRETARY (Address, including zip code, and telephone 300 CONCORD PLAZA DRIVE number, SAN ANTONIO, TEXAS 78216-6999 including area code, of registrant's principal (210) 828-8484 executive offices) (Name, address, including zip code, and telephone number, including area code, of agent for service)
COPY TO: CHARLES L. STRAUSS FULBRIGHT & JAWORSKI L.L.P. 1301 MCKINNEY, SUITE 5100 HOUSTON, TEXAS 77010 (713) 651-5151 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this registration statement. If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, please check the following box. [ ] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] CALCULATION OF REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION SECURITIES TO BE REGISTERED REGISTERED PER UNIT PRICE(1) FEE(2) - ----------------------------------------------------------------------------------------------------------------- 8% Senior Secured Notes due 2008, Series B............. $375,000,000 100% $375,000,000 $30,337.50 - ----------------------------------------------------------------------------------------------------------------- Subsidiary Guarantees(3)..... N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------
(1) Pursuant to Rule 457(f)(2), represents the book value of the outstanding 8% Senior Secured Notes for which the registered securities will be exchanged. Estimated solely for the purpose of calculating the registration fee. (2) Calculated Pursuant to Rule 457(f)(2). Pursuant to Rule 457(n), no additional registration fee is required for the registration of the subsidiary guarantees. (3) No separate consideration will be received for the guarantees. The guarantees are not traded separately. --------------------- THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF OTHER REGISTRANTS
STATE OR OTHER PRIMARY STANDARD JURISDICTION OF INDUSTRIAL I.R.S. EMPLOYER EXACT NAME OF REGISTRANT AS INCORPORATION CLASSIFICATION IDENTIFICATION SPECIFIED IN ITS CHARTER OR ORGANIZATION NUMBER NUMBER - --------------------------- ---------------- ---------------- ------------------ Digicomp Inc. .................................. Delaware 7379 74-2521015 Far East Maritime Company....................... Delaware 4422 74-2886469 Gold Star Maritime Company...................... Delaware 4422 74-2886462 Kenai Pipe Line Company......................... Delaware 4613 94-6062891 Smiley's Super Service, Inc. ................... Hawaii 5541 99-0088611 Tesoro Alaska Company........................... Delaware 2911 94-1646130 Tesoro Alaska Pipeline Company.................. Delaware 4613 74-1839523 Tesoro Aviation Company......................... Delaware 4522 74-2922277 Tesoro Financial Services Holding Company....... Delaware 6711 51-0377202 Tesoro Gas Resources Company, Inc. ............. Delaware 1311 92-0150083 Tesoro Hawaii Corporation....................... Hawaii 2911 99-0143882 Tesoro High Plains Pipeline Company............. Delaware 4612 74-3009696 Tesoro Marine Services Holding Company.......... Delaware 5171 74-2807425 Tesoro Marine Services, LLC..................... Delaware 5171 74-2766974 Tesoro Maritime Company......................... Delaware 4422 74-2886466 Tesoro Northstore Company....................... Alaska 5541 92-0098209 Tesoro Petroleum Companies, Inc. ............... Delaware 7389 74-2385513 Tesoro Refining and Marketing Company........... Delaware 2911 76-0489496 Tesoro Technology Company....................... Delaware 7379 74-2521013 Tesoro Trading Company.......................... Delaware 5172 75-3025497 Tesoro Vostock Company.......................... Delaware 5172 74-2257610 Tesoro Wasatch, LLC............................. Delaware 6519 74-3009694 Victory Finance Company......................... Delaware 6719 51-0377203
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED JUNE 2, 2003 (TESORO PETROLEUM CORPORATION LOGO) TESORO PETROLEUM CORPORATION OFFER TO EXCHANGE 8% SENIOR SECURED NOTES DUE 2008, SERIES B THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 FOR ANY AND ALL OUTSTANDING 8% SENIOR SECURED NOTES DUE 2008 ($375,000,000 IN PRINCIPAL AMOUNT OUTSTANDING) THE EXCHANGE OFFER The exchange offer expires at 5:00 p.m., New York City time, on , 2003, unless extended. The exchange offer is not conditioned upon the tender of any minimum aggregate amount of the outstanding 8% Senior Secured Notes due 2008, which we refer to in this prospectus as the outstanding 8% notes. All of the outstanding 8% notes tendered according to the procedures in this prospectus and not withdrawn will be exchanged for an equal principal amount of exchange notes. The exchange offer is not subject to any condition other than that it not violate applicable laws or any applicable interpretation of the staff of the Securities and Exchange Commission. THE EXCHANGE NOTES The terms of the exchange notes to be issued in the exchange offer are substantially identical to the outstanding 8% notes, except that we have registered the exchange notes with the Securities and Exchange Commission. In addition, the exchange notes will not be subject to the transfer restrictions applicable to the outstanding 8% notes. We will not apply for listing any of the exchange notes on any securities exchange or to arrange for them to be quoted on any quotation system. Tesoro's obligations under the exchange notes will be jointly and severally guaranteed by each of its current and future material domestic restricted subsidiaries. In addition, the exchange notes and the guarantees will be secured on a first-priority basis (subject to permitted prior liens) by certain collateral as described in "Description of the Exchange Notes -- Security". Interest on the exchange notes will accrue from April 17, 2003, or from the most recent interest payment date to which interest has been paid, and is payable on April 15 and October 15 of each year, beginning on October 15, 2003. The notes will mature on April 15, 2008. WE URGE YOU TO CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 21 OF THIS PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this prospectus is , 2003. TABLE OF CONTENTS
PAGE ---- Available Information....................................... iii Forward-Looking Statements.................................. iii Prospectus Summary.......................................... 1 Risk Factors................................................ 21 The Exchange Offer.......................................... 32 Use of Proceeds............................................. 41 Ratio of Earnings to Fixed Charges.......................... 41 Capitalization.............................................. 43 Selected Historical Consolidated Financial Data............. 44 Description of Other Indebtedness........................... 45 Description of the Exchange Notes........................... 47 Certain Federal Income Tax Considerations................... 106 Plan of Distribution........................................ 110 Legal Matters............................................... 110 Experts..................................................... 111
We are not making an offer to sell, or a solicitation of an offer to buy, the outstanding 8% notes or the exchange notes in any jurisdiction where, or to any person to or from whom, the offer or sale is not permitted. We urge you to contact us with any questions about this exchange offer or if you require additional information to verify the information contained in this document. We are not making any representation to any holder of the outstanding 8% notes regarding the legality of an investment in the exchange notes by it under any legal investment or similar laws or regulations. You should not consider any information in this document to be legal, business or tax advice. You should consult your own attorney, business advisor and tax advisor for legal, business and tax advice regarding an investment in the exchange notes. The federal securities laws prohibit trading in our securities while in possession of material non-public information with respect to us. --------------------- NOTICE TO NEW HAMPSHIRE RESIDENTS ONLY NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH. --------------------- We sold the outstanding 8% notes to Goldman, Sachs & Co. and Banc One Capital Markets, Inc., as the initial purchasers, on April 17, 2003, in transactions not registered under the Securities Act of 1933, as i amended, in reliance upon the exemption provided in Section 4(2) of the Securities Act. The initial purchasers placed the outstanding 8% notes with qualified institutional buyers (as defined in Rule 144A under the Securities Act) ("Qualified Institutional Buyers" or "QIBs"), each of whom agreed to comply with certain transfer restrictions and other restrictions. Accordingly, the outstanding 8% notes may not be reoffered, resold or otherwise transferred in the United States unless such transaction is registered under the Securities Act or an applicable exemption from the registration requirements of the Securities Act is available. We are offering the exchange notes hereby in order to satisfy our obligations under a registration rights agreement among us, the subsidiary guarantors and the initial purchasers relating to the outstanding 8% notes. The exchange notes will bear interest at a rate of 8% per annum, payable semiannually on April 15 and October 15 of each year, commencing October 15, 2003. Holders of exchange notes of record on October 1, 2003, will receive on October 15, 2003, an interest payment in an amount equal to (x) the accrued interest on such exchange notes from the date of issuance thereof to October 15, 2003, plus (y) the accrued interest on the previously held outstanding 8% notes from the date of issuance of such outstanding 8% notes (April 17, 2003) to the date of exchange thereof. The outstanding 8% notes and the exchange notes mature on April 15, 2008. The outstanding 8% notes were initially represented by two global outstanding 8% notes (the "Old Global Notes") in registered form, registered in the name of Cede & Co., as nominee for The Depository Trust Company ("DTC" or the "Depositary"), as depositary. The exchange notes exchanged for outstanding 8% notes represented by the Old Global Notes will be initially represented by one or more global exchange notes (the "Exchange Global Notes") in registered form, registered in the name of the Depositary. See "Description of the Exchange Notes -- Book-Entry, Delivery and Form". References herein to "Global Notes" shall be references to the Old Global Notes and the Exchange Global Notes. Based on an interpretation of the Securities Act by the staff of the Securities and Exchange Commission (the "SEC" or "Commission"), exchange notes issued pursuant to the exchange offer in exchange for outstanding 8% notes may be offered for resale, resold and otherwise transferred by a holder thereof (other than (i) a broker-dealer who purchased such outstanding 8% notes directly from us for resale pursuant to Rule 144A or any other available exemption under the Securities Act or (ii) a person that is our "affiliate" (within the meaning of Rule 405 of the Securities Act)), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such holder is acquiring the exchange notes in its ordinary course of business and is not participating, and has no arrangement or understanding with any person to participate, in the distribution of the exchange notes. Holders of outstanding 8% notes wishing to accept the exchange offer must represent to us that such conditions have been met. Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must agree that it will deliver a prospectus in connection with any resale of such exchange notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for outstanding 8% notes where such outstanding 8% notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. We have agreed that, for a period of one year after the expiration date of the exchange offer, we will make this prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution". The exchange notes will be a new issue of securities for which there currently is no market. The initial purchasers are not obligated to make a market in the exchange notes, and any such market making may be discontinued at any time without notice. As the outstanding 8% notes were issued and the exchange notes are being issued to a limited number of institutions who typically hold similar securities for investment, we do not expect that an active public market for the exchange notes will develop. Accordingly, there can be no assurance as to the development, liquidity or maintenance of any market for the exchange notes on any securities exchange or for quotation through the Nasdaq Stock Market. See "Risk Factors". ii AVAILABLE INFORMATION Tesoro files annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission, or SEC. You may read and copy any document Tesoro files at the SEC's public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-888-SEC-0330 for further information on the public reference rooms. Our SEC filings are also available to the public from the SEC's Web site at www.sec.gov or through Tesoro's web site at www.tesoropetroleum.com. However, the information on Tesoro's web site does not constitute a part of this prospectus. In this document, Tesoro "incorporates by reference" the information it files with the SEC, which means that Tesoro can disclose important information to you by referring to that information. The information incorporated by reference is considered to be a part of this prospectus, and later information filed with the SEC will update and supersede this information. Tesoro incorporates by reference the documents listed below and any future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date of this prospectus and until this offering is completed: - Tesoro's Annual Report on Form 10-K for the fiscal year ended December 31, 2002; - Tesoro's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2003; - Tesoro's Current Report on Form 8-K filed on February 25, 2002, as amended by Amendment No. 1 to the Current Report on Form 8-K filed on April 22, 2002; - Tesoro's Current Report on Form 8-K filed on May 24, 2002, as amended by Amendment No. 1 to the Current Report on Form 8-K filed on July 16, 2002 and Amendment No. 2 to the Current Report on Form 8-K filed on July 24, 2002; - Tesoro's Current Report on Form 8-K filed on April 2, 2003; - Tesoro's Current Report on Form 8-K filed on April 24, 2003; and You may request a copy of these filings at no cost, by writing or telephoning Tesoro at: 300 Concord Plaza Drive, San Antonio, Texas 78216-6999, or (210) 828-8484, Attention: Corporate Communications. The financial statements as of December 31, 2001 and 2000 and for the year ended December 31, 2001 and the four month period ended December 31, 2000 of the Golden Eagle Refining and Marketing Assets Business (the California refinery and related business) incorporated herein by reference were audited by Arthur Andersen LLP. After reasonable efforts, we were not able to obtain Arthur Andersen LLP's consent to the incorporation by reference of its audit report dated February 14, 2002 (Note 16 is dated February 20, 2002) into this prospectus. However, Rule 437a under the Securities Act of 1933, as amended, permits us to file the registration statement of which this prospectus is a part without Arthur Andersen LLP's written consent. Accordingly, investors will not be able to sue Arthur Andersen LLP pursuant to Section 11(a)(4) of the Securities Act of 1933, and any recover under that section you may have may be limited as a result of the lack of Arthur Andersen LLP's consent. You should rely only upon the information provided in this prospectus or incorporated by reference into this prospectus. Tesoro has not authorized anyone to provide you with different information. You should not assume that the information in this prospectus, including any information incorporated by reference, is accurate as of any date other than the date of this prospectus. FORWARD-LOOKING STATEMENTS This prospectus includes and incorporates by reference forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are included throughout this prospectus, including in the sections entitled "Prospectus Summary" and "Risk Factors" and relate to, among other things, projections of refining margins, revenues, earnings, earnings per share, cash flows, capital expenditures, working capital or other financial items, throughput, expectations regarding debt reduction goals, iii discussions of estimated future revenue enhancements, potential synergies and cost savings. These statements also relate to our business strategy, goals and expectations concerning our market position, future operations, margins, profitability, liquidity and capital resources. We have used the words "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan", "predict", "project", "will" and similar terms and phrases to identify forward-looking statements in this prospectus. 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. Our operations involve risks and uncertainties, many of which are outside our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct. Accordingly, these forward-looking statements are qualified in their entirety by reference to the factors described in "Risk Factors" and elsewhere, in this prospectus. Actual results and trends in the future may differ materially from those suggested or implied by the forward-looking statements depending on a variety of factors including, but not limited to: - changes in general economic conditions; - the timing and extent of changes in commodity prices and underlying demand for our products; - the availability and costs of crude oil, other refinery feedstocks and refined products; - changes in our cash flow from operations, liquidity and capital requirements; - our ability to achieve our debt reduction goal; - our ability to meet debt covenants; - adverse changes in the ratings assigned to our trade credit and debt instruments; - reduced availability of trade credit; - increased interest rates and the condition of the capital markets; - the direct or indirect effects on our business resulting from actual or threatened terrorist incidents or acts of war; - political developments in foreign countries; - changes in our inventory levels and carrying costs; - seasonal variations in demand for refined products; - changes in the cost or availability of third-party vessels, pipelines and other means of transporting feedstocks and products; - changes in fuel and utility costs for our facilities; - disruptions due to equipment interruption or failure at our or third-party facilities; - execution of planned capital projects; - state and federal environmental, economic, safety and other policies and regulations, any changes therein, and any legal or regulatory 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; - actions of customers and competitors; - weather conditions affecting our operations or the areas in which our products are marketed; and - earthquakes or other natural disasters affecting operations. iv Many of these factors are described in greater detail in our filings with the 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. 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 prospectus. v PROSPECTUS SUMMARY This summary may not contain all the information that may be important to you. You should read this entire prospectus, including the financial data and related notes, before making an investment decision. The terms "Tesoro", the "company", "we", "our" and "us" in this prospectus refer to Tesoro Petroleum Corporation and its subsidiaries, unless the context otherwise requires. You should pay special attention to the "Risk Factors" section beginning on page 21 of this prospectus to determine whether an investment in the notes is appropriate for you. OVERVIEW We are an independent refiner and marketer with two major operating segments -- (1) refining crude oil and other feedstocks and selling petroleum products in bulk and wholesale markets (we refer to this segment as "Refining") and (2) selling motor fuels and convenience products and services in the retail market (we refer to this segment as "Retail"). Through our Refining segment, we manufacture products, primarily gasoline and gasoline blendstocks, jet fuel, diesel fuel and residual fuel, for sale to a wide variety of commercial customers in the mid-continental and western United States. Our Retail segment distributes motor fuels through a network of gas stations, primarily under the Tesoro(R) and Mirastar(R) brands. In addition to our Refining and Retail segments, we also market and distribute petroleum products and provide logistical support services to the marine and offshore exploration and production industries operating in the Gulf of Mexico. THE COMPANY THE TRANSFORMATION OF TESORO Beginning in 1998, we entered into a series of acquisitions and strategic initiatives that we believe have significantly enhanced our competitive position, the composition and geographical focus of our assets and our financial and operating performance. Key components of this transformation include: - expansion of our refining capacity through the acquisition of our Hawaii and Washington refineries in 1998, our Mid-Continent refineries in 2001 and our California refinery in 2002, which increased our rated crude oil capacity from 72,000 barrels-per-day ("bpd") in 1997 to 558,000 bpd today; - achievement of significant size by becoming the second largest refiner in our core markets; - creation of an integrated refining and marketing system focused on markets in the western United States; - divestiture of our exploration and production assets at the end of 1999 to focus on the refining and marketing sector; and - investment in capital projects to increase our ability to process less expensive feedstocks, maximize high value products, increase throughput and meet environmental requirements. REFINING We own and operate six petroleum refineries, which are located in California ("California" region), Alaska and Washington ("Pacific Northwest" region), Hawaii ("Mid-Pacific" region) and North Dakota and Utah ("Mid-Continent" region). We sell refined products to a wide variety of customers in the mid-continental and western United States. Our six refineries have a combined rated crude oil capacity of 558,000 bpd. We operate the largest refineries in Hawaii and Utah, the second largest refinery in Alaska, the only refinery in North Dakota and the 1 second largest refinery in northern California. Capacity and throughput rates of crude oil and other feedstocks by refinery are as follows:
THROUGHPUT (BPD) --------------------------------------- THREE MONTHS RATED ENDED CRUDE OIL MARCH 31, REFINERY CAPACITY 2000 2001 2002 2003 - -------- --------- ------- ------- ------- --------- (BPD) CALIFORNIA(a) California........................ 168,000 -- -- 94,600 157,800 PACIFIC NORTHWEST Washington........................ 108,000 116,600 119,400 104,000 105,600 Alaska............................ 72,000 48,500 50,000 53,000 44,300 MID-PACIFIC Hawaii............................ 95,000 84,400 87,100 81,900 75,400 MID-CONTINENT(b) North Dakota...................... 60,000 -- 17,100 51,400 49,200 Utah.............................. 55,000 -- 16,500 50,100 32,200 ------- ------- ------- ------- ------- Total(a)(b).................... 558,000 249,500 290,100 435,000 464,500 ======= ======= ======= ======= =======
- --------------- (a) Throughput volumes in 2002 included the California refinery since we acquired it on May 17, 2002, averaged over 365 days. Throughput for the California refinery averaged over the 229 days we owned it in 2002 was 150,800 bpd. (b) Throughput volumes in 2001 included the Mid-Continent refineries since we acquired them on September 6, 2001, averaged over 365 days. Throughput for these refineries averaged over the 117 days that we owned them in 2001 was 53,500 bpd in North Dakota and 51,500 bpd in Utah. CALIFORNIA REFINERY Our California refinery, located in Martinez approximately 30 miles east of San Francisco, is a highly complex refinery with a rated crude oil capacity of 168,000 bpd. Major product upgrading units at the refinery include a fluid catalytic cracking ("FCC"), fluid coker, hydrocracking, naphtha reforming, vacuum distillation, hydrotreating and alkylation units. These units enable the refinery to produce a high proportion of motor fuels, including cleaner-burning California Air Resources Board ("CARB") gasoline and CARB diesel products as well as conventional gasoline and diesel. Other products produced at the refinery include liquefied petroleum gas, coke, fuel oil, decant oil and other residual products. The refinery receives crude oil primarily from California and Alaska transported by ship and third-party pipelines. The refinery distributes refined products through third-party pipelines, terminals and truck racks and our Stockton and Martinez, California terminals. A major turnaround at the refinery, including the refinery's fluid coker, was completed in March 2002, and a turnaround of the larger crude unit was completed in the second quarter of 2002. The next scheduled turnaround is for the hydrocracker in the fourth quarter of 2004. PACIFIC NORTHWEST REFINERIES Washington Our Washington refinery, located in Anacortes on the Puget Sound about 60 miles north of Seattle, has a total rated crude oil capacity of 108,000 bpd. Major product upgrading units at the refinery include the FCC, alkylation, hydrotreating, vacuum distillation and catalytic reforming units. The FCC and other product upgrade units enable the Washington refinery to produce approximately 75% of its output as light products, that is, gasoline (including cleaner-burning CARB gasoline), diesel and jet fuel. The FCC unit also can upgrade heavy vacuum gas oils from our Alaska and Hawaii refineries and other suppliers. The refinery 2 receives crude oil from Canada transported by the third-party Transmountain Pipeline and from Alaska and Southeast Asia by ship through the refinery's marine terminal. The refinery distributes refined products through third-party pipeline systems, truck racks, marine terminals, and by rail. We completed a turnaround of the FCC and alkylation units at the end of the first quarter of 2002. The next scheduled turnaround is for the crude distillation and reformer units in the fourth quarter of 2004. Alaska Our Alaska refinery is located near Kenai approximately 70 miles southwest of Anchorage and adjacent to the Cook Inlet. The refinery has a total rated crude oil capacity of 72,000 bpd. Major product upgrading units include the vacuum distillation, distillate hydrocracking, hydrotreating and catalytic reforming units. The Alaska refinery produces liquefied petroleum gas, gasoline and gasoline blendstocks, jet fuel, diesel fuel, heating oil, liquid asphalt, heavy oils and residual products. The refinery receives crude oil primarily from the Alaska Cook Inlet and North Slope transported either by ship through our Kenai marine terminal or through our pipeline connecting some of the Cook Inlet producing fields with the Kenai marine terminal. The refinery distributes refined products through the Kenai marine terminal and our pipeline connecting the Alaska refinery to our terminals and the airport in Anchorage. We completed a scheduled maintenance turnaround of all major process units at the Alaska refinery in May 2003, and the next turnaround of all major process units is scheduled for the second quarter of 2005. MID-PACIFIC REFINERY Hawaii Our Hawaii refinery, located at Kapolei 22 miles west of Honolulu, produces liquified petroleum gas, gasoline and gasoline blendstocks, jet fuel, diesel fuel and fuel oil. The refinery has a total rated crude oil capacity of 95,000 bpd. Major product upgrading units include the vacuum distillation, distillate hydrocracking, hydrotreating, visbreaking and catalytic reforming units. The refinery receives crude oil primarily from Alaska and Southeast Asia transported by ship to our offshore mooring terminal, which is connected by three pipelines to the refinery. The refinery distributes refined products through our pipeline system on the island of Oahu, and through third-party and Tesoro-owned terminals at Honolulu International Airport, Honolulu Harbor and on the islands of Maui, Kauai and Hawaii. We completed a scheduled maintenance turnaround in the third quarter of 2000, and the next turnaround of all major units is scheduled for the first quarter of 2004. MID-CONTINENT REFINERIES North Dakota Our North Dakota refinery is located near Mandan. This 60,000 bpd refinery is the only one in the state and serves both in-state needs and those of neighboring Minnesota. Major product upgrading units at the refinery include the FCC, reforming, hydrotreating and alkylation units. The North Dakota refinery's primary products include gasoline, diesel fuel and jet fuel. The refinery receives crude oil primarily from the Williston Basin transported through our pipeline connecting the refinery with the Williston Basin and adjacent production areas in North Dakota and Montana. The refinery distributes refined products through a third-party pipeline connecting the refinery with third-party terminals in Minnesota and North Dakota. A maintenance turnaround of all major process units is scheduled at the North Dakota refinery in the fourth quarter of 2003. Utah Our Utah refinery is located in Salt Lake City. The 55,000 bpd refinery supplies products to the Utah, Idaho and eastern Washington marketing areas. The Utah refinery's primary products include gasoline, diesel fuel and jet fuel. Major product upgrading units include the FCC, reforming, hydrotreating and alkylation units. The refinery receives crude oil from Canada and the Rocky Mountains transported by third party pipelines and trucks. The refinery distributes refined products through a system of both Tesoro-owned and third-party terminals and pipeline connections to Utah, Idaho, Washington, Nevada and Wyoming. We 3 completed a maintenance turnaround of the crude distillation and reforming units in March 2003. The next major turnaround is scheduled for the first quarter of 2006. TYPES OF FEEDSTOCKS AND PRODUCT YIELD Actual throughput of crude oil and other feedstocks and our refining yield, in volume and as a percentage, are summarized below:
THREE MONTHS ENDED 2000 2001 2002 MARCH 31, 2003 ------------ ------------ ------------ -------------- VOLUME % VOLUME % VOLUME % VOLUME % ------ --- ------ --- ------ --- ------- ---- (VOLUMES IN THOUSANDS OF BPD) TOTAL REFINING THROUGHPUT(a)(b) Heavy crude(c).................... 106 43% 131 45% 212 49% 283 61% Light crude....................... 133 53 151 52 205 47 168 36 Other feedstocks.................. 10 4 8 3 18 4 14 3 --- --- --- --- --- --- --- --- Total Throughput............... 249 100% 290 100% 435 100% 465 100% === === === === === === === === TOTAL REFINING YIELD(d)(e) Gasoline and gasoline blendstocks.................... 95 37% 111 37% 204 45% 230 47% Jet fuel.......................... 58 23 59 20 64 15 56 12 Diesel fuel....................... 39 15 53 18 87 19 98 20 Heavy oils, residual products, internally produced fuel and other.......................... 65 25 75 25 95 21 100 21 --- --- --- --- --- --- --- --- Total Yield.................... 257 100% 298 100% 450 100% 484 100% === === === === === === === ===
- --------------- (a) Throughput volumes in 2001 included 33,600 bpd for the Mid-Continent refineries since we acquired them on September 6, 2001, averaged over 365 days. Throughput for these refineries averaged over the 117 days that we owned them in 2001 was 105,000 bpd. (b) Throughput volumes in 2002 included 94,600 for the California refinery since we acquired it on May 17, 2002, averaged over 365 days. Throughput for the California refinery averaged over the 229 days we owned it in 2002 was 150,800 bpd. (c) We define "heavy" crude oil as Alaska North Slope or crude oil with an American Petroleum Institute specific gravity of 32 or less. (d) Refining yield in 2001 included 34,900 bpd for the Mid-Continent refineries since we acquired them on September 6, 2001, averaged over 365 days. Refining yield for these refineries averaged over the 117 days we owned them in 2001 was 108,700 bpd. (e) Refining yield in 2002 included 100,400 bpd for the California refinery since we acquired it on May 17, 2002, averaged over 365 days. Refining yield for the California refinery averaged over the 229 days we owned it was 160,000 bpd. TERMINALS AND PIPELINES We currently operate refined product terminals in the following locations: - California -- Martinez and Stockton; - Washington -- Anacortes, Port Angeles and Vancouver; - Alaska -- Anchorage and Kenai; - Hawaii -- on the islands of Hawaii, Kauai, Maui and Oahu; - North Dakota -- Mandan; 4 - Utah -- Salt Lake City; and - Idaho -- Boise and Burley. These terminals are supplied primarily by our refineries. We also distribute products through third-party terminals and truck racks. Fuel distributed through third-party terminals also is supplied by our refineries and through purchases and exchange arrangements with other refining and marketing companies. We also own and operate the following pipelines: - a 71-mile, ten-inch diameter, common-carrier petroleum products pipeline that runs from our Alaska refinery to our terminal facilities in Anchorage and to the Anchorage airport and has the capacity to transport approximately 40,000 bpd of products; - a 24-mile pipeline from Swanson River Field to the Alaska Refinery; - a 23-mile pipeline system we use to distribute refined products to customers on the island of Oahu that includes connections to military facilities at several locations; and - a common-carrier crude oil pipeline system consisting of over 700 miles of pipeline that delivers all of the crude oil supply to our North Dakota refinery. RETAIL Our Retail segment sells gasoline and diesel in retail markets in the mid-continental and western United States (including Alaska and Hawaii). The demand for gasoline is seasonal in a majority of our markets, with highest demand for gasoline during the summer driving season. We sell gasoline to retail customers through Tesoro-operated sites and agreements with third-party branded distributors ("jobber/dealers"). As of March 31, 2003, our Retail segment included a network of 584 branded retail stations (under the Tesoro(R) and Mirastar(R) brands), including 230 Tesoro-operated retail gasoline stations and 354 jobber/dealer stations in the mid-continental and western United States. Our retail network provides a committed outlet for a portion of the motor fuels produced at our refineries. Currently, we have adopted a flat to modest growth strategy for our Retail segment that will focus on selected jobber/dealer investments in certain of our markets. We do not expect to build any new retail stations in 2003. STRATEGY AND COMPETITIVE STRENGTHS Our strategy is to create a geographically-focused, value-added refining and marketing business that has (i) economies of scale, (ii) a low-cost structure, (iii) superior management information systems and (iv) outstanding employees focused on business excellence, and that seeks to provide stockholders with competitive returns in any economic environment. Our immediate focus is to reduce our level of debt through a combination of cash flow from operations, cost savings and revenue enhancements. DEBT REDUCTION INITIATIVES In June 2002, we announced our goal to reduce debt by $500 million by the end of 2003. As reflected in our operating results, we experienced a weak margin environment in 2002, which negatively affected our debt reduction plans. Nevertheless, through March 31, 2003, we have repaid $200 million of term loan debt since May 2002 (including a $16 million prepayment in January 2003 and a $60 million payment in March 2003, of which $13 million was a scheduled payment and $47 million was a voluntary prepayment). We continue to pursue our goal to further reduce debt through positive operating cash flows and cash conservation measures based on the following strategic initiatives: (i) a cost reduction and refinery improvement program, (ii) elimination or deferral of capital expenditures and refinery turnaround spending, (iii) achievement of system-wide synergies from the acquisition of our California refinery, (iv) asset sales and (v) increasing cash available to reduce debt through the reduction of early payments and prepayments by use of letters of credit under our new credit agreement. Our next goal is to pay down at least another $150 million 5 by the end of the second quarter of 2003, assuming that the industry does not experience substantial increases in crude oil prices. COST REDUCTION AND REFINERY IMPROVEMENT PROGRAM Our largest initiative is to realize $65 million of operating income improvements in 2003 through cost reductions and refining improvements that do not require significant capital investments. During the 2003 first quarter we continued programs to consolidate our marketing organization, eliminate non-essential travel and reduce contract labor in both operations and administration. We completed a workforce reduction program in the first quarter which included a voluntary early retirement offer and various position eliminations. We estimate that the results of the workforce reduction program will yield annual savings of approximately $20 million. In addition, we made other reductions in manufacturing costs, but they were partially offset by higher utility expenses. Through these programs and other efficiencies, we achieved $15 million in operating improvements during the 2003 first quarter, including $10 million in cost reductions and $5 million in refining improvements. For the remainder of 2003, we expect to further reduce operating expenses by achieving economies in refinery maintenance and purchasing and other cost savings. REDUCTIONS IN CAPITAL EXPENDITURES AND REFINERY TURNAROUND SPENDING Another initiative is to reduce capital expenditures and refinery turnaround spending. We currently expect to spend approximately $164 million in 2003, including approximately $47 million for major turnarounds at three of our refineries and $5 million for retail projects. Capital expenditures in 2002 totaled $191 million for refining projects (including refinery turnaround and other major maintenance projects), $41 million for retail projects and $12 million for corporate and other projects. The reduced capital spending for retail projects reflects our current strategy of flat to modest growth that will focus on jobber/dealer investments in selected markets. We do not expect to build any new retail stations in 2003. We spent $36 million in the 2003 first quarter, which included $15 million for the CARB III project at the California refinery and $8 million for refinery turnaround and other major maintenance costs. With the March 2003 completion of the CARB III project, our California refinery can produce up to 93,000 bpd of CARB III gasoline. ACHIEVEMENT OF SYNERGIES We also are focusing on pursuing new synergies from our refinery system following the acquisition of the California refinery. Our goal is to achieve $25 million of annual system synergies by the end of 2003, and we achieved approximately $12 million in synergies in the 2003 first quarter. During the first quarter, we were able to achieve benefits that otherwise would have been unavailable without the California refinery. For example, we were able to increase the value of certain gasoline volumes through movements between refineries. OUTLOOK We believe that the outlook for the United States refining industry is attractive due to certain significant trends. We believe that: - refined petroleum product supply and demand fundamentals have improved since the late 1990s and will continue to improve; - industry conditions that led to low margins in 2002 have improved due to various factors, including: - the cold winter experienced in the Northeast United States in 2003, which increased demand and margins for distillates throughout the country; and - jet fuel demand, which has slowly improved and now approaches pre-September 11, 2001 levels; and - gasoline supply is expected to tighten due to several factors, including changes in gasoline specifications related to the phase-out of MTBE in California. 6 THE FINANCING TRANSACTIONS Concurrently with the consummation of the offering of the outstanding 8% notes, we borrowed (a) approximately $321 million under a new $650 million credit agreement and (b) $200 million under new term loans. Those borrowings, together with the net proceeds from the sale of the outstanding 8% notes, were used to repay all outstanding amounts under our previous senior secured credit facility and to repurchase $25 million aggregate principal amount of our outstanding senior subordinated notes. The outstanding 8% notes are, and the exchange notes will be, secured on an equal and ratable basis with the new term loans by security interests in certain assets of Tesoro and its domestic subsidiaries. At March 31, 2003, the property, plant and equipment of our refining segment represented approximately $2.0 billion of net book value. The collateral, which includes substantially all of the property, plant and equipment of our refining segment, consists of: - Currently owned refinery assets which comprise the six refineries, consisting of the: - California refinery, located in Martinez, California; - Washington refinery, located in Anacortes, Washington; - Alaska refinery, located near Kenai, Alaska; - Hawaii refinery, located at Kapolei, Hawaii; - North Dakota refinery, located near Mandan, North Dakota; and - Utah refinery, located in Salt Lake City, Utah; - Currently owned terminals consisting of: - the terminal assets that are located in or near, or used or useful for, or in connection with the California refinery (the Martinez terminal), the Washington refinery (the Anacortes marine terminal), the Alaska refinery (the Kenai Pipe Line Company marine terminal), the North Dakota terminal (the Mandan terminal), and the Salt Lake City terminal (Salt Lake City terminal); - the terminal located in Burley, Idaho; and - the terminal located in Boise, Idaho; - After-acquired real property, fixtures or equipment located on or contiguous to or connected with any of the refineries and terminals referred to above and necessary or used in connection with the ownership, expansion, operation, use or maintenance of any of the refineries and terminals referred to above, and in connection with certain leases related to the Hawaii, California and Washington refineries; - After-acquired general intangibles necessary, used or useful for, or in connection with, or in any respect related, incidental or ancillary to, the ownership, expansion, operation, use, maintenance or sale or other disposition of any of the refineries, terminals referred to above and pipelines referred to below; - Currently owned and after-acquired fixtures and equipment used in connection with pipelines consisting of: - the 71-mile pipeline from the Alaska refinery to Anchorage, Alaska; - the 24-mile pipeline from Swanson River Field to the Alaska refinery; - the 23-mile pipeline system connected to the Hawaii refinery; - the 700-mile pipeline system extending from the Williston Basin fields to the North Dakota refinery; and - any other pipeline at any time acquired to serve any of, and connected to, the refineries referred to above; 7 - Rights to payment at any time owned or acquired constituting: - intercompany indebtedness resulting from the declaration of a dividend or a debt distribution on account of capital stock of a subsidiary or a redemption, reclassification or recapitalization of the capital stock of any such subsidiary; and - intercompany indebtedness resulting from the funding of proceeds of any transaction raising capital (whether by the issuance of debt or equity) for us or any of our subsidiaries as an intercompany loan to us or any of such subsidiaries (other than the funding of proceeds of any extension of credit or borrowing under our new credit agreement), in each case, whether such rights to payment constitute accounts or payment intangibles, or arise under or in connection with chattel paper of instruments; - Currently owned and after-acquired capital stock and all intercompany indebtedness of: - Tesoro Alaska Pipeline Company, owner of the 71-mile pipeline from the Alaska Refinery to Anchorage, Alaska; and - Kenai Pipe Line Company, owner of the 24-mile pipeline from Swanson River Field to the Alaska Refinery; - 66 2/3% of the currently owned and after-acquired capital stock and intercompany indebtedness of Tesoro High Plains Pipeline Company, owner of the 700-mile pipeline extending from the Williston Basin fields to the North Dakota refinery; - Currently owned or after-acquired fixtures and equipment located at any terminals or other facilities at which inventory is stored or distributed that are leased by us and are necessary for or used in connection with the operation, use or maintenance of any of the refineries referred to above or the transportation of any inventory to or from such leased terminals or facilities or the refineries referred to above; - Certain assets purchased with the proceeds of asset sales; and - All proceeds from sales of any of the foregoing, provided, that the preceding assets will not at any time include any property that is, at such time, an excluded asset (as described in "Description of the Exchange Notes"). The collateral agent's security interests (1) in the North Dakota-Montana pipeline system and the capital stock of Tesoro High Plains Pipeline Company are subject to obtaining the consents of the North Dakota Public Service Commission and (2) in certain leased real estate with governmental authorities which is located in navigable waters adjacent to our Hawaii, Alaska, California and Washington refineries are subject to obtaining the consents of governmental authorities. The collateral securing the 8% notes (both the outstanding and the exchange notes) and the new term loans does not include, among other assets of Tesoro and its subsidiaries, the interests in real estate related to our pipelines, our marine services assets, our retail business assets, most after-acquired assets (including refineries) not described above and leased terminal properties and does not include the property securing our new credit agreement. See "Description of the Exchange Notes -- Collateral". Our new credit agreement is secured by liens on all of Tesoro's and substantially all of its domestic subsidiaries' inventory and the proceeds thereof, accounts and other rights to payment related to the sale of inventory or the rendering of services, intercompany indebtedness obligations not arising from proceeds of the note and the new term loans, cash and cash equivalents, related contracts and general intangibles and other rights related to, and all proceeds of, the foregoing. After giving effect to the collateral for the 8% notes, the new term loans and the new credit agreement, all of our assets will not be encumbered. See "Description of the Exchange Notes -- Definition of 'Credit Facility Collateral' ". The terms of our new term loan agreement and our new credit agreement are summarized below under "Description of Other Indebtedness". The 8% notes constitute senior debt, and rank pari passu in right of payment with all other senior debt of Tesoro and the guarantors, including the new term loans and the new credit agreement. --------------------- 8 THE EXCHANGE OFFER BACKGROUND OF THE OUTSTANDING 8% NOTES...................... Tesoro Petroleum Corporation issued $375 million aggregate principal amount of our 8% Senior Secured Notes due 2008 to Goldman, Sachs & Co. and Banc One Capital Markets, Inc., as the initial purchasers, on April 17, 2003. The initial purchasers then sold the outstanding 8% notes to qualified institutional buyers in reliance on Rule 144A under the Securities Act and to non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act. Because they were sold pursuant to exemptions from registration, the outstanding 8% notes are subject to transfer restrictions. In connection with the issuance of the outstanding 8% notes, we entered into a registration rights agreement in which we agreed to deliver to you this prospectus and to use our reasonable best efforts to complete the exchange offer or to file and cause to become effective a registration statement covering the resale of the outstanding 8% notes. THE EXCHANGE OFFER............ We are offering to exchange up to $375 million principal amount of exchange notes for an identical principal amount of the outstanding 8% notes. The outstanding 8% notes may be exchanged only in $1,000 increments. The terms of the exchange notes are identical in all material respects to the outstanding 8% notes except that the exchange notes have been registered under the Securities Act. Because we have registered the exchange notes, the exchange notes will not be subject to transfer restrictions and holders of exchange notes will have no registration rights. RESALE OF EXCHANGE NOTES...... We believe you may offer, sell or otherwise transfer the exchange notes you receive in the exchange offer without compliance with the registration and prospectus delivery provisions of the Securities Act provided that: - You acquire the exchange notes you receive in the exchange offer in the ordinary course of your business; - you are not participating and have no understanding with any person to participate in the distribution of the exchange notes issued to you in the exchange offer; and - you are not an affiliate of ours. Each broker-dealer issued exchange notes in the exchange offer for its own account in exchange for the outstanding 8% notes acquired by the broker-dealer as a result of market-making or other trading activities must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of the exchange notes issued in the exchange offer. A broker- dealer may use this prospectus for an offer to resell, resale or other retransfer of the exchange notes issued to it in the exchange offer. EXPIRATION DATE............... 5:00 p.m., New York City time, on , 2003 unless we extend the exchange offer. It is possible that we will extend the exchange offer until all of the outstanding 8% notes are tendered. 9 You may withdraw the outstanding 8% notes you tendered at any time before 5:00 p.m., New York City time, on the expiration date. See "The Exchange Offer -- Expiration Date; Extensions; Amendments". WITHDRAWAL RIGHTS............. You may withdraw the outstanding 8% notes you tendered by furnishing a notice of withdrawal to the exchange agent or by complying with applicable Automated Tender Offer Program (ATOP) procedures of The Depositary Trust Company (DTC) at any time before 5:00 p.m. New York City time on the expiration date. See "The Exchange Offer -- Withdrawal of Tenders". ACCRUED INTEREST ON THE EXCHANGE NOTES AND OUR OUTSTANDING 8% NOTES...................... The exchange notes will bear interest from April 17, 2003 or, if later, from the most recent date of payment of interest on the outstanding 8% notes. Accordingly, holders of outstanding 8% notes that are accepted for exchange will not receive interest that is accrued but unpaid on the outstanding 8% notes at the time of tender. CONDITIONS TO THE EXCHANGE OFFER......................... The exchange offer is subject only to the following conditions: - the compliance of the exchange offer with securities laws; - the proper tender of the outstanding 8% notes; - the representation by the holders of the outstanding 8% notes that they are not our affiliates, that the exchange notes they will receive are being acquired by them in the ordinary course of business and that at the time the exchange offer is completed the holders had no plans to participate in the distribution of the exchange notes; and - no judicial or administrative proceeding is pending or shall have been threatened that would limit us from proceeding with the exchange offer. REPRESENTATIONS AND WARRANTIES.................... By participating in the exchange offer, you represent to us that, among other things: - you will acquire the exchange notes you receive in the exchange offer in the ordinary course of your business; - you are not participating and have no understanding with any person to participate in the distribution of the exchange notes issued to you in the exchange offer; and - you are not an affiliate of ours or, if you are an affiliate, you will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. PROCEDURES FOR TENDERING OUR OUTSTANDING 8% NOTES.......... To accept the exchange offer, you must send the exchange agent either - a properly completed and executed letter of transmittal; or - a computer-generated message transmitted by means of DTC's ATOP system that, when received by the exchange agent will 10 form a part of a confirmation of book-entry transfer in which you acknowledge and agree to be bound by the terms of the letter of transmittal; and either - a timely confirmation of book-entry transfer of your outstanding 8% notes into the exchange agent's account at DTC; or - the documents necessary for compliance with the guaranteed delivery procedures described below. Other procedures may apply to holders of certificated notes. For more information, see "The Exchange Offer -- Procedures for Tendering". TENDERS BY BENEFICIAL OWNERS........................ If you are a beneficial owner whose outstanding 8% notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and wish to tender those outstanding 8% notes in the exchange offer, please contact the registered holder as soon as possible and instruct that holder to tender on your behalf and comply with the instructions in this prospectus. GUARANTEED DELIVERY PROCEDURES.................... If you are unable to comply with the procedures for tendering, you may tender your outstanding 8% notes according to the guaranteed delivery procedures described in this prospectus under the heading "The Exchange Offer -- Guaranteed Delivery Procedures". ACCEPTANCE OF THE OUTSTANDING 8% NOTES AND DELIVERY OF THE EXCHANGE NOTES................ If the conditions described under "The Exchange Offer -- Conditions" are satisfied, we will accept for exchange any and all outstanding 8% notes that are properly tendered before the expiration date. EFFECT OF NOT TENDERING....... Any of the outstanding 8% notes that are not tendered or that are tendered but not accepted will remain subject to restrictions on transfer. Since the outstanding 8% notes have not been registered under the federal securities laws, they bear a legend restricting their transfer absent registration or the availability of an exemption from registration. Upon completion of the exchange offer, we will have no further obligation, except under limited circumstances, to provide for registration of the outstanding 8% notes under the federal securities laws. FEDERAL INCOME TAX CONSIDERATIONS................ See "Certain Federal Income Tax Considerations" for a discussion of U.S. federal income tax considerations we urge you to consider before tendering the outstanding 8% notes in the exchange offer. EXCHANGE AGENT................ The Bank of New York is serving as exchange agent for the exchange offer. The address for the exchange agent is listed under "The Exchange Offer -- Exchange Agent". THE EXCHANGE NOTES The form and terms of the exchange notes to be issued in the exchange offer are the same as the form and terms of the outstanding 8% notes except that the exchange notes will be registered under the Securities Act and, accordingly, will not bear legends restricting their transfer. The notes issued in the exchange offer will 11 evidence the same debt as the outstanding 8% notes, and both the outstanding 8% notes and the exchange notes are governed by the same indenture. The following terms are applicable to both the outstanding 8% notes and the exchange notes. In this document, the terms "notes" or "8% notes" refer to both the outstanding 8% notes and the exchange notes. We define certain capitalized terms used in this summary in the "Description of the Exchange Notes -- Certain Definitions" section of this prospectus. ISSUER........................ Tesoro Petroleum Corporation. SECURITIES OFFERED............ $375 million in aggregate principal amount of 8.00% Senior Secured Notes due 2008, Series B. MATURITY...................... April 15, 2008. INTEREST RATE................. 8.00% per year. INTEREST PAYMENT DATES........ April 15 and October 15 of each year, commencing October 15, 2003. RANKING....................... The notes will be our senior obligations and will be pari passu in right of payment with all our existing and future senior Indebtedness, including Indebtedness under our new term loans and our new credit agreement. The notes will be senior in right of payment to all our existing and future subordinated Indebtedness, including our outstanding 9% Senior Subordinated Notes due 2008, 9 5/8% Senior Subordinated Notes due 2008 and 9 5/8% Senior Subordinated Notes due 2012. The term "Indebtedness" is defined in the "Description of the Exchange Notes -- Certain Definitions" section of this prospectus. GUARANTEES.................... The notes will be jointly and severally guaranteed by each of our current and future domestic restricted subsidiaries (other than our immaterial subsidiaries). Each guarantee will be pari passu in right of payment with all existing and future senior Indebtedness of that guarantor, including guarantees of Indebtedness under our new term loans and our new credit agreement. Each guarantee will be senior in right of payment to all existing and future subordinated Indebtedness of such guarantor, including guarantees of our existing senior subordinated notes. SECURITY...................... The notes and the subsidiary guarantees will be secured together with the new term loans and the related term loan guarantees on an equal and ratable basis by first-priority security interests (subject to permitted prior liens) in the Collateral. The Collateral includes each of our existing six refineries and certain related assets. The term "Collateral" is defined in the "Description of the Exchange Notes -- Security -- Collateral" section of this prospectus. OPTIONAL REDEMPTION........... We cannot redeem the notes until April 15, 2006, except as described below. At anytime on or after April 15, 2006, we can redeem some or all of the notes at the redemption prices listed in the "Description of the Exchange Notes -- Optional Redemption" section of this prospectus, plus accrued interest. OPTIONAL REDEMPTION AFTER EQUITY OFFERINGS.............. At any time before April 15, 2006, on one or more occasions, we can choose to redeem up to 35% of the outstanding principal amount of the notes, including any additional notes, with the net 12 cash proceeds of any one or more public or private equity offerings, so long as: - we pay holders of the notes a redemption price of 108% of the face amount of the notes we redeem, plus accrued interest; - we redeem the notes within 90 days of such equity offering; and - at least 65% of the aggregate principal amount of notes issued under the indenture, including the principal amount of any additional notes, remains outstanding immediately after each such redemption. See "Description of the Exchange Notes -- Optional Redemption". CHANGE OF CONTROL OFFER....... If a change of control of our company occurs, we must give holders of the notes the opportunity to sell to us at a purchase price of 101% of their face amount, plus accrued interest. The term "Change of Control" is defined in the "Description of the Exchange Notes -- Certain Definitions" section of this prospectus. COVENANTS..................... The indenture governing the notes will contain covenants that limit our ability and that of our subsidiaries to: - incur additional debt; - pay dividends or distributions on, or redeem or repurchase, our capital stock; - make investments; - engage in transactions with affiliates; - create liens on our assets; - transfer or sell assets; - guarantee debt; - restrict dividend or other payments to us; - consolidate, merge or transfer all or substantially all of our assets and the assets of our subsidiaries; and - engage in unrelated businesses. These covenants are subject to important exceptions and qualifications, which are described in the "Description of the Exchange Notes" section of this prospectus. If the notes and the term loans are assigned a rating equal to or higher than Baa3 by Moody's and BBB- by S&P and no default or event of default has occurred and is continuing, certain covenants will be suspended. If the ratings should subsequently decline to below Baa3 or BBB-, the suspended covenants will be reinstituted. For more details, see the "Description of the Exchange Notes -- Certain Covenants -- Covenant Suspension" section of this prospectus. The security documents creating the security interests in the Collateral will include certain covenants relating to the Collateral. EXCHANGE OFFER; REGISTRATION RIGHTS........................ We and the Guarantors have agreed to offer to exchange the notes for a new issue of substantially identical debt securities registered under the Securities Act as evidence of the same underlying 13 obligation of indebtedness. We have also agreed to provide a shelf registration statement to cover resales of the notes under certain circumstances. If we fail to satisfy these obligations, we have agreed to pay special interest to holders of the notes under specified circumstances. See "Description of the Exchange Notes -- Registration Rights; Special Interest". AMENDMENTS AND WAIVERS........ Except for specific amendments, the indenture may be amended with the consent of the holders of a majority of the principal amount of the notes then outstanding. In general, the security documents may be amended with the consent of the holders of a majority of the principal amount of the notes and the new term loans, voting together as a single class, provided that all or substantially all of the Collateral cannot be released without the consent of 100% in principal amount of the notes and the term loans voting together as a single class. In general, the intercreditor agreement may be amended with the consent of the holders of a majority of the principal amount of the notes and the new term loans then outstanding, voting together as a single class, except that any amendment that adversely affects the rights of the holders of the notes and the new term loans will be effective only with the consent of the holders of 66 2/3% in principal amount of the notes and the new term loans. ORIGINAL ISSUE DISCOUNT....... The outstanding 8% notes were issued with original issue discount for United States federal income tax purposes. Thus, in addition to the stated interest on the notes, you may be required to include amounts representing the original issue discount in gross income on a constant yield basis for United States federal income tax purposes in advance of the receipt of cash payments to which such income is attributable. USE OF PROCEEDS............... We will not receive any cash proceeds from the exchange offer. We used all of the net proceeds of the issuance of the outstanding 8% notes, along with the proceeds of our new term loans and borrowings under our new credit agreement, primarily to repay all amounts outstanding under our previous senior secured credit facility and repurchase a portion of our outstanding senior subordinated notes. RISK FACTORS Investing in the notes involves substantial risk. See "Risk Factors" section of this prospectus for a description of certain of the risks you should consider before participating in the exchange offer. ADDITIONAL INFORMATION We were incorporated in Delaware in 1968. Our principal executive office is located at 300 Concord Plaza Drive, San Antonio, Texas 78216-6999, and our telephone number is (210) 828-8484. 14 SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA The following tables set forth certain of our summary historical condensed consolidated financial data and certain pro forma information after giving effect to the Financing Transactions. The summary historical financial information presented below for each of the years ended December 31, 2000, 2001 and 2002 and the three months ended March 31, 2002 and 2003 has been derived from the financial statements incorporated by reference in this prospectus. The pro forma balance sheet data gives effect to the Financing Transactions as if they had occurred on March 31, 2003. The pro forma financial ratio of earnings to fixed charges (1) gives effect to the acquisition of our California refinery and related assets (the "California Acquisition") as if it had occurred on January 1, 2002 and (2) gives further effect to the Financing Transactions as if they had occurred on January 1, 2002. The pro forma information giving effect to the California Acquisition is based on historical data and we believe it is not indicative of future results of operations (see note (k) below). You should read this information in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements incorporated by reference in this prospectus.
THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, ------------------------------ ------------------- 2000 2001(a) 2002(b) 2002 2003 -------- -------- -------- -------- -------- (DOLLARS IN MILLIONS) STATEMENT OF OPERATIONS DATA: Revenues Refining......................... $4,788.2 $4,851.4 $6,760.3 $1,166.9 $2,200.4 Retail........................... 305.0 491.3 1,052.5 190.8 224.2 Other............................ 186.5 172.9 132.2 26.5 43.2 Intersegment sales from Refining to Retail............ (212.9) (333.9) (825.7) (151.6) (181.7) -------- -------- -------- -------- -------- Total Revenues.............. 5,066.8 5,181.7 7,119.3 1,232.6 2,286.1 -------- -------- -------- -------- -------- Costs of Sales and Expenses Refining......................... 4,326.6 4,228.6 5,757.5 1,030.7 1,879.7 Retail........................... 300.1 455.2 1,047.9 197.0 227.3 Other............................ 173.7 159.7 126.8 25.3 41.4 Corporate........................ 43.7 57.8 66.7 17.4 21.0 Depreciation and amortization.... 69.3 79.9 130.7 25.2 37.0 Loss on asset sales and impairment.................... -- 1.8 8.4 0.2 0.2 -------- -------- -------- -------- -------- Total Costs of Sales and Expenses................. 4,913.4 4,983.0 7,138.0 1,295.8 2,206.6 -------- -------- -------- -------- -------- Operating Income (Loss)............ 153.4 198.7 (18.7) (63.2) 79.5 Interest and Financing Costs, Net of Capitalized Interest.......... (32.7) (52.8) (166.1) (30.3) (47.2) Interest Income.................... 2.8 1.0 3.5 0.7 0.2 -------- -------- -------- -------- -------- Earnings (Loss) Before Income Taxes............................ 123.5 146.9 (181.3) (92.8) 32.5 Income Tax Provision (Benefit)..... 50.2 58.9 (64.3) (37.2) 12.1 -------- -------- -------- -------- -------- Net Earnings (Loss)................ 73.3 88.0 (117.0) (55.6) 20.4 Preferred Dividend Requirements(c).................. 12.0 6.0 -- -- -- -------- -------- -------- -------- -------- Net Earnings (Loss) Applicable to Common Stock..................... $ 61.3 $ 82.0 $ (117.0) $ (55.6) $ 20.4 ======== ======== ======== ======== ========
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THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, ------------------------------ ------------------- 2000 2001(a) 2002(b) 2002 2003 -------- -------- -------- -------- -------- (DOLLARS IN MILLIONS) OTHER DATA: EBITDA(d): Refining......................... $ 248.7 $ 288.9 $ 177.1 $ (15.4) $ 139.0 Retail........................... 4.9 36.1 4.6 (6.2) (3.1) Other............................ 12.8 13.2 5.4 1.2 1.8 -------- -------- -------- -------- -------- Total Segment EBITDA........ 266.4 338.2 187.1 (20.4) 137.7 Corporate and unallocated........ (43.7) (57.8) (66.7) (17.4) (21.0) Loss on asset sales and impairment.................... -- (1.8) (8.4) (0.2) (0.2) -------- -------- -------- -------- -------- Total Consolidated EBITDA... $ 222.7 $ 278.6 $ 112.0 $ (38.0) $ 116.5 ======== ======== ======== ======== ======== Capital Expenditures(e): Refining......................... $ 56.5 $ 140.0 $ 150.9 $ 36.3 $ 27.0 Retail........................... 31.0 43.2 40.6 10.1 0.2 Other............................ 3.2 3.1 2.5 1.2 0.3 Corporate........................ 3.3 23.2 9.5 5.0 0.2 -------- -------- -------- -------- -------- Total Capital Expenditures............. $ 94.0 $ 209.5 $ 203.5 $ 52.6 $ 27.7 ======== ======== ======== ======== ========
AS OF DECEMBER 31, AS OF MARCH 31, 2003 2002 --------------------------------- ------------ PRO FORMA FOR THE ACTUAL ACTUAL FINANCING TRANSACTIONS ------------ -------- ---------------------- (DOLLARS IN MILLIONS) BALANCE SHEET DATA: Cash and Cash Equivalents(f)............... $ 109.8 $ 13.6 $ --(g) Working Capital............................ 445.9 450.5 482.0 Property, Plant and Equipment, Net......... 2,303.4 2,303.5 2,303.5 Total Assets............................... 3,758.8 3,664.0 3,651.2(i) Total Senior Debt.......................... 946.8 870.5 917.0 Total Debt and Other Obligations(f)........ 1,976.7 1,906.0 1,926.4 Stockholders' Equity(h).................... 887.6 908.0 887.4(i)
FOR THE YEAR ENDED DECEMBER 31, 2002 ----------------------------------------- FOR THE THREE MONTHS PRO FORMA FOR ENDED MARCH 31, 2003 PRO FORMA THE CALIFORNIA ---------------------- FOR THE ACQUISITION AND PRO FORMA FOR CALIFORNIA THE FINANCING THE FINANCING ACTUAL(b) ACQUISITION TRANSACTIONS ACTUAL TRANSACTIONS --------- ----------- --------------- ------ ------------- Ratio of Earnings to Fixed Charges..................... (j) (k) (l) 1.56x 1.68x
- --------------- (a) Financial results of the Mid-Continent refining and retail operations have been included in the amounts above since September 6, 2001, their acquisition date. (b) Financial results of the California refinery have been included in the amounts above since May 17, 2002, its acquisition date. 16 (c) The Premium Income Equity Securities automatically converted into shares of common stock in July 2001, which eliminated our $12 million annual preferred dividend requirement. (d) EBITDA represents earnings before interest and financing costs, interest income, income taxes and depreciation and amortization. EBITDA is presented herein because we believe it enhances an investor's understanding of our ability to satisfy principal and interest obligations with respect to our indebtedness and to use cash for other purposes, including capital expenditures. EBITDA is also used for internal analysis and as a component of the fixed charge coverage financial covenant in our new credit agreement. EBITDA should not be considered as an alternative to net earnings (loss), earnings (loss) before income taxes, cash flows from operating activities or any other measure of financial performance or liquidity presented in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). EBITDA may not be comparable to similarly titled measures used by other entities. Our EBITDA and segment EBITDA for the years ended December 31, 2000, 2001 and 2002 and the three months ended March 31, 2002 and 2003 were as follows (in millions):
THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, ------------------------- --------------- 2000 2001 2002 2002 2003 ------ ------ ------- ------ ------ CONSOLIDATED EBITDA Net Earnings (Loss)...................... $ 73.3 $ 88.0 $(117.0) $(55.6) $ 20.4 Add Income Tax Provision (Benefit)....... 50.2 58.9 (64.3) (37.2) 12.1 Add Interest and Financing Costs......... 32.7 52.8 166.1 30.3 47.2 Less Interest Income..................... (2.8) (1.0) (3.5) (0.7) (0.2) ------ ------ ------- ------ ------ Operating Income (Loss)................ 153.4 198.7 (18.7) (63.2) 79.5 Add Depreciation and Amortization........ 69.3 79.9 130.7 25.2 37.0 ------ ------ ------- ------ ------ Consolidated EBITDA.................... $222.7 $278.6 $ 112.0 $(38.0) $116.5 ====== ====== ======= ====== ====== EBITDA BY SEGMENT Refining Operating income (loss)................ $191.1 $225.8 $ 72.9 $(35.8) $109.2 Depreciation and amortization.......... 57.6 63.1 104.2 20.4 29.8 ------ ------ ------- ------ ------ Refining EBITDA..................... 248.7 288.9 177.1 (15.4) 139.0 ------ ------ ------- ------ ------ Retail Operating income (loss)................ (1.7) 25.0 (12.3) (9.6) (8.1) Depreciation and amortization.......... 6.6 11.1 16.9 3.4 5.0 ------ ------ ------- ------ ------ Retail EBITDA....................... 4.9 36.1 4.6 (6.2) (3.1) ------ ------ ------- ------ ------ Other Operating income....................... 10.1 10.3 2.3 0.5 1.1 Depreciation and amortization.......... 2.7 2.9 3.1 0.7 0.7 ------ ------ ------- ------ ------ Other EBITDA........................ 12.8 13.2 5.4 1.2 1.8 ------ ------ ------- ------ ------ Total Segment EBITDA..................... 266.4 338.2 187.1 (20.4) 137.7 Corporate and Unallocated.............. (43.7) (57.8) (66.7) (17.4) (21.0) Loss on asset sales and impairment..... -- (1.8) (8.4) (0.2) (0.2) ------ ------ ------- ------ ------ Consolidated EBITDA................. $222.7 $278.6 $ 112.0 $(38.0) $116.5 ====== ====== ======= ====== ======
Historical EBITDA as presented above is different than EBITDA as defined under our previous senior secured credit facility and new credit agreement. The primary differences are non-cash postretirement 17 benefit costs and loss on asset sales and impairment, which are added to net earnings (loss) under the credit agreement EBITDA calculations. (e) Capital expenditures exclude amounts to fund acquisitions in the Refining segment and Retail segment in 2001 and 2002 and exclude amounts for refinery turnaround spending and other major maintenance. (f) At December 31, 2002, cash and cash equivalents included $16 million which was used to prepay term loans in January 2003, as required by our previous senior secured credit facility. (g) Pro forma cash and cash equivalents as adjusted for the Financing Transactions were used to partially pay underwriting fees and offering expenses of approximately $34 million. (h) We have not paid dividends on our common stock since 1986. (i) The reduction in pro forma total assets and stockholders' equity is due to the write-off of debt issuance costs, net of income taxes, primarily associated with our previous senior secured credit facility. (j) For the year ended December 31, 2002, fixed charges exceeded earnings by $183.8 million on a historical basis. (k) For the year ended December 31, 2002, fixed charges exceeded earnings by $261.1 million on a pro forma basis, as adjusted for the California Acquisition. A major turnaround of our California refinery, including the refinery's fluid coker, was completed in March 2002 and a turnaround of the larger crude unit was completed in June 2002. The inclusion of the results of our California Acquisition prior to May 17, 2002, the date of the consummation of that acquisition, in our pro forma as adjusted results for the year ended December 31, 2002 resulted in a $46 million increase in our net loss from our historical results for the same period. (l) For the year ended December 31, 2002, fixed charges exceeded earnings by $251.2 million on a pro forma basis as adjusted for the California Acquisition and the Financing Transactions. See also Note (k). SUMMARY REFINING AND MARKETING OPERATING DATA
THREE MONTHS YEAR ENDED DECEMBER 31, ENDED ------------------------ MARCH 31, 2000 2001 2002 2003 ------ ------ ------ ------------ REFINING THROUGHPUT (thousand bpd): California Refinery(a)................................... -- -- 95 158 Washington Refinery(b)................................... 117 119 104 106 Hawaii Refinery(b)....................................... 84 87 82 76 Alaska Refinery.......................................... 48 50 53 44 North Dakota Refinery(c)................................. -- 17 51 49 Utah Refinery(c)......................................... -- 17 50 32 ----- ----- ----- ------ Total Throughput.................................... 249 290 435 465 ===== ===== ===== ====== RATED CRUDE OIL REFINING CAPACITY (thousand bpd)......... 275 390 558 558 ===== ===== ===== ====== REFINING YIELD (thousand bpd): California Refinery(d) Gasoline and gasoline blendstocks...................... -- -- 62 101 Diesel fuel............................................ -- -- 22 40 Heavy oils, residual products, internally-produced fuel and other........................................... -- -- 16 27 ----- ----- ----- ------ Total............................................... -- -- 100 168 ----- ----- ----- ------
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THREE MONTHS YEAR ENDED DECEMBER 31, ENDED ------------------------ MARCH 31, 2000 2001 2002 2003 ------ ------ ------ ------------ Pacific Northwest Refineries Gasoline and gasoline blendstocks...................... 74 73 68 66 Jet fuel............................................... 32 28 28 25 Diesel fuel............................................ 27 30 24 23 Heavy oils, residual products, internally-produced fuel and other........................................... 38 44 42 41 ----- ----- ----- ------ Total............................................... 171 175 162 155 ----- ----- ----- ------ Mid-Pacific Refinery Gasoline and gasoline blendstocks...................... 21 20 20 18 Jet fuel............................................... 26 27 26 23 Diesel fuel............................................ 12 14 12 13 Heavy oils, residual products, internally-produced fuel and other........................................... 27 27 25 23 ----- ----- ----- ------ Total............................................... 86 88 83 77 ----- ----- ----- ------ Mid-Continent Refineries(e) Gasoline and gasoline blendstocks...................... -- 18 54 45 Jet fuel............................................... -- 4 10 8 Diesel fuel............................................ -- 9 29 22 Heavy oils, residual products, internally-produced fuel and other........................................... -- 4 12 9 ----- ----- ----- ------ Total............................................... -- 35 105 84 ----- ----- ----- ------ Total Refining Yield(d)(e) Gasoline and gasoline blendstocks...................... 95 111 204 230 Jet fuel............................................... 58 59 64 56 Diesel fuel............................................ 39 53 87 98 Heavy oils, residual products, internally-produced fuel and other........................................... 65 75 95 100 ----- ----- ----- ------ Total............................................... 257 298 450 484 ===== ===== ===== ====== REFINING MARGIN ($/throughput barrel)(f)(g): California Gross refining margin.................................. $ -- $ -- $6.41 $10.56 Manufacturing cost before depreciation and amortization........................................ $ -- $ -- $4.17 $ 4.27 Pacific Northwest Gross refining margin.................................. $6.93 $6.07 $4.09 $ 6.19 Manufacturing cost before depreciation and amortization........................................ $1.99 $1.89 $2.05 $ 2.45 Mid-Pacific Gross refining margin.................................. $4.14 $4.96 $2.85 $ 3.15 Manufacturing cost before depreciation and amortization........................................ $1.29 $1.27 $1.39 $ 1.40 Mid-Continent Gross refining margin.................................. $ -- $7.25 $4.17 $ 4.71 Manufacturing cost before depreciation and amortization........................................ $ -- $2.07 $2.22 $ 2.47 Total Refining Segment Gross refining margin.................................. $5.98 $5.87 $4.38 $ 6.92 Manufacturing cost before depreciation and amortization........................................ $1.75 $1.72 $2.43 $ 2.90
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THREE MONTHS YEAR ENDED DECEMBER 31, ENDED ------------------------ MARCH 31, 2000 2001 2002 2003 ------ ------ ------ ------------ NUMBER OF BRANDED RETAIL STATIONS (end of period): Tesoro (including Tesoro Alaska(R)) Tesoro-operated........................................ 63 138 154 150 Jobber/dealer.......................................... 193 183 359 354 Mirastar Tesoro-operated........................................ 20 55 78 78 Other Tesoro-operated........................................ -- 20 2 2 Jobber/dealer.......................................... -- 281 -- -- Total Branded Retail Stations Tesoro-operated(h)..................................... 83 213 234 230 Jobber/dealer(i)....................................... 193 464 359 354 ----- ----- ----- ------ Total............................................... 276 677 593 584 ===== ===== ===== ======
- --------------- (a) Throughput volumes in 2002 included the California refinery since we acquired it on May 17, 2002, averaged over 365 days. Throughput for the California refinery averaged over the 229 days we owned it in 2002 was 150,800 bpd. (b) The Washington refinery reduced throughput in 2002 during a scheduled turnaround. The Hawaii refinery temporarily reduced throughput in 2003 for maintenance to its crude oil distribution unit. (c) Throughput volumes in 2001 included the Mid-Continent refineries since we acquired them on September 6, 2001, averaged over 365 days. Throughput for these refineries averaged over the 117 days that we owned them in 2001 was 53,500 bpd in North Dakota and 51,500 bpd in Utah. (d) Refining yield in 2002 included the California refinery since we acquired it on May 17, 2002, averaged over 365 days. Refining yield for the California refinery averaged over the 229 days we owned it was 160,000 bpd. (e) Refining yield in 2001 included the Mid-Continent refineries since we acquired them on September 6, 2001, averaged over 365 days. Refining yield for these refineries averaged over the 117 days we owned them in 2001 was 108,700 bpd. (f) Management uses gross refining margin per barrel to compare profitability to other companies in the industry. Gross refining margin per barrel is calculated by dividing gross refining margin by total refining throughput. Gross refining margin per barrel may not be comparable to similarly titled measures used by other entities. (g) Management uses manufacturing costs per barrel to evaluate the efficiency of refinery operations. Manufacturing costs per barrel may not be comparable to similarly titled measures used by other entities. (h) Tesoro-operated stations included 31 in Alaska, 33 in Hawaii, 47 in Washington, 40 in Utah and 83 in several other western states at December 31, 2002 and 29 in Alaska, 33 in Hawaii, 47 in Washington, 40 in Utah and 81 in several other western states at March 31, 2003. (i) At December 31, 2002, the branded jobber/dealer stations included 88 in Alaska, 22 in California, 34 in Idaho, 71 in Utah, 60 in North Dakota, 44 in Washington and 40 in several other western states. The decrease in jobber/dealer stations during 2002 was primarily due to approximately 150 BP/Amoco jobber/dealer stations (included in the Mid-Continent acquisition) that did not rebrand to the Tesoro(R) brand name. This decision not to rebrand resulted in us no longer being those jobber/dealer stations' exclusive supplier under the terms of the acquisition agreement. At March 31, 2003, the branded jobber/dealer stations included 88 in Alaska, 21 in California, 32 in Idaho, 68 in Utah, 62 in North Dakota, 44 in Washington and 39 in several other western states. 20 RISK FACTORS Your investment in the notes will involve risks. Before you decide to purchase any notes, you should carefully consider the following risk factors and other information contained, or incorporated by reference, in this prospectus. RISKS RELATING TO THE NOTES WE HAVE A SUBSTANTIAL AMOUNT OF DEBT THAT COULD PREVENT US FROM SATISFYING OUR OBLIGATIONS UNDER THE NOTES. OUR DEBT HAS LIMITED AND COULD FURTHER LIMIT OUR FLEXIBILITY IN OPERATING OUR BUSINESS AND COULD LIMIT OUR ACCESS TO FUNDS WE NEED TO GROW OUR BUSINESS. Giving effect to the Financing Transactions, our pro forma consolidated indebtedness as of March 31, 2003 would have been $1.9 billion (including the notes, the new term loans, and borrowings under our new credit agreement, but excluding additional amounts available under our new credit agreement). Our high degree of leverage may have important consequences, including the following: - a substantial portion of our cash flow is used to service debt, which reduces the funds that would otherwise be available for operations and future business opportunities; - our debt level makes us more vulnerable to the impact of economic downturns and adverse developments in our business; - our debt level could limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; - we may have difficulties obtaining additional or favorable financing for capital expenditures, working capital, acquisitions or other purposes; - our debt level may impact our level of discretionary capital expenditures and related expansion opportunities; and - our debt level may place us at a competitive disadvantage to our less leveraged competitors. Our ability to meet our expenses and debt obligations, to refinance our debt obligations and to fund capital expenditures will depend on our future performance, which will be affected by general economic, financial, competitive, legislative, regulatory and other factors beyond our control. Our business may not generate sufficient cash flow, or we may not be able to borrow funds under our new credit agreement, in an amount sufficient to enable us to service our indebtedness, including the notes, the new term loans and our existing senior subordinated notes, or make capital expenditures. If we are unable to generate sufficient cash flow from operations or to borrow sufficient funds, we may be required to sell assets, eliminate or defer future capital expenditures, refinance all or a portion of our existing debt (including the notes) or obtain additional financing. We may not be able to refinance our debt, sell assets or borrow more money on terms acceptable to us, if at all. Additionally, our ability to incur additional debt will be restricted under the covenants contained in our new term loans, our new credit agreement and our indentures. IT MAY BE DIFFICULT TO REALIZE THE VALUE OF THE COLLATERAL PLEDGED TO SECURE THE NOTES, AND THE PROCEEDS FROM THE SALE OF THE COLLATERAL MAY BE INSUFFICIENT TO REPAY THE NOTES. As described below under the caption "Description of the Exchange Notes -- Security", the notes will be secured together with the new term loans, equally and ratably, by first priority security interests (subject to permitted prior liens) in the Collateral. The Collateral includes substantially all of the non-working capital assets which constitute each of our existing six refineries and certain related assets. The Collateral may be illiquid, and the proceeds from the sale of the Collateral may not be adequate to repay the principal amount of, or the accrued and unpaid interest on, the notes and the new term loans. In the event that a bankruptcy case is commenced by or against us, if the value of the Collateral is less than the 21 amount of principal and accrued and unpaid interest on the notes and the new term loans, interest may cease to accrue on the notes from and after the date the bankruptcy petition is filed. The collateral agent's ability to foreclose on the Collateral on the noteholders' behalf may be subject to perfection and priority issues. For example, since neither mortgages nor fixture filings (other than pursuant to transmitting utilities financing statements) will be made with respect to the pipelines included in the Collateral, no liens will be created in the real estate interests related to such pipelines. Although personal property financing statements, including transmitting utility filings, will be filed with respect to the pipelines, such financing statements may be ineffective to perfect the security interest of the collateral trustee therein or, even if effective, may be subject to the interests of other creditors who may obtain priority over the security interest of the collateral agent therein. In addition, the security interest of the collateral agent will be subject to practical problems generally associated with the realization of its security interest in the Collateral. For example, the collateral agent may need to obtain the consent of a third party prior to obtaining a security interest in, or thereafter transferring, a contract. We cannot assure you that the collateral agent will be able to obtain any such consent. If the collateral agent exercises its right to foreclose on certain assets, transferring required government approvals to, or obtaining new approvals by, a purchaser or new operator of a refinery may require governmental proceedings with consequent delays. NOT ALL OF THE ASSETS RELATED TO, OR NEEDED FOR THE OPERATION OF, THE COLLATERAL WILL BE PLEDGED TO SECURE THE NOTES. THE VALUE OF THE COLLATERAL MAY BE DIMINISHED BY THE ABSENCE OF SECURITY INTERESTS IN, AND ASSURED ACCESS TO, THOSE ASSETS. As described below under the caption "Description of the Exchange Notes -- Security -- Collateral", the notes and the Guarantees will not be secured by all of our assets or all of the assets of our subsidiaries. In particular, the collateral agent will not have a perfected first priority security interest in all of the assets which constitute, or which are associated with the operation of, the refineries. For example, the collateral agent may not have security interests in all of our pipelines currently used to supply refinery feedstocks and distribute products. We must receive state regulatory approval prior to granting a security interest in the fixtures and equipment comprising the North Dakota-Montana pipeline system and the outstanding capital stock of Tesoro High Plains Pipeline Company. Those regulatory approvals have yet to be obtained. We and Tesoro High Plains Pipeline Company have agreed to use all commercially reasonable efforts to obtain such consents as soon as practicable after the date of the closing of this offering, but if we conclude in good faith that such efforts will not be successful, we and Tesoro High Plains Pipeline Company will not be required to grant a security interest in the North Dakota-Montana pipeline system and we will not be required to grant a security interest in the capital stock of Tesoro High Plains Pipeline Company. We may not be able to receive those state regulatory approvals prior to closing of this offering, or at all. Furthermore, if securing the notes with the capital stock of any Pipeline Subsidiary (as defined under "Description of the Exchange Notes") requires us to prepare audited financial statements of such entity in order to comply with Regulation S-X, the collateral agent will be required to release the security interest in such capital stock. The grant of a security interest in some of the Collateral requires the consent of third-parties which may not have been obtained. In addition, and as discussed above, certain of the facilities that are important to the operation of the refineries are leased from, held under contract with, or regulated by, governmental authorities pursuant to agreements that require consent to encumber the asset and may require consent to further transfer the asset in the event of a foreclosure. These assets include waterfront rights at our Hawaii, Alaska, California and Washington refineries. We have committed to use all commercially reasonable efforts to obtain these consents as soon as practicable after the closing of this offering, but if we conclude in good faith that such efforts will not be successful, we will not be required to continue to seek such consents. It is possible that we will not be successful, and a number of the governmental authorities from whom we will seek such consents are generally not in a position to grant such consents in a timely manner. Furthermore, the collateral agent will not have a security interest in the real estate over, under or through which certain of the pipelines that are part of the Collateral run, and as described above, the security interest 22 granted in the pipelines may be subject to perfection and priority issues. Similarly, the collateral agent will not possess security interests in leased terminals that are owned by third-parties, including the terminals located in Anchorage, Alaska which are the primary sources of distribution of the refined products produced by our Alaska refinery and the collateral agent will not have security interests in our rights to use any of the third-party pipelines currently used to supply and distribute products. Finally, we are not permitted to collaterally assign many of our contracts, including those pursuant to which we are granted the right to use proprietary technology necessary for the operation of our refineries without the prior consent of such counterparty. Accordingly, these rights are not included in the Collateral. Consequently, in the event of a bankruptcy or liquidation, the collateral agent may not possess a security interest in all assets that would ensure that our refineries will have continued access to crude oil, or access to transportation for the sale of refined products, in either case in sufficient volume or at all. This inability to access sufficient volumes of crude oil, or to distribute sufficient volumes of refined products, may cause a diminution in the value of the refineries and other Collateral securing the notes and the guarantees. THE NOTES WILL NOT BE SECURED BY ALL OF OUR ASSETS. THE NOTES WILL BE SUBORDINATED TO THE SECURITY INTEREST OF OUR NEW CREDIT AGREEMENT IN CERTAIN ASSETS, AND WILL HAVE AN UNSECURED SENIOR CLAIM TO ALL OF OUR ASSETS OTHER THAN THE COLLATERAL. Our new credit agreement will be secured by first priority security interests (subject to permitted prior liens) in all of Tesoro's and substantially all of its domestic subsidiaries' inventory, accounts and other rights to payment related to the sale of inventory or the rendering of services, intercompany indebtedness (other than intercompany indebtedness constituting collateral securing the notes and the new term loans), cash and cash equivalents, related contracts and general intangibles and other rights related to, and all proceeds of, the foregoing. Lenders under our new credit agreement will be entitled to receive the proceeds from any sale of those assets to repay in full all outstanding obligations under our new credit agreement before the holders of the notes and the new term loans, as well as any other holders of senior debt, will be entitled to any recovery from those assets. The notes, our new term loans and our new credit agreement will not have security interests in certain of our assets, including our retail assets. If the proceeds from the sale of Collateral are not sufficient to repay amounts outstanding under the notes and new term loans, then holders of notes and term loans (to the extent not repaid from the proceeds from the sale of the Collateral) would only have an unsecured claim against our remaining assets. Additionally, to the extent that proceeds from the sale of the assets securing the new credit agreement are insufficient to repay in full all outstanding obligations under that facility, lenders under that facility, along with all of our unsecured creditors (including the holders of our senior subordinated notes), will also have a claim against those of our assets that have not been pledged as Collateral and that claim would be pari passu in right of payment with the claim of the holders of the notes and the new term loans, as well as any other holders of senior debt, against those remaining assets. THE VALUE OF SOME OF THE COLLATERAL MAY BE LOWERED DUE TO THE DIFFICULTY TO TRANSFER REQUIRED ENERGY AND ENVIRONMENTAL PERMITS AND THE PRESENCE OF SOME CONTAMINATION, EVEN IF COVERED BY CERTAIN INDEMNITIES. Our business requires numerous federal, state and local energy and environmental permits. Continued operation of the Collateral depends on the maintenance of such permits, which are described more fully in Items 1 and 2 -- "Business and Properties -- Government Regulation and Legislation" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2002, incorporated by reference in this prospectus, and below under "-- Risks relating to our business -- Our operations are subject to general environmental risks, expenses and liabilities which could affect our results of operation". In the event of foreclosure, the transfer of such permits may require us to incur significant cost and expense. Further, we cannot assure you that the applicable governmental authorities will consent to the transfer of all such permits. If the regulatory approval required for such transfers are not obtained or are delayed, the foreclosure may be delayed, a temporary shutdown of operations may result and the value of the Collateral may be significantly decreased. 23 In addition, our operations involve the use, storage, distribution, manufacture and refining of petroleum and other hazardous materials. As described more fully in Item 7 -- "Management's Discussion and Analysis -- Capital Resources and Liqudity -- Long-Term Commitments -- Other Environmental Matters" section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2002, incorporated by reference in this prospectus and below under "-- Risks relating to our business -- Our business is impacted by risks inherent in petroleum refining operations" and "-- Risks relating to our business -- Our operations are subject to general environmental risks, expenses and liabilities which could affect our results of operations", this has led, and could lead, to the presence of contamination on the Collateral. The presence of such contamination may reduce the value of any contaminated Collateral, even if the contamination is covered by indemnities, such as at our California refinery. Further, the transfer of such environmental indemnities may require the consent of the indemnitor. The delay or failure to obtain such consent may greatly reduce the value of the Collateral. FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO VOID GUARANTEES AND LIENS GRANTED BY THE GUARANTORS AND REQUIRE HOLDERS OF NOTES TO RETURN PAYMENTS RECEIVED FROM GUARANTORS OR THEIR PROPERTY. Tesoro Petroleum Corporation is a holding company and conducts substantially all of its operations through its subsidiaries. Our only significant assets are the capital stock of our subsidiaries. As a holding company, we are dependent on distributions of funds from our subsidiaries to meet our debt service and other obligations, including the payment of principal and interest on the notes. If we are unable to obtain funds from our subsidiaries or if the subsidiary guarantees were to be held unenforceable for any reason, we may not be able to pay interest or principal on the notes when due and we cannot assure you that we will be able to obtain the necessary funds from other sources. The notes will be guaranteed on a senior basis by all of our current and future domestic restricted subsidiaries. Under federal bankruptcy law and comparable provisions of state fraudulent transfer laws, a guarantee and any liens granted to secure such guarantee could be voided, or claims in respect of a guarantee could be subordinated to all other debts of that guarantor if, among other things, the guarantor, at the time it incurred the indebtedness evidenced by its guarantee: - received less than reasonably equivalent value or fair consideration for the incurrence of such guarantee; and - was insolvent or rendered insolvent by reason of such incurrence; or - was engaged in a business or transaction for which the guarantor's remaining assets constituted unreasonably small capital; or - intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature. In addition, any payment by that guarantor pursuant to its guarantee could be voided and required to be returned to the guarantor or to a fund for the benefit of the creditors of the guarantor. The measures of insolvency for purposes of these fraudulent transfer laws will vary depending on the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, a guarantor would be considered insolvent if: - the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all of its assets; - if the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or - it could not pay its debts as they become due. 24 We believe that each guarantor, after giving effect to its guarantee of these notes, will not be insolvent, will not have unreasonably small capital for the business in which it is engaged and will not have incurred debts beyond its ability to pay such debts as they mature. We cannot assure you, however, as to what standard a court would apply in making these determinations or that a court would agree with our conclusions in this regard. YOU MAY SUFFER ADVERSE CONSEQUENCES IF YOU DO NOT EXCHANGE THE OUTSTANDING 8% NOTES. Any of the outstanding 8% notes that are not exchanged for exchange notes have not been registered with the SEC or in any state. Unless the outstanding 8% notes are registered, they only may be offered and sold pursuant to an exemption from, or in a transaction that is not subject to, the registration requirements of the Securities Act. Depending upon the percentage of the outstanding 8% notes exchanged for exchange notes, the liquidity of the outstanding 8% notes may be adversely affected. THE COLLATERAL SECURING THE NOTES COULD BE IMPAIRED IN THE EVENT WE WERE TO FILE FOR BANKRUPTCY. As described below under the caption "Description of the Exchange Notes -- Security", the notes will be secured together with the new term loans on an equal and ratable basis by first priority security interests (subject to permitted prior liens), in all our currently owned and all after-acquired Collateral. Upon the occurrence of an event of default, the collateral agent will have the right to foreclose upon and sell the Collateral if so directed by the holders of a majority in outstanding principal amount of the notes and the new term loans, voting together as a single class. See "Description of the Exchange Notes -- Security -- Collateral Agent". This right, however, would be subject to limitations under applicable bankruptcy laws if we become subject to a bankruptcy proceeding. To the extent that your rights as a secured creditor are limited or set aside in a bankruptcy proceeding, you would lose some or all of the benefit of the security that the Collateral was intended to provide. ANY FUTURE PLEDGE OF COLLATERAL MIGHT BE AVOIDABLE BY A TRUSTEE IN BANKRUPTCY. Any future pledge of Collateral in favor of the collateral agent, including pursuant to security documents delivered after the date of the indenture, might be avoidable by the pledgor (as debtor in possession) or by its trustee in bankruptcy in certain events or circumstances exist or occur, including, among others, if the pledgor is insolvent at the time of the pledge, the pledge permits the holders of the notes to receive a greater recovery than if the pledge had not been given and a bankruptcy proceeding in respect of the pledgor is commenced within 90 days following the pledge, or, in certain circumstances, a longer period. YOUR RIGHT TO RECEIVE PAYMENTS ON THE NOTES COULD BE ADVERSELY AFFECTED IF ANY OF OUR NON-GUARANTOR SUBSIDIARIES DECLARE BANKRUPTCY, LIQUIDATE OR REORGANIZE. On the closing date, substantially all of our operating subsidiaries will guarantee the notes. However, under the terms of the indenture, we may, under certain circumstances, designate additional subsidiaries as unrestricted subsidiaries, and those unrestricted subsidiaries will not guarantee the notes. In the event of a bankruptcy, liquidation or reorganization of any of our non-guarantor subsidiaries, holders of their indebtedness and their trade creditors will generally be entitled to payment of their claims from the assets of those subsidiaries before any assets are made available for distribution to us. On March 31, 2003, our non-guarantor subsidiaries had no indebtedness including trade payables. Our non-guarantor subsidiaries generated less than 1% of our consolidated revenues in the year ended December 31, 2002 and the three months ended March 31, 2003 and held less than 1% of our consolidated assets as of March 31, 2003. 25 OUR DEBT INSTRUMENTS IMPOSE RESTRICTIONS ON US THAT MAY ADVERSELY AFFECT OUR ABILITY TO OPERATE OUR BUSINESS. Under our new credit agreement, we will be required to comply with specified financial covenants and conditions, including maintaining, at certain times, a minimum consolidated fixed charge coverage ratio and, at all times, a minimum excess availability and a minimum consolidated tangible net worth. Our ability to comply with these covenants, as they currently exist or as they may be amended, may be affected by many events beyond our control and our future operating results may not allow us to comply with the covenants, or in the event of a default, to remedy that default. Our failure to comply with those financial covenants or to comply with the other restrictions contained in our new credit agreement could result in a default, which could cause that indebtedness (and by reason of cross-acceleration provisions, our new term loans, the notes, our existing senior subordinated notes and other indebtedness) to become immediately due and payable. If we are unable to repay those amounts, the lenders under our new credit agreement could proceed against the collateral granted to them to secure that indebtedness. If those lenders accelerate the payment of our new credit agreement, we cannot assure you that we could pay that indebtedness immediately and continue to operate our business. In addition, our new term loans and the indentures for the notes and our existing senior subordinated notes contain other covenants that restrict, among other things, our ability to - pay dividends and other distributions with respect to our capital stock and purchase, redeem or retire our capital stock; - incur additional indebtedness and issue preferred stock; - enter into asset sales unless the proceeds from those asset sales are used to repay debt; - enter into transactions with affiliates; - incur liens on assets to secure certain debt; - engage in certain business activities; and - engage in certain mergers or consolidations and transfers of assets. See "Description of Other Indebtedness" and "Description of the Exchange Notes". WE MAY NOT BE ABLE TO FINANCE A CHANGE OF CONTROL OFFER AS REQUIRED BY THE INDENTURE. Upon a change of control under the indenture, we will be required to offer to repurchase all of the notes then outstanding at 101% of the principal amount, plus accrued and unpaid interest and special interest, if any, to the repurchase date. Since the events that constitute a change of control under the indenture will also constitute a change of control under our new credit agreement, under our new term loan agreement and under the indentures that govern our existing senior subordinated notes, upon each occurrence, we will be required to offer to repay outstanding term loans and offer to repurchase all of our existing senior subordinated notes then outstanding, each at 101% of the principal amount thereof, plus accrued and unpaid interest to the repurchase date. Additionally, a change of control under the indenture would constitute a default under our new credit agreement. If a change of control were to occur today, we would not have the financial resources available to repay all of the debt that would become payable upon a change of control and to repurchase all of the notes. We cannot assure you that we will have the financial resources available or that we will be permitted by our debt instruments to fulfill these obligations upon a change of control. YOUR ABILITY TO TRANSFER THE NOTES MAY BE LIMITED BY THE ABSENCE OF AN ACTIVE TRADING MARKET AND WE CANNOT ASSURE YOU THAT ANY ACTIVE TRADING MARKET WILL DEVELOP FOR THE NOTES. We do not intend to list the notes on any national securities exchange or to seek the admission of the notes for trading on the Nasdaq National Market. The initial purchasers are not obligated to make a market in the notes and any market-making activities with respect to the notes may be discontinued at any time without 26 notice. Accordingly, we cannot assure you that an active public or other market will develop for the notes or provide you with assurances as to the liquidity of the trading market for the notes. If a trading market does not develop or is not maintained, holders of the notes may experience difficulty in reselling the notes or may be unable to sell them at all. If a market for the notes develops, that market may be discontinued at any time. If a public trading market develops for the notes, future trading prices of the notes will depend on many factors, including, among other things, prevailing interest rates, our financial condition and results of operations and the market for similar notes. Depending on those and other factors, the notes may trade at a discount from their principal amount. SINCE ARTHUR ANDERSEN LLP ACTED AS THE INDEPENDENT AUDITOR OF THE CALIFORNIA REFINERY AND RELATED BUSINESS PRIOR TO OUR ACQUISITION OF IT, YOUR ABILITY TO SEEK POTENTIAL RECOVERIES FROM THEM RELATED TO THEIR WORK WILL BE LIMITED. The financial statements as of December 31, 2001 and 2000 and for the year ended December 31, 2001 and the four month period ended December 31, 2000 of the Golden Eagle Refining and Marketing Assets Business (our California refinery and related assets) incorporated herein by reference were audited by Arthur Andersen LLP. After reasonable efforts, we were not able to obtain Arthur Andersen LLP's consent to the incorporation by reference of its audit report dated February 14, 2002 (Note 16 is dated February 20, 2002) into this prospectus. Accordingly, any recovery you may have may be limited as a result of the lack of Arthur Andersen LLP's consent. RISKS RELATING TO OUR BUSINESS OUR HIGH LEVEL OF DEBT AFFECTS OUR ACCESS TO TRADE CREDIT. We have experienced a tightening of the trade credit we receive because of our high level of debt, combined with the weakness in industry refining margins from the fourth quarter of 2001 through January 2003 and continued economic uncertainty. Under current economic conditions and in light of the general uncertainty that surrounds business, we cannot assure you that the trade credit extended to us will not be further tightened. A significant further tightening in trade credit could result in our business not generating sufficient cash flow to fund operations, capital expenditures and debt service. THE VOLATILITY OF CRUDE OIL PRICES, REFINED PRODUCT PRICES AND NATURAL GAS AND ELECTRICAL POWER PRICES MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR CASH FLOW AND RESULTS OF OPERATIONS. Our earnings and cash flows from our refining and wholesale marketing operations depend on a number of factors, including fixed and variable expenses (including the cost of refinery feedstocks) and the margin above those expenses at which we are able to sell refined products. In recent years, the prices of crude oil and refined products have fluctuated substantially. These prices depend on numerous factors beyond our control, including the demand for crude oil, gasoline and other refined products, which are subject to, among other things: - changes in the economy and the level of foreign and domestic production of crude oil and refined products; - threatened or actual terrorist incidents, acts of war, and other worldwide political conditions; - availability of crude oil and refined products and the infrastructure to transport crude oil and refined products; - weather conditions, earthquakes or other natural disasters; - government regulations; and - local factors, including market conditions and the level of operations of other refineries in our markets. Prices for refined products are influenced by the commodity price of crude oil. Generally, 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 of the relative movement of the prices as well as the overall change in 27 product prices, however, can reduce profit margins and could have a significant impact on our refining and wholesale marketing operations and our earnings and cash flow. Industry margins deteriorated beginning in the fourth quarter of 2001 and continued through January 2003, which adversely impacted our profit margins, earnings and cash flows. In addition, we maintain inventories of crude oil, intermediate products and refined products, the values of which are subject to rapid fluctuation in market prices. Also, crude oil supply contracts are generally term contracts with market-responsive pricing provisions. We purchase our refinery feedstocks prior to selling the refined products manufactured. Price level changes during the period between purchasing feedstocks and selling the manufactured refined products from these feedstocks could have a significant effect on our financial results. We also purchase refined products manufactured by others for sale to our customers. Price level changes during the periods between purchasing and selling these products could have a material adverse effect on our business, financial condition and results of operations. The rising costs and unpredictable availability of natural gas and electrical power used by our refineries and other operations have increased manufacturing and operating costs and will continue to impact production and delivery of products. Fuel and utility prices have been and will continue to be affected by supply and demand for fuel and utility services in both local and regional markets. OUR BUSINESS IS IMPACTED BY RISKS INHERENT IN PETROLEUM REFINING OPERATIONS. The operation of refineries, pipelines and product terminals is inherently subject to spills, discharges or other releases of petroleum or hazardous substances. If any of these events has previously occurred or occurs in the future in connection with any of our refineries, pipelines or product terminals other than events for which we are indemnified, we will be liable for all costs and penalties associated with their remediation under federal, state and local environmental laws or common law, and will be liable for property damage to third parties caused by contamination from releases and spills. The penalties and clean-up costs that we could have to pay for releases or spills, or the amounts that we could have to pay to third parties for damage to their property, could be significant and the payment of these amounts could have a material adverse effect on our business, financial condition and results of operations. We operate in environmentally sensitive coastal waters, where tanker, pipeline and refined product transportation operations are closely regulated by local and federal agencies and monitored by environmental interest groups. Our California, Mid-Pacific and Pacific Northwest refineries import crude oil feedstocks by tanker. Transportation of crude oil and refined product over water involves inherent risk and subjects us to the provisions of the Federal Oil Pollution Act of 1990 and state laws in California, Washington, Hawaii, Alaska and the U.S. Gulf Coast. Among other things, these laws require us to demonstrate in some situations our capacity to respond to a "worst case discharge" to the maximum extent possible. We have contracted with various spill response service companies in the areas in which we transport crude oil and refined product to meet the requirements of the Federal Oil Pollution Act of 1990 and state laws. However, there may be accidents involving tankers transporting crude oil or refined products, and response services may not respond to a "worst case discharge" in a manner that will adequately contain that discharge or we may be subject to liability in connection with a discharge. Our operations are inherently subject to accidental spills, discharges or other releases of petroleum or hazardous substances that may make us liable to governmental entities or private parties under federal, state or local environmental laws, as well as under common law. These may involve contamination associated with facilities we currently own or operate, facilities we formerly owned or operated and facilities to which we sent wastes or by-products for treatment or disposal and other contamination. Accidental discharges may occur in the future, future action may be taken in connection with past discharges, governmental agencies may assess damages or penalties against us in connection with any past or future contamination, or third parties may assert claims against us for damages allegedly arising out of any past or future contamination. WE MAY NOT REALIZE ANTICIPATED COST REDUCTIONS AND REFINING IMPROVEMENTS. We expect to realize $65 million of operating income improvements in 2003 through cost reductions and refining improvements that do not require significant capital investments. Our success in realizing these 28 reductions and improvements will depend, in part, on the success of our efforts to reorganize our operations in a manner that achieve economies in refinery maintenance and purchase and other cost savings. We may not be successful and, even if we are, we cannot assure you that our success will result in the realization of the benefits we currently expect, or that those benefits will be achieved within the anticipated time frame. THE DANGERS INHERENT IN OUR OPERATIONS AND THE POTENTIAL LIMITS ON INSURANCE COVERAGE COULD EXPOSE US TO POTENTIALLY SIGNIFICANT LIABILITY COSTS. Our operations are subject to hazards and risks inherent in refining operations and in transporting and storing crude oil and refined products, such as fires, natural disasters, explosions, pipeline ruptures and spills and mechanical failure of equipment at our or third-party facilities, any of which can result in environmental pollution, personal injury claims and other damage to our properties and the properties of others. In addition, we operate six petroleum refineries, any of which could experience a major accident, be damaged by severe weather or other natural disaster, or otherwise be forced to shut down. Any such unplanned shutdown could have a material adverse effect on our results of operations and financial condition as a whole. In addition, because of past incidents that occurred while the California refinery was under previous ownership, the cost to insure the refinery may remain substantially above industry norms. We do not maintain insurance coverage against all potential losses and we could suffer losses for uninsurable or uninsured risks or in amounts in excess of existing insurance coverage. The occurrence of an event that is not fully covered by insurance could have a material adverse effect on our business, financial condition and results of operations. OUR OPERATIONS ARE SUBJECT TO GENERAL ENVIRONMENTAL RISKS, EXPENSES AND LIABILITIES WHICH COULD AFFECT OUR RESULTS OF OPERATIONS. From time to time we have been, and presently are, subject to litigation and investigations with respect to environmental and related matters. We may become involved in further litigation or other proceedings, or we may be held responsible in any existing or future litigation or proceedings, the costs of which could be material. We have in the past operated service stations with underground storage tanks in various jurisdictions, and currently operate service stations that have underground storage tanks in Hawaii, Alaska and 16 states in the mid-continental and western United States. Federal and state regulations and legislation govern the storage tanks and compliance with these requirements can be costly. The operation of underground storage tanks also poses certain other risks, including damages associated with soil and groundwater contamination. Leaks from underground storage tanks which may occur at one or more of our service stations, or which may have occurred at our previously operated service stations, may impact soil or groundwater and could result in fines or civil liability for us. All of our operations, like those of other companies engaged in similar business, to some degree, are subject to extensive and frequently changing federal, state, regional and local laws, regulations and ordinances relating to the protection of the environment, including those governing emissions or discharges to the air and water, the handling and disposal of solid and hazardous wastes and the remediation of contamination. The failure to comply with these regulations can lead, among other things, to civil and criminal penalties and, in some circumstances, the temporary or permanent curtailment or shutdown of all or part of our operations in one or more of our facilities. The nature of our business exposes us to risks of liability due to the production, processing and refining, storage, transportation, and disposal of materials that can cause contamination or personal injury if released into the environment. Our operations are inherently subject to accidental spills, discharges or other releases of petroleum or hazardous substances that could make us responsible for cleanup costs and related penalties or liable to governmental entities or private parties. This may involve facilities we currently own or operate, facilities we formerly owned or operated and facilities to which we sent wastes or by-products for treatment or disposal. In addition, we operate in environmentally sensitive coastal waters, where tanker, pipeline and refined product transportation operations are closely regulated by local and federal agencies and monitored by environmental interest groups. The transportation of crude oil and refined product over water involves risk and subjects us to the provisions of the Federal Oil Pollution Act of 1990 and related 29 state regulations, which require that most oil refining, transport and storage companies maintain and update various oil spill prevention and oil spill contingency plans. Consistent with the experience of all U.S. refineries, environmental laws and regulations have raised operating costs and necessitated significant capital investments at our refineries. We believe that existing physical facilities at our refineries are substantially adequate to maintain compliance with existing applicable laws and regulatory requirements. However, potentially material expenditures could be required in the future. For example, we may be required to comply with evolving environmental and health and safety laws, regulations or requirements that may be adopted or imposed in the future or to address information or conditions that may be discovered in the future and that require a response. Several recently passed regulations will require us to complete the following projects at our refineries prior to the effective date of the related requirements and regulations: - Upgrades to sulfur removal capabilities, which are required to comply with mandates adopted by the EPA to reduce the sulfur content of diesel fuel and gasoline; and - Changes that will be required to comply with the terms of a settlement agreement with the EPA of alleged violations by previous owners of certain provisions of the federal Clean Air Act of 1990 (the "Clean Air Act") at our Mid-Continent refineries and a potential settlement at our California refinery. TERRORIST ATTACKS AND THREATS OR ACTUAL WAR MAY NEGATIVELY IMPACT OUR BUSINESS. Our business is affected by general economic conditions and fluctuations in consumer confidence and spending, which can decline as a result of numerous factors outside of our control, such as actual or threatened terrorist attacks and acts of war. Terrorist attacks in the United States, as well as events occurring in response to or in connection with them, including future terrorist attacks against U.S. targets, rumors or threats of war, actual conflicts involving the United States or its allies or military or trade disruptions impacting our suppliers or our customers or energy markets generally, may adversely impact our operations. As a result, there could be delays or losses in the delivery of supplies and raw materials to us, delays in our delivery of refined products, decreased sales of our products (especially sales to our customers that purchase jet fuel) and extension of time for payment of accounts receivable from our customers (especially our customers in the airline industry). Strategic targets such as energy-related assets (which could include refineries such as ours) may be at greater risk of future terrorist attacks than other targets in the United States. These occurrences could significantly impact energy prices, including prices for our crude oil and refined products, and have a material adverse impact on the margins from our refining and wholesale marketing operations. In addition, disruption or significant increases in energy prices could result in government-imposed price controls. Any one of, or a combination of, these occurrences could have a material adverse effect on our business. IF WE ARE UNABLE TO MAINTAIN AN ADEQUATE SUPPLY OF FEEDSTOCKS, OUR RESULTS OF OPERATIONS MAY BE ADVERSELY AFFECTED. We may not continue to have an adequate supply of feedstocks, primarily crude oil, available to our six refineries to sustain our current level of refining operations. If additional crude oil becomes necessary at one or more of our refineries, we intend to implement available alternatives that are most advantageous under then prevailing conditions. Implementation of some alternatives could require the consent or cooperation of third parties and other considerations beyond our control. In particular, the North Dakota refinery is landlocked and does not have a diversity of pipelines to allow us to transport crude oil to it. The North Dakota refinery, therefore, is completely dependent upon the delivery of crude oil through our crude oil pipeline system. If outside events cause an inadequate supply of crude oil, or if our crude oil pipeline system transports lower volumes of crude oil, our anticipated revenues could decrease. If we are unable to obtain supplemental crude oil volumes, or are only able to obtain these volumes at uneconomic prices, our results of operations could be adversely affected. 30 WE ARE SUBJECT TO INTERRUPTIONS OF SUPPLY AND INCREASED COSTS AS A RESULT OF OUR RELIANCE ON THIRD-PARTY TRANSPORTATION OF CRUDE OIL AND REFINED PRODUCTS. Our Washington refinery receives all of its Canadian crude oil through pipelines operated by third parties. During 2002, our Washington refinery delivered approximately 62,000 bpd of gasoline, diesel and jet fuel through third-party pipelines. Our Hawaii and Alaska refineries receive most of their crude oil and transport a substantial portion of refined products through ships and barges. Our Mid-Continent refineries receive substantially all of their crude oil and deliver substantially all of their products through pipelines. Our California refinery receives approximately half of its crude oil through pipelines and the balance through marine vessels. Substantially all of our California refinery's production is delivered through third-party pipelines, ships and barges. Our California, Washington, Alaska and Hawaii refineries are adjacent to navigable waters and receive and ship products across leased docks and wharfs. In addition to environmental risks discussed above, we could experience an interruption of supply or an increased cost to deliver refined products to market if the ability of the pipelines or vessels to transport crude oil or refined products is upset because of accidents, governmental regulation, third-party action or if any of the leased docks and wharfs become unavailable. A prolonged upset of our ability to transport crude oil or product could have a material adverse effect on our business, financial condition and results of operations. OUR OPERATING RESULTS ARE SEASONAL AND GENERALLY ARE LOWER IN THE FIRST AND FOURTH QUARTERS OF THE YEAR. Demand for gasoline is higher during the spring and summer months than during the winter months due to seasonal increases in highway traffic. As a result, our operating results for the first and fourth quarters are generally lower than for those in the second and third quarters. 31 THE EXCHANGE OFFER PURPOSE AND EFFECT OF THE EXCHANGE OFFER We issued $375 million aggregate principal amount of the outstanding 8% notes to the initial purchasers on April 17, 2003 in transactions not registered under the Securities Act of 1933 in reliance on exemptions from registration under that act. The initial purchasers then sold the outstanding 8% notes to qualified institutional buyers in reliance on Rule 144A under the Securities Act and to non-United States persons outside the United States in reliance on Regulation S under the Securities Act. Because they have been sold pursuant to exemptions from registration, the outstanding 8% notes are subject to transfer restrictions. In connection with the issuance of the outstanding 8% notes, we agreed with the initial purchasers that we would: - file with the SEC a registration statement related to the exchange notes; - use our reasonable best efforts to cause the registration statement to become effective under the Securities Act; and - offer to the holders of the outstanding 8% notes the opportunity to exchange the outstanding 8% notes for a like principal amount of exchange notes upon the effectiveness of the registration statement. Our failure to comply with these agreements within certain time periods would result in additional interest being due on the outstanding 8% notes. A copy of the agreement with the initial purchasers has been filed as an exhibit to the registration statement of which this prospectus is a part. Based on existing interpretations of the Securities Act by the staff of the SEC described in several no-action letters to third parties, and subject to the following sentence, we believe that the exchange notes issued in the exchange offer may be offered for resale, resold and otherwise transferred by their holders, other than broker-dealers or our "affiliates", without further compliance with the registration and prospectus delivery provisions of the Securities Act. However, any holder of the outstanding 8% notes who is an affiliate of ours, who is not acquiring the exchange notes in the ordinary course of such holder's business or who intends to participate in the exchange offer for the purpose of distributing the exchange notes: - will not be able to rely on the interpretations by the staff of the SEC described in the above-mentioned no-action letters; - will not be able to tender the outstanding 8% notes in the exchange offer; and - must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or transfer of the outstanding 8% notes unless the sale or transfer is made under an exemption from these requirements. We do not intend to seek our own no-action letter, and there is no assurance that the staff of the SEC would make a similar determination regarding the exchange notes as it has in these no-action letters to third parties. As a result of the filing and effectiveness of the registration statement of which this prospectus is a part, we will not be required to pay an increased interest rate on the outstanding 8% notes unless we either fail to timely consummate the exchange offer or fail to maintain the effectiveness of the registration statement to the extent we agreed to do so. Following the closing of the exchange offer, holders of the outstanding 8% notes not tendered will not have any further registration rights except in limited circumstances requiring the filing of a shelf registration statement, and the outstanding 8% notes will continue to be subject to restrictions on transfer. Accordingly, the liquidity of the market for the outstanding 8% notes will be adversely affected. TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions stated in this prospectus and in the letter of transmittal, we will accept all outstanding 8% notes properly tendered and not withdrawn before 5:00 p.m., New York City 32 time, on the expiration date. After authentication of the exchange notes by the trustee or an authenticating agent, we will issue $1,000 principal amount of exchange notes in exchange for each $1,000 principal amount of the outstanding 8% notes accepted in the exchange offer. By tendering the outstanding 8% notes for exchange notes in the exchange offer and signing or agreeing to be bound by the letter of transmittal, you will represent to us that: - you will acquire the exchange notes you receive in the exchange offer in the ordinary course of your business; - you are not participating and have no understanding with any person to participate in the distribution of the exchange notes issued to you in the exchange offer; - you are not an affiliate of ours or, if you are an affiliate, you will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable; - if you are not a broker-dealer, that you are not engaged in and do not intend to engage in the distribution of the exchange notes; and - if you are a broker-dealer that will receive exchange notes for your own account in exchange for outstanding 8% notes that were acquired as a result of market-making or other trading activities, that you will deliver a prospectus, as required by law, in connection with any resale of those exchange notes. Broker-dealers that are receiving exchange notes for their own account must have acquired the outstanding 8% notes as a result of market-making or other trading activities in order to participate in the exchange offer. Each broker-dealer that receives exchange notes for its own account under the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. The letter of transmittal states that, by so acknowledging and by delivering a prospectus, a broker-dealer will not be admitting that it is an "underwriter" within the meaning of the Securities Act. We will be required to allow broker-dealers to use this prospectus following the exchange offer in connection with the resale of exchange notes received in exchange for outstanding 8% notes acquired by broker-dealers for their own account as a result of market-making or other trading activities. If required by applicable securities laws, we will, upon written request, make this prospectus available to any broker-dealer for use in connection with a resale of exchange notes. See "Plan of Distribution". The exchange notes will evidence the same debt as the outstanding 8% notes and will be issued under and entitled to the benefits of the same indenture. The form and terms of the exchange notes are identical in all material respects to the form and terms of the outstanding 8% notes except that: - the exchange notes will be issued in a transaction registered under the Securities Act; - the exchange notes will not be subject to transfer restrictions; and - provisions providing for an increase in the stated interest rate on the outstanding 8% notes will be eliminated after completion of the exchange offer. As of the date of this prospectus, $375 million aggregate principal amount of the outstanding 8% notes was outstanding. In connection with the issuance of the outstanding 8% notes, we arranged for the outstanding 8% notes to be issued and transferable in book-entry form through the facilities of DTC, acting as depositary. The exchange notes will also be issuable and transferable in book-entry form through DTC. This prospectus, together with the accompanying letter of transmittal, is initially being sent to all registered holders as of the close of business on , 2003. We intend to conduct the exchange offer as required by the Exchange Act, and the rules and regulations of the SEC under the Exchange Act, including Rule 14e-1, to the extent applicable. Rule 14e-1 describes unlawful tender offer practices under the Exchange Act. This rule requires us, among other things: - to hold our exchange offer open for 20 business days; 33 - to give ten business days notice of any change in the terms of this offer; and - to issue a press release in the event of an extension of the exchange offer. The exchange offer is not conditioned upon any minimum aggregate principal amount of the outstanding 8% notes being tendered, and holders of the outstanding 8% notes do not have any appraisal or dissenters' rights under the Delaware General Corporation Law or under the indenture in connection with the exchange offer. We shall be considered to have accepted the outstanding 8% notes tendered according to the procedures in this prospectus when, as and if we have given oral or written notice of acceptance to the exchange agent. See "-- Exchange Agent". The exchange agent will act as agent for the tendering holders for the purpose of receiving exchange notes from us and delivering exchange notes to those holders. If any tendered outstanding 8% notes are not accepted for exchange because of an invalid tender or the occurrence of other events described in this prospectus, certificates for these unaccepted outstanding 8% notes will be returned, at our cost, to the tendering holder of outstanding 8% notes or, in the case of outstanding 8% notes tendered by book-entry transfer, into the holder's account at DTC according to the procedures described below, as promptly as practicable after the expiration date. Holders who tender outstanding 8% notes in the exchange offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes related to the exchange of the outstanding 8% notes in the exchange offer. We will pay all charges and expenses, other than applicable taxes, in connection with the exchange offer. See "-- Solicitation of Tenders; Fees and Expenses". NEITHER WE NOR OUR BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO HOLDERS OF THE OUTSTANDING 8% NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR OUTSTANDING 8% NOTES IN THE EXCHANGE OFFER. MOREOVER, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF THE OUTSTANDING 8% NOTES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER IN THE EXCHANGE OFFER AND, IF SO, THE AMOUNT OF THE OUTSTANDING 8% NOTES TO TENDER AFTER READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND CONSULTING WITH THEIR ADVISORS, IF ANY, BASED ON THEIR OWN FINANCIAL POSITION AND REQUIREMENTS. EXPIRATION DATE; EXTENSIONS; AMENDMENTS The term "expiration date" shall mean 5:00 p.m., New York City time, on , 2003, unless we, in our sole discretion, extend the exchange offer, in which case the term "expiration date" shall mean the latest date to which the exchange offer is extended. We expressly reserve the right, in our sole discretion: - to delay acceptance of any outstanding 8% notes or to terminate the exchange offer and to refuse to accept outstanding 8% notes not previously accepted, if any of the conditions described under "-- Conditions" shall have occurred and shall not have been waived by us; - to extend the expiration date of the exchange offer; - to amend the terms of the exchange offer in any manner; - to purchase or make offers for any outstanding 8% notes that remain outstanding subsequent to the expiration date; - to the extent permitted by applicable law, to purchase outstanding 8% notes in the open market, in privately negotiated transactions or otherwise. The terms of the purchases or offers described in the fourth and fifth clauses above may differ from the terms of the exchange offer. Any delay in acceptance, termination, extension, or amendment will be followed as promptly as practicable by oral or written notice to the exchange agent and by making a public announcement. If the exchange offer is amended in a manner determined by us to constitute a material change, we will promptly disclose the amendment in a manner reasonably calculated to inform the holders of the amendment. 34 Without limiting the manner in which we may choose to make public announcements of any delay in acceptance, termination, extension, or amendment of the exchange offer, we shall have no obligation to publish, advise, or otherwise communicate any public announcement, other than by making a timely release to Business Wire. You are advised that we may extend the exchange offer because some of the holders of the outstanding 8% notes do not tender on a timely basis. In order to give these noteholders the ability to participate in the exchange and to avoid the significant reduction in liquidity associated with holding an unexchanged note, we may elect to extend the exchange offer. INTEREST ON THE EXCHANGE NOTES The exchange notes will bear interest from April 17, 2003 or the most recent date on which interest was paid or provided for on the outstanding 8% notes surrendered for the exchange notes. Accordingly, holders of outstanding 8% notes that are accepted for exchange will not receive interest that is accrued but unpaid on the outstanding 8% notes at the time of tender. Interest on the exchange notes will be payable semi-annually on each April 15 and October 15, commencing on October 15, 2003. PROCEDURES FOR TENDERING Only a holder may tender its outstanding 8% notes in the exchange offer. Any beneficial owner whose outstanding 8% notes are registered in the name of such holder's broker, dealer, commercial bank, trust company or other nominee or are held in book-entry form and who wishes to tender should contact the registered holder promptly and instruct the registered holder to tender on such holder's behalf. If the beneficial owner wishes to tender on such holder's own behalf, the beneficial owner must, before completing and executing the letter of transmittal and delivering such holder's outstanding 8% notes, either make appropriate arrangements to register ownership of outstanding 8% notes in the owner's name or obtain a properly completed bond power from the registered holder. The transfer of record ownership may take considerable time. The tender by a holder will constitute an agreement among the holder, us and the exchange agent according to the terms and subject to the conditions described in this prospectus and in the letter of transmittal. A holder who desires to tender outstanding 8% notes and who cannot comply with the procedures set forth herein for tender on a timely basis or whose outstanding 8% notes are not immediately available must comply with the procedures for guaranteed delivery set forth below. THE METHOD OF DELIVERY OF THE OUTSTANDING 8% NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDERS. DELIVERY OF SUCH DOCUMENTS WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT OR DEEMED RECEIVED UNDER THE ATOP PROCEDURES DESCRIBED BELOW. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OUTSTANDING 8% NOTES SHOULD BE SENT TO US. HOLDERS MAY ALSO REQUEST THAT THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES EFFECT THE TENDER FOR HOLDERS IN EACH CASE AS DESCRIBED IN THIS PROSPECTUS AND IN THE LETTER OF TRANSMITTAL. 35 OUTSTANDING 8% NOTES HELD IN CERTIFICATED FORM For a holder to validly tender outstanding 8% notes held in physical form, the exchange agent must receive, before 5:00 p.m., New York City time, on the expiration date, at its address set forth in this prospectus: - a properly completed and validly executed letter of transmittal, or a manually signed facsimile thereof, together with any signature guarantees and any other documents required by the instructions to the letter of transmittal, and - certificates for tendered outstanding 8% notes. OUTSTANDING 8% NOTES HELD IN BOOK-ENTRY FORM We understand that the exchange agent will make a request promptly after the date of the prospectus to establish accounts for the outstanding 8% notes at DTC for the purpose of facilitating the exchange offer, and subject to their establishment, any financial institution that is a participant in DTC may make book-entry delivery of the outstanding 8% notes by causing DTC to transfer the outstanding 8% notes into the exchange agent's account for the 8% notes using DTC's procedures for transfer. If you desire to transfer outstanding 8% notes held in book-entry form with DTC, the exchange agent must receive, before 5:00 p.m. New York City time on the expiration date, at its address set forth in this prospectus, a confirmation of book-entry transfer of outstanding 8% notes into the exchange agent's account at DTC, which is referred to in this prospectus as a "book-entry confirmation", and: - a properly completed and validly executed letter of transmittal, or manually signed facsimile thereof, together with any signature guarantees and other documents required by the instructions in the letter of transmittal; or - an agent's message transmitted pursuant to ATOP. TENDER OF OUTSTANDING 8% NOTES USING DTC'S AUTOMATED TENDER OFFER PROGRAM (ATOP) The exchange agent and DTC have confirmed that the exchange offer is eligible for ATOP. Accordingly, DTC participants may electronically transmit their acceptance of the exchange offer by causing DTC to transfer outstanding 8% notes held in book-entry form to the exchange agent in accordance with DTC's ATOP procedures for transfer. DTC will then send a book- entry confirmation, including an agent's message, to the exchange agent. The term "agent's message" means a message transmitted by DTC, received by the exchange agent and forming part of the book-entry confirmation, which states that DTC has received an express acknowledgment from the participant in DTC tendering outstanding 8% notes that are the subject of that book-entry confirmation that the participant has received and agrees to be bound by the terms of the letter of transmittal, and that we may enforce such agreement against such participant. If you use ATOP procedures to tender outstanding 8% notes you will not be required to deliver a letter of transmittal to the exchange agent, but you will be bound by its terms just as if you had signed it. SIGNATURES Signatures on a letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or correspondent in the United States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act, unless outstanding 8% notes tendered with the letter of transmittal are tendered: - by a registered holder who has not completed the box entitled "Special Registration Instructions" or "Special Delivery Instructions" in the letter of transmittal; or - for the account of an institution eligible to guarantee signatures. 36 If the letter of transmittal is signed by a person other than the registered holder or DTC participant who is listed as the owner, the outstanding 8% notes must be endorsed or accompanied by appropriate bond powers which authorize the person to tender the outstanding 8% notes on behalf of the registered holder or DTC participant who is listed as the owner, in either case signed as the name of the registered holder(s) who appears on the outstanding 8% notes or the DTC participant who is listed as the owner. If the letter of transmittal or any of the outstanding 8% notes or bond powers are signed or endorsed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, those persons should so indicate when signing, and unless waived by us, evidence satisfactory to us of their authority to so act must be submitted with the letter of transmittal. If you tender your notes through ATOP, signatures and signature guarantees are not required. DETERMINATIONS OF VALIDITY All questions as to the validity, form, eligibility, including time of receipt, acceptance and withdrawal of the tendered outstanding 8% notes will be determined by us in our sole discretion. This determination will be final and binding. We reserve the absolute right to reject any and all outstanding 8% notes not properly tendered or any outstanding 8% notes our acceptance of which would, in the opinion of our counsel, be unlawful. We also reserve the absolute right to waive any irregularities or conditions of tender as to particular outstanding 8% notes. Our interpretation of the terms and conditions of the exchange offer, including the instructions in the letter of transmittal, will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of outstanding 8% notes must be cured within the time we shall determine. Although we intend to notify holders of defects or irregularities related to tenders of outstanding 8% notes, neither we, the exchange agent nor any other person shall be under any duty to give notification of defects or irregularities related to tenders of outstanding 8% notes nor shall we or any of them incur liability for failure to give notification. Tenders of outstanding 8% notes will not be considered to have been made until the irregularities have been cured or waived. Any outstanding 8% notes received by the exchange agent that we determine are not properly tendered or the tender of which is otherwise rejected by us and as to which the defects or irregularities have not been cured or waived by us will be returned by the exchange agent to the tendering holder unless otherwise provided in the letter of transmittal, as soon as practicable following the expiration date. GUARANTEED DELIVERY PROCEDURES Holders who wish to tender their outstanding 8% notes and: - whose outstanding 8% notes are not immediately available; - who cannot complete the procedure for book-entry transfer on a timely basis; - who cannot deliver their outstanding 8% notes, the letter of transmittal or any other required documents to the exchange agent before the expiration date; or - who cannot complete a tender of outstanding 8% notes held in book-entry form using DTC's ATOP procedures on a timely basis; may effect a tender if they tender through an eligible institution described under "-- Procedures for Tendering -- Signatures" or if they tender using ATOP's guaranteed delivery procedures. A tender of outstanding 8% notes made by or through an eligible institution will be accepted if: - before 5:00 p.m., New York City time, on the expiration date, the exchange agent receives from an eligible institution a properly completed and duly executed notice of guaranteed delivery, by facsimile transmittal, mail or hand delivery, that: (1) sets forth the name and address of the holder, the certificate number or numbers of the holder's outstanding 8% notes and the principal amount of the outstanding 8% notes tendered, (2) states that the tender is being made, and (3) guarantees that, within three business days after the expiration date, a properly completed and validly executed letter of transmittal or facsimile, together with a certificate(s) representing the outstanding 8% notes to be 37 tendered in proper form for transfer, or a confirmation of book-entry transfer into the exchange agent's account at DTC of the outstanding 8% notes delivered electronically, and any other documents required by the letter of transmittal will be deposited by the eligible institution with the exchange agent; and - the properly completed and executed letter of transmittal or a facsimile, together with the certificate(s) representing all tendered outstanding 8% notes in proper form for transfer, or a book-entry confirmation, and all other documents required by the letter of transmittal are received by the exchange agent within three business days after the expiration date. A tender made through ATOP will be accepted if: - before 5:00 p.m., New York City time, on the expiration date, the exchange agent receives an agent's message from DTC stating that DTC has received an express acknowledgment from the participant in DTC tendering the outstanding 8% notes that they have received and agree to be bound by the notice of guaranteed delivery; and - the exchange agent receives, within three business days after the expiration date, either: (1) a book-entry conformation, including an agent's message, transmitted via ATOP procedures; or (2) a properly completed and executed letter of transmittal or a facsimile, together with the certificate(s) representing all tendered outstanding 8% notes in proper form for transfer, or a book-entry confirmation, and all other documents required by the letter of transmittal. Upon request to the exchange agent, a notice of guaranteed delivery will be sent to holders who wish to tender their outstanding 8% notes according to the guaranteed delivery procedures described above. WITHDRAWAL OF TENDERS Except as otherwise provided in this prospectus, tenders of outstanding 8% notes may be withdrawn at any time before 5:00 p.m., New York City time, on the expiration date. To withdraw a tender of outstanding 8% notes in the exchange offer: - a written or facsimile transmission of a notice of withdrawal must be received by the exchange agent at its address listed below before 5:00 p.m., New York City time, on the expiration date; or - you must comply with the appropriate procedures of ATOP. Any notice of withdrawal must: - specify the name of the person having deposited the outstanding 8% notes to be withdrawn; - identify the outstanding 8% notes to be withdrawn, including the certificate number or numbers and principal amount of the outstanding 8% notes or, in the case of the outstanding 8% notes transferred by book-entry transfer, the name and number of the account at the depositary to be credited; - be signed by the same person and in the same manner as the original signature on the letter of transmittal by which the outstanding 8% notes were tendered, including any required signature guarantee, or be accompanied by documents of transfer sufficient to permit the trustee for the outstanding 8% notes to register the transfer of the outstanding 8% notes into the name of the person withdrawing the tender; and - specify the name in which any of these outstanding 8% notes are to be registered, if different from that of the person who deposited the outstanding 8% notes to be withdrawn. All questions as to the validity, form and eligibility, including time of receipt, of the withdrawal notices will be determined by us, and our determination shall be final and binding on all parties. Any outstanding 8% notes so withdrawn will be judged not to have been tendered according to the procedures in this prospectus for purposes of the exchange offer, and no exchange notes will be issued in exchange for those outstanding 8% notes unless the outstanding 8% notes so withdrawn are validly retendered. Any outstanding 8% notes that have been tendered but are not accepted for exchange will be returned to the holder of the outstanding 38 8% notes without cost to the holder or, in the case of outstanding 8% notes tendered by book-entry transfer into the holder's account at DTC according to the procedures described above. This return or crediting will take place as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn outstanding 8% notes may be retendered by following one of the procedures described above under "-- Procedures for Tendering" at any time before the Expiration Date. CONDITIONS The exchange offer is subject only to the following conditions: - the compliance of the exchange offer with securities laws; - the proper tender of the outstanding 8% notes; - the representation by the holders of the outstanding 8% notes that they are not our affiliates, that the exchange notes they will receive are being acquired by them in the ordinary course of business and that at the time the exchange offer is completed the holders had no plans to participate in the distribution of the exchange notes; and - no judicial or administrative proceeding is pending or shall have been threatened that would limit us from proceeding with the exchange offer. EXCHANGE AGENT The Bank of New York, the trustee under the indenture, has been appointed as exchange agent for the exchange offer. In this capacity, the exchange agent has no fiduciary duties and will be acting solely on the basis of our directions. Requests for assistance and requests for additional copies of this prospectus or of the letter of transmittal should be directed to the exchange agent. You should send certificates for the outstanding 8% notes, letters of transmittal and any other required documents to the exchange agent addressed as follows: By Registered or Certified Mail, Hand Delivery or Overnight Courier: The Bank of New York Reorganization Unit 101 Barclay Street -- 7 East New York, New York 10286 Attention: By Facsimile Transmission: (for eligible institutions only) (212) 298-1915 Attention: To Confirm by Telephone or for Information: (212) 815-2742 DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS LISTED ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS DESCRIBED ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF THE LETTER OF TRANSMITTAL. SOLICITATION OF TENDERS; FEES AND EXPENSES We will bear the expenses of soliciting the requesting holders of outstanding 8% notes to determine if such holders wish to tender those notes for exchange notes. The principal solicitation under the exchange offer is being made by mail. Additional solicitations may be made by our officers and regular employees and our affiliates in person, by telegraph, telephone or telecopier. 39 We have not retained any dealer-manager in connection with the exchange offer and will not make any payments to brokers, dealers or other persons soliciting acceptances of the exchange offer. We, however, will pay the exchange agent reasonable and customary fees for its services and will reimburse the exchange agent for its reasonable out-of-pocket costs and expenses in connection with the exchange offer and will indemnify the exchange agent for all losses and claims incurred by it as a result of the exchange offer. We may also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding copies of this prospectus, letters of transmittal and related documents to the beneficial owners of the outstanding 8% notes and in handling or forwarding tenders for exchange. We will pay the expenses to be incurred in connection with the exchange offer, including fees and expenses of the exchange agent and trustee and accounting and legal fees and printing costs. You will not be obligated to pay any transfer tax in connection with the exchange, except if you instruct us to register exchange notes in the name of, or request that notes not tendered or not accepted in the exchange offer be returned to, a person other than you, in which event you will be responsible for the payment of any applicable transfer tax. ACCOUNTING TREATMENT The exchange notes will be recorded at the same carrying value as the outstanding 8% notes, as reflected in our accounting records on the date of the exchange. Accordingly, no gain or loss for accounting purposes will be recognized by us upon the closing of the exchange offer. We will amortize the expenses of the exchange offer over the term of the exchange notes. PARTICIPATION IN THE EXCHANGE OFFER; UNTENDERED 8% NOTES Participation in the exchange offer is voluntary. Holders of the outstanding 8% notes are urged to consult their financial and tax advisors in making their own decisions on what action to take. As a result of the making of, and upon acceptance for exchange of all of the outstanding 8% notes tendered under the terms of, this exchange offer, we will have fulfilled a covenant contained in the terms of the registration rights agreement. Holders of the outstanding 8% notes who do not tender in the exchange offer will continue to hold their outstanding 8% notes and will be entitled to all the rights, and subject to the limitations, applicable to the outstanding 8% notes under the indenture. Holders of the outstanding 8% notes will no longer be entitled to any rights under the registration rights agreement that by their terms terminate or cease to have further effect as a result of the making of this exchange offer. See "Description of the Exchange Notes". All untendered outstanding 8% notes will continue to be subject to the restrictions on transfer described in the indenture. To the extent the outstanding 8% notes are tendered and accepted, there will be fewer outstanding 8% notes remaining following the exchange, which could significantly reduce the liquidity of the untendered notes. We may in the future seek to acquire our untendered outstanding 8% notes in the open market or through privately negotiated transactions, through subsequent exchange offers or otherwise. We intend to make any acquisitions of the outstanding 8% notes following the applicable requirements of the Securities Exchange Act of 1934, and the rules and regulations of the SEC under the Exchange Act, including Rule 14e-1, to the extent applicable. We have no present plan to acquire any outstanding 8% notes that are not tendered in the exchange offer or to file a registration statement to permit resales of any outstanding 8% notes that are not tendered in the exchange offer, except in those circumstances in which we may be obligated to file a shelf registration statement. 40 USE OF PROCEEDS We will not receive any cash proceeds from the exchange offer. We used all of the net proceeds of the issuance of the outstanding 8% notes, along with the proceeds of our new term loans and borrowings under our new credit agreement, primarily to repay all amounts outstanding under our previous senior secured credit facility and repurchase a portion of our outstanding senior subordinated notes. RATIO OF EARNINGS TO FIXED CHARGES We have computed the ratio of earnings to fixed charges for each of the following periods on a consolidated basis. For purposes of computing the ratio of earnings to fixed charges, "earnings" consist of pretax income from continuing operations plus fixed charges (excluding capitalized interest). "Fixed charges" represent interest incurred (whether expensed or capitalized), amortization of debt expense and that portion of rental expense on operating leases deemed to be the equivalent of interest. The pro forma computations (1) give effect to the California Acquisition and related financings as if they had occurred on January 1, 2002 (see footnote (a) below), and (2) give further effect to the Financing Transactions as if they had occurred on January 1, 2002. You should read the ratio of earnings to fixed charges in conjunction with our consolidated financial statements that are incorporated by reference in this prospectus.
PRO FORMA AS ADJUSTED PRO FORMA FOR THE AS CALIFORNIA ADJUSTED ACQUISITION PRO FORMA FOR THE AND THE AS ADJUSTED CALIFORNIA FINANCING FOR THE ACQUISITION TRANSACTIONS TESORO FINANCING TESORO HISTORICAL (a) (a) HISTORICAL TRANSACTIONS ------------------------------------------ ----------- ------------ ---------- ------------ YEARS ENDED DECEMBER 31, ----------------------------------------------------------------------- THREE MONTHS ENDED 1998 1999 2000 2001 2002 2002 2002 MARCH 31, 2003 ----- ------ ------ ------ ------- ----------- ------------ ------------------------- (DOLLARS IN MILLIONS) EARNINGS: Earnings (Loss) from continuing operations before income taxes and extraordinary loss...... $12.1 $ 51.2 $123.5 $146.9 $(181.3) $(258.6) $(248.7) $32.5 $36.5 Interest expense, net of capitalized interest(b)............. 24.8 36.7 31.7 51.6 157.8 179.8 166.9 44.0 39.2 Amortization of debt discount................ 0.1 0.2 0.2 0.3 6.3 10.0 10.8 2.6 2.8 Amortization of debt issuance costs.......... 0.3 0.7 0.8 0.9 2.0 2.2 4.4 0.6 1.2 Estimated interest portion of rents(c)............. 17.4 22.4 19.8 17.0 27.5 28.8 28.8 7.4 7.4 ----- ------ ------ ------ ------- ------- ------- ----- ----- Total Earnings.......... $54.7 $111.2 $176.0 $216.7 $ 12.3 $ (37.8) $ (37.8) $87.1 $87.1 ----- ------ ------ ------ ------- ------- ------- ----- ----- FIXED CHARGES: Interest expense whether expensed or capitalized(b).......... $24.9 $ 37.3 $ 32.4 $ 56.7 $ 160.3 $ 182.3 $ 169.4 $45.3 $40.5 Amortization of debt discount................ 0.1 0.2 0.2 0.3 6.3 10.0 10.8 2.6 2.8 Amortization of debt issuance costs.......... 0.3 0.7 0.8 0.9 2.0 2.2 4.4 0.6 1.2 Estimated interest portion of rents(c)............. 17.4 22.4 19.8 17.0 27.5 28.8 28.8 7.4 7.4 ----- ------ ------ ------ ------- ------- ------- ----- ----- Total Fixed Charges..... $42.7 $ 60.6 $ 53.2 $ 74.9 $ 196.1 $ 223.3 $ 213.4 $55.9 $51.9 ----- ------ ------ ------ ------- ------- ------- ----- ----- Ratio of Earnings to Fixed Charges................... 1.28x 1.83x 3.31x 2.89x (d) (e) (f) 1.56x 1.68x ----- ------ ------ ------ ------- ------- ------- ----- -----
- --------------- (a) The pro forma information giving effect to the California Acquisition is based on historical data and we believe it is not indicative of the results of future operations. A major turnaround at our California refinery, including the refinery's fluid coker, was completed in March 2002, and a turnaround of the larger crude unit was completed in the second quarter of 2002. The inclusion of the results of our California Acquisition prior to May 17, 2002, the date of the consummation of that acquisition, in our pro forma as 41 adjusted results for the year ended December 31, 2002 resulted in a $46 million increase in our net loss from our historical results for the same period. The next scheduled turnaround at our California refinery is for the hydrocracker in the fourth quarter of 2004. (b) Includes interest expense and other financing costs. (c) For a majority of the marine charter leases, the interest portion of rents was estimated by using our incremental borrowing rate in effect at the inception of the leases. For the remaining leases, interest expense was estimated by using one third of the rental payments. Total rental expense, including marine charters, was approximately $54 million, $64 million, $60 million, $66 million and $92 million for the years ended 1998, 1999, 2000, 2001 and 2002, respectively, and $25 million for the three months ended March 31, 2003. (d) For the year ended December 31, 2002, fixed charges exceeded earnings by $183.8 million. (e) For the year ended December 31, 2002, fixed charges exceeded earnings by $261.1 million on a pro forma basis as adjusted for the California Acquisition. See footnote (a) above. (f) For the year ended December 31, 2002, fixed charges exceeded earnings by $251.2 million on a pro forma basis as adjusted for the California Acquisition and the Financing Transactions. See footnote (a) above. 42 CAPITALIZATION The following table sets forth our consolidated capitalization as of March 31, 2003 on a historical basis and as adjusted to give effect to the Financing Transactions. You should read this table in conjunction with our consolidated financial statements, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and other financial information included or incorporated by reference in this prospectus.
MARCH 31, 2003 ---------------------------------- PRO FORMA AS ADJUSTED FOR THE FINANCING HISTORICAL TRANSACTIONS ---------- --------------------- (DOLLARS IN MILLIONS) Cash and cash equivalents............................... $ 14 $ --(a) ------ ------ Debt, including current portion: Previous senior secured credit facility: Revolving credit facility(b)....................... -- -- Tranche A term loan................................ 165 -- Tranche B term loan................................ 677 -- New credit agreement(c): Revolving credit line.............................. -- 167 Term loan.......................................... -- 150 New Term Loans........................................ -- 200 8% Notes due 2008..................................... -- 371 Existing 9% Senior Subordinated Notes due 2008........ 298 298 Existing 9 5/8% Senior Subordinated Notes due 2008.... 215 211 Existing 9 5/8% Senior Subordinated Notes due 2012.... 450 429 Junior subordinated notes............................. 69 69 Other debt(d)......................................... 32 32 ------ ------ Total debt, including current portion......... 1,906 1,927 Stockholders' equity.................................... 908 887(e) ------ ------ Total capitalization.......................... $2,814 $2,814 ====== ======
- --------------- (a) Pro forma cash and cash equivalents as adjusted for the Financing Transactions were used to partially pay underwriting fees and offering expenses of approximately $34 million. (b) The previous revolving credit facility had total availability of $225 million, which included a sublimit of $150 million for the issuance of letters of credit. As of March 31, 2003, we had no borrowings and approximately $85 million of letters of credit outstanding. (c) Subject to borrowing base calculations, our new credit agreement has total availability of up to $650 million, which includes a sublimit of $400 million for the issuance of letters of credit. The new credit agreement consists of a $500 million revolving credit line and a $150 million term loan. As adjusted for the Financing Transactions, as of March 31, 2003, approximately $402 million would have been outstanding, including $85 million of letters of credit. As of April 30, 2003, the borrowing base under the credit agreement was $595 million of which $226 million was borrowed, including the $150 million term loan, and $198 million in letters of credit were outstanding. (d) Other debt consists primarily of capital lease obligations. (e) The reduction in pro forma stockholders' equity is due to the write-off of debt issuance costs, net of income taxes, primarily associated with our previous senior secured credit facility. 43 SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA The following table sets forth certain selected historical consolidated financial information based upon our historical financial statements. Separate financial statements of our subsidiary guarantors are not included herein because our subsidiary guarantors are jointly and severally liable on the notes and the aggregate net assets, earnings and equity of the subsidiary guarantors are substantially equivalent to the net assets, earnings and equity on a consolidated basis. The selected historical consolidated financial information presented below for each of the years ended December 31, 2000, 2001 and 2002, and for the three-month periods ended March 31, 2002 and 2003, has been derived from our financial statements incorporated by reference in this prospectus. You should read this information in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K and our Quarterly Report on Form 10-Q and with the consolidated financial statements incorporated by reference in this prospectus.
THREE MONTHS YEARS ENDED DECEMBER 31,(A) ENDED MARCH 31, ---------------------------------------------------- ------------------- 1998 1999 2000 2001 2002 2002 2003 -------- -------- -------- -------- -------- -------- -------- (UNAUDITED) (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) STATEMENTS OF OPERATIONS DATA: Total Revenues............................... $1,386.6 $3,000.3 $5,066.8 $5,181.7 $7,119.3 $1,232.6 $2,286.1 Earnings (Loss) from Continuing Operations, Net of Income Taxes........................ 7.6 32.2 73.3 88.0 (117.0) (55.6) 20.4 Net Earnings (Loss)(b)....................... (19.4) 75.0 73.3 88.0 (117.0) (55.6) 20.4 Net Earnings (Loss) Applicable to Common Stock...................................... (25.4) 63.0 61.3 82.0 (117.0) (55.6) 20.4 Earnings (Loss) per Share from Continuing Operations(c) Basic...................................... $ 0.05 $ 0.62 $ 1.96 $ 2.26 $ (1.93) $ (1.15) $ 0.32 Diluted.................................... 0.05 0.62 1.75 2.10 (1.93) (1.15 0.32 OTHER DATA: Cash Flows From (Used In): Operating activities....................... $ 121.8 $ 112.7 $ 90.4 $ 214.4 $ 57.8 $ (47.9) $ 7.2 Investing activities....................... (718.6) 166.3 (88.0) (976.7) (940.7) (352.7) (26.4) Financing activities....................... 606.6 (149.2) (130.1) 800.1 940.8 348.9 (77.0) -------- -------- -------- -------- -------- -------- -------- Increase (Decrease) in Cash and Cash Equivalents................................ $ 9.8 $ 129.8 $ (127.7) $ 37.8 $ 57.9 $ (51.7) $ (96.2) ======== ======== ======== ======== ======== ======== ======== Capital Expenditures(d): Continuing Operations...................... $ 50.0 $ 84.7 $ 94.0 $ 209.5 $ 203.5 $ 52.6 $ 27.7 Discontinued Operations.................... 135.1 56.5 -- -- -- -- -- -------- -------- -------- -------- -------- -------- -------- Total Capital Expenditures............... $ 185.1 $ 141.2 $ 94.0 $ 209.5 $ 203.5 $ 52.6 $ 27.7 ======== ======== ======== ======== ======== ======== ======== BALANCE SHEET DATA: Working Capital.............................. $ 182.4 $ 290.0 $ 247.8 $ 339.5 $ 445.9 $ 302.4 $ 450.5 Property, Plant and Equipment, Net........... 691.4 731.6 781.4 1,522.3 2,303.4 1,556.2 2,303.5 Total Assets................................. 1,406.4 1,486.5 1,543.6 2,662.3 3,758.8 2,998.6 3,664.0 Total Debt and Other Obligations(e).......... 543.9 417.6 310.6 1,146.9 1,976.7 1,251.4 1,906.0 Stockholders' Equity(e)(f)................... 559.2 623.1 669.9 757.0 887.6 948.0 908.0
- --------------- (a) Financial results of operations acquired in 1998, 2001 and 2002 have been included in the amounts above since their respective acquisition dates. (b) In December 1999, we sold our oil and gas exploration and production operations and recorded an aftertax gain of $39.1 million from the sale of these operations. In 1998, these operations incurred pretax write-downs of oil and gas properties of $68.3 million ($43.2 million aftertax) and recognized pretax income from receipt of contingency funds of $21.3 million ($13.4 million aftertax). 44 (c) The assumed conversion of our Premium Income Equity Securities ("PIES") into 10.35 million shares of our common stock for 1998 and 1999 produced anti-dilutive results and therefore was not included in the diluted calculations of earnings per share. The PIES automatically converted into shares of common stock in July 2001, which eliminated our $12 million annual preferred dividend requirement. In March 2002, we completed an underwritten public offering of 23 million shares of common stock to partially fund the California Acquisition. (d) Capital expenditures exclude amounts to fund acquisitions in the Refining segment and Retail segment in 1998, 2001 and 2002. (e) During 2002, we issued $450 million in principal amount of 9 5/8% senior subordinated notes due 2012 and two 10-year junior subordinated notes with face amounts totaling $150 million, and we amended and restated our previous senior secured credit facility, primarily to fund the California Acquisition. In conjunction with the acquisitions of the Mid-Continent refineries, we issued $215 million in principal amount of 9 5/8% senior subordinated notes due 2008 and entered into a senior secured credit facility in 2001. In conjunction with acquisitions in 1998, we refinanced our then existing indebtedness and issued 9% senior subordinated notes due 2008 and additional equity securities, including common stock and PIES that are included in stockholders' equity. (f) In March 2002, we completed an underwritten public offering of 23 million shares of common stock to partially fund the California Acquisition. We have not paid dividends on our common stock since 1986. DESCRIPTION OF OTHER INDEBTEDNESS NEW CREDIT AGREEMENT In connection with the Financing Transactions, we entered into a new credit agreement with an aggregate maximum availability of $650 million. Our new credit agreement was initially fully underwritten by Bank One, NA and Goldman Sachs Credit Partners L.P., and subsequently syndicated to a group of lenders led by Banc One Capital Markets, Inc., as sole lead arranger and sole bookrunner, Bank One, NA, as administrative agent, and an affiliate of Goldman, Sachs Credit Partners L.P., as syndication agent. The credit agreement consists of a $500 million revolving credit facility (on the Company's election and satisfaction of related conditions, subject to being increased to $550 million) with a sublimit of $400 million for letters of credit, which matures in June 2006 and a $150 million term loan, which matures in April 2007. The borrower under the credit agreement is Tesoro Petroleum Corporation. The credit agreement is guaranteed by certain domestic subsidiaries and is secured by a first priority lien on all of Tesoro's and the guarantors' inventory, accounts and other rights to payment related to the sale of inventory or the rendering of services, intercompany indebtedness (other than intercompany indebtedness constituting collateral securing the notes and the new term loans), cash and cash equivalents, related contracts, general intangibles and other rights related to, and all proceeds of, the foregoing. The revolving credit facility provides for borrowings of up to the lesser of $500 million or the amount of the borrowing base, calculated as of the date of determination, as the sum of 75% of eligible inventory, plus 85% of eligible accounts receivable, plus 100% of cash and cash equivalents held by Bank One, NA, less certain reserves from time to time established by the lenders. Borrowing rates under the credit agreement will be based on a pricing grid. Rates on the revolving credit facility will vary, at Tesoro's option, at (1) the greater of the Bank One prime rate and the sum of the federal funds effective rate plus .50% per annum (plus .50% to 1.50% depending on a measurement to be determined) or (2) LIBOR (plus 2.25% to 3.25% depending on a measurement to be determined). Rates on the term loan will vary, at Tesoro's option, at (1) the greater of the Bank One prime rate and the sum of the federal funds effective rate plus 2.25% per annum or (2) LIBOR plus 4.0% per annum. We are required to comply with various affirmative and negative covenants which may limit our ability to incur new debt, make certain investments and acquisitions, sell certain assets, grant liens, and take other actions. We are also subject to financial covenants and conditions which will require us to maintain at certain 45 times a minimum consolidated fixed charge coverage ratio and at all times a minimum excess availability and a minimum consolidated tangible net worth. The credit agreement requires us to maintain a collection account for cash receipts which are used to repay outstanding borrowings daily. NEW TERM LOANS In connection with the Financing Transactions, we also entered into a new five-year $200 million credit and guaranty agreement, referred to below as the term loan agreement, among Tesoro, the guarantors of the notes and Goldman Sachs Credit Partners L.P., as sole lead arranger, sole bookrunner, syndication agent and administrative agent. The borrower under our new term loans is Tesoro Petroleum Corporation. Tesoro's payment obligations under the term loans are jointly and severally guaranteed by the same entities that guarantee the notes, and the term loans and the related guarantees are secured together with the notes and the related guarantees on an equal and ratable basis by first priority security interests (subject to permitted prior liens), granted to the collateral agent, on all of the Collateral. See "Description of the Exchange Notes -- Security" for a description of the Collateral, a summary of provisions relating to the Collateral and a description of the voting rights of the holders of the term loans in relation to the holders of the notes. The term loan agreement initially provides for borrowings of up to $200 million. Subject to the covenants contained in the term loan agreement and the indenture governing the notes, Tesoro and the guarantors may borrow additional term loans under the term loan agreement or issue additional notes under the indenture governing the notes offered in this offering, or any combination thereof, having an aggregate principal amount not exceeding $200 million, which will be pari passu in right of payment with the term loans, the notes, and the related guarantees and will be equally and ratably secured by the Collateral. The outstanding principal amount of the term loans will be payable in quarterly installments, each of which will be equal to 0.25% of the original amount of the term loans, until April 15, 2007, with the balance payable in four equal quarterly installments in the year ending April 15, 2008. All amounts outstanding under the term loans will bear interest, at Tesoro's option, at: - the base rate plus 4.50% per annum, payable quarterly; or - at the reserve adjusted Eurodollar rate plus 5.50%, payable monthly, bi-monthly or quarterly. The term loan agreement contains covenants and events of default substantially the same as those contained in the indenture. Tesoro will not be permitted to optionally prepay the term loans until April 15, 2004, except as described below. After April 15, 2004, Tesoro will be permitted to optionally prepay some or all of the term loans at a premium, plus accrued interest. After April 15, 2006, Tesoro will be permitted to optionally prepay some or all of the term loans at par without payment of any premium. At any time before April 15, 2004, on one or more occasions, Tesoro will be permitted to optionally prepay up to 35% of the outstanding principal amount of the term loans, including any additional term loans, with the net cash proceeds of any one or more public or private equity offerings, so long as: - Tesoro pays holders of the term loans a premium equal to the interest rate then in effect on the term loans being prepaid, plus accrued interest; - Tesoro prepays the term loans within 90 days of such equity offering; and - at least 65% of the aggregate principal amount of term loans issued under the term loan agreement, including the principal amount of any additional term loans, remains outstanding immediately after each such optional prepayment. The term loan agreement contains provisions relating to changes of control and sales of assets substantially similar to those contained in the indenture. 46 SENIOR SUBORDINATED NOTES In April 2002, we issued $450 million principal amount of 9 5/8% senior subordinated notes due April 1, 2012. On April 17, 2003, we repurchased $21 million principal amount of the 9 5/8% senior subordinated notes due 2012. The 9 5/8% senior subordinated notes due 2012 have a ten-year maturity with no sinking fund requirements and are subject to optional redemption by us beginning in April 2007 at declining premiums. In addition, until April 1, 2005, we may redeem up to 35% of the principal amount at a redemption price of 109.625% with proceeds of certain equity issuances. In November 2001, we issued $215 million principal amount of 9 5/8% senior subordinated notes due November 1, 2008. On April 17, 2003, we repurchased $4 million principal amount of the 9 5/8% senior subordinated notes due 2008. The 9 5/8% senior subordinated notes due 2008 have a seven-year maturity with no sinking fund requirements and are subject to optional redemption by us beginning in November 2005 at declining premiums. In addition, until November 1, 2004, we may redeem up to 35% of the principal amount at a redemption price of 109.625% with the net cash proceeds of one or more equity offerings. Our 9% senior subordinated notes due 2008, Series B, were issued in 1998 at a principal amount of $300 million. These notes have a ten-year maturity without sinking fund requirements and are subject to optional redemption by us beginning in July 2003 at declining premiums. The indentures for our senior subordinated notes contain covenants and restrictions which are customary for notes of this nature. These covenants and restrictions limit, among other things, our ability to: - pay dividends and other distributions with respect to our capital stock and purchase, redeem or retire our capital stock; - incur additional indebtedness and issue preferred stock; - enter into certain asset sales; - enter into transactions with affiliates; - incur liens on assets to secure certain debt; - engage in certain business activities; and - engage in certain merger or consolidations and transfers of assets. The indentures also limit our subsidiaries' ability to create restrictions on making certain payments and distributions. The senior subordinated notes are guaranteed by substantially all of our operating subsidiaries. JUNIOR SUBORDINATED NOTES In connection with our acquisition of the California refinery, we issued to the seller two ten-year junior subordinated notes with face amounts aggregating $150 million. The notes consist of: (i) a $100 million junior subordinated note, due July 2012, which is non-interest bearing through May 16, 2007 and carries a 7.5% interest rate thereafter, and (ii) a $50 million junior subordinated note, due July 2012, which is non-interest bearing through May 16, 2003 and bears interest at 7.47% from May 17, 2003 through May 16, 2007 and 7.5% thereafter. The two junior subordinated notes with face amounts of $100 million and $50 million were initially recorded at a combined present value of approximately $61 million, discounted at a rate of 15.625% and 14.375%, respectively. The discount is being amortized over the term of the notes. DESCRIPTION OF THE EXCHANGE NOTES Tesoro issued the outstanding 8% notes, and will issue the exchange notes, under an indenture among Tesoro, the Guarantors and The Bank of New York, as trustee, in a private transaction that is not subject to the registration requirements of the Securities Act. See "Notice to Investors". The terms of the notes include those provisions contained in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939, as amended. The holders of notes will be entitled to certain registration rights, as 47 set forth in the registration rights agreement by and among Tesoro, the Guarantors and the initial purchasers of the notes. The security documents referred to below under the caption "-- Security" by and among Tesoro, the Guarantors and Wilmington Trust Company, as collateral agent, contain the terms of the security arrangements that will secure the notes. The following discussion summarizes the material provisions of the indenture, the registration rights agreement, the intercreditor agreement and the security documents. It does not purport to be complete, and is qualified in its entirety by reference to all of the provisions of those agreements, including the definition of certain terms, and to the Trust Indenture Act of 1939, as amended. We urge you to read the indenture, the registration rights agreement, the intercreditor agreement and the security documents because they, and not this description, define your rights as holders of the notes. Copies of the indenture, the registration rights agreement, the intercreditor agreement and the security documents are available as set forth below under the caption "-- Additional Information". You can find the definitions of certain terms used in this description under the caption "-- Certain Definitions". In this description, the word "Tesoro" refers only to Tesoro Petroleum Corporation and does not include any of its subsidiaries. Certain other defined terms used in this description but not defined below under the caption "-- Certain Definitions" have the meanings assigned to them in the indenture. The registered holder of a note will be treated as the owner of it for all purposes. Only registered holders will have rights under the indenture. BRIEF DESCRIPTION OF THE EXCHANGE NOTES AND THE GUARANTEES THE NOTES The notes: - will be general obligations of Tesoro; - will be pari passu in right of payment with all existing and future senior Indebtedness of Tesoro, including the Term Loans to be incurred pursuant to the Term Loan Agreement on the date on which notes are first issued and borrowings under the Senior Credit Facility; - will be senior in right of payment to Tesoro's outstanding 9% Senior Subordinated Notes due 2008, 9 5/8% Senior Subordinated Notes due 2008 and 9 5/8% Senior Subordinated Notes due 2012, and to all future subordinated Indebtedness of Tesoro; - will be unconditionally guaranteed by the Guarantors on a senior basis; and - will be secured together with the Term Loans (on an equal and ratable basis) by first priority security interests (subject to Permitted Prior Liens) in the Collateral owned or at any time acquired by Tesoro. THE GUARANTEES The notes will be guaranteed by each of Tesoro's Domestic Subsidiaries, other than the Immaterial Subsidiaries. Each guarantee of the notes: - will be a general obligation of the Guarantor; - will be pari passu in right of payment with all existing and future senior Indebtedness of that Guarantor, including the guarantees of the Term Loans and the guarantees of the Indebtedness under the Senior Credit Facility; - will be senior in right of payment to the guarantees of Tesoro's outstanding 9% Senior Subordinated Notes due 2008, 9 5/8% Senior Subordinated Notes due 2008 and 9 5/8% Senior Subordinated Notes due 2012, and to all future subordinated Indebtedness of such Guarantor; and 48 - will be secured together with the guarantees of the Term Loans (on an equal and ratable basis) by first priority security interests (subject to Permitted Prior Liens) in the Collateral owned or at any time acquired by that Guarantor. In the event of a bankruptcy, liquidation or reorganization of any of our non-guarantor Subsidiaries, the non-guarantor Subsidiaries will pay the holders of their debt and their trade creditors before they will be able to distribute any of their assets to us. These non-guarantor Subsidiaries generated less than 1% of our consolidated revenues in the fiscal year ended December 31, 2002 and the three months ended March 31, 2003 and held less than 1% of our consolidated assets as of March 31, 2003. As of the Issue Date, all of our Subsidiaries were Restricted Subsidiaries. However, under the circumstances described below under the subheading "Certain Covenants -- Restricted Payments", we will be permitted to designate certain of our subsidiaries as "Unrestricted Subsidiaries". Our Unrestricted Subsidiaries will not be subject to many of the restrictive covenants in the indenture. Our Unrestricted Subsidiaries will neither guarantee the notes nor grant any Liens in their property to secure the repayment of the notes. PRINCIPAL, MATURITY AND INTEREST The notes will mature on April 15, 2008. The notes will bear interest at the rate set forth on the cover page of this prospectus from April 17, 2003, or from the most recent interest payment date to which interest has been paid, payable semiannually on April 15 and October 15 of each year, beginning on October 15, 2003. We will pay interest to the persons in whose names the notes are registered at the close of business on April 1 and October 1 of each year. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. We will issue notes with an initial maximum aggregate principal amount of $375 million. We may issue additional notes from time to time after the date hereof having an aggregate principal amount not to exceed, when added to the aggregate principal amount of the notes and the Term Loans then outstanding, $725 million. Any offering of additional notes will be subject to all of the covenants in the indenture. The notes and any additional notes subsequently issued under the indenture will be treated as a single class for all purposes under the indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. Any additional notes subsequently issued under the indenture will be guaranteed by the Guarantors and, subject to the limitations set forth under clause (2) of the definition of "Permitted Liens", will be secured by the Collateral on an equal and ratable basis. See "-- Security". Principal of, and premium and interest (including special interest), if any, on, the notes will be payable, and the notes will be exchangeable and transferable, at the office or agency of Tesoro in The City of New York maintained for such purposes, which initially will be the office of the trustee in The City of New York. In addition, interest may be paid, at our option, by check mailed to the registered holders at their respective addresses as shown on the security register. The notes will be issued only in fully registered form without coupons, in denominations of $1,000 and integral multiples thereof. No service charge will be made for any registration of transfer, exchange or redemption of notes, except in specified circumstances for any tax or other governmental charge that may be imposed in connection with those transfers, exchanges or redemptions. The interest rate on the notes is subject to increase in certain circumstances if we do not file a registration statement relating to a registered exchange offer for the notes, or, in lieu thereof, a resale shelf registration statement for the notes, if such registration statement is not declared effective on a timely basis or if certain other conditions are not satisfied, all as further described under "-- Registration Rights; Special Interest". SUBSIDIARY GUARANTEES Tesoro's payment obligations under the notes will be jointly and severally guaranteed on a senior basis by the Guarantors. Each Domestic Subsidiary of Tesoro other than the Immaterial Subsidiaries will be required to execute a Subsidiary Guarantee and become a Guarantor under the indenture. The indenture provides that if any Restricted Subsidiary of Tesoro ceases to be an Immaterial Subsidiary at any time, it will promptly become a Guarantor if it would otherwise be required to be a Guarantor at that date. The obligations of each 49 Guarantor under its Subsidiary Guarantee will be limited to the maximum amount the Guarantors are permitted to guarantee under applicable law without creating a "fraudulent conveyance". See "Risk Factors -- Federal and state statutes allow courts, under specific circumstances, to void guarantees and liens granted by the guarantors and require holders of notes to return payments received from guarantors or their property". The Subsidiary Guarantees of each Guarantor will be pari passu in right of payment with all existing and future senior Indebtedness of that Guarantor, including all guarantees of the Term Loans and all guarantees of Indebtedness under the Senior Credit Facility, and will be secured equally and ratably with all guarantees of the Term Loans in all Collateral owned or at any time acquired by that Guarantor. The indenture provides that, subject to the provisions of the following paragraph, no Guarantor may consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person, whether or not affiliated with such Guarantor, unless: (1) the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) assumes all the obligations of such Guarantor, pursuant to a supplemental indenture and other documentation in form and substance reasonably satisfactory to the trustee, under the notes, the indenture, all security documents delivered by that Guarantor, and, if then in effect, the registration rights agreement, and, in the case of a Pipeline Subsidiary, if and to the extent that a pledge in respect thereof is required to then be in effect, the Capital Stock of the successor resultant transferee Person continues to be pledged to the collateral agent for the benefit of the holders of the Secured Obligations; (2) immediately after giving effect to such transaction, no Default or Event of Default exists; and (3) Tesoro would be permitted by virtue of Tesoro's pro forma Fixed Charge Coverage Ratio, immediately after giving effect to such transaction, to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the covenant described below under the caption "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock"; provided, however, that this clause (3) shall be suspended for so long as Tesoro and its Restricted Subsidiaries are not subject to the Suspended Covenants. See "Certain Covenants -- Covenant Suspension". Notwithstanding the foregoing paragraph: (1) any Guarantor other than a Pipeline Subsidiary may consolidate with, merge into or transfer all or a part of its properties and assets to Tesoro or any other Guarantor; (2) any Guarantor may consolidate with, merge into or transfer all or a part of its properties and assets to a Restricted Subsidiary of Tesoro that has no significant assets or liabilities and was incorporated, organized or formed solely for the purpose of reincorporating or otherwise reorganizing such Guarantor in another State of the United States; provided that such successor, resultant or transferee Person continues to be a Guarantor and to have the same obligations under the notes, the indenture, all of the security documents and, if then in effect, the registration rights agreement and, in the case of a Pipeline Subsidiary, if and to the extent that a pledge in respect thereof is required to then be in effect, the Capital Stock of the successor resultant transferee Person continues to be pledged to the collateral agent for the benefit of the holders of the Secured Obligations; and (3) the indenture provides that in certain circumstances involving the disposition (including by way of merger, consolidation or otherwise) of all or substantially all of the assets or all Capital Stock of any Guarantor, that Guarantor will be released from its Subsidiary Guarantee, all security interests granted by that Guarantor to the collateral agent and all of the other obligations of that Guarantor under the notes, the indenture, all of the security documents and, if then in effect, the registration rights agreement and any resultant, surviving or transferee Person shall not be required to assume such obligations upon the conditions described under the caption "-- Certain Covenants -- Additional Subsidiary Guarantees and Liens". See also "-- Security -- Release of Security Interests". 50 SECURITY The payment of the notes, the Term Loans, and all other Secured Obligations, when due, whether on an interest payment date, at maturity, by acceleration, repurchase, redemption or otherwise and whether by Tesoro pursuant to the notes or the Term Loans or by any Guarantor pursuant to the Subsidiary Guarantees or the guarantees of the Term Loans, and the performance of all other obligations of Tesoro and its Restricted Subsidiaries under the Note Documents and the Term Loan Documents are secured as provided in the security documents and will be secured by all security documents delivered as required or permitted by the indenture and the Term Loan Agreement. COLLATERAL AGENT Tesoro has appointed Wilmington Trust Company to serve as the collateral agent for the benefit of the holders of the notes and the Term Loans from time to time. The security documents provide that the collateral agent may not be the same institution serving as the Term Loan Administrative Agent or as the trustee under the indenture. The security documents provide that the collateral agent will be subject to such directions as may be given it by the trustee and by the Term Loan Administrative Agent from time to time as required or permitted by the indenture and the Term Loan Agreement. The relative rights with respect to control of the collateral agent will be specified in the collateral agency agreement by and among Tesoro, the Guarantors, the trustee, the Term Loan Administrative Agent and the collateral agent. Except as directed by the holders of a majority in principal amount of the notes and the Term Loans then outstanding, voting together as a single class, the collateral agent will not be obligated: (1) to act upon directions purported to be delivered to it by any other Person; (2) to foreclose upon or otherwise enforce any Lien; or (3) to take any other action whatsoever with regard to any or all of the security documents, the Liens created thereby or Collateral. COLLATERAL The indenture and the security documents provide that the notes and the Subsidiary Guarantees will be secured together with the Term Loans and the guarantees of the Term Loans by the Guarantors on an equal and ratable basis by first priority security interests (subject to Permitted Prior Liens), granted to the collateral agent for the benefit of the holders of the Secured Obligations, in all of the following property (collectively, the "Collateral"): (1) the real property, fixtures and equipment comprising or used or useful for or in connection with the six refineries and connected terminal assets owned on the Issue Date by Domestic Subsidiaries and located in or near Martinez, California, Anacortes, Washington, Kenai, Alaska, Kapolei, Hawaii, Mandan, North Dakota, and Salt Lake City, Utah (the "Existing Refineries"); (2) the real property, fixtures and equipment comprising or used or useful for or in connection with the two terminals owned on the Issue Date by a Domestic Subsidiary and located in Burley, Idaho and Boise, Idaho (the "Owned Terminals"); (3) (a) all real property, fixtures or equipment acquired at any time after the Issue Date by Tesoro or any Guarantor (i) located on, or contiguous to or connected with and in reasonable proximity to, any of the Existing Refineries or Owned Terminals and (ii) necessary, used or useful for or in connection with the ownership, expansion, operation, use or maintenance of any of the Existing Refineries or Owned Terminals and (b) any owned or acquired interest in leases or contracts with governmental authorities, where such leases or contracts are in real estate in navigable waters contiguous to or connected with and in reasonable proximity to any of the Existing Refineries or Owned Terminals; 51 (4) all fixtures and equipment at any time owned or acquired by Tesoro or any Domestic Subsidiary comprising or acquired for use with (a) the pipelines serving and connected to the Existing Refineries on the Issue Date, which are a 71-mile pipeline from the Kenai refinery to Anchorage, Alaska, a 24-mile pipeline from Swanson River Field to the Kenai refinery, a 23-mile pipeline system connected to the Kapolei refinery and a 700-mile pipeline system in North Dakota and Montana, or (b) any other pipeline acquired at any time after the Issue Date by Tesoro or any Domestic Subsidiary to serve and that is connected to any of the Existing Refineries (collectively, the "Pipelines"); (5) (i) all outstanding Capital Stock of each of Tesoro Alaska Pipeline Company, which on the Issue Date owned the Kenai-Anchorage pipeline, Kenai Pipe Line Company, which on the Issue Date owned the Swanson River-Kenai pipeline, and each additional Pipeline Subsidiary (other than Tesoro High Plains Pipeline Company), (ii) all intercompany Indebtedness owed by any Pipeline Subsidiary (other than Tesoro High Plains Pipeline Company) at any time owned or acquired by Tesoro or any Domestic Subsidiary, and (iii) 66 2/3% of all outstanding Capital Stock of, and 66 2/3% of all intercompany Indebtedness owed by, Tesoro High Plains Pipeline Company, which on the Issue Date owned the North Dakota-Montana pipeline system, at any time owned or acquired by Tesoro or any Domestic Subsidiary; and (6) all fixtures and equipment at any time owned or acquired by Tesoro or any Guarantor located at any of the terminals or any other facilities at which any inventory is stored or distributed that are leased by Tesoro or any Guarantor and that are necessary for or used in connection with the operation, use or maintenance of any of the Existing Refineries (the "Associated Leased Terminals") or the transportation of any inventory to or from any Existing Refinery, Owned Terminal or Associated Leased Terminal; (7) all general intangibles (including patents, copyrights, trade secrets and other intellectual property, whether owned or licensed, customer and supplier contracts, drawings, plans, books and records, employment, consulting, operating, maintenance or services agreements and other contractual rights, public and private licenses, permits, franchises, powers, authorities, pollution or environmental credits and allowances, goodwill and other intangible property of every type or description) at any time owned or acquired by Tesoro or any Guarantor necessary, used or useful for or in connection with, or in any respect related, incidental or ancillary to, the ownership, expansion, operation, use, maintenance or sale or other disposition of any of the Existing Refineries, the Owned Terminals, the Associated Leased Terminals or the Pipelines; (8) all rights to payment at any time owned or acquired by Tesoro or any Subsidiary of Tesoro constituting (a) intercompany Indebtedness resulting from the declaration of a dividend or a debt distribution on account of Capital Stock of a Subsidiary of Tesoro or a redemption, reclassification or recapitalization of the Capital Stock of any such Subsidiary and (b) intercompany Indebtedness resulting from the funding of proceeds of any transaction raising capital (whether by the issuance of debt or equity) for Tesoro or any Subsidiary of Tesoro as an intercompany loan to Tesoro or any such Subsidiary (other than the funding of proceeds of any extension of credit or borrowing under a Credit Facility), in each case, whether such rights to payment constitute accounts or payment intangibles, or arise under or in connection with chattel paper of instruments (collectively, the "Specified Intercompany Debt"); (9) each Asset Sale Proceeds Account and all deposits therein and interest thereon and investments thereof, and all property of every type and description in which any proceeds of any Sale of Collateral or other disposition of Collateral are invested or upon which the collateral agent is at any time granted, or required to be granted, a Lien to secure the Secured Obligations as set forth in the covenant described under the caption "-- Repurchase at the Option of Holders -- Asset Sales" or in clause (3) of the definition of "Asset Sale"; and (10) all proceeds of any of the foregoing; provided, that the Collateral will not at any time include any property that is, at such time, an Excluded Asset. On the Issue Date, the fixtures and equipment comprising the North Dakota-Montana pipeline system and the Capital Stock of Tesoro High Plains Pipeline Company were Excluded Assets because a security 52 interest in these assets may only be granted after receipt of regulatory approvals from the North Dakota Public Service Commission which had not been obtained and such fixtures and equipment shall remain Excluded Assets until such regulatory approvals have been obtained. Tesoro and Tesoro High Plains Pipeline Company have agreed promptly to apply for and seek all regulatory approvals and use all commercially reasonable efforts to obtain all such approvals as soon as practicable, but if Tesoro concludes in good faith that such efforts will not be successful, Tesoro and Tesoro High Plains Pipeline Company will not be required to grant such security interests. In addition, on the Issue Date, the interests of Tesoro or any Domestic Subsidiary in leases and contracts with governmental authorities relating to (a) the wharfs and related facilities that are connected to the Martinez, California refinery and Diablo Coke Plant, California, (b) the transportation causeway, wharf and related facilities that are connected to the Anacortes, Washington refinery and terminal, (c) the mooring and related facilities that are connected to the Kapolei, Hawaii refinery, (d) the wharfs and related facilities that are connected to the Kenai, Alaska refinery, and (e) the real estate contiguous to or connected with and in reasonable proximity to the Existing Refineries or Owned Terminals, were Excluded Assets because a security interest in the leaseholds or contracts pursuant to which these assets are held may only be granted after receipt of the consent of such governmental authorities which have not been obtained and such interests shall remain Excluded Assets until such consents have been obtained. Tesoro and its Domestic Subsidiaries have agreed promptly to seek all such consents and use all commercially reasonable efforts to obtain all such consents as soon as practicable, but if Tesoro concludes in good faith that such efforts will not be successful, Tesoro and its Domestic Subsidiaries will not be required to grant such security interests. There can be no assurance that such approvals or consents will be granted on a timely basis, or at all. See "Risk Factors -- Risks relating to the notes -- Not all of the assets related to, or needed for the operation of, the Collateral will be pledged to secure the notes. The value of the Collateral may be diminished by the absence of security interests in, and assured access to, those assets." Tesoro and the Guarantors will enter into security documents granting the collateral agent a security interest on the Collateral to secure the payment and performance when due of all of the notes, the Term Loans and other Secured Obligations. The security interests held by the collateral agent will secure the Secured Obligations equally and ratably. The security documents provide that, subject to the covenants contained in the indenture and in the Term Loan Agreement, Tesoro and the Guarantors may issue additional notes under the indenture or borrow additional Term Loans under the Term Loan Agreement, having an aggregate principal amount not exceeding $150 million, which will be pari passu with the notes and the Subsidiary Guarantees and the Term Loans and the related guarantees and will be equally and ratably secured by the Collateral. Such additional notes or Term Loans will only be permitted to share in the Collateral if such Indebtedness is permitted to be incurred under the Term Loan Agreement and the covenant described below under the caption "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock". ENFORCEMENT OF SECURITY INTERESTS The security documents provide that, in enforcing its Liens on the Collateral, the collateral agent will be subject to such instructions as may be given to it by the holders of a majority in outstanding principal amount of the notes and the Term Loans, voting together as a single class. RELEASE OF SECURITY INTERESTS The security documents provide that the Collateral will be released: (1) in whole, upon payment in full of the notes, the Term Loans and all other Secured Obligations that are outstanding, due and payable at the time the notes and the Term Loans are paid in full; (2) with respect to the Note Obligations only, upon satisfaction and discharge of the indenture as set forth under the caption "-- Satisfaction and Discharge"; 53 (3) with respect to the Note Obligations only, upon a Legal Defeasance or Covenant Defeasance as set forth under the caption "-- Legal Defeasance and Covenant Defeasance"; (4) with respect to the Note Obligations only, upon payment in full of the notes and all other Note Obligations that are outstanding, due and payable at the time the notes are paid in full; (5) with respect to the Term Loan Obligations only, upon payment in full of the Term Loans and all other Term Loan Obligations that are outstanding, due and payable at the time the Term Loan Obligations are paid in full; (6) as to any Collateral that constitutes all or substantially all of the Collateral, with the consent of the holders of 100% in principal amount of the notes and Term Loans then outstanding, voting together as a single class (including, without limitation, consents obtained in connection with a tender offer or exchange offer for, or purchase of, the notes); (7) as to any Collateral that constitutes less than all or substantially all of the Collateral, with the consent of the holders of a majority in principal amount of the notes and Term Loans then outstanding, voting together as a single class (including, without limitation, consents obtained in connection with a tender offer or exchange offer for, or purchase of, the notes); (8) as to any Collateral (i) that is sold or otherwise disposed of by Tesoro or any of its Restricted Subsidiaries in a transaction permitted by the Term Loan Agreement and the indenture, at the time of such sale or disposition, to the extent of the interest sold or disposed of in accordance with the terms of the covenant described below under the caption "-- Repurchase at the Option of Holders -- Asset Sales", (ii) that is exchanged or traded as provided in clause (3) of the definition of "Asset Sale", (iii) that constitutes Excess Proceeds from the Sale of Collateral which have been offered to, but not accepted by, the holders of notes and Term Loans and are released as set forth in the last paragraph of the description below under the caption "-- Repurchase at the Option of Holders -- Asset Sales" or (iv) that is owned or at any time acquired by a Subsidiary that has been released from its Subsidiary Guarantee and its guarantee of the Term Loans, concurrently with the release thereof; or (9) as to the Capital Stock of any Pipeline Subsidiary, if securing the notes with the Capital Stock of such Pipeline Subsidiary as provided by clause (5) under the caption "-- Collateral" would give rise to an obligation of Tesoro to prepare audited financial statements of such Pipeline Subsidiary in order to comply with Regulation S-X, but only if such obligation did not arise as a result of the transfer of assets to such Pipeline Subsidiary, the transfer of pipeline assets to another Subsidiary or any recapitalization of any Subsidiary by Tesoro or any of its Subsidiaries. If Tesoro at any time delivers to the collateral agent an officers' certificate stating that Tesoro or any Guarantor intends to incur Indebtedness that will be secured by a purchase money security interest permitted under clause (4) in the definition of "Permitted Liens" upon certain property identified therein with reasonable specificity to be acquired with such Indebtedness, then the collateral agent shall deliver to Tesoro, upon the incurrence of such Indebtedness, a lien subordination agreement in form and substance reasonably satisfactory to the collateral agent confirming that the Collateral Agent's Liens upon such property are subject and subordinate to such purchase money security interest to the extent it secures Obligations in respect of such Indebtedness. FURTHER ASSURANCES The security documents provide that Tesoro will, and will cause each of its Subsidiaries to, do or cause to be done all acts and things which may be required, or which the collateral agent from time to time may reasonably request, to assure and confirm that the collateral agent holds, for the benefit of the holders of Secured Obligations, duly created, enforceable and perfected first priority Liens (subject to Permitted Prior Liens) upon the Collateral as contemplated by the Note Documents and the Term Loan Documents. If Tesoro or any Domestic Subsidiary shall at any time acquire any real property or leasehold or other interest in real property described in the definition of Collateral that is not covered by the mortgages running 54 to the benefit of the collateral agent that were executed on or before the Issue Date, then within 45 days of such acquisition Tesoro or such Domestic Subsidiary shall execute, deliver and record a supplement to the mortgages running to the benefit of the collateral agent that were executed on or before the Issue Date, reasonably satisfactory in form and substance to the collateral agent, subjecting such real property or leasehold or other interests in real property to the Lien created by such mortgage. If requested by the collateral agent, Tesoro or such Subsidiary shall obtain an appropriate title policy or endorsement or supplement to the title policy insuring the Collateral Agent's Liens in such additional interests in real property, subject only to permitted prior liens and other exceptions to title approved by the collateral agent, provided that the collateral agent shall not request any such additional title policy or endorsement or supplement to the title policy in respect of such additional real property described in the definition of Collateral having a Fair Market Value less than $1 million. Upon request of the collateral agent at any time and from time to time, Tesoro will, and will cause each of its Subsidiaries to, promptly execute, acknowledge and deliver such security documents, instruments, certificates, notices and other documents and take such other actions as shall be required or which the collateral agent may reasonably request to create, perfect, protect, assure or enforce the Liens and benefits intended to be conferred as contemplated by the indenture and the Term Loan Agreement for the benefit of the holders of the Secured Obligations. If Tesoro or such Subsidiary fails to do so, the collateral agent is hereby irrevocably authorized and empowered, with full power of substitution, to execute, acknowledge and deliver such security documents, instruments, certificates, notices and other documents and, subject to the provisions of the Note Documents and the Term Loan Documents, take such other actions in the name, place and stead of Tesoro or such Subsidiary, but the collateral agent will have no obligation to do so and no liability for any action taken or omitted by it in good faith in connection therewith. Tesoro will otherwise comply with the provisions of TIA sec.314(b). To the extent applicable, Tesoro will cause TIA sec.313(b), relating to reports, and TIA sec.314(d), relating to the release of property or securities or relating to the substitution therefore of any property or securities to be subjected to the Lien of the security documents, to be complied with. Any certificate or opinion required by TIA sec.314(d) may be made by an officer of Tesoro except in cases where TIA sec.314(d) requires that such certificate or opinion be made by an independent Person, which Person will be an independent engineer, appraiser or other expert selected or reasonably satisfactory to the trustee. Notwithstanding anything to the contrary in this paragraph, Tesoro will not be required to comply with all or any portion of TIA sec.314(d) if it determines, in good faith based on advice of counsel, that under the terms of TIA sec.314(d) and/or any interpretation or guidance as to the meaning thereof of the Commission and its staff, including "no action" letters or exemptive orders, all or any portion of TIA sec.314(d) is inapplicable to one or a series of released Collateral. To the extent applicable, Tesoro will furnish to the trustee, prior to each proposed release of Collateral pursuant to the security documents: (1) all documents required by TIA sec.314(d); and (2) an opinion of counsel to the effect that such accompanying documents constitute all documents required by TIA sec.314(d). If any Collateral is released in accordance with the indenture or any security document and if Tesoro has delivered the certificates and documents required by the security documents and this covenant, the trustee will determine whether it has received all documentation required by TIA sec.314(d) in connection with such release and, based on such determination and the opinion of counsel delivered pursuant to the indenture, will deliver a certificate to the collateral agent setting forth such determination. EQUAL AND RATABLE LIEN SHARING BY HOLDERS OF NOTES AND HOLDERS OF TERM LOANS Notwithstanding (i) anything to the contrary contained in the Note Documents or the Term Loan Documents, (ii) the time, order or method of attachment of the Collateral Agent's Liens, (iii) the time or order of filing or recording of financing statements or other documents filed or recorded to perfect any Lien upon any 55 Collateral, (iv) the time of taking possession or control over any Collateral or (v) the rules for determining priority under the Uniform Commercial Code or any other law governing relative priorities of secured creditors: (1) all Liens at any time granted to secure any Secured Obligations will secure equally and ratably all of the notes (including additional notes permitted by clause (2) of the definition of "Permitted Liens"), all other present and future Note Obligations, all of the Term Loans (including additional Term Loans permitted by clause (2) of the definition of "Permitted Liens") and all other present and future Term Loan Obligations, and (2) all proceeds of Collateral encumbered by such Liens shall be allocated and distributed equally and ratably on account of the Note Obligations and Term Loan Obligations. AMENDMENT No amendment or supplement to the provisions of the security documents will be effective without the consent of the holders of at least a majority in principal amount of the notes and the Term Loans then outstanding voting as a single class; provided that (i) no amendment or supplement to the provisions of the security documents that adversely affects the right of any holder of Secured Obligations to share in the Collateral equally and ratably will become effective without the consent of each such holder and (ii) any amendment or supplement to the provisions of the security documents that releases all or substantially all of the Collateral will be governed by the provisions described under "Release of Security Interests". Any such amendment or supplement that imposes any obligation upon the collateral agent or adversely affects the rights of the collateral agent in its individual capacity will become effective only with the consent of the collateral agent. INTERCREDITOR AGREEMENT WITH CREDIT FACILITY AGENT UNDER QUALIFIED CREDIT FACILITY If and whenever any Credit Facility becomes a Qualified Credit Facility, the collateral agent and the Credit Facility Agent under such Qualified Credit Facility shall become obligated to perform, each for the benefit of the other, the obligations described below under this caption "-- Intercreditor Agreement with Credit Facility Agent under Qualified Credit Facility". No agent or representative under any Credit Facility that is not a Qualified Credit Facility shall have the right to rely on or enforce any obligation of the collateral agent described hereunder. DISCLAIMER OF CONSENSUAL LIENS The collateral agent will not claim or enforce any consensual Lien upon any Credit Facility Collateral. The Credit Facility Agent will not claim or enforce any consensual Lien upon any property other than Credit Facility Collateral. The holders of Secured Obligations shall be entitled to receive and retain, free from any Lien securing Credit Facility Obligations, all payments made in cash by Tesoro or any other Obligor and all amounts received with respect to Secured Obligations through the exercise of a set-off or other similar right, even if such cash constitutes proceeds of property subject to a Lien securing Credit Facility Obligations. The holders of Credit Facility Obligations shall be entitled to receive and retain, free from any Collateral Agent's Liens thereon, all payments made in cash by Tesoro or any other Obligor and all amounts received with respect to Credit Facility Obligations through the exercise of a set-off or other similar right, even if such cash constitutes proceeds of property subject to a Collateral Agent's Lien. If any cash proceeds of Credit Facility Collateral are converted into or invested in property subject to Collateral Agent's Liens (other than cash, Cash Equivalents or deposit accounts) at any time when the collateral agent has not received written notice from the Credit Facility Agent or any holder of Indebtedness outstanding under a Qualified Credit Facility stating that such Indebtedness has become due and payable in 56 full (whether at maturity, upon acceleration or otherwise), then all Liens upon such proceeds securing Credit Facility Obligations shall be released and discharged concurrently with such conversion or investment. If any cash proceeds of Collateral are converted into or invested in property subject to the Lien of the Credit Facility Agent (other than cash, Cash Equivalents or deposit accounts) at any time when the Credit Facility Agent has not received written notice from the collateral agent stating that the notes and the Term Loans have become due and payable in full (whether at maturity, upon acceleration or otherwise), then all Liens upon such proceeds securing the Secured Obligations shall be released and discharged concurrently with such conversion or investment. The provisions of the indenture described in this section will not apply to, restrict or affect any judicial lien, including any attachment or judgment lien. CONSENT TO LICENSE TO USE INTELLECTUAL PROPERTY; ACCESS TO INFORMATION; ACCESS TO REAL PROPERTY TO PROCESS AND SELL INVENTORY If so requested at any time by the Credit Facility Agent, the collateral agent shall deliver its written consent (given without any representation, warranty or obligation whatsoever) to any grant by any Obligor to the Credit Facility Agent of a non-exclusive royalty-free license to use any patent, trademark or proprietary information of such Obligor that is subject to a consensual Lien held by the collateral agent, in connection with the enforcement of any consensual Lien held by the Credit Facility Agent upon any inventory of Tesoro or any Subsidiary of Tesoro and to the extent the use of such patent, trademark or proprietary information is necessary or appropriate, in the good faith opinion of the Credit Facility Agent, to process, ship, produce, store, complete, supply, lease, sell or otherwise dispose of any such inventory in any lawful manner. Any consent so delivered by the collateral agent shall be binding on its successors and assigns, including a purchaser of the patent, trademark or proprietary information subject to such license at a foreclosure sale conducted in foreclosure of any Collateral Agent's Liens thereon. If the collateral agent or a purchaser at a foreclosure sale conducted in foreclosure of any Collateral Agent's Liens takes actual possession of any documentation of Tesoro or a Subsidiary of Tesoro (whether such documentation is in the form of a writing or is stored in any data equipment or data record in the physical possession of the collateral agent or the foreclosure purchaser), then upon request of the Credit Facility Agent and reasonable advance notice, the collateral agent or such foreclosure purchaser will permit the Credit Facility Agent or its representative to inspect and copy such documentation if and to the extent the Credit Facility Agent certifies to the collateral agent that: (1) such documentation contains or may contain information necessary or appropriate, in the good faith opinion of the Credit Facility Agent, to the enforcement of the Credit Facility Agent's Liens upon any Credit Facility Collateral; and (2) the Credit Facility Agent and the lenders under the Credit Facility are entitled to receive and use such information as against Tesoro and its Subsidiaries and their suppliers, customers and contractors and under applicable law and, in doing so, will comply with all obligations imposed by law or contract in respect of the disclosure or use of such information. If, upon enforcement of any Collateral Agent's Liens held by the collateral agent, the collateral agent or a purchaser at a foreclosure sale conducted in foreclosure of any Collateral Agent's Liens takes actual possession of refinery, terminal or pipeline property of any Obligor, then, if so requested by the Credit Facility Agent and upon reasonable advance notice, the collateral agent or such foreclosure purchaser will allow the Credit Facility Agent and its officers, employees and agents (but not any of its transferees) reasonable and non-exclusive access to and use of such property for a period not exceeding 120 consecutive calendar days (the "Processing and Sale Period"), as necessary or reasonably appropriate to process, ship, produce, store, complete, supply, have, sell or otherwise dispose of, in any lawful manner, any inventory upon which the Credit Facility Agent holds a Lien, subject to the following conditions and limitations: (1) the Processing and Sale Period shall commence on the date the collateral agent or, if the collateral agent has not taken possession, the foreclosure purchaser takes possession of such real property 57 and shall terminate on the earlier of (i) the day that is 120 days thereafter and (ii) the day on which all inventory (other than inventory abandoned by the Credit Facility Agent) has been removed from such property; and (2) each of the collateral agent and foreclosure purchaser shall be entitled, as a condition of permitting such access and use, to demand and receive assurances reasonably satisfactory to it that the access or use requested and all activities incidental thereto: (a) will be permitted, lawful and enforceable as against Tesoro and the Subsidiaries and their suppliers, customers and contractors and under applicable law and will be conducted in accordance with prudent manufacturing practices; and (b) will be adequately insured for damage to property and liability to persons, including property and liability insurance for the benefit of the collateral agent and the holders of the Secured Obligations, at no cost to the collateral agent or such holders. The collateral agent and/or any such purchaser (i) shall provide reasonable cooperation to the Credit Facility Agent in connection with the manufacture, production, completion, removal and sale of any Credit Facility Collateral by the Credit Facility Agent as provided above and (ii) shall be entitled to receive, from the Credit Facility Agent, fair compensation and reimbursement for their reasonable costs and expenses incurred in connection with such cooperation, support and assistance to the Credit Facility Agent. The collateral agent and/or any such purchaser (or its transferee or successor) shall not otherwise be required to manufacture, produce, complete, remove, insure, protect, store, safeguard, sell or deliver any inventory subject to any Lien held by the Credit Facility Agent or to provide any support, assistance or cooperation to the Credit Facility Agent in respect thereof. AMENDMENT; WAIVER The intercreditor agreement provides that no amendment or supplement to, or waiver of, the provisions described under the caption "-- Intercreditor Agreement with Credit Facility Agent under Qualified Credit Facility" will: (1) be effective unless set forth in a writing signed by the collateral agent with the consent of the holders of at least a majority in principal amount of the notes and the Term Loans then outstanding voting as a single class, except that any such amendment, supplement or waiver that increases the obligations or adversely affects the rights of the holders of the Secured Obligations will be effective only with the consent of the holders of at least 66 2/3% in principal amount of the notes and the Term Loans then outstanding, voting as a single class; and (2) become effective at any time when any Credit Facility Obligations are outstanding or committed under any Qualified Credit Facility unless such amendment, supplement or waiver is consented to in a writing signed by the Credit Facility Agent acting upon the direction or with the consent of such number of the lenders thereunder as may, by the terms of such Qualified Credit Facility, have the power to bind all of such lenders thereto. Any such amendment or supplement that: (A) imposes any obligation upon Tesoro or any Subsidiary of Tesoro, or adversely affects the rights of Tesoro or any Subsidiary of Tesoro or affects the benefits, if any, specifically afforded Tesoro or any Subsidiary of Tesoro and described under "-- Intercreditor Agreement with Credit Facility Agent under Qualified Credit Facility", will become effective only with the consent of Tesoro and such Subsidiary; (B) imposes any obligation upon the collateral agent, or adversely affects the rights of the collateral agent in its individual capacity, will become effective only with the consent of the collateral agent; or (C) imposes any obligation upon the Credit Facility Agent, or adversely affects the rights of the Credit Facility Agent in its individual capacity, will become effective only with the consent of the Credit Facility Agent. 58 ENFORCEMENT The rights and obligations set forth in or arising under the indenture and described under the caption "-- Intercreditor Agreement with Credit Facility Agent under Qualified Credit Facility" are enforceable only by the collateral agent and Credit Facility Agent under a Qualified Credit Facility against each other (and their respective successors, including, but only to the extent expressly provided herein, a purchaser at a foreclosure sale conducted in foreclosure of Collateral Agent's Liens) and against the Obligors. No other Person (including holders of Secured Obligations or Credit Facility Obligations) shall be entitled to enforce any such right or shall be obligated to perform any such obligation; however, such provisions will be binding on the holders of Secured Obligations and Credit Facility Obligations. RELATIVE RIGHTS The provisions described above under the caption "-- Intercreditor Agreement with Credit Facility Agent under Qualified Credit Facility" set forth certain relative rights, as lienholders, of the collateral agent and the Credit Facility Agent. Nothing in the indenture will: (1) impair, as between Tesoro, any other Obligor and holders of notes, the obligation of Tesoro, which is absolute and unconditional, to pay principal of, premium and interest and Special Interest, if any, on the notes in accordance with their terms or to perform any other obligation of Tesoro or any other Obligor under the Note Documents; (2) impair, as between Tesoro, any other Obligor and holders of Term Loans, the obligation of Tesoro, which is absolute and unconditional, to pay principal of, premium and interest, on the Term Loans in accordance with their terms or to perform any other obligation of Tesoro or any other Obligor under the Term Loan Documents; (3) impair, as between Tesoro, any other Obligor under a Qualified Credit Facility and holders of the loans under a Qualified Credit Facility, the obligation of Tesoro, which is absolute and unconditional, to pay principal of, premium and interest, on such loans in accordance with their terms or to perform any other obligation of Tesoro or any other obligor under a Qualified Credit Facility; (4) affect the relative rights of holders of Note Obligations, Term Loan Obligations or Credit Facility Obligations and other creditors of Tesoro or any of its Subsidiaries; (5) restrict the right of any holder of Secured Obligations or Credit Facility Obligations to sue for payments that are then due and owing; (6) prevent the trustee, the Term Loan Administrative Agent, the collateral agent or the Credit Facility Agent or any holder of Secured Obligations or Credit Facility Obligations from exercising against Tesoro or any other Obligor any of its other available remedies upon a default or event of default; or (7) restrict the right of the trustee, the Term Loan Administrative Agent, the collateral agent or the Credit Facility Agent or any holder of Secured Obligations or Credit Facility Obligations to file and prosecute a petition seeking an order for relief in an involuntary bankruptcy case as to any Obligor or otherwise to commence, or seek relief commencing, any insolvency or liquidation proceeding involuntarily against any Obligor or to assert or enforce any claim, Lien, right or remedy in any voluntary or involuntary bankruptcy case or insolvency or liquidation proceeding. OPTIONAL REDEMPTION The notes will not be redeemable at Tesoro's option prior to April 15, 2006, except as provided in the next paragraph. Thereafter, the notes will be subject to redemption at any time or from time to time at the option of Tesoro, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest (including 59 special interest), if any, thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on April 15 of the years indicated below:
YEAR PERCENTAGE - ---- ---------- 2006........................................................ 104.000% 2007 and thereafter......................................... 100.000%
Notwithstanding the foregoing, at any time or from time to time on or before April 15, 2006, Tesoro may on any one or more occasions redeem up to 35% of the aggregate principal amount of notes issued under the indenture at a redemption price of 108% of the principal amount thereof, plus accrued and unpaid interest (including special interest), if any, thereon, to the redemption date, with the net cash proceeds (other than Designated Proceeds) of any one or more Equity Offerings; provided that at least 65% of the aggregate principal amount of notes issued under the indenture remains outstanding immediately after each such redemption; and provided, further, that each such redemption shall occur within 90 days of the date of the closing of such Equity Offering. SELECTION AND NOTICE If less than all of the notes are to be redeemed at any time, selection of notes for redemption will be made by the trustee in compliance with the requirements of the principal national securities exchange, if any, on which the notes are listed, or, if the notes are not so listed, on a pro rata basis, by lot or by such method as the trustee shall deem fair and appropriate; provided that no notes of $1,000 or less shall be redeemed in part. Notices of redemption, shall be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each holder of notes to be redeemed at its registered address. Notices of redemption may not be conditional. If any note is to be redeemed in part only, the notice of redemption that relates to such note shall state the portion of the principal amount thereof to be redeemed. A new note in principal amount equal to the unredeemed portion thereof will be issued in the name of the holder thereof upon cancellation of the original note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest (including special interest), if any, ceases to accrue on notes or portions of them called for redemption. REPURCHASE AT THE OPTION OF HOLDERS CHANGE OF CONTROL Upon the occurrence of a Change of Control, each holder of notes will have the right to require Tesoro to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such holder's notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest (including special interest), if any, thereon, to the date of purchase (the "Change of Control Payment"). Within 30 days following any Change of Control, Tesoro will mail a notice to each holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase notes on the date specified in such notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"), pursuant to the procedures required by the indenture and described in such notice. Tesoro will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the notes as a result of a Change of Control. On the Change of Control Payment Date, Tesoro will, to the extent lawful: (1) accept for payment all notes or portions thereof properly tendered pursuant to the Change of Control Offer; (2) deposit with the paying agent (who will initially be the trustee) an amount equal to the Change of Control Payment in respect of all notes or portions thereof so tendered; and 60 (3) deliver or cause to be delivered to the trustee the notes so accepted together with an officers' certificate stating the aggregate principal amount of notes or portions thereof being purchased by Tesoro. The paying agent will promptly mail to each holder of notes so tendered the Change of Control Payment for such notes, and the trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each holder a new note equal in principal amount to any unpurchased portion of the notes surrendered, if any; provided that each such new note will be in a principal amount of $1,000 or an integral multiple thereof. Tesoro will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. The Change of Control provisions described above will be applicable whether or not any other provisions of the indenture are applicable, except as set forth under the captions "-- Legal Defeasance and Covenant Defeasance" and "-- Satisfaction and Discharge". Except as described above with respect to a Change of Control, the indenture will not contain provisions that permit the holders of the notes to require that Tesoro repurchase or redeem the notes in the event of a takeover, recapitalization or similar transaction. The definition of Change of Control includes a phrase relating to the sale, lease, transfer, conveyance or other disposition of "all or substantially all" of the assets of Tesoro. There is little case law interpreting the phrase "all or substantially all" in the context of an indenture. Because there is no precise established definition of this phrase, the ability of a holder of notes to require Tesoro to repurchase such notes as a result of a sale, lease, exchange or other transfer of Tesoro's assets to a Person or a group based on the Change of Control provisions may be uncertain. Tesoro will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the indenture applicable to a Change of Control Offer made by Tesoro and purchases all notes validly tendered and not withdrawn under such Change of Control Offer. ASSET SALES The indenture provides that Tesoro will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale (including a Sale of Collateral) unless: (1) Tesoro or the Restricted Subsidiary, as the case may be, receives consideration at the time of the Asset Sale at least equal to the fair market value (which, in the case of an Asset Sale for consideration exceeding $30 million, shall be determined in good faith by Tesoro's Board of Directors) of the assets or Equity Interests issued or sold or otherwise disposed of; (2) at least 75% of the consideration therefor received by Tesoro or the Restricted Subsidiary is in the form of, or any combination of: (a) cash or Cash Equivalents; (b) the assumption of any liabilities (as shown on Tesoro's or the Restricted Subsidiary's most recent balance sheet) of Tesoro or any Restricted Subsidiary of Tesoro (other than liabilities that are by their terms subordinated to the notes or any Subsidiary Guarantee) by the transferee of any such assets pursuant to a customary novation agreement that releases Tesoro or the Restricted Subsidiary from further liability; (c) any securities, notes or other obligations received by Tesoro or any such Restricted Subsidiary from such transferee that are converted by Tesoro or the Restricted Subsidiary into cash or Cash Equivalents within 60 days following their receipt (to the extent of cash or Cash Equivalents received); and (d) other assets or rights used or useful in a Permitted Business, including, without limitation, assets or Investments of the nature or type described in clause (13) of the definition of "Permitted Investments" except that, in the case of a Sale of Collateral, such assets or rights shall consist solely of Refinery Assets; and 61 (3) in the case of a Sale of Collateral, the collateral agent is immediately granted a perfected first priority security interest (subject to Permitted Prior Liens) in the Net Sale Consideration therefor received by Tesoro or the Restricted Subsidiary as additional Collateral under the security documents to secure the Secured Obligations, and, in the case of cash or Cash Equivalents constituting Net Sale Consideration, such cash or Cash Equivalents must be deposited into a segregated account under the sole control of the collateral agent that includes only proceeds from the Sale of Collateral and interest earned thereon (an "Asset Sale Proceeds Account") and is free from all other Liens, all on terms and pursuant to arrangements reasonably satisfactory to the collateral agent in its reasonable determination (which may include, at the collateral agent's reasonable request, customary officers' certificates and legal opinions and shall include release provisions requiring the collateral agent to release deposits in the Asset Sale Proceeds Account as necessary to permit Tesoro or its Restricted Subsidiaries to apply such Net Sale Consideration in the manner described below, unless the collateral agent has received written notice that a Default or Event of Default has occurred and is continuing); provided, that any Asset Sale pursuant to a condemnation, appropriation or other similar taking, including by deed in lieu of condemnation, or pursuant to the foreclosure or other enforcement of a Lien incurred not in violation of the covenant described under the caption "Certain Covenants -- Liens" or exercise by the related lienholder of rights with respect thereto, including by deed or assignment in lieu of foreclosure shall not be required to satisfy the conditions set forth in clauses (1) and (2) of this paragraph. Within 365 days after the receipt of any Net Proceeds from an Asset Sale, other than a Sale of Collateral, Tesoro or the Restricted Subsidiary, as the case may be, may apply such Net Proceeds, at its option: (a) to repay, repurchase or redeem any secured Indebtedness or other secured Obligations; (b) to acquire a controlling interest in another business or all or substantially all of the assets of another business, in each case engaged in a Permitted Business; (c) to make capital expenditures; or (d) to acquire other non-current assets to be used in a Permitted Business, including, without limitation, assets or Investments of the nature or type described in clause (13) of the definition of "Permitted Investments"; provided that Tesoro or the applicable Restricted Subsidiary will be deemed to have complied with clause (b) or (c) if, within 365 days of such Asset Sale, Tesoro or such Restricted Subsidiary shall have commenced and not completed or abandoned an expenditure or Investment, or a binding agreement with respect to an expenditure or Investment, in compliance with clause (b) or (c), and that expenditure or Investment is substantially completed within a date one year and six months after the date of such Asset Sale. Pending the final application of any such Net Proceeds, Tesoro may temporarily reduce Indebtedness under any Credit Facility or otherwise expend or invest such Net Proceeds in any manner that is not prohibited by the indenture. Any Net Proceeds from Asset Sales described in this paragraph that are not applied or invested as provided in the first sentence of this paragraph shall be deemed to constitute "Excess Asset Sale Proceeds". When the aggregate amount of Excess Asset Sale Proceeds exceeds $15 million, Tesoro will be required to make an offer to all holders of notes and holders of each other series of Indebtedness that ranks by its terms pari passu in right of payment with the notes and the terms of which contain substantially similar requirements with respect to the application of net proceeds from asset sales as are contained in the indenture, including the Term Loans (an "Asset Sale Offer"), to purchase on a pro rata basis (with the Excess Asset Sale Proceeds prorated between the holders of notes and such holders of pari passu Indebtedness based upon outstanding aggregate principal amounts) the maximum principal amount of the notes and such other Indebtedness that may be purchased or prepaid, as applicable, out of the prorated Excess Asset Sale Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest (including special interest), if any, thereon, to the date of purchase, in accordance with the procedures set forth in the indenture. To the extent that the aggregate amount of notes and other Indebtedness tendered (and electing to be redeemed or repaid, as applicable) pursuant to an Asset Sale Offer is less than the Excess Asset Sale Proceeds, Tesoro and its Restricted Subsidiaries may use any remaining Excess Asset Sale 62 Proceeds for general corporate purposes and any other purpose not prohibited by the indenture. If the aggregate principal amount of notes and such other Indebtedness surrendered by holders thereof exceeds the amount of the prorated Excess Asset Sale Proceeds, Tesoro shall select the notes and such other Indebtedness to be purchased on a pro rata basis. Upon completion of the offer to purchase, the amount of Excess Asset Sale Proceeds shall be reset at zero. Within 365 days after the receipt of any Net Sale Consideration from an Asset Sale that constitutes a Sale of Collateral, Tesoro or the Restricted Subsidiary, as the case may be, may apply such Net Sale Consideration, at its option: (a) to acquire a controlling interest in another business or all or substantially all of the assets of another business, in each case engaged in a Permitted Business and principally owning Refinery Assets that have (in the good faith judgment of Tesoro) a value, net of the value of any Credit Facility Collateral included therein, at least equal to the amount of such Net Sale Consideration; or (b) to make capital expenditures on or acquire Refinery Assets; provided, that in each such case, the collateral agent shall immediately be granted a perfected first priority security interest (subject to Permitted Prior Liens) on all of the assets (other than any Credit Facility Collateral included therein) acquired with such Net Sale Consideration as Collateral under the security documents to secure the Secured Obligations, all on terms and pursuant to arrangements reasonably satisfactory to the collateral agent in its reasonable determination (which may include, at the collateral agent's reasonable request, customary officers' certificates and legal opinions). Tesoro or the applicable Restricted Subsidiary will be deemed to have complied with clause (a) or (b) if, within 365 days of such Sale of Collateral, Tesoro or such Restricted Subsidiary shall have commenced and not completed or abandoned an acquisition, Investment or expenditure, or a binding agreement with respect to an acquisition, Investment or expenditure, in compliance with clause (a) or (b), and that acquisition, Investment or expenditure is substantially completed within a date one year and six months after the date of such Asset Sale. Any Net Sale Consideration from the Sale of Collateral that is not applied or invested as provided this paragraph shall be deemed to constitute "Excess Proceeds from the Sale of Collateral". When the aggregate amount of Excess Proceeds from the Sale of Collateral exceeds $15 million, Tesoro will be required to make an offer to all holders of notes and holders of Term Loans (a "Collateral Proceeds Offer") to purchase (or redeem or repay, as applicable) on a pro rata basis (with the Excess Proceeds from the Sale of Collateral prorated between the holders of notes and such holders of Term Loans based upon outstanding aggregate principal amounts) the maximum principal amount of the notes that may be purchased, and the Term Loans that may be prepaid, in each case, out of the prorated Excess Proceeds from the Sale of Collateral, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest (including special interest), if any, thereon, to the date of purchase, in accordance with the procedures set forth in the indenture. To the extent that the aggregate amount of notes and Term Loans tendered (and electing to be redeemed or repaid, as applicable) pursuant to such Collateral Proceeds Offer is less than the Excess Proceeds from the Sale of Collateral, Tesoro and its Restricted Subsidiaries may use any remaining Excess Proceeds from the Sale of Collateral, free and clear of any Liens created by any security documents or otherwise for the benefit of any holder of Secured Obligations, for general corporate purposes and any other purpose not prohibited by the indenture. If the aggregate principal amount of notes and Term Loans surrendered by holders thereof exceeds the amount of the prorated Excess Proceeds from the Sale of Collateral, the trustee shall select the notes to be purchased on a pro rata basis and the Term Loan Administrative Agent will select the Term Loans to be repaid on a pro rata basis. Upon completion of the offer to purchase, the amount of Excess Proceeds from the Sale of Collateral shall be reset at zero. 63 CERTAIN COVENANTS RESTRICTED PAYMENTS Tesoro will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly: (1) declare or pay any dividend or make any other payment or distribution on account of Tesoro's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving Tesoro or any of its Restricted Subsidiaries) or to the direct or indirect holders of Tesoro's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such, in each case other than dividends or distributions declared or paid in Equity Interests (other than Disqualified Stock) of Tesoro or declared or paid to Tesoro or any of its Restricted Subsidiaries; (2) purchase, redeem or otherwise acquire or retire for value (including without limitation, in connection with any merger or consolidation involving Tesoro) any Equity Interests of Tesoro (other than any such Equity Interests owned by a Restricted Subsidiary of Tesoro); (3) make any payment to purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the notes, except a payment of interest or principal at its Stated Maturity; or (4) make any Investment other than a Permitted Investment (all such payments and other actions set forth in clauses (1) through (3) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (a) no Default or Event of Default shall have occurred and be continuing; and (b) Tesoro would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described below under the caption "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock"; and (c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by Tesoro or any of its Restricted Subsidiaries after the Issue Date (excluding Restricted Payments permitted by clauses (2), (3), (4), (5), (6), (8), (10), (11) or (12) of the next succeeding paragraph), is less than the sum of: (1) 50% of the Consolidated Net Income of Tesoro for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing immediately prior to the Issue Date to the end of Tesoro's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a loss, less 100% of such loss), plus (2) 100% of the aggregate net cash proceeds (other than Designated Proceeds), or the Fair Market Value of assets or property other than cash, received by Tesoro from the issue or sale, in either case, since the Issue Date of (A) Equity Interests of Tesoro (other than Disqualified Stock), or (B) Disqualified Stock or debt securities of Tesoro that have been converted into, or exchanged for, such Equity Interests, together with the aggregate cash received at the time of such conversion or exchange, or received by Tesoro from any such conversion or exchange of such debt securities sold or issued prior to the Issue Date other than Equity Interests (or Disqualified Stock or convertible or exchangeable debt securities) sold to a Restricted Subsidiary of Tesoro and other than Disqualified Stock or debt securities that have been converted or exchanged into Disqualified Stock, plus (3) in case any Unrestricted Subsidiary has been redesignated a Restricted Subsidiary pursuant to the terms of the indenture or has been merged, consolidated or amalgamated with or into, or transfers or conveys assets to or is liquidated into, Tesoro or a Restricted Subsidiary and provided that no Default or 64 Event of Default shall have occurred and be continuing or would occur as a consequence thereof, the lesser of (A) the book value (determined in accordance with GAAP) at the date of such redesignation, combination or transfer of the aggregate Investments made by Tesoro and its Restricted Subsidiaries in such Unrestricted Subsidiary (or of the assets transferred or conveyed, as applicable) and (B) the fair market value of such Investment in such Unrestricted Subsidiary at the time of such redesignation, combination or transfer (or of the assets transferred or conveyed, as applicable), in each case, as determined in good faith by the Board of Directors of Tesoro, whose determination shall be conclusive and evidenced by a resolution of such Board and, in each case, after deducting any Indebtedness of the Unrestricted Subsidiary so designated or combined or with the assets so transferred or conveyed, plus (4) to the extent not already included in Consolidated Net Income for such period, (A) if any Restricted Investment that was made by Tesoro or any Restricted Subsidiary after the Issue Date is sold for cash or otherwise liquidated or repaid for cash, the cash return of capital with respect to such Restricted Investment resulting from such sale or disposition (less the cost of disposition, if any) and (B) with respect to any Restricted Investment that was made by Tesoro or any Restricted Subsidiary after the Issue Date, the net reduction in such Restricted Investment resulting from payments of interest, dividends, principal repayments and other transfers and distributions of cash, assets or property, in an amount not to exceed the aggregate amount of such Restricted Investment. The foregoing provisions shall not prohibit: (1) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of the indenture; (2) the redemption, repurchase, retirement, defeasance or other acquisition, prior to its Stated Maturity, of any (y) Indebtedness (or portion thereof) which is subordinated to the notes, or the making of any principal payment thereon, or (z) Equity Interests of Tesoro or any Restricted Subsidiary, in each case, in exchange for, or out of the net cash proceeds (other than Designated Proceeds) of the substantially concurrent sale or issuance (a sale or issuance will be deemed substantially concurrent if such redemption, repurchase, retirement or acquisition occurs not more than 30 days after such sale or issuance) (other than to a Restricted Subsidiary of Tesoro) of, Equity Interests of Tesoro (other than any Disqualified Stock), provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition, or payments, shall be excluded from clause (c)(2) of the preceding paragraph; (3) the making of any principal payment on, or the defeasance, redemption, repurchase or other acquisition of, prior to its Stated Maturity, Indebtedness which is subordinated to the notes with the net cash proceeds from an incurrence of, or in exchange for the issuance of, Permitted Refinancing Indebtedness; (4) the payment of any dividend or distribution by a Restricted Subsidiary of Tesoro to the holders of its Equity Interests (other than Disqualified Stock) on a pro rata basis; (5) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of Tesoro or any Restricted Subsidiary of Tesoro held by any current or former officer, employee or director of Tesoro (or any of its Subsidiaries) pursuant to the terms of agreements (including employment agreements) and plans approved by Tesoro's Board of Directors, including any management equity plan or stock option plan or any other management or employee benefit plan, agreement or trust, provided, however, that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests pursuant to this clause (5) shall not exceed the sum of (y) $4 million in any twelve-month period and (z) the aggregate net proceeds received by Tesoro during such 12-month period from issuance of such Equity Interests pursuant to such agreements or plans; (6) repurchases of Equity Interests deemed to occur upon the cashless exercise of stock options; (7) the purchase, redemption, defeasance or retirement, in each case, prior to its Stated Maturity, of any Indebtedness that is subordinated to the notes in right of payment by payments out of Excess Asset 65 Sale Proceeds remaining after completion of an Asset Sale Offer and/or Excess Proceeds from the Sale of Collateral remaining after completion of a Collateral Proceeds Offer, provided that (x) in the case of payments made out of Excess Asset Sale Proceeds, any payments made or value given for such purchase, redemption, defeasance or retirement shall be made out of, or shall not be in excess of, any Excess Asset Sale Proceeds remaining after completion of an Asset Sale Offer (but for the provision of the last sentence of the third paragraph under the caption "-- Repurchase at the Option of Holders -- Asset Sales"), (y) in the case of payments made out of Excess Proceeds from the Sale of Collateral, any payments made or value given for such purchase, redemption, defeasance or retirement shall be made out of, or shall not be in excess of, any Excess Proceeds from the Sale of Collateral remaining after completion of a Collateral Proceeds Offer (but for the provision of the last sentence under the caption "-- Repurchase at the Option of Holders -- Asset Sales") and (z) Tesoro would, at the time of such payment and after giving pro forma effect thereto as if such payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described below under the caption "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock"; (8) the payment of reasonable and customary directors' fees to the members of Tesoro's Board of Directors, provided that such fees are consistent with past practice or current requirements; (9) the purchase by Tesoro of fractional shares arising out of stock dividends, splits or combinations or business combinations; (10) the declaration and payment of dividends on mandatorily convertible preferred stock of Tesoro (other than Disqualified Stock) issued after the Issue Date in an aggregate amount not to exceed the amount of Designated Proceeds; (11) the repurchase by Tesoro on the Issue Date of a portion of Tesoro's 9 5/8% senior subordinated notes due 2012, 9 5/8% senior subordinated notes due 2008 or 9% senior subordinated notes due 2008, in an aggregate principal amount not to exceed $25 million; and (12) other Restricted Payments in an aggregate principal amount since the Issue Date not to exceed $50 million; provided, further, that, with respect to clauses (2), (3), (5), (6), (7), (8), (10), (11) and (12) above, no Default or Event of Default shall have occurred and be continuing. In determining whether any Restricted Payment is permitted by the foregoing covenant, Tesoro may allocate or reallocate all or any portion of such Restricted Payment among the clauses (1) through (12) of the preceding paragraph or among such clauses and the first paragraph of this covenant including clauses (a), (b) and (c), provided that at the time of such allocation or reallocation, all such Restricted Payments, or allocated portions thereof, would be permitted under the various provisions of the foregoing covenant. The amount of all Restricted Payments (other than cash) shall be the Fair Market Value (as determined by the Board of Directors of Tesoro and as evidenced by a resolution of the Board of Directors of Tesoro set forth in an officers' certificate delivered to the trustee) on the date of the transfer, incurrence or issuance of such non-cash Restricted Payment. Not later than (1) the end of any calendar quarter in which any Restricted Payment is made or (2) the making of a Restricted Payment which, when added to the sum of all previous Restricted Payments made in a calendar quarter, would cause the aggregate of all Restricted Payments made in such quarter to exceed $20 million, Tesoro shall deliver to the trustee an officers' certificate stating that such Restricted Payments were permitted and setting forth the basis upon which the calculations required by this covenant were computed, which calculations may be based upon Tesoro's latest available financial statements. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if: (1) immediately after giving effect to such designation, Tesoro could incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test under the first paragraph of 66 the covenant described below under the caption "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock"; (2) immediately before and immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing; and (3) Tesoro certifies that such designation complies with this covenant. Any such designation by the Board of Directors shall be evidenced by Tesoro promptly filing with the trustee a copy of the resolution giving effect to such designation and an officers' certificate certifying that such designation complied with the foregoing provisions. The Board of Directors may designate any Subsidiary of Tesoro to be an Unrestricted Subsidiary under the circumstances and pursuant to the requirements described in the definition of "Unrestricted Subsidiary", which requirements include that such designation will be made in compliance with this covenant. For purposes of making the determination as to whether such designation would be made in compliance with this covenant, all outstanding Investments by Tesoro and its Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary so designated will be deemed to be Restricted Payments at the time of such designation and will reduce the amount available for Restricted Payments under the first paragraph of this covenant. All such outstanding Investments will be deemed to constitute Investments in an amount equal to the greatest of (1) the net book value (determined in accordance with GAAP) of such Investments at the time of such designation, (2) the Fair Market Value of such Investments at the time of such designation and (3) the original Fair Market Value of such Investments at the time they were made. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK The indenture provides that Tesoro will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt), other than Permitted Debt, and Tesoro shall not issue, and shall not permit any of its Restricted Subsidiaries to issue, any Disqualified Stock; provided, however, that Tesoro or any Guarantor may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock if Tesoro's Fixed Charge Coverage Ratio for Tesoro's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.00 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if such additional Indebtedness had been incurred, or such Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period. The provisions of the first paragraph of this covenant shall not apply to the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"): (1) the incurrence by Tesoro or any Guarantor of additional Indebtedness and letter of credit reimbursement obligations under one or more Credit Facilities (with letter of credit reimbursement obligations being deemed to have a principal amount equal to the maximum potential liability of Tesoro or its Restricted Subsidiaries for reimbursement obligations thereunder) in an aggregate principal amount at any one time outstanding under this clause (1) not to exceed the greater of: (a) $700 million; or (b) the amount of the Borrowing Base as of the date of such incurrence; (2) the incurrence by Tesoro and the Guarantors of Indebtedness represented by the notes, the Subsidiary Guarantees to be issued on the Issue Date and the related exchange notes and Subsidiary Guarantees to be issued pursuant to the registration rights agreement, in each case, together with the related Note Obligations; 67 (3) the incurrence by Tesoro and the Guarantors of Indebtedness under the Term Loan Agreement or represented by the Term Loans and the other Term Loan Obligations on the Issue Date in an aggregate principal amount not to exceed $200 million; (4) the incurrence by Tesoro or any of its Restricted Subsidiaries of Existing Indebtedness; (5) the incurrence by Tesoro or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness, the net proceeds of which are applied to refinance any Indebtedness other than Indebtedness incurred pursuant to clause (1) above; (6) the incurrence by Tesoro or any of its Restricted Subsidiaries of intercompany Indebtedness between or among Tesoro and any of its Restricted Subsidiaries; provided, however, that (A) if Tesoro or any Guarantor is the obligor and a Restricted Subsidiary of Tesoro that is not a Guarantor is the obligee on such Indebtedness, such Indebtedness will be subordinated to the payment in full of all Obligations with respect to the notes, (B) if such intercompany Indebtedness constitutes Specified Intercompany Debt, a perfected first priority security interest (subject to Permitted Prior Liens) is granted to the collateral agent in such intercompany Indebtedness and (C) (1) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than Tesoro or a Restricted Subsidiary of Tesoro and (2) any sale or other transfer of any such Indebtedness to a Person that is not either Tesoro or a Restricted Subsidiary of Tesoro shall be deemed, in each case, to constitute an incurrence of such Indebtedness by Tesoro or such Restricted Subsidiary, as the case may be, that is not then permitted by this clause (6); (7) the incurrence by Tesoro or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations (including any Acquired Debt), in each case, incurred in connection with the purchase of, or for the purpose of financing the purchase of, the cost of construction, improvement or development of, property, plant or equipment used in the Permitted Business (including, without limitation, oil and gas properties) of Tesoro or a Restricted Subsidiary of Tesoro or incurred to extend, refinance, renew, replace, defease or refund any such purchase price or cost of construction, improvement or development, in an aggregate principal amount not to exceed $100 million at any time outstanding; (8) the incurrence by Tesoro or any of its Restricted Subsidiaries of Indebtedness consisting of Hedging Obligations entered into in the ordinary course of business and not for speculative purposes; (9) Indebtedness arising from agreements of Tesoro or any of its Restricted Subsidiaries providing for indemnification, adjustment of purchase price or similar obligations, in each case, incurred in connection with the disposition or acquisition of any business, assets or a Restricted Subsidiary of Tesoro or any business or assets of its Restricted Subsidiaries, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or a Restricted Subsidiary of Tesoro or any of its Restricted Subsidiaries for the purposes of financing such acquisition; provided, however, that (A) such Indebtedness is not reflected on the balance sheet of Tesoro or any of its Restricted Subsidiaries (contingent obligations referred to in a footnote to financial statements and not otherwise reflected on the balance sheet will not be deemed to be reflected on such balance sheet for purposes of this clause (A)) and (B) the maximum liability in respect of all such Indebtedness incurred in connection with a disposition shall at no time exceed the gross proceeds including noncash proceeds (the Fair Market Value of such noncash proceeds being measured at the time received and without giving effect to any subsequent changes in value) actually received by Tesoro and its Restricted Subsidiaries in connection with such disposition; (10) the guarantee by Tesoro or any of the Guarantors of, or the grant by Tesoro or any of the Guarantors of security interests with respect to, Indebtedness of Tesoro or a Restricted Subsidiary of Tesoro that was permitted to be incurred by any other provision of this covenant; provided that the guarantee of, or the grant of security interests with respect to, any Indebtedness of a Restricted Subsidiary of Tesoro that ceases to be such a Restricted Subsidiary shall be deemed a Restricted Investment at the time such Restricted Subsidiary's status terminates in an amount equal to the 68 maximum principal amount so guaranteed or liened against, for so long as, and to the extent that, such guarantee or security interest remains outstanding; (11) the issuance by a Restricted Subsidiary of Tesoro of preferred stock to Tesoro or to any of its Restricted Subsidiaries; provided, however, that any subsequent event or issuance or transfer of any Equity Interests that results in the owner of such preferred stock ceasing to be Tesoro or any of its Restricted Subsidiaries or any subsequent transfer of such preferred stock to a Person, other than Tesoro or one of its Restricted Subsidiaries, shall be deemed to be an issuance of preferred stock by such Subsidiary that was not permitted by this clause (11); and (12) the incurrence by Tesoro or any of its Restricted Subsidiaries of Indebtedness (in addition to Indebtedness permitted by any other provision of this covenant) in an aggregate principal amount (or accreted value, as applicable) at any time outstanding not to exceed $75 million. To the extent Tesoro's Unrestricted Subsidiaries incur Non-Recourse Indebtedness and any such Indebtedness ceases to be Non-Recourse Indebtedness of such Unrestricted Subsidiary, then such event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of Tesoro that was subject to this covenant. Tesoro will not incur any Indebtedness (including Permitted Debt) that is contractually subordinated in right of payment to any other Indebtedness of Tesoro unless such Indebtedness is also contractually subordinated in right of payment to the notes on substantially identical terms; provided, however, that no Indebtedness of Tesoro will be deemed to be contractually subordinated in right of payment to any other Indebtedness of Tesoro solely by virtue of being unsecured. For purposes of determining compliance with this covenant, in the event that an item of Indebtedness (including Acquired Debt) meets the criteria of more than one of the categories of Permitted Debt described above or is entitled to be incurred pursuant to the first paragraph of this covenant, Tesoro will, in its sole discretion, classify (or later reclassify) in whole or in part such item of Indebtedness in any manner that complies with this covenant and such item of Indebtedness or a portion thereof may be classified (or later reclassified) in whole or in part as having been incurred under more than one of the applicable clauses or pursuant to the first paragraph hereof. Accrual of interest, the accretion of accreted value and the payment of interest in the form of additional Indebtedness will not be deemed to be an incurrence of Indebtedness for purposes of this covenant. Notwithstanding the foregoing, no Pipeline Subsidiary shall incur or maintain any Indebtedness or grant or become or remain subject to any Lien upon any of its property securing Indebtedness, except (i) liabilities outstanding on the Issue Date in respect of Tesoro's outstanding Senior Subordinated Notes, (ii) guarantees of the notes (including the additional notes) and Term Loans (including additional Term Loans) and Liens securing Secured Obligations and (iii) Permitted Liens. LIENS The indenture provides that Tesoro will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien other than Permitted Liens. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES The indenture provides that Tesoro will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary of Tesoro or Tesoro to: (1) (x) pay dividends or make any other distributions to Tesoro or any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (y) pay any Indebtedness owed to Tesoro or any of its Restricted Subsidiaries; (2) make loans or advances to Tesoro or any of its Restricted Subsidiaries; or 69 (3) transfer any of its properties or assets to Tesoro or any of its Restricted Subsidiaries. However the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of: (a) agreements in effect on the Issue Date and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings (collectively, for the purposes of this covenant, "amendments") of any such agreements or any Existing Indebtedness to which such agreements relate, provided that such amendments are no more restrictive with respect to such dividend, distribution or other payment restrictions and loan or investment restrictions than those contained in such agreement, as in effect on the Issue Date; (b) any Credit Facility in effect after the Issue Date to the extent its provisions are no more restrictive with respect to such dividend, distribution or other payment restrictions and loan or investment restrictions than those contained in the Term Loan Agreement or the Senior Credit Facility as in effect on the Issue Date; (c) the indenture, the notes, the exchange notes and the Subsidiary Guarantees, or any other indenture governing debt securities issued by Tesoro or any Guarantor that are no more restrictive with respect to such dividend, distribution or other payment restrictions and loan or investment restrictions than those contained in the indenture and the notes; (d) any future Liens that may be permitted to be granted under, or incurred not in violation of, any other provisions of the indenture; (e) applicable law; (f) any instrument governing Indebtedness or Capital Stock, or any other agreement relating to any property or assets, of a Person acquired by Tesoro or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except with respect to Indebtedness incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person or such Person's subsidiaries, so acquired, provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of the indenture to be incurred; (g) restrictions of the nature described in clause (3) above by reason of customary non-assignment provisions in contracts, agreements, licenses and leases entered into in the ordinary course of business; (h) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (3) above on the property so acquired; (i) any restriction with respect to a Restricted Subsidiary of Tesoro imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition; (j) agreements relating to secured Indebtedness otherwise permitted to be incurred pursuant to the covenant described under the caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock", and not in violation of the covenant described under caption "-- Liens", that limit the right of the debtor to dispose of assets securing such Indebtedness; (k) Permitted Refinancing Indebtedness in respect of Indebtedness referred to in clauses (a), (b), (c), (f), (h) and (j) of this paragraph, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive with respect to such dividend, distribution or other payment restrictions and loan or investment restrictions than those contained in the agreements governing the Indebtedness being refinanced; and (l) provisions with respect to the disposition or distribution of assets in joint venture agreements and other similar agreements entered into in the ordinary course of business. 70 MERGER, CONSOLIDATION OR SALE OF ASSETS The indenture provides that Tesoro will not consolidate or merge with or into, or sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets in one or more related transactions, to another Person unless: (1) Tesoro is the resulting, transferee or surviving Person or the resultant, transferee or surviving Person (if other than Tesoro) shall be a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (2) the resulting transferee or surviving Person (if other than Tesoro) assumes all the obligations and covenants of Tesoro under the notes, the indenture, all security documents and, if then in effect, the registration rights agreement, pursuant to a supplemental indenture and other appropriate documentation in form and substance reasonably satisfactory to the collateral agreement and the trustee; (3) immediately before and after such transaction no Default or Event of Default shall have occurred and be continuing; and (4) except in the case of a merger of Tesoro with or into a Restricted Subsidiary, Tesoro or the resultant, transferee or surviving Person (if other than Tesoro) will, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of covenant described above under the caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock"; provided, however, that this clause (4) shall be suspended for so long as Tesoro and its Restricted Subsidiaries are not subject to the Suspended Covenants. See "-- Covenant Suspension". Upon any transaction or series of related transactions that are of the type described in, and are effected in accordance with, the foregoing paragraph, the surviving Person (if other than Tesoro) shall succeed to, and be substituted for, and may exercise every right and power of, Tesoro under the indenture and the notes with the same effect as if such surviving Person had been named as Tesoro in the indenture; and when a surviving Person duly assumes all of the obligations and covenants of Tesoro pursuant to the indenture and the notes, the predecessor Person shall be relieved of all such obligations. In addition, Tesoro may not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person. This "Merger, Consolidation or Sale of Assets" covenant will not apply to a sale, assignment, transfer, conveyance or other disposition of assets between or among Tesoro and any of the Guarantors. ADDITIONAL SUBSIDIARY GUARANTEES AND LIENS The indenture provides that if Tesoro or any of its Restricted Subsidiaries acquires or creates another Domestic Subsidiary (other than any Immaterial Subsidiary) after the Issue Date, then that newly acquired or created Subsidiary will become a Guarantor and (a) execute a supplemental indenture and a joinder agreement to the security documents in form and substance reasonably satisfactory to the trustee providing that such Subsidiary shall become a Guarantor under the indenture and a party to the security documents and (b) deliver an opinion of counsel to the effect that such supplemental indenture has been duly authorized and executed by such Subsidiary, in each case, within 30 days following the date on which it was acquired or created. If Tesoro or any of the Guarantors at any time owns or acquires Collateral that is not subject to a valid, enforceable perfected first priority Lien (subject to Permitted Prior Liens) in favor of the collateral agent as security for the Secured Obligations, then Tesoro will, or will cause such Guarantor to, concurrently: (1) execute and deliver to the collateral agent a security document upon substantially the same terms as the security documents delivered in connection with the issuance of the notes, granting a Lien upon such Collateral in favor of the collateral agent for the benefit of the holders of Secured Obligations; 71 (2) cause the Lien granted in such security document to be duly perfected in any manner permitted by law and cause each other Lien upon such Collateral to be (a) released, unless it is a Permitted Lien or (b) subordinated to the Collateral Agent's Liens if it is a Permitted Lien but not a Permitted Prior Lien; and (3) deliver to the collateral agent and the trustee an opinion of counsel reasonably satisfactory to the collateral agent and the trustee, confirming as to such security document and Lien the matters set forth as to the security documents and Liens in the opinions of counsel delivered on behalf of Tesoro to the initial purchasers on the Issue Date in connection with the original issuance of the notes and the initial incurrence of the Term Loans and, if the property subject to such security document is an interest in real estate, such local counsel opinions, title and flood insurance policies, surveys and other supporting documents as may have been delivered to the initial purchasers on the Issue Date in connection with the original issuance of the notes and the initial incurrence of the Term Loans, all as the collateral agent may reasonably request and in form and substance reasonably satisfactory to the collateral agent. TRANSACTIONS WITH AFFILIATES The indenture provides that Tesoro will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, make any payment to, or sell, lease, transfer or otherwise dispose of any properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of any such Person (each of the foregoing, an "Affiliate Transaction"), unless (1) such Affiliate Transaction is on terms that are no less favorable to Tesoro or the relevant Restricted Subsidiary than those that could have been obtained in a transaction by Tesoro or such Restricted Subsidiary with an unrelated Person; and (2) Tesoro delivers to the trustee: (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of at least $5 million, an officers' certificate certifying that such Affiliate Transaction complies with clause (1) above; (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $20 million, a resolution of its Board of Directors set forth in an officers' certificate certifying that such Affiliate Transaction complies with clause (1) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of its Board of Directors; and (c) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $30 million and for which there are no disinterested members of its Board of Directors, an opinion as to the fairness to Tesoro of such Affiliate Transaction from a financial point of view issued by an Independent Financial Advisor; provided that none of the following shall be deemed to be Affiliate Transactions and therefore shall not be subject to the provisions of the preceding paragraph: (1) Affiliate Transactions involving the purchase or sale of crude oil, natural gas and other hydrocarbons, and refined products therefrom, in the ordinary course of any Permitted Business, so long as such transactions are priced in line with industry accepted benchmark prices and the pricing of such transactions are equivalent to the pricing of comparable transactions with unrelated third parties; (2) any employment, equity award, equity option or equity appreciation agreement or plan, agreement or other similar compensation plan or arrangement entered into by Tesoro or any of its Restricted Subsidiaries in the ordinary course of its business; (3) transactions between or among (A) Tesoro and its Restricted Subsidiaries and (B) the Restricted Subsidiaries; 72 (4) the performance of any agreement in effect on the Issue Date; (5) loans or advances to officers, directors and employees for moving, entertainment and travel expenses, drawing accounts and similar expenditures and other purposes, in each case, in the ordinary course of business; (6) maintenance in the ordinary course of business of customary benefit programs or arrangements for employees, officers or directors, including vacation plans, health and life insurance plans, deferred compensation plans and retirement or savings plans and similar plans; (7) fees and compensation paid to, and indemnity provided on behalf of, officers, directors, employees or consultants of Tesoro or any of its Restricted Subsidiaries in their capacity as such, to the extent such fees and compensation are reasonable and customary; (8) sales of Equity Interests of Tesoro (other than Disqualified Stock) to Affiliates of Tesoro or any of its Restricted Subsidiaries; and (9) Restricted Payments that are permitted by the provisions of the indenture described above under the caption "-- Restricted Payments". BUSINESS ACTIVITIES The indenture provides that Tesoro will not, and Tesoro will not permit any of its Restricted Subsidiaries to, engage in any business other than a Permitted Business, except to such extent as would not be material to Tesoro and its Restricted Subsidiaries taken as a whole. PAYMENTS FOR CONSENT The indenture provides that Tesoro will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any holder of any notes or Term Loans for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the indenture, the notes, the Term Loans, the Term Loan Agreement or any security document unless such consideration is offered to be paid or agreed to be paid to all holders of the notes and/or Term Loans that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. REPORTS The indenture provides that whether or not required by the Commission's rules and regulations, so long as any notes are outstanding, Tesoro will furnish to each of the holders of notes, within the time periods specified in the Commission's rules and regulations: (1) all quarterly and annual reports that would be required to be filed with the Commission on Forms 10-Q and 10-K if Tesoro were required to file such reports; and (2) all current reports that would be required to be filed with the Commission on Form 8-K if Tesoro were required to file such reports. All such reports will be prepared in all material respects in accordance with all of the rules and regulations applicable to such reports. Each annual report on Form 10-K will include a report on Tesoro's consolidated financial statements by Tesoro's certified independent accountants. In addition, Tesoro will file a copy of each of the reports referred to in clauses (1) and (2) above with the Commission for public availability within the time periods specified in the rules and regulations applicable to such reports (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. If at any time, Tesoro is no longer subject to the periodic reporting requirements of the Exchange Act for any reason, Tesoro will nevertheless continue filing the reports specified in the preceding paragraph with the Commission within the time periods specified above unless the Commission will not accept such a filing. Tesoro agrees that it will not take any action for the purpose of causing the Commission not to accept any such 73 filings. If, notwithstanding the foregoing, the Commission will not accept Tesoro's filings for any reason, Tesoro will post the reports referred to in the preceding paragraph on its website within the time periods that would apply if Tesoro were required to file those reports with the Commission. In addition, Tesoro and the Guarantors agree that, for so long as any notes remain outstanding, at any time they are not required to file the reports required by the preceding paragraphs with the Commission, they will furnish to the holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. COVENANT SUSPENSION The indenture provides that in the event that (a) the rating assigned to the notes and the Term Loans by each of S&P and Moody's is an Investment Grade Rating and (b) no Default or Event of Default has occurred and is continuing under the indenture or the Term Loan Agreement, then, beginning on that day and subject to the provisions of the following paragraph, the provisions of the indenture described above under the following captions (and the corresponding provisions in the Term Loan Agreement) will be suspended: (a) "-- Repurchase at the Option of Holders -- Asset Sales", provided that those provisions relating to Sales of Collateral and the application of the proceeds therefrom will remain in full force and effect and will not be suspended; (b) "-- Restricted Payments"; (c) "-- Incurrence of Indebtedness and Issuance of Preferred Stock"; (d) "-- Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries"; (e) "-- Transactions with Affiliates"; and (f) "-- Business Activities" (collectively, the "Suspended Covenants"); provided, however, that Tesoro and its Restricted Subsidiaries will remain subject to the provisions of the indenture (and the corresponding provisions in the Term Loan Agreement) described above under the following captions: (1) "-- Subsidiary Guarantees" (other than the financial tests described in clause (3) of such provision); (2) "-- Security"; (3) "-- Repurchase at the Option of Holders -- Change of Control"; (4) those provisions of the covenant described under "-- Repurchase at the Option of Holders -- Asset Sales" relating to Sales of Collateral and the application of the proceeds therefrom; (5) "-- Liens"; (6) "-- Merger, Consolidation or Sale of Assets" (other than the financial tests described in clause (4) of such provision); (7) "-- Additional Subsidiary Guarantees and Liens"; (8) "-- Payment for Consent"; and (9) "-- Reports". Notwithstanding the foregoing, if the rating assigned by either such rating agency should subsequently decline to below an Investment Grade Rating, respectively, the foregoing covenants shall be reinstituted as of and from the date of such rating decline. The "-- Restricted Payments" covenant will be interpreted as if it had been in effect since the Issue Date except that no default will be deemed to have occurred solely by reason of a Restricted Payment made while that covenant was suspended. There can be no assurance that the notes will ever achieve an Investment Grade Rating or that any such rating will be maintained. 74 EVENTS OF DEFAULT AND REMEDIES The indenture provides that each of the following constitutes an Event of Default: (1) default for 30 days in the payment when due of interest on, or special interest with respect to, the notes; (2) default in payment when due of the principal of, or premium, if any, on the notes; (3) failure by Tesoro or any of its Restricted Subsidiaries to comply with the provisions described under the captions "-- Certain Covenants -- Merger, Consolidation or Sale of Assets", "-- Repurchase at the Option of Holders -- Change of Control" and "-- Special Mandatory Redemption"; (4) failure by Tesoro or any of its Restricted Subsidiaries for 60 days after written notice of such failure from the trustee or the holders of at least 25% in aggregate principal amount of outstanding notes to comply with any of its other agreements in the indenture, the notes or the security documents; (5) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by Tesoro or any of its Restricted Subsidiaries (or the payment of which is guaranteed by Tesoro or any of its Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or is created after the Issue Date, which default: (a) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness (a "Payment Default"); or (b) results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates without duplication $20 million or more, and such default shall not have been cured or waived or any such acceleration rescinded, or such Indebtedness is repaid, within ten business days after the running of such grace period or the occurrence of such acceleration; (6) failure by Tesoro or any of its Restricted Subsidiaries to pay final judgments aggregating in excess of $20 million (excluding amounts covered by insurance), which judgments are not paid, discharged or stayed for a period of 60 days; (7) any security document or any Lien purported to be granted thereby on any one or more items of Collateral having an aggregate Fair Market Value in excess of $20.0 million is held in any judicial proceeding to be unenforceable or invalid, in whole or in part, or ceases for any reason (other than pursuant to a release that is delivered or becomes effective as set forth in the indenture) to be fully enforceable and perfected; (8) Tesoro or any Guarantor, or any Person acting on behalf of any of them, denies or disaffirms, in writing, any obligation of Tesoro or any Guarantor set forth in or arising under any security document; (9) certain events of bankruptcy or insolvency with respect to Tesoro, or any group of Subsidiaries that when taken together, would constitute a Significant Subsidiary or any Significant Subsidiary upon the occurrence of such events; and (10) except as permitted by the indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any such Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee (other than by reason of the termination of the indenture or the release of any such Subsidiary Guarantee in accordance with the indenture). 75 If any Event of Default occurs and is continuing, the trustee or the holders of at least 25% in principal amount of the then outstanding notes may declare all the notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to Tesoro, any Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding notes will become due and payable without further action or notice. Holders of the notes may not enforce the indenture or the notes except as provided in the indenture. Subject to certain limitations, holders of a majority in principal amount of the then outstanding notes may direct the trustee in its exercise of any trust or power. The trustee may withhold from holders of the notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest or special interest) if it determines that withholding notice is in their interest. The holders of a majority in aggregate principal amount of the notes then outstanding by notice to the trustee may on behalf of the holders of all of the notes (1) waive any existing Default or Event of Default and its consequences under the indenture except a continuing Default or Event of Default in the payment of interest (including special interest), if any, on, or the principal of, the notes and (2) rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal or interest (including special interest) that has become due solely because of the acceleration) have been cured or waived. Tesoro is required to deliver to the trustee annually a statement regarding compliance with the indenture, and Tesoro is required upon becoming aware of any Default or Event of Default, to deliver to the trustee a statement specifying such Default or Event of Default. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, MANAGERS, INCORPORATORS, MEMBERS, PARTNERS AND STOCKHOLDERS No director, officer, employee, manager, incorporator, member, partner or stockholder or other owner of Capital Stock of Tesoro or any of its Subsidiaries, as such, shall have any liability for any obligations of Tesoro or any Guarantor under the notes, the Subsidiary Guarantees, the indenture or the security documents or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of notes by accepting a note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the notes. Such waiver may not be effective to waive liabilities under the federal securities laws, and it is the view of the Commission that such a waiver is against public policy. LEGAL DEFEASANCE AND COVENANT DEFEASANCE Tesoro may, at its option and at any time, elect to have all of its obligations discharged with respect to the outstanding notes and all obligations of the Guarantors discharged with respect to their Guarantees ("Legal Defeasance") except for: (1) the rights of holders of outstanding notes to receive payments in respect of the principal of, premium, if any, and interest (including special interest), if any, on such notes when such payments are due (but not the Change of Control Payment or the payment pursuant to an Asset Sale Offer) from the trust referred to below; (2) Tesoro's obligations with respect to the notes concerning issuing temporary notes, registration of notes, mutilated, destroyed, lost or stolen notes and the maintenance of an office or agency for payment and money for security payments held in trust; (3) the rights, powers, trusts, duties and immunities of the trustee, and Tesoro's obligations in connection therewith; and (4) the Legal Defeasance provisions of the indenture. In addition, Tesoro may, at its option and at any time, elect to have the obligations of Tesoro and the Guarantors released with respect to certain covenants that are described in the indenture ("Covenant 76 Defeasance"), and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) described under "-- Events of Default and Remedies" will no longer constitute an Event of Default with respect to the notes. In order to exercise either Legal Defeasance or Covenant Defeasance: (1) Tesoro must irrevocably deposit with the trustee, in trust, for the benefit of the holders of the notes, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, and premium, if any, and interest (including special interest), if any, on the outstanding notes on the stated maturity or on the applicable redemption date, as the case may be, and Tesoro must specify whether the notes are being defeased to maturity or to a particular redemption date; (2) in the case of Legal Defeasance, Tesoro shall have delivered to the trustee an opinion of counsel in the United States reasonably acceptable to the trustee confirming that (A) Tesoro has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the Issue Date, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the holders of the outstanding notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (3) in the case of Covenant Defeasance, Tesoro shall have delivered to the trustee an opinion of counsel in the United States reasonably acceptable to the trustee confirming that the holders of the outstanding notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (4) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the incurrence of Indebtedness or the grant of Liens securing such Indebtedness, all or a portion of the proceeds of which will be applied to such deposit) or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit; (5) such deposit will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than the indenture) to which Tesoro or any of its Restricted Subsidiaries is a party or by which Tesoro or any of its Restricted Subsidiaries is bound, or if such breach, violation or default would occur, which is not waived as of, and for all purposes, on and after, the date of such deposit; (6) Tesoro must have delivered to the trustee an opinion of counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (7) Tesoro must deliver to the trustee an officers' certificate stating that the deposit was not made by Tesoro with the intent of preferring the holders of notes over the other creditors of Tesoro with the intent of defeating, hindering, delaying or defrauding creditors of Tesoro or others; and (8) Tesoro must deliver to the trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent provided for relating to the Legal Defeasance or the Covenant Defeasance have been complied with. The Collateral will be released with respect to the Note Obligations only, as provided above under the caption "-- Security -- Release of Security Interests" upon a Legal Defeasance or Covenant Defeasance in accordance with the provisions described in this section. 77 SATISFACTION AND DISCHARGE The indenture will be discharged and will cease to be of further effect as to all notes issued thereunder, when: (a) either (1) all such notes theretofore authenticated and delivered (except lost, stolen or destroyed notes which have been replaced or paid and notes for whose payment money has heretofore been deposited in trust and thereafter repaid to Tesoro) have been delivered to the trustee for cancellation; or (2) all such notes not theretofore delivered to such trustee for cancellation have become due and payable by reason of the making of a notice of redemption or otherwise or will become due and payable within one year and Tesoro has irrevocably deposited or caused to be deposited with such trustee as trust funds in trust solely for the benefit of the holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire Indebtedness on such notes not theretofore delivered to the trustee for cancellation for principal, premium, if any, and accrued interest to the date of maturity or redemption; (b) no Default or Event of Default with respect to the indenture or the notes shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other material instrument to which Tesoro is a party or by which Tesoro is bound; (c) Tesoro has paid or caused to be paid all sums due and payable by it under the indenture; and (d) Tesoro has delivered irrevocable instructions to the trustee under the indenture to apply the deposited money toward the payment of such notes at maturity or the redemption date, as the case may be. In addition, Tesoro must deliver an officers' certificate and an opinion of counsel to the trustee stating that all conditions precedent to satisfaction and discharge have been satisfied. The Collateral will be released with respect to the Note Obligations only, as provided above under the caption "-- Security -- Release of Security Interests" upon a discharge of the indenture in accordance with the provisions described in this section. TRANSFER AND EXCHANGE A holder may transfer or exchange notes in accordance with the indenture. The Registrar and the trustee may require a holder, among other things, to furnish appropriate endorsements and transfer documents and Tesoro may require a holder to pay any taxes and fees required by law or permitted by the indenture. Tesoro is not required to transfer or exchange any note selected for redemption. Also, Tesoro is not required to transfer or exchange any note for a period of 15 days before a selection of notes to be redeemed. The registered holder of a note will be treated as the owner of it for all purposes. AMENDMENT, SUPPLEMENT AND WAIVER Except as provided in the next two succeeding paragraphs, the indenture, the notes or the Subsidiary Guarantees may be amended or supplemented with the consent of the holders of at least a majority in principal amount of the notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, notes), and any existing default or compliance with any provision of the indenture or the notes may be waived with the consent of the holders of a majority in principal amount of the then outstanding notes (including consents obtained in connection with a tender offer or exchange offer for notes). Without the consent of each holder affected, an amendment, supplement or waiver may not (with respect to any notes held by a non-consenting holder): (1) reduce the principal amount of notes whose holders must consent to an amendment, supplement or waiver; 78 (2) reduce the principal of or change the fixed maturity of any note or alter the provisions with respect to the redemption of the notes (other than provisions relating to the covenants described above under the caption "-- Repurchase at the Option of Holders"); (3) reduce the rate of or change the time for payment of interest or special interest on any note; (4) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest or special interest, if any, on the notes (except a rescission of acceleration of the notes by the holders of at least a majority in aggregate principal amount of the notes and a waiver of the payment default that resulted from such acceleration); (5) make any note payable in money other than that stated in the notes; (6) make any change in the provisions of the indenture relating to waivers of past Defaults or the rights of holders of notes to receive payments of principal of or premium, if any, or interest or special interest, if any, on the notes; (7) waive a redemption payment with respect to any note (other than a payment required by one of the covenants described above under the caption "-- Repurchase at the Option of Holders"); (8) release any Collateral from the obligations created by the security documents except as provided in the security documents or the intercreditor provisions; or (9) make any change in the foregoing amendment and waiver provisions. In addition, no amendment or supplement to the provisions of the security documents described above under "-- Security" will impose any obligation on the trustee or adversely affect the rights of the trustee in its individual capacity without the consent of the trustee. Notwithstanding the foregoing, without the consent of any holder of notes, Tesoro and the trustee may amend or supplement the indenture, the notes, the Subsidiary Guarantees or the security documents: (1) to cure any ambiguity, defect or inconsistency; (2) to provide for uncertificated notes in addition to or in place of certificated notes; (3) to provide for the assumption of Tesoro's or any Guarantor's obligations to holders of notes in the case of a merger or consolidation or sale of all or substantially all of Tesoro's or such Guarantor's assets; (4) to make any change that would provide any additional rights or benefits to the holders of notes or that does not adversely affect the legal rights under the indenture of any such holder; (5) to comply with requirements of the Commission in order to effect or maintain the qualification of the indenture under the Trust Indenture Act; (6) to add any additional Guarantor or to release any Guarantor from its Subsidiary Guarantee, to evidence or provide for the acceptance of appointment of a successor trustee or to add any additional Events of Default, in each case, as provided in the indenture; (7) to make, complete or confirm any grant of Collateral permitted or required by the security documents or the indenture or any release of Collateral that becomes effective as set forth in the security documents or the indenture; (8) to conform the text of the indenture, the notes, the Subsidiary Guarantees or the security documents to any provision of this Description of the Exchange Notes to the extent that such provision in this Description of the Exchange Notes was intended to be a verbatim recitation of a provision of the indenture, the notes, the Subsidiary Guarantees or the security documents; or (9) to reflect any waiver or termination of any right arising under the provisions of the indenture that otherwise would be enforceable by any holder of a Term Loan Obligation, if such waiver or 79 termination is set forth in the agreement governing such Term Loan Obligation, provided that no such waiver or amendment shall adversely affect the rights of holders of notes. CONCERNING THE TRUSTEE The indenture will contain certain limitations on the rights of the trustee, should it become a creditor of Tesoro, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue or resign. The holders of a majority in principal amount of the then outstanding notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the trustee, subject to certain exceptions. The indenture provides that in case an Event of Default shall occur and be continuing, the trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the trustee will be under no obligation to exercise any of its rights or powers under the indenture at the request of any holder of notes, unless such holder shall have offered to the trustee security and indemnity satisfactory to it against any loss, liability or expense. ADDITIONAL INFORMATION Anyone who receives this prospectus may obtain a copy of the indenture, the registration rights agreement and the security documents without charge by writing to Tesoro Petroleum Corporation, 300 Concord Plaza Drive, San Antonio, Texas 78216-6999, Attention: Vice President and Treasurer. BOOK-ENTRY, DELIVERY AND FORM The notes offered and sold to qualified institutional buyers ("Qualified Institutional Buyers" or "QIBs") will be represented by one or more global notes in registered, global form without interest coupons (collectively, the "Rule 144A global note"). The Rule 144A global note will be initially deposited upon issuance with the trustee as custodian for The Depository Trust Company (the "Depositary"), in New York, New York, and registered in the name of the Depositary or its nominee, in each case, for credit to an account of a direct or indirect participant as described below. The notes sold in offshore transactions in reliance on Regulation S under the Securities Act will be initially represented by one or more global notes in registered, global form without interest coupons (collectively, the "Regulation S global note" and, together with the Rule 144A global note, the "global notes"). The Regulation S global note will be registered in the name of a nominee of the Depositary for credit to the subscribers' respective accounts at Euroclear Bank S.A./N.V., as operator of the Euroclear System ("Euroclear") and Clearstream Banking N.A. ("Clearstream"). Through and including the 40th day after the later of the commencement of this notes offering and the closing of this offering (such period through and including such 40th day, the "Restricted Period"), beneficial interests in the Regulation S global note may be held only through Euroclear or Clearstream (as indirect participants in the Depository). See "-- Depositary Procedures -- Exchanges between Regulation S Notes and the Rule 144A Global Note". Beneficial interests in the Rule 144A global note may not be exchanged for beneficial interests in the Regulation S global note at any time except in the limited circumstances described below. See "-- Depositary Procedures -- Exchanges between Regulation S Notes and the Rule 144A Global Note". Except as set forth below, the global notes may be transferred, in whole and not in part, only to another nominee of the Depositary or to a successor of the Depositary or its nominee. Beneficial interests in the global notes may not be exchanged for notes in certificated form except in the limited circumstances described below. See "-- Depositary Procedures -- Exchange of Book-Entry Notes for Certificated Notes". The Rule 144A global note (including beneficial interests in the Rule 144A global note) is subject to certain restrictions on transfer and bears a restrictive legend as described under "Notice to Investors". In addition, transfer of beneficial interests in the global notes are subject to the applicable rules and procedures of 80 the Depositary and its direct or indirect participants (including, if applicable, those of Euroclear and Clearstream), which may change from time to time. The notes may be presented for registration of transfer and exchange at the offices of the Registrar. DEPOSITARY PROCEDURES The Depositary has advised Tesoro that the Depositary is a limited-purpose trust company created to hold securities for its participating organizations (collectively, the "Participants") and to facilitate the clearance and settlement of transactions in those securities between Participants through electronic book-entry changes in accounts of Participants. The Participants include securities brokers and dealers (including the initial purchasers), banks, trust companies, clearing corporations and certain other organizations. Access to the Depositary's system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (collectively, "Indirect Participants"). Persons who are not Participants may beneficially own securities held by or on behalf of the Depositary only through the Participants or Indirect Participants. The ownership interest and transfer of ownership interest of each actual purchaser of each security held by or on behalf of the Depositary are recorded on the records of the Participants and Indirect Participants. Clearstream and Euroclear hold interests on behalf of their participants through customers' securities accounts in Clearstream's and Euroclear's names on the books of their respective depositaries, which hold those interests in customers' securities accounts in the depositaries' names on the books of the Depositary. At the present time, Citibank, N.A. acts as U.S. depositary for Clearstream and The Chase Manhattan Bank acts as U.S. depositary for Euroclear (the "U.S. Depositaries"). Beneficial interests in the global securities are held in denominations of $1,000 and integral multiples thereof. Except as set forth below, the global securities may be transferred, in whole but not in part, only to another nominee of the Depositary or to a successor of the Depositary or its nominee. Clearstream has advised us that it is incorporated under the laws of Luxembourg as a professional depositary. Clearstream holds securities for its participating organizations ("Clearstream Participants") and facilitates the clearance and settlement of securities transactions between Clearstream Participants through electronic book-entry changes in accounts of Clearstream Participants, thereby eliminating the need for physical movement of certificates. Clearstream provides to Clearstream Participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream interfaces with domestic markets in several countries. As a professional depositary, Clearstream is subject to regulation by the Luxembourg Monetary Institute. Clearstream Participants are recognized financial institutions around the world, including underwriters, securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations and may include the initial purchasers or their affiliates. Indirect access to Clearstream is also available to others, such as banks, brokers, dealers and trust companies that clear through, or maintain a custodial relationship with, a Clearstream Participant either directly or indirectly. Distributions with respect to the notes held beneficially through Clearstream will be credited to cash accounts of Clearstream Participants in accordance with its rules and procedures, to the extent received by the U.S. Depositary for Clearstream. Euroclear has advised us that it was created in 1968 to hold securities for participants of Euroclear ("Euroclear Participants") and to clear and settle transactions between Euroclear Participants through simultaneous electronic book-entry delivery against payment, thereby eliminating the need for physical movement of certificates and any risk from lack of simultaneous transfers of securities and cash. Euroclear includes various other services, including securities lending and borrowing and interfaces with domestic markets in several countries. Euroclear is operated by Euroclear Bank S.A./N.V. (the "Euroclear Operator"), under contract with Euroclear Clearance Systems S.C., a Belgian cooperative corporation (the "Cooperative"). All operations are conducted by the Euroclear Operator, and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with the Euroclear Operator, not the Cooperative. The Cooperative establishes policy for Euroclear on behalf of Euroclear Participants. Euroclear Participants 81 include banks (including central banks), securities brokers and dealers and other professional financial intermediaries and may include the initial purchasers or their affiliates. Indirect access to Euroclear is also available to other firms that clear through or maintain a custodial relationship with a Euroclear Participant, either directly or indirectly. Securities clearance accounts and cash accounts with the Euroclear Operator are governed by the Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of the Euroclear System, and applicable Belgian law (the "Terms and Conditions"). The Terms and Conditions govern transfers of securities and cash within Euroclear, withdrawals of securities and cash from Euroclear and receipt of payments with respect to securities in Euroclear. All securities in Euroclear are held on a fungible basis without attribution of specific certificates to specific securities clearance accounts. The Euroclear Operator acts under the Terms and Conditions only on behalf of Euroclear Participants, and has no record of, or relationship with, persons holding through Euroclear Participants. Distribution with respect to the notes held beneficially through Euroclear will be credited to the cash accounts of Euroclear Participants in accordance with the Terms and Conditions, to the extent received by the U.S. Depositary for Euroclear. The laws of some states require that certain persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer beneficial interests in a global note to such persons may be limited to that extent. Because the Depositary can act only on behalf of the Participants, which in turn act on behalf of the Indirect Participants and certain banks, the ability of a person having beneficial interests in a global note to pledge such interests to persons or entities that do not participate in the Depositary system, or otherwise take actions in respect of such interests, may be affected by the lack of a physical certificate evidencing such interests. For certain other restrictions on the transferability of the notes, see "-- Depository Procedures -- Exchange of Book-Entry Notes for Certificated Notes", "-- Exchanges Between Regulation S Notes and the Rule 144A Note" and "-- Certificated Notes". EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS, OR HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE. Payments in respect of the principal and premium, if any, and interest (including special interest), if any, on a global note registered in the name of the Depositary or its nominee will be payable by the trustee to the Depositary or its nominee in its capacity as the registered holder under the indenture. Under the terms of the indenture, Tesoro and the trustee will treat the persons in whose names the notes, including the global notes, are registered as the owners thereof for the purpose of receiving such payments and for any and all other purposes whatsoever. Consequently, neither Tesoro, the trustee nor any agent of Tesoro or the trustee has or will have any responsibility or liability for (1) any aspect of the Depositary's records or any Participant's or Indirect Participant's records relating to or payments made on account of beneficial ownership interests in the global notes, or for maintaining, supervising or reviewing any of the Depositary's records or any Participant's or Indirect Participant's records relating to the beneficial ownership interests in the global notes; or (2) any other matter relating to the actions and practices of the Depositary or any of its Participants or Indirect Participants. The Depositary has advised Tesoro that its current practices, upon receipt of any payment in respect of securities such as the notes (including principal and interest (including special interest), if any), is to credit the accounts of the relevant Participants with the payment on the payment date, in amounts proportionate to their respective holdings in principal amount of beneficial interests in the relevant security such as the global notes as shown on the records of the Depositary. Payments by Participants and the Indirect Participants to the beneficial owners of notes will be governed by standing instructions and customary practices and will not be the responsibility of the Depositary, the trustee or Tesoro. Neither Tesoro nor the trustee will be liable for any 82 delay by the Depositary or its Participants in identifying the beneficial owners of the notes, and Tesoro and the trustee may conclusively rely on and will be protected in relying on instructions from the Depositary or its nominee as the registered owner of the notes for all purposes. Except for trades involving only Euroclear and Clearstream Participants, interests in the global notes will trade in the Depositary's Same-Day Funds Settlement System and secondary market trading activity in such interests will, therefore, settle in immediately available funds, subject in all cases to the rules and procedures of the Depositary and its Participants. Transfers between Participants in the Depositary will be effective in accordance with the Depositary's procedures, and will be settled in same-day funds. Transfers between Participants in Euroclear and Clearstream will be effected in the ordinary way in accordance with their respective rules and operating procedures. Subject to compliance with the transfer restrictions applicable to the notes described herein, cross-market transfers between Participants in the Depositary, on the one hand, and Euroclear or Clearstream Participants, on the other hand, will be effected through the Depositary in accordance with the depository's rules on behalf of Euroclear or Clearstream, as the case may be, by its respective depository; however, such cross-market transactions will require delivery of instructions to Euroclear or Clearstream, as the case may be, by the counterparty in such system in accordance with the rules and procedures and within the established deadlines (Brussels time) of such system. Euroclear or Clearstream, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depository to take action to effect final settlement on its behalf by delivering or receiving interests in the relevant global note in the Depositary, and making or receiving payment in accordance with normal procedures for same-day fund settlement applicable to the Depositary. Euroclear Participants and Clearstream Participants may not deliver instructions directly to the depositories for Euroclear or Clearstream. Due to time zone differences, the securities accounts of a Euroclear or Clearstream Participant purchasing an interest in a global note from a Participant in the Depositary will be credited, and any such crediting will be reported to the relevant Euroclear or Clearstream Participant, during the securities settlement processing day (which must be a business day for Euroclear or Clearstream) immediately following the settlement date of the Depositary. Cash received in Euroclear or Clearstream as a result of sales of interests in a global note by or through a Euroclear or Clearstream Participant to a Participant in the Depositary will be received with value on the settlement date of the Depositary but will be available in the relevant Euroclear or Clearstream cash account only as of the business day for Euroclear or Clearstream following the Depositary's settlement date. The Depositary has advised Tesoro that it will take any action permitted to be taken by a holder of notes only at the direction of one or more Participants to whose account the Depositary interests in the global notes are credited and only in respect of such portion of the aggregate principal amount of the notes as to which such Participant or Participants has or have given direction. However, if there is an Event of Default under the notes, the Depositary reserves the right to exchange global notes for legended notes in certificated form, and to distribute such notes to its Participants. The information in this section concerning the Depositary, Euroclear and Clearstream and their book-entry systems has been obtained from sources that Tesoro believes to be reliable, but Tesoro takes no responsibility for the accuracy of that information. Although the Depositary, Euroclear and Clearstream have agreed to the foregoing procedures to facilitate transfers of interests in the Regulation S global note and in the Rule 144A global note among Participants in the Depositary, Euroclear and Clearstream, they are under no obligation to perform or to continue to perform such procedures, and such procedures may be discontinued at any time. None of Tesoro, the initial purchasers or the trustee will have any responsibility for the performance by the Depositary, Euroclear or Clearstream or their respective Participants or Indirect Participants of their respective obligations under the rules and procedures governing their operations. 83 EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES A global note is exchangeable for definitive notes in registered certificated form if (1) the Depositary (A) notifies Tesoro that it is unwilling or unable to continue as depository for the global note and Tesoro thereupon fails to appoint a successor depository or (B) has ceased to be a clearing agency registered under the Exchange Act or (2) Tesoro, at its option, notifies the trustee in writing that it elects to cause issuance of the notes in certificated form. In addition, beneficial interests in a global note may be exchanged for certificated notes upon request but only upon at least 20 days prior written notice given to the trustee by or on behalf of the Depositary in accordance with customary procedures. In all cases, certificated notes delivered in exchange for any global note or beneficial interest therein will be registered in names, and issued in any approved denominations, requested by or on behalf of the Depositary (in accordance with its customary procedures) and will bear the restrictive legend referred to in "Notice to Investors" unless Tesoro determines otherwise in compliance with applicable law. EXCHANGES BETWEEN REGULATION S NOTES AND THE RULE 144A GLOBAL NOTE Beneficial interests in Regulation S global notes may be transferred to a person who takes delivery in the form of an interest in a Rule 144A global note only if: (1) such exchange occurs in connection with a transfer of the notes pursuant to Rule 144A; and (2) the transferor first delivers to the trustee a written certificate (in the form provided in the indenture) to the effect that the notes are being transferred to a Person: (a) who the transferor reasonably believes to be a qualified institutional buyer within the meaning of Rule 144A; (b) purchasing for its own account or the account of a qualified institutional buyer in a transaction meeting the requirements of Rule 144A; and (c) in accordance with all applicable securities laws of the states of the United States and other jurisdictions. Beneficial interests in Rule 144A global notes may be transferred to a person who takes delivery in the form of an interest in Regulation S global notes, whether before or after the expiration of the Restricted Period, only if the transferor first delivers to the trustee a written certificate to the effect that such transfer is being made in accordance with Rule 903 or 904 of Regulation S and that, if such transfer occurs prior to the expiration of the Restricted Period, the interest transferred will be held immediately thereafter through Euroclear and Clearstream. Any beneficial interest in one of the global notes that is transferred to a person who takes delivery in the form of an interest in another global note will, upon transfer, cease to be an interest in such global note and become an interest in such other global note, and accordingly, will thereafter be subject to all transfer restrictions and other procedures applicable to beneficial interests in such other global note for as long as it remains such an interest. Transfers involving an exchange of a beneficial interest in the Regulation S global note for a beneficial interest in the Rule 144A global note or vice versa will be effected by the Depositary by means of an instruction originated by the trustee through the Depositary/Deposit Withdraw at Custodian system. Accordingly, in connection with such transfer, appropriate adjustments will be made to reflect a decrease in the principal amount of the Regulation S global note and a corresponding increase in the principal amount of the Rule 144A global note or vice versa, as applicable. CERTIFICATED NOTES Subject to certain conditions, any person having a beneficial interest in the global note may, upon request to the trustee, exchange such beneficial interest for notes in the form of certificated notes. Upon any such issuance, the trustee is required to register such certificated notes in the name of, and cause the same to be 84 delivered to, such person or persons (or the nominee of any thereof). All such certificated notes would be subject to the legend requirements described herein under "Notice to Investors". In addition, if (1) Tesoro notifies the trustee in writing that the Depositary is no longer willing or able to act as a depository and Tesoro is unable to locate a qualified successor within 90 days or (2) Tesoro, at its option, notifies the trustee in writing that it elects to cause the issuance of notes in the form of certificated notes under the indenture, then, upon surrender by the global note holder of its global note, notes in such form will be issued to each person that the global note holder and the Depositary identify as being the beneficial owner of the related notes. Neither Tesoro nor the trustee will be liable for any delay by the global note holder or the Depositary in identifying the beneficial owners of notes and Tesoro and the trustee may conclusively rely on, and will be protected in relying on, instructions from the global note holder or the Depositary for all purposes. SAME DAY SETTLEMENT AND PAYMENT The indenture will require that payments in respect of the notes represented by the global note (including principal, premium, if any, and interest (including special interest), if any) be made by wire transfer of immediately available funds to the accounts specified by the global note holder. With respect to certificated notes, Tesoro will make all payments of principal, premium, if any, interest (including special interest), if any, by wire transfer of immediately available funds to the accounts specified by the holders thereof or, if no such account is specified, by mailing a check to each such holder's registered address. Tesoro expects that secondary trading in the certificated notes will also be settled in immediately available funds. REGISTRATION RIGHTS; SPECIAL INTEREST The following description is a summary of the material provisions of the registration rights agreement. It does not restate that agreement in its entirety. We urge you to read the proposed form of registration rights agreement in its entirety because it, and not this description, defines your registration rights as holders of these notes. See "-- Additional Information". Pursuant to the registration rights agreement, Tesoro will agree to file with the Commission the exchange offer registration statement on the appropriate form under the Securities Act with respect to the exchange notes. Upon the effectiveness of the exchange offer registration statement, Tesoro will offer pursuant to the Registered Exchange Offer to the holders of Transfer Restricted Securities who are able to make certain representations the opportunity to exchange their Transfer Restricted Securities for exchange notes. If (1) Tesoro is not required to file the exchange offer registration statement or permitted to consummate the Registered Exchange Offer because the Registered Exchange Offer is not permitted by applicable law or Commission policy or (2) any holder of Transfer Restricted Securities notifies Tesoro within 20 business days following consummation of the Registered Exchange Offer that (A) it is prohibited by law or Commission policy from participating in the Registered Exchange Offer or (B) it may not resell the exchange notes acquired by it in the Registered Exchange Offer to the public without delivering a prospectus and the prospectus contained in the exchange offer registration statement is not appropriate or available for such resales or (C) that it is a broker-dealer and owns notes acquired directly from Tesoro or an affiliate of Tesoro, Tesoro will file with the Commission a shelf registration statement to cover resales of the notes by the holders thereof who satisfy certain conditions relating to the provision of information in connection with the shelf registration statement. Tesoro will use its reasonable best efforts to cause the applicable registration statement to be declared effective as promptly as possible by the Commission. For purposes of the foregoing, "Transfer Restricted Securities" means each note until (1) the date on which such note has been exchanged by a person other than a broker-dealer for a exchange note in the Registered Exchange Offer, (2) following the exchange by a broker-dealer in the Registered Exchange Offer of a note for a exchange note, the date on which such exchange note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the exchange offer registration statement, (3) the date on which such note has been effectively registered under the Securities Act and disposed of in accordance with the shelf registration statement or (4) the date on which such note is distributed to the public pursuant to Rule 144 under the Securities Act. 85 The registration rights agreement provides that: (1) Tesoro will file an exchange offer registration statement with the Commission on or prior to 90 days after the closing of this Offering; (2) Tesoro will use its reasonable best efforts to have the exchange offer registration statement declared effective by the Commission on or prior to 210 days after the closing of this Offering; (3) unless the Registered Exchange Offer would not be permitted by applicable law or Commission policy, Tesoro will commence the Registered Exchange Offer and use its reasonable best efforts to issue on or prior to 60 days after the date on which the exchange offer registration statement was declared effective by the Commission, exchange notes in exchange for all notes tendered prior thereto in the Registered Exchange Offer; and (4) if obligated to file the shelf registration statement, Tesoro will use its reasonable best efforts to file the shelf registration statement with the Commission on or prior to 30 days after such filing obligation arises and to cause the shelf registration to be declared effective by the Commission on or prior to 90 days after the date upon which Tesoro is obligated to make such filing. If (a) Tesoro fails to file any of the registration statements required by the registration rights agreement on or before the date specified for such filing, (b) any of such Registration Statements is not declared effective by the Commission on or prior to the date specified for such effectiveness (the "Effectiveness Target Date"), or (c) Tesoro fails to consummate the Registered Exchange Offer within 30 business days of the Effectiveness Target Date with respect to the exchange offer registration statement, or (d) the shelf registration statement or the exchange offer registration statement is declared effective but thereafter ceases to be effective or usable in connection with resales of Transfer Restricted Securities during the periods specified in the registration rights agreement (each such event referred to in clauses (a) through (d) above a "Registration Default"), then Tesoro will pay special interest to each holder of notes, with respect to the first 90-day period immediately following the occurrence of such Registration Default in an amount equal to $0.05 per week per $1,000 principal amount of notes held by such holder. The amount of special interest will increase by an additional $0.05 per week per $1,000 principal amount of notes with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of special interest of $0.50 per week per $1,000 principal amount of notes. All accrued special interest will be paid by Tesoro on each Damages Payment Date to the global note holder by wire transfer of immediately available funds or by federal funds check and to holders of Certificated Securities by wire transfer to the accounts specified by them or by mailing checks to their registered addresses if no such accounts have been specified. Following the cure of all Registration Defaults, the accrual of special interest will cease. Holders of notes will be required to make certain representations to Tesoro (as described in the registration rights agreement) in order to participate in the Registered Exchange Offer and will be required to deliver information to be used in connection with the shelf registration statement and to provide comments on the shelf registration statement within the time periods set forth in the registration rights agreement in order to have their notes included in the shelf registration statement and benefit from the provisions regarding special interest set forth above. CERTAIN DEFINITIONS Set forth below are certain defined terms used in the indenture. Reference is made to the indenture for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided. "Acquired Debt" means, with respect to any specified Person: (1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Restricted Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Restricted Subsidiary of such specified Person; and 86 (2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person, but excluding, in any event, Indebtedness that is extinguished, retired or repaid in connection with such Person merging with or becoming a Restricted Subsidiary of such specified Person. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that, for purposes of the covenant described under the caption "-- Certain Covenants -- Transactions with Affiliates" and the use of the term "Affiliates" thereunder, beneficial ownership of 10% or more of the voting securities of a specified Person shall be deemed to be control by the owner thereof. "Asset Sale" means: (1) the sale, lease, conveyance or other disposition of any assets or rights (including, without limitation, by way of a sale and leaseback) other than in the ordinary course of business, or any damage or loss of property resulting in the payment of property insurance or condemnation proceeds to Tesoro or any Restricted Subsidiary (provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of Tesoro and its Restricted Subsidiaries taken as a whole will be governed by the covenants described above under the captions "-- Repurchase at the Option of Holders -- Change of Control" and "-- Certain Covenants -- Merger, Consolidation or Sale of Assets" and not by the provisions of the covenant described above under the caption "-- Repurchase at the Option of Holders -- Asset Sales"); and (2) the issue or sale by Tesoro or any of its Restricted Subsidiaries of Equity Interests of any of Tesoro's Restricted Subsidiaries, in the case of either clause (1) or (2), whether in a single transaction or a series of related transactions, (a) that have a Fair Market Value in excess of $5 million or (b) for Net Proceeds in excess of $5 million; provided that the following will not be deemed to be Asset Sales: (1) any transfer, conveyance, sale, lease or other disposition of Credit Facility Collateral; (2) any sale or exchange of production of crude oil, natural gas and natural gas liquids, or refined products or residual hydrocarbons, or any other asset or right constituting inventory, made in the ordinary course of the Permitted Business; (3) (i) any disposition of assets (other than Collateral) in trade or exchange for assets of comparable Fair Market Value used or usable in any Permitted Business (including, without limitation, the trade or exchange for a controlling interest in another business or all or substantially all of the assets of a business, in each case, engaged in a Permitted Business or for other non-current assets to be used in a Permitted Business, including, without limitation, assets or Investments of the nature or type described in clause (13) of the definition of "Permitted Investments") and (ii) any disposition of assets constituting Collateral in trade or exchange for assets constituting Refinery Assets of comparable Fair Market Value; provided that, in each such case (x) except for trades or exchanges of oil and gas properties and interests therein for other oil and gas properties and interests therein, if the Fair Market Value of the assets so disposed of, in a single transaction or in a series of related transactions, is in excess of $35 million, Tesoro shall obtain an opinion or report from an Independent Financial Advisor confirming that the assets received by Tesoro and the Restricted Subsidiaries in such trade or exchange have a fair market value of at least the fair market value of the assets so disposed, (y) any cash or Cash Equivalents received by Tesoro or a Restricted Subsidiary in connection with such trade or exchange (net of any transaction costs of the type deducted under the definition of "Net Proceeds") shall be treated as Net Proceeds of an Asset Sale and shall be applied in the manner set forth in the covenant described under the caption "-- Repurchase at the Option of Holders -- Asset Sales" and (z) in the case of clause (ii) above, the 87 collateral agent shall concurrently be granted a perfected first priority security interest (subject to Permitted Prior Liens) in such Refinery Assets as additional Collateral under the security documents to secure the Secured Obligations, all on terms and pursuant to arrangements reasonably satisfactory to the collateral agent in its reasonable determination (which may include, at the collateral agent's request, customary officers' certificates and legal opinions); (4) a transfer of assets by Tesoro to a Restricted Subsidiary of Tesoro or by a Restricted Subsidiary of Tesoro to Tesoro or to a Restricted Subsidiary of Tesoro; (5) an issuance or sale of Equity Interests by a Restricted Subsidiary of Tesoro to Tesoro or to another Restricted Subsidiary of Tesoro; (6) (A) a Permitted Investment or (B) a Restricted Payment that is permitted by the covenant described above under the caption "Certain Covenants -- Restricted Payments"; (7) the trade, sale or exchange of Cash Equivalents; (8) the sale, exchange or other disposition of obsolete assets not integral to any Permitted Business; (9) the abandonment or relinquishment of assets or property in the ordinary course of business, including without limitation the abandonment, relinquishment or farm-out of oil and gas leases, concessions or drilling or exploration rights or interests therein; (10) any lease of assets entered into in the ordinary course of business and with respect to which Tesoro or any Restricted Subsidiary of Tesoro is the lessor and the lessee has no option to purchase such assets for less than Fair Market Value at any time the right to acquire such asset occurs; (11) the disposition of assets received in settlement of debts accrued in the ordinary course of business; (12) the creation or perfection of a Lien on any properties or assets (or any income or profit therefrom) of Tesoro or any of its Restricted Subsidiaries that is not prohibited by any covenant of the indenture; (13) the surrender or waiver in the ordinary course of business of contract rights or the settlement, release or surrender of contractual, non-contractual or other claims of any kind; and (14) the grant in the ordinary course of business of any non-exclusive license of patents, trademarks, registrations therefor and other similar intellectual property. "Board of Directors" means the Board of Directors of Tesoro or any committee thereof duly authorized to act on behalf of such Board. "Borrowing Base" means, as of any date, an amount equal to: (1) 85% of the face amount of all accounts receivable owned by Tesoro and its Domestic Subsidiaries as of the end of the most recent fiscal quarter preceding such date that were not more than 90 days past due; plus (2) 80% of the book value (before any reduction from current cost to LIFO cost) of all inventory owned by Tesoro and its Domestic Subsidiaries as of the end of the most recent fiscal quarter preceding such date; plus (3) 100% of the cash and Cash Equivalents owned by Tesoro and its Domestic Subsidiaries as of the end of the most recent fiscal quarter preceding such date. "Capital Lease Obligations" means, at the time any determination thereof is to be made, the amount of the liability in respect of one or more capital leases that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means: (1) in the case of a corporation, corporate stock; (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) 88 of corporate stock; (3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" means: (1) United States dollars; (2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than one year from the date of acquisition; (3) certificates of deposit and Eurodollar time deposits with maturities of not more than one year from the date of acquisition, bankers' acceptances with maturities of not more than one year from the date of acquisition and overnight bank deposits, in each case, with any domestic commercial bank having capital and surplus in excess of $500 million and a Thompson Bank Watch Rating of "B" or better; (4) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above; and (5) commercial paper having the highest rating obtainable from Moody's or S&P with maturities of not more than one year from the date of acquisition. "Change of Control" means the occurrence of one or more of the following events: (1) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of Tesoro to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a "Group") together with any Affiliates thereof (whether or not otherwise in compliance with the provisions of the indenture) unless immediately following such sale, lease, exchange or other transfer in compliance with the indenture such assets are owned, directly or indirectly, by Tesoro or a Subsidiary of Tesoro; (2) the approval by the holders of Capital Stock of Tesoro of any plan or proposal for the liquidation or dissolution of Tesoro; (3) the acquisition in one or more transactions, of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of Voting Securities of Tesoro by any Person or Group that either (A) beneficially owns (within the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, at least 50% of Tesoro's then outstanding voting securities entitled to vote on a regular basis for the board of directors of Tesoro, or (B) otherwise has the ability to elect, directly or indirectly, a majority of the members of Tesoro's board of directors, including, without limitation, by the acquisition of revocable proxies for the election of directors; (4) during any period of two consecutive years, individuals who at the beginning of such period constituted the board of directors of Tesoro (together with any new directors whose election by such board of directors or whose nomination for election by the shareholders (or members, as applicable) of Tesoro was approved by a vote of 66 2/3% of the directors of Tesoro then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the board of directors then in office; or (5) Tesoro consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges with or into, Tesoro, in any such event pursuant to a transaction in which any of the outstanding Voting Stock of Tesoro or such other Person is converted into or exchanged for cash, securities or other property, other than any such transaction where the Voting Stock of Tesoro outstanding immediately prior to such transaction is converted into or exchanged for Voting Stock (other than Disqualified Stock) of the surviving or transferee Person constituting a majority of the outstanding shares of such Voting Stock of such surviving or transferee Person (immediately after giving effect to such issuance). 89 Notwithstanding the foregoing, a Change of Control shall not be deemed to occur upon the consummation of any actions undertaken by Tesoro or any of its Restricted Subsidiaries solely for the purpose of changing the legal structure of Tesoro or such Restricted Subsidiary. "collateral agency agreement" means a declaration of trust for a collateral trust, a collateral trust agreement or a collateral agency agreement dated the Issue Date, executed and delivered by Tesoro, the Guarantors and the collateral agent on customary terms reasonably satisfactory to the trustee and the Term Loan Administrative Agent, in each case, as amended, modified, renewed, restated or replaced, in whole or in part, from time to time, in accordance with its terms. "collateral agent" means Wilmington Trust Company, in its capacity as collateral agent under the collateral agency agreement, together with its successors in such capacity. "Collateral Agent's Liens" means a Lien granted to the collateral agent as security for Secured Obligations. "Commission" means the U.S. Securities and Exchange Commission. "Commodity Hedging Agreements" means agreements or arrangements designed to protect such Person against fluctuations in the price of (1) crude oil, natural gas, or other hydrocarbons, including refined hydrocarbon products; (2) electricity and other sources of energy or power used in Tesoro's refining or processing operations; or (3) any other commodity; in each case, in connection with the conduct of its business and not for speculative purposes. "Commodity Hedging Obligations" means, with respect to any Person, the net payment Obligations of such Person under Commodity Hedging Agreements. "Consolidated Cash Flow" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period, plus: (1) an amount equal to any extraordinary, unusual or non-recurring expenses or losses (including, whether or not otherwise includable as a separate item in the statement of Consolidated Net Income for such period, losses on sales of assets outside of the ordinary course of business) plus any net loss realized in connection with an Asset Sale (to the extent such losses were deducted in computing such Consolidated Net Income), plus (2) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was included in computing such Consolidated Net Income, plus (3) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income, plus (4) depreciation and amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation and amortization were deducted in computing such Consolidated Net Income, minus (5) non-cash items increasing such Consolidated Net Income for such period, in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the foregoing, the provision for taxes on the income or profits of, and the depreciation and amortization and other non-cash charges of, a Restricted Subsidiary of the referent Person shall be added to Consolidated Net Income to compute Consolidated Cash Flow only to the extent (and in same proportion) 90 that the Net Income of such Restricted Subsidiary was included in calculating the Consolidated Net Income of such Person and only if a corresponding amount would be permitted at the date of determination to be dividended to Tesoro by such Restricted Subsidiary without prior governmental approval (that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Restricted Subsidiary or its stockholders. "Consolidated Net Income" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries (for such period, on a consolidated basis, determined in accordance with GAAP); provided that (1) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Restricted Subsidiary; (2) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders; (3) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded; (4) the cumulative effect of a change in accounting principles shall be excluded; and (5) any ceiling limitation writedowns under Securities and Exchange Commission guidelines shall be treated as capitalized costs, as if such writedown had not occurred. "Credit Facility" means, with respect to Tesoro or any Restricted Subsidiary of Tesoro, one or more debt facilities (including, without limitation, the Senior Credit Facility) or commercial paper facilities with banks or other institutional lenders providing for revolving credit loans, other borrowings (including term loans), receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, extended, refunded, replaced or refinanced (in each case, without limitation as to amount) in whole or in part from time to time. "Credit Facility Agent" means, at any time in respect of any Qualified Credit Facility, the administrative agent, collateral agent or collateral trustee for holders of Obligations under such Qualified Credit Facility that holds the Liens securing such Obligations. "Credit Facility Collateral" means, at any time in respect of any Credit Facility: (1) all now owned and hereafter acquired inventory (as defined in Article 9 of the Uniform Commercial Code as in effect in any applicable jurisdiction), all documents (as defined in Article 9 of the Uniform Commercial Code as in effect in any applicable jurisdiction) related thereto and all rights under any existing or future policy of property loss or casualty insurance on such inventory; (2) all now owned and hereafter acquired rights to payment from inventory sold or leased and services rendered (whether such rights to payment constitute accounts or payment intangibles, or arise under or in connection with chattel paper or instruments, each as defined in Article 9 of the Uniform Commercial Code as in effect in any applicable jurisdiction, and whether or not such rights to payment constitute Indebtedness or conform to the underlying contract), together with (i) all rights in and to any merchandise or goods which such rights to payment may represent, whether as returned or repossessed goods or otherwise; and (ii) all Liens, letters of credit, insurance, guarantees and other obligations securing or supporting such rights to payment; 91 (3) all now owned and hereafter acquired money, deposit accounts (as defined in Article 9 of the Uniform Commercial Code as in effect in any applicable jurisdiction) and deposits therein and Cash Equivalents (whether held directly or in securities accounts (as defined in Article 9 of the Uniform Commercial Code as in effect in any applicable jurisdiction)), except (i) the Asset Sale Proceeds Account and deposits therein and (ii) money, deposit accounts, deposits and Cash Equivalents (whether held directly or in securities accounts) constituting identifiable proceeds of Collateral; (4) all now owned and hereafter acquired rights to payment constituting intercompany debt obligations (whether such rights to payment constitute accounts or payment intangibles, or arise under or in connection with chattel paper of instruments, and whether or not such rights to payment constitute Indebtedness), together with all Liens, letters of credit, insurance, guarantees and other obligations securing or supporting such rights to payment; provided, however, that such intercompany debt obligations shall not include (x) Specified Intercompany Debt, (y) any Liens, letters of credit, insurance, guarantees and other obligations securing or supporting Specified Intercompany Debt or (z) any cash or non-cash proceeds of Specified Intercompany Debt; (5) all now owned and hereafter acquired rights under contracts and other general intangibles, but only to the extent necessary, used or useful in (i) the collection, sale or other disposition of the rights to payment described in clause (2) above or (ii) the processing, shipment (including any rights of stoppage in transit), offtake, storage, completion, supply, lease, sale or other disposition (collectively, "Inventory Disposition Actions") of inventory which is owned or has been sold as of the date of any such Inventory Disposition Action; and (6) all cash and non-cash proceeds (as defined in Article 9 of the Uniform Commercial Code as in effect in any applicable jurisdiction) of the foregoing. "Credit Facility Obligations" means Indebtedness under a Credit Facility permitted to be incurred under clauses (1) or (12) of the covenant described in the second paragraph under the caption "-- Certain Covenants -- Incurrence of Indebtedness" and other Obligations (not constituting Indebtedness) under such Credit Facility (which may, but need not, include Hedging Obligations and obligations under deposit account services agreements and cash management contracts with any lender that is or at any time was party to such Credit Facility or any of its Affiliates). "Default" means any event that is or with the passage of time or the giving of notice (or both) would be an Event of Default. "Designated Proceeds" means the amount of net cash proceeds received by Tesoro from each issuance or sale since the Issue Date of mandatorily convertible preferred stock of Tesoro (other than Disqualified Stock), that at the time of such issuance was designated by Tesoro as Designated Proceeds pursuant to an officer's certificate delivered to the trustee; provided, however, that if the mandatorily convertible preferred stock providing such Designated Proceeds is thereafter converted into common stock of Tesoro, that portion of the Designated Proceeds that has not been paid as dividends pursuant to clause (10) of the second paragraph of the covenant described under "Certain Covenants -- Restricted Payments" will no longer be considered to be Designated Proceeds. "Disqualified Stock" means, with respect to any Person, any Capital Stock to the extent that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event, it matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the notes mature, except such Capital Stock that is solely redeemable with, or solely exchangeable for, any Capital Stock of such Person that is not Disqualified Stock. Notwithstanding the preceding paragraph, any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require Tesoro or any of its Restricted Subsidiaries to repurchase Capital Stock upon the occurrence of a change of control or an asset sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that Tesoro or such Restricted Subsidiary may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or 92 redemption complies with the covenant described above under the caption "-- Certain Covenants -- Restricted Payments". "Domestic Subsidiary" means any Restricted Subsidiary of Tesoro that was formed under the laws of the United States or any state of the United States or the District of Columbia or that guarantees or otherwise provides direct credit support for any Indebtedness of Tesoro. "equally and ratably" means, in reference to sharing of any Liens or proceeds thereof as between the holders of Note Obligations, on the one hand, and Term Loan Obligations, on the other hand, that such Liens or proceeds: (1) shall be allocated and distributed first to the trustee for account of the holders of notes, on the one hand, and to the Term Loan Administrative Agent, on the other hand, ratably in proportion to the principal of and interest and premium (if any) outstanding on the notes when the allocation or distribution is made, on the one hand, and the principal of and interest and premium (if any) outstanding on the Term Loans when the allocation or distribution is made, on the other hand; and thereafter (2) shall be allocated and distributed (if any remain after payment in full of all of the principal of and interest and premium on the notes and the Term Loans) to the trustee for account of the holders of any remaining Note Obligations, on the one hand, and to the Term Loan Administrative Agent for account of the holders of any remaining Term Loan Obligations, on the other hand, ratably in proportion to the aggregate unpaid amount of such remaining Note Obligations due and demanded (with written notice to the trustee and the collateral agent) prior to the date such distribution is made, on the one hand, and the aggregate unpaid amount of such remaining Term Loan Obligations due and demanded (with written notice to the trustee, the Term Loan Administrative Agent and the collateral agent) prior to the date such distribution is made, on the other hand. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Equity Offering" means any public or private sale of Capital Stock of Tesoro (other than sales made to any Restricted Subsidiary of Tesoro and sales of Disqualified Stock) made for cash after the Issue Date. "exchange notes" means notes designated as "Series B" in the indenture and registered under the Securities Act that are issued under the indenture in exchange for the notes initially issued under the indenture pursuant to the Exchange Offer or in replacement of any such initially issued notes pursuant to the Shelf Registration Statement. "Excluded Assets" means: (1) Credit Facility Collateral; (2) any lease of premises used only as office space or to warehouse inventory; (3) all easements, rights-of-way, licenses and other real property interests for or pertaining to the construction, operation, use or maintenance of any pipeline over, upon or under land owned by another; (4) the fixtures and equipment of any pipeline and the Capital Stock of Tesoro High Plains Pipeline Company if, to the extent that and for as long as (i) the ownership or operation of such pipeline is regulated by any federal or state regulatory authority and (ii) under the law applicable to such regulatory authority the grant of a security interest in such fixtures and equipment or such Capital Stock, respectively, is prohibited or a security interest in such fixtures and equipment or such Capital Stock, respectively, may be granted only after completion of a filing with, or receipt of consent from, such regulatory authority which has not been effectively completed or received; provided, however, that (a) such fixtures and equipment or such Capital Stock, respectively, will be an Excluded Asset only to the extent and for as long as the conditions set forth in clauses (i) and (ii) in this definition are and remain satisfied and to the extent such assets otherwise constitute Collateral, will cease to be an Excluded Asset, and will become subject to the security interests granted to the collateral agent under the security documents, immediately and automatically at such time as the such conditions cease to exist, including 93 by reason of the effective completion of any required filing or effective receipt of any required regulatory approval; and (b) unless prohibited by law, the proceeds of any sale, lease or other disposition of any such fixtures, equipment or Capital Stock that are Excluded Assets shall not be an Excluded Asset and shall at all times be and remain subject to the security interests granted to the collateral agent under the security documents; (5) with respect to personal property, any lease, license, permit, franchise, power, authority or right if, to the extent that and for as long as (i) the grant of a security interest therein constitutes or would result in the abandonment, invalidation or unenforceability of such lease, license, interest, permit, franchise, power, authority or right or the termination of or a default under the instrument or agreement by which such lease, license, interest, permit, franchise, power, authority or right is governed and (ii) such abandonment, invalidation, unenforceability, breach, termination or default is not rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the Uniform Commercial Code (or any successor provision) of any relevant jurisdiction or any other applicable law (including the United States bankruptcy code) or principles of equity; provided, however, that (a) such lease, license, interest, permit, franchise, power, authority or right will be an Excluded Asset only to the extent and for as long as the conditions set forth in clauses (i) and (ii) in this definition are and remain satisfied and to the extent such assets otherwise constitute Collateral, will cease to be an Excluded Asset, and will become subject to the security interests granted to the collateral agent under the security documents, immediately and automatically at such time as such conditions cease to exist, including by reason of any waiver or consent under the applicable instrument or agreement, and (b) the proceeds of any sale, lease or other disposition of any such lease, license, interest, permit, franchise, power, authority or right that is or becomes an Excluded Asset shall not be an Excluded Asset and shall at all times be and remain subject to the security interests granted to the collateral agent under the security documents; (6) with respect to any real property, any lease, license, permit, franchise, power, authority or right if, to the extent that and for as long as the grant of a security interest therein (i) requires a third party consent or (ii) constitutes or would result in the abandonment, invalidation or unenforceability of such lease, license, interest, permit, franchise, power, authority or right or the termination of or a default under the instrument or agreement by which such lease, license, interest, permit, franchise, power, authority or right is governed; provided, however, that such lease, license, interest, permit, franchise, power, authority or right will be an Excluded Asset only to the extent and for as long as the conditions set forth in this definition are and remain satisfied and to the extent such assets otherwise constitute Collateral, will cease to be an Excluded Asset, and will become subject to the security interests granted to the collateral agent under the security documents, immediately and automatically at such time as such conditions cease to exist, including by reason of any waiver or consent under the applicable instrument or agreement; (7) all trademarks; (8) the Marine Services Business; (9) the Retail Properties; and (10) (i) other property in which a security interest cannot be perfected by the filing of a financing statement under the Uniform Commercial Code and (ii) without duplication, motor vehicles, that have, in the aggregate for all such property and motor vehicles, a fair market value (as determined in good faith by Tesoro) not exceeding $10 million. "Existing Indebtedness" means the aggregate Indebtedness of Tesoro and its Restricted Subsidiaries (other than Indebtedness under the Senior Credit Facility) in existence on the Issue Date. "Fair Market Value" means, with respect to consideration received or to be received, or given or to be given, pursuant to any transaction by Tesoro or any Restricted Subsidiary, the fair market value of such consideration as determined in good faith by the Board of Directors of Tesoro. "Financial Hedging Agreements" means (1) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (2) other agreements or arrangements designed to protect such Person 94 against fluctuations in interest rates or currency exchange rates in connection with the conduct of its business and not for speculative purposes. "Financial Hedging Obligations" means, with respect to any Person, the net payment Obligations of such Person under Financial Hedging Agreements. "Fixed Charge Coverage Ratio" means, with respect to any Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that Tesoro or any of its Restricted Subsidiaries incurs, assumes, guarantees or redeems any Indebtedness (other than revolving credit borrowings under any Credit Facility) or issues or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee or redemption of Indebtedness, or such issuance or redemption of preferred stock, as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of making the computation referred to above: (1) acquisitions that have been made by Tesoro or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated without giving effect to clause (3) of the proviso set forth in the definition of Consolidated Net Income; (2) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded; and (3) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the referent Person or any of its Restricted Subsidiaries following the Calculation Date. "Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of: (1) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation or duplication, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations); (2) the consolidated interest of such Person and its Restricted Subsidiaries that was capitalized during such period; (3) any interest expense on Indebtedness of another Person that is guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries (whether or not such guarantee or Lien is called upon); and (4) the product of: (a) all dividend payments, whether or not in cash, on any series of preferred stock of such Person or any of its Restricted Subsidiaries, other than dividend payments on Equity Interests payable solely in Equity Interests of Tesoro (other than Disqualified Stock), times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. 95 "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, the statements and pronouncements of the Financial Accounting Standards Board and such other statements by such other entities as have been approved by a significant segment of the accounting profession, which are applicable at the date of determination. "Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America for the payment of which guarantees or obligations the full faith and credit of the United States is pledged. "guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof or pledging assets to secure), of all or any part of any Indebtedness. "Guarantors" means: (1) each of Digicomp Inc., Far East Maritime Company, Gold Star Maritime Company, Kenai Pipe Line Company, Smiley's Super Service, Inc., Tesoro Alaska Company, Tesoro Alaska Pipeline Company, Tesoro Aviation Company, Tesoro Financial Services Holding Company, Tesoro Gas Resources Company, Inc., Tesoro Hawaii Corporation, Tesoro High Plains Pipeline Company, Tesoro Marine Services Holding Company, Tesoro Marine Services, LLC, Tesoro Maritime Company, Tesoro Northstore Company, Tesoro Petroleum Companies, Inc., Tesoro Refining and Marketing Company, Tesoro Technology Company, Tesoro Trading Company, Tesoro Vostok Company, Tesoro Wasatch, LLC and Victory Finance Company; (2) each of Tesoro's Restricted Subsidiaries that becomes a guarantor of the notes pursuant to the covenant described above under "-- Certain Covenants -- Additional Subsidiary Guarantees and Liens"; and (3) each of Tesoro's Restricted Subsidiaries executing a supplemental indenture in which such Restricted Subsidiary agrees to be bound by the terms of the indenture; provided that any Person constituting a Guarantor as described above shall cease to constitute a Guarantor when its respective Subsidiary Guarantee is released in accordance with the terms thereof. "Hedging Obligations" means, with respect to any Person, collectively, the Commodity Hedging Obligations of such Person and the Financial Hedging Obligations of such Person. "Immaterial Subsidiary" means any Domestic Subsidiary for so long as: (1) such Domestic Subsidiary has total assets with a fair market value (as determined by Tesoro in good faith) of less than $1.0 million; (2) such Domestic Subsidiary has total revenues for each of its annual fiscal periods ending after the Issue Date of less than $1.0 million; and (3) such Domestic Subsidiary has not guaranteed or otherwise provided direct or indirect credit support for any Indebtedness of Tesoro or any of its Restricted Subsidiaries. "Indebtedness" means, with respect to any Person, without duplication, (1) the principal of and premium, if any, with respect to indebtedness of such Person for borrowed money or evidenced by bonds, notes, debentures or similar instruments; (2) reimbursement obligations of such Person for letters of credit or banker's acceptances; (3) Capital Lease Obligations of such Person; (4) obligations of such Person for the payment of the balance deferred and unpaid of the purchase price of any property except any such balance that constitutes an accrued expense or trade payable; or 96 (5) Hedging Obligations, in each case of the foregoing clauses (1) through (5) if and to the extent any of the foregoing obligations or indebtedness (other than letters of credit, banker's acceptances and Hedging Obligations), but excluding amounts recorded in accordance with Statement of Financial Accounting Standard No. 133, would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP. In addition, the term "Indebtedness" includes: (A) obligations or indebtedness of others of the type referred to in the foregoing clauses (1) through (5) that are secured by a Lien on any asset of such Person (whether or not such Indebtedness is assumed by such Person), but in an amount not to exceed the lesser of the amount of such other Person's obligation or indebtedness or the Fair Market Value of such asset; and (B) to the extent not otherwise included, the guarantee by such Person of any obligations or indebtedness of others of the type referred to in the foregoing clauses (1) through (5), whether or not such guarantee is contingent, and whether or not such guarantee appears on the balance sheet of such Person. "Independent Financial Advisor" means a nationally recognized accounting, appraisal or investment banking firm that is, in the reasonable judgment of the Board of Directors, qualified to perform the task for which such firm has been engaged hereunder and disinterested and independent with respect to Tesoro and its Affiliates; provided, that providing accounting, appraisal or investment banking services to Tesoro or any of its Affiliates or having an employee, officer or other representative serving as a member of the Board of Directors of Tesoro or any of its Affiliates will not disqualify any firm from being an Independent Financial Advisor. "intercreditor agreement" means any agreement at any time entered into between the collateral agent and a Credit Facility Agent as described under "-- Intercreditor Agreement with Credit Facility Agent under Qualified Credit Facility", in each case, as amended, modified, renewed, restated or replaced, in whole or in part, from time to time, in accordance with its terms. "Investment Grade Rating" means a rating equal to or higher than Baa3 (or the equivalent) by Moody's or BBB- (or the equivalent) by S&P. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including guarantees of Indebtedness or other Obligations), advances (other than advances to customers in the ordinary course of business which are recorded as accounts receivable on the balance sheet of the lender and commissions, moving, travel and similar advances to employees and officers made in the ordinary course of business) or capital contributions, purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If Tesoro or any of its Restricted Subsidiaries sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary of Tesoro such that, after giving effect to any such sale or disposition, such Person is no longer a direct or indirect Restricted Subsidiary of Tesoro, Tesoro, or such Restricted Subsidiary, as the case may be, shall be deemed to have made an Investment on the date of any such sale or disposition equal to the Fair Market Value of the Equity Interests of such Restricted Subsidiary not sold or disposed of in an amount determined as provided in the fourth paragraph of the covenant described above under the caption "-- Certain Covenants -- Restricted Payments". "Issue Date" means April 17, 2003, the first date on which the outstanding 8% notes were issued, authenticated and delivered under the indenture. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in any asset and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). 97 "Marine Services Business" means (1) all assets involved in the marketing and distribution of petroleum products and provision of logistical support services to the marine and offshore exploration and production industries operating in the Gulf of Mexico, including, without limitation, the 15 terminals located on the Texas and Louisiana coast and all related tugboats, barges and trucks, provided that such assets are owned by either entity referred to in clauses (2) or (3) of this definition and such assets are located on or near either the Texas or Louisiana coast, (2) the Capital Stock of Tesoro Marine Services Holding Company and (3) the membership interests of Tesoro Marine Services, LLC; provided that such assets will not include any assets relating to the sale of petroleum products in bulk and wholesale markets. "Moody's" means Moody's Investors Service, Inc. or any successor to the rating agency business thereof. "Net Income" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however, (1) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions); or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries; and (2) any extraordinary or nonrecurring gain (but not loss), together with any related provision for taxes on such extraordinary or nonrecurring gain (but not loss). "Net Proceeds" means the aggregate cash proceeds or Cash Equivalents received by Tesoro or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of (i) the direct costs relating to such Asset Sale (including, without limitation, legal, accounting, investment banking and brokers fees, sales and underwriting commissions and other reasonable costs incurred in preparing such asset for sale), any relocation expenses incurred as a result thereof and any related severance and associated costs, expenses and charges of personnel related to the sold assets and related operations, (ii) taxes paid or reserved as payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), (iii) distributions and payments required to be made to minority interest holders in Restricted Subsidiaries as a result of such Asset Sale, (iv) amounts paid in order to satisfy any Lien attaching to an asset in connection with such Asset Sale and (v) any reserve for adjustment (whether or not placed in escrow) in respect of the sale price of such asset or assets established in accordance with GAAP. "Net Sale Consideration" means the aggregate cash proceeds, Cash Equivalents and other consideration received by Tesoro or any of its Restricted Subsidiaries in respect of any Sale of Collateral, net of (i) the direct costs relating to such Sale of Collateral (including, without limitation, legal, accounting, investment banking and brokers fees, sales and underwriting commissions and other reasonable costs incurred in preparing such asset for sale), any relocation expenses incurred as a result thereof and any related severance and associated costs, expenses and charges of personnel related to the sold assets and related operations, (ii) taxes paid or reserved as payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), (iii) amounts paid in order to satisfy any Lien attaching to an asset in connection with such Sale of Collateral and (iv) distributions and payments required to be made to minority interest holders in Restricted Subsidiaries as a result of such Sale of Collateral. "Non-Recourse Indebtedness" means Indebtedness: (1) as to which neither Tesoro nor any of its Restricted Subsidiaries, (a) provides any guarantee or credit support of any kind (including any undertaking, guarantee, indemnity, agreement or instrument that would constitute Indebtedness); or (b) is directly or indirectly liable (as a guarantor or otherwise); (2) the incurrence of which will not result in any recourse against any of the assets of Tesoro or its Restricted Subsidiaries; and (3) no default with respect to which would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of Tesoro or any of its Restricted Subsidiaries to declare pursuant to the express terms governing such Indebtedness a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its Stated Maturity. 98 "Note Documents" means the indenture, the notes, the exchange notes, the Subsidiary Guarantees and the security documents. "Note Obligations" means the notes (including all additional notes and all exchange notes therefor), the Subsidiary Guarantees and all other Obligations of any Obligor under the Note Documents. "Obligations" means any principal, premium (if any), interest (including special interest), if any, and interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to Tesoro or its Restricted Subsidiaries whether or not a claim for post-filing interest is allowed in such proceeding), penalties, fees, charges, expenses, indemnifications, reimbursement obligations, damages (including special interest), guarantees (including the Subsidiary Guarantees) and other liabilities or amounts payable under the documentation governing any Indebtedness or in respect thereof. "Obligor" means Tesoro, the Guarantors and each other Subsidiary of Tesoro that has granted the collateral agent a Lien upon any of the Collateral as security for any Secured Obligation. "Permitted Business" means, with respect to Tesoro and its Restricted Subsidiaries, the businesses of: (1) the acquisition, development, operation and disposition of interests in oil, gas and other hydrocarbon properties; (2) the acquisition, gathering, treating, processing, storage, transportation of production from such interests or properties; (3) the acquisition, processing, marketing, refining, distilling, storage and/or transportation of hydrocarbons and/or royalty or other interests in crude oil or refined or associated products related thereto; (4) the acquisition, operation, improvement, leasing and other use of convenience stores, retail service stations, truck stops and other public accommodations in connection therewith; (5) the marketing and distribution of petroleum and marine products and the provision of logistical services to marine and offshore exploration and production industries; (6) any business currently engaged in by Tesoro or its Restricted Subsidiaries; and (7) any activity or business that is a reasonable extension, development or expansion of, or reasonably related to, any of the foregoing. "Permitted Investments" means: (1) any Investment in Tesoro or in a Restricted Subsidiary of Tesoro that is a Guarantor; (2) any Investment in Cash Equivalents or deposit accounts maintained in the ordinary course of business consistent with past practices; (3) any Investment by Tesoro or any Restricted Subsidiary of Tesoro in a Person, if as a result of such Investment: (a) such Person becomes a Restricted Subsidiary of Tesoro and a Guarantor; or (b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys all or substantially all of its assets to, or is liquidated into, Tesoro or a Restricted Subsidiary of Tesoro that is a Guarantor; (4) any security or other Investment received or Investment made as a result of the receipt of non-cash consideration from: (a) an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption "-- Repurchase at the Option of Holders -- Asset Sales"; or (b) a disposition of assets that do not constitute an Asset Sale; 99 (5) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of Tesoro; (6) any Investment received in settlement of debts, claims or disputes owed to Tesoro or any Restricted Subsidiary of Tesoro that arose out of transactions in the ordinary course of business; (7) any Investment received in connection with or as a result of a bankruptcy, workout or reorganization of any Person; (8) advances and extensions of credit in the nature of accounts receivable arising from the sale or lease of goods or services or the licensing of property in the ordinary course of business; (9) relocation allowances for, and advances and loans to, employees, officers and directors (including, without limitation, loans and advances the net cash proceeds of which are used solely to purchase Equity Interests of Tesoro in connection with restricted stock or employee stock purchase plans, or to exercise stock received pursuant thereto or other incentive plans in a principal amount not to exceed the aggregate exercise or purchase price), or loans to refinance principal and accrued interest on any such loans, provided that the aggregate principal amount of such loans, advances and allowances shall not exceed at any time $20 million; (10) other Investments by Tesoro or any Restricted Subsidiary of Tesoro in any Person having an aggregate Fair Market Value (measured as of the date each such Investment is made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (10) (net of returns of capital, dividends and interest paid on Investments and sales, liquidations and redemptions of Investments), not in excess of $50 million; (11) Investments in the form of intercompany Indebtedness or Guarantees of Indebtedness of a Restricted Subsidiary of Tesoro permitted under clauses (6) and (11) of the covenant described under the caption "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock"; (12) Investments arising in connection with Hedging Obligations that are incurred in the ordinary course of business for the purpose of fixing or hedging currency, commodity or interest rate risk in connection with the conduct of the business of Tesoro and its Subsidiaries and not for speculative purposes; (13) Investments in the form of, or pursuant to, operating agreements, joint ventures, partnership agreements, working interests, royalty interests, mineral leases, processing agreements, farm-out agreements, contracts for the sale, transportation or exchange of oil and natural gas, unitization agreements, pooling agreements, area of mutual interests agreements, production sharing agreements or other similar or customary agreements, transactions, properties, interests or arrangements, and Investments and expenditures in connection therewith or pursuant thereto, in each case, made or entered into the ordinary course of the business described in clauses (1) and (2) of the definition of "Permitted Business" excluding, however, investments in corporations; (14) any Investments in prepaid expenses, negotiable instruments held for collection and lease, utility, worker's compensation, performance and other similar deposits and prepaid expenses made in the ordinary course of business; and (15) Investments pursuant to agreements and obligations of Tesoro and any Restricted Subsidiary in effect on the Issue Date. "Permitted Liens" means: (1) Liens on Credit Facility Collateral of Tesoro and any Guarantor (other than a Pipeline Subsidiary) securing the Credit Facility Obligations; (2) Liens created pursuant to the security documents securing, equally and ratably, the notes and the Term Loans, having an aggregate principal amount at any one time outstanding not to exceed $725 million, together with all other Secured Obligations; 100 (3) Liens (not securing Obligations under a Credit Facility) in favor of Tesoro or the Guarantors; (4) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (7) of the second paragraph of the covenant described above under the caption "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock" covering only the assets acquired with such Indebtedness; (5) Liens existing on the Issue Date; (6) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings diligently pursued, provided that any reserve or other appropriate provision as is required in conformity with GAAP has been made therefore; (7) Liens on the Marine Services Business; (8) Liens on the Retail Properties; (9) carriers', warehousemen's, mechanics', materialmen's, repairman's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 30 days or that are being contested in good faith by appropriate proceedings; (10) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation; (11) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (12) easements, rights of way, restrictions and other similar encumbrances incurred in the ordinary course of business that, in the aggregate, do not materially interfere with the ordinary conduct of the business of Tesoro or any of its Subsidiaries; (13) any interest or title of a lessor under any lease entered into by Tesoro or any of its Subsidiaries in the ordinary course of its business and covering only the assets so leased; (14) any Lien securing Indebtedness, neither assumed nor guaranteed by Tesoro or any of its Subsidiaries nor on which it customarily pays interest, existing upon real estate or rights in or relating to real estate acquired by Tesoro for substation, metering station, pump station, storage, gathering line, transmission line, transportation line, distribution line or for right-of-way purposes, any Liens reserved in leases for rent and for compliance with the terms of the leases in the case of leasehold estates, to the extent that any such Lien referred to in this clause (14) does not materially impair the use of the property covered by such Lien for the purposes of which such property is held by Tesoro or any of its Subsidiaries; (15) inchoate Liens arising under ERISA; (16) any obligations or duties affecting any of the property of Tesoro or its Subsidiaries to any municipality or public authority with respect to any franchise, grant, license or permit which do not materially impair the use of such property for the purposes for which it is held; (17) defects, irregularities and deficiencies in title of any rights of way or other property of Tesoro or any of its Subsidiaries which, in the aggregate, do not materially impair the use of such rights of way or other property for the purposes for which such rights of way and other property are held by Tesoro or any of its Subsidiaries and defects, irregularities and deficiencies in title to any property of Tesoro or any of its Subsidiaries, which defects, irregularities or deficiencies have been cured by possession under applicable statutes of limitation; (18) Liens in favor of collecting or payor banks having a right of setoff, revocation, refund or chargeback with respect to money or instruments of Tesoro or any of its Subsidiaries on deposit with or in possession of such bank; 101 (19) Liens on cash or cash equivalents to secure obligations of Tesoro and its Subsidiaries in respect of Commodity Hedging Agreements and Financial Hedging Agreements, in each case entered into in the ordinary course of business and not for speculative purposes, and Liens with respect to hedging accounts maintained with dealers of NYMEX or similar contracts which require the maintenance of cash margin account balances; and (20) Liens incurred in the ordinary course of business of Tesoro or any Subsidiary of Tesoro with respect to obligations that do not exceed $5.0 million at any one time outstanding. "Permitted Prior Liens" means (a) Liens described in clauses (4), (5), (12), (13), (17) or (18) of the definition of "Permitted Liens" and (b) Liens that arise by operation of law and are not voluntarily granted, to the extent entitled by law to priority over the security interests created by the security documents. "Permitted Refinancing Indebtedness" means any Indebtedness of Tesoro or any of its Restricted Subsidiaries, or portion of such Indebtedness, issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of Tesoro or any of its Restricted Subsidiaries (other than intercompany Indebtedness), including Indebtedness that extends, refinances, renews, replaces, defeases or refunds Permitted Refinancing Indebtedness, provided that: (1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus accrued and unpaid interest on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus fees and expenses incurred in connection therewith, including any premium or defeasance cost); (2) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the notes on terms at least as favorable to the holders of notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (4) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is secured, the Liens securing such Permitted Refinancing Indebtedness (a) are not materially less favorable to the holders of the notes and are not materially more favorable to the lienholders with respect to such Liens than the Liens in respect of the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded and (b) do not extend to or cover any property or assets of Tesoro or any of its Subsidiaries not securing the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded; and (5) such Indebtedness is incurred either by Tesoro or a Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Person" means any individual, corporation, partnership, joint venture, association, joint stock company, trust, limited liability company, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Pipeline Subsidiary" means (i) each of Kenai Pipe Line Company, Tesoro Alaska Pipeline Company and Tesoro High Plains Pipeline Company, and (ii) each other Restricted Subsidiary of Tesoro which acquires any of the Pipelines after the Issue Date. "Qualified Credit Facility" means the Senior Credit Facility or any other Credit Facility: (1) which is governed by an agreement that provides for the benefit of the holders of the notes, the trustee, the collateral agent, the holders of the Term Loans and the Term Loan Administrative Agent, as third party beneficiaries thereof, unless and until the notes and Term Loans are paid in full and the Collateral Agent's Liens are released, that (a) the Credit Facility Agent shall be bound by and shall 102 perform each of the obligations of the Credit Facility Agent as set forth in the indenture and (b) neither the Credit Facility Agent nor any lender or other holder of Credit Facility Obligations will ever accept, enforce or claim or retain any benefit of (i) any guarantee of any Credit Facility Obligation from any subsidiary that was a Pipeline Subsidiary on the date of such agreement, (ii) any Lien upon any assets of any such Pipeline Subsidiary as security for any Credit Facility Obligations or (iii) any consensual security interest in any Capital Stock of any Subsidiary of Tesoro; and (2) in respect of which such Credit Facility Agent has delivered to the trustee, the Term Loan Administrative Agent and the collateral agent: (a) written notice (that has not been withdrawn by such agent or representative) certifying that such Credit Facility is a Qualified Credit Facility and that such Credit Facility Agent is bound by and will perform the obligations of the Credit Facility Agent; and (b) if any other Credit Facility Agent previously delivered such notice and certification in respect of any predecessor Credit Facility, an instrument reasonably satisfactory to the collateral agent signed by such previous Credit Facility Agent withdrawing the previous notice and certification and forever renouncing and discharging all rights and benefits under the indenture that otherwise would have been enforceable by such previous Credit Facility Agent or the holders of Obligations under such previous Credit Facility, in each case, as amended, modified, renewed, restated, refunded, replaced or refinanced (in each case, without limitation as to amount), in whole or in part, from time to time. "Rating Agency" means each of S&P and Moody's, or if S&P or Moody's or both shall not make a rating on the notes publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, selected by Tesoro (as certified by a resolution of the Board of Directors) which shall be substituted for S&P or Moody's, or both, as the case may be. "Refinery Assets" means property, plant and equipment used or to be used in the business of gathering, wholesale marketing, refining, distilling, wholesale distributing, terminalling, treating, processing, storing or transporting oil, gas or other hydrocarbons or related products, and other assets that are reasonably related thereto. "Regulation S" means Regulation S promulgated under the Securities Act. "Representative" means the administrative agent under the Senior Credit Facility or its successor thereunder. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Subsidiary" of a Person means any Subsidiary of the referenced Person that is not an Unrestricted Subsidiary or a direct or indirect Subsidiary of an Unrestricted Subsidiary; provided that, on the Issue Date, all Subsidiaries of Tesoro were Restricted Subsidiaries of Tesoro. "Retail Properties" means all assets directly related to the retail sale of gasoline and diesel fuel in retail markets in the mid-continental and western United States (including Alaska and Hawaii), including, without limitation, all related gas stations, convenience stores, merchandise items, tow trucks, auto maintenance facilities, oil change facilities, and car washes; provided that such assets will not include any assets relating to the sale of petroleum products in bulk and wholesale markets. "S&P" means Standard & Poor's Ratings Group, Inc., or any successor to the rating agency business thereof. "Sale of Collateral" means any Asset Sale to the extent involving assets, rights or other property that constitutes Collateral under the security documents. "Secured Obligations" means, collectively, the Note Obligations and the Term Loan Obligations. "security documents" means the collateral agency agreement and one or more security agreements, pledge agreements, collateral assignments, mortgages, collateral agency agreements, deed of trust or other 103 grants or transfers for security executed and delivered by Tesoro or any other Obligor creating (or purporting to create) a Lien upon Collateral in favor of the collateral agent equally and ratably for the benefit of the holders of the Secured Obligations, in each case, as amended, modified, renewed, restated or replaced, in whole or in part, from time to time, in accordance with its terms. "Senior Credit Facility" means those certain senior secured credit facilities of Tesoro available pursuant to the Three-Year Credit Agreement, by and among Tesoro, Bank One, NA, as Administrative Agent, Banc One Capital Markets, Inc., as Sole Lead Arranger and Sole Bookrunner, Goldman Credit Partners L.P., as Syndication Agent, and certain other financials institutions from time to time parties thereto, as lenders, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith and, in each case, as amended, modified, renewed, restated, refunded, replaced or refinanced (in each case, without limitation as to amount), in whole or in part, from time to time and any agreements (and related documents) governing Indebtedness incurred to refund or refinance credit extensions and commitments then outstanding or permitted to be outstanding under such Senior Credit Facility, whether by the same or any other lender or group of lenders. Tesoro shall promptly notify the trustee of any such refunding or refinancing of the existing Senior Credit Facility. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the Issue Date. "Stated Maturity" means, with respect to any installment of interest or principal, or sinking fund or mandatory redemption of principal, on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid or made, as applicable, in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "Subsidiary" means, with respect to any Person, (1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person; and (2) any partnership (a) the sole general partner or the managing general partner of which is such Person or an entity described in clause (1) and related to such Person or (b) the only general partners of which are such Person or of one or more entities described in clause (1) and related to such Person (or any combination thereof). "Subsidiary Guarantee" means the guarantee of the notes and the exchange notes by each of the Guarantors pursuant to the indenture and in the form of guarantee endorsed on the form of note attached as Exhibit A-1 or A-2 to the indenture and any additional guarantee of the notes and the exchange notes to be executed by any Subsidiary of Tesoro pursuant to the covenant described above under the caption "-- Certain Covenants -- Additional Subsidiary Guarantees and Liens". "Term Loan Administrative Agent" means Goldman Sachs Credit Partners L.P., as administrative agent under the Term Loan Agreement, together with its successors in such capacity. "Term Loan Agreement" means that certain Credit and Guaranty Agreement dated the Issue Date among Tesoro, the Guarantors and the Term Loan Administrative Agent, relating to $200 million in aggregate principal amount of Term Loans, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, as amended, modified, renewed, restated or replaced, in whole or in part, from time to time. "Term Loan Documents" means the Term Loan Agreement and the security documents. "Term Loan Obligations" means the Term Loans (including additional Term Loans) and all other Obligations under the Term Loan Agreement or the security documents. 104 "Term Loans" means the principal of and interest and premium (if any) on Indebtedness of Tesoro incurred under the Term Loan Agreement. "Unrestricted Subsidiary" means: (1) any Subsidiary of Tesoro (including any newly acquired or newly formed Subsidiary of Tesoro) that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a resolution of the Board of Directors as certified in an officers' certificate delivered to the trustee; and (2) each Subsidiary of an Unrestricted Subsidiary, whenever it shall become such a Subsidiary. The Board of Directors may designate any Subsidiary of Tesoro to become an Unrestricted Subsidiary if it: (1) has no Indebtedness other than Non-Recourse Indebtedness; (2) is not party to any agreement, contract, arrangement or understanding with Tesoro or any Restricted Subsidiary of Tesoro unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to Tesoro or such Restricted Subsidiary than those that might be obtained, in light of all the circumstances, at the time from Persons who are not Affiliates of Tesoro; (3) is a Person with respect to which neither Tesoro nor any of its Restricted Subsidiaries has any direct or indirect obligation (x) to subscribe for additional Equity Interests or (y) to maintain or preserve such Persons' financial condition or to cause such Persons to achieve any specified levels of operating results; (4) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of Tesoro or any of its Restricted Subsidiaries; (5) does not own any Capital Stock of or own or hold any Lien on any property of, Tesoro or any Restricted Subsidiary of Tesoro; and (6) would constitute an Investment which Tesoro could make in compliance with the covenant under the caption "-- Certain Covenants -- Restricted Payments". Notwithstanding the foregoing, if, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred as of such date. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (2) the then outstanding principal amount of such Indebtedness. 105 CERTAIN FEDERAL INCOME TAX CONSIDERATIONS The following is a summary of (1) certain United States federal income tax considerations relevant to persons holding the outstanding 8% notes that acquired the outstanding 8% notes in the initial offering at the initial issue price and are U.S. Holders (as defined below), and (2) certain United States federal income and estate tax considerations relevant to persons holding the outstanding 8% notes that acquired the notes in the initial offering at the initial issue price and are Non-U.S. Holders (as defined below). This summary is based on currently existing provisions of the Internal Revenue Code of 1986, as amended (the "Code"), existing and temporary Treasury regulations promulgated thereunder, and administrative and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect, or different interpretations. No advance tax ruling has been sought or obtained from the Internal Revenue Service regarding the U.S. federal income or estate tax consequences of any of the transactions described herein. If the Internal Revenue Service contests a conclusion set forth herein, no assurance can be given that a holder of the notes would ultimately prevail in a final determination by a court. This discussion does not address the tax consequences to subsequent holders of notes and is limited to holders who hold the notes as capital assets, within the meaning of Section 1221 of the Code. Moreover, this discussion is for general information only and does not address all of the tax consequences that may be relevant to particular holders in light of their personal circumstances or to certain types of holders (such as certain financial institutions, insurance companies, tax-exempt entities, dealers in securities or currencies, persons holding notes as part of a hedging, integrated, conversion or constructive sale transaction or a straddle, traders in securities that elect to use a mark-to market method of accounting for their securities holdings, persons liable for alternative minimum tax, certain U.S. expatriates or holders of notes whose "functional currency" is not the U.S. dollar) or the effect of any applicable state, local or foreign tax law. This discussion does not address the tax consequences to persons who hold the notes through a partnership or similar pass-through entity. If a partnership holds the notes, the tax treatment of a partner will generally depend on the status of the partner and the tax treatment of the partnership. A partner of a partnership holding the notes should consult its tax advisors. YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO YOU OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING THE APPLICABILITY OF ANY FEDERAL TAX LAWS OR ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND ANY CHANGES (OR PROPOSED CHANGES) IN APPLICABLE TAX LAWS OR INTERPRETATIONS THEREOF. UNITED STATES FEDERAL INCOME TAXATION OF U.S. HOLDERS As used herein, the term "U.S. Holder" means a beneficial owner of a note that is, for United States federal income tax purposes (a) an individual who is a citizen or resident of the United States (including certain former citizens and former long-term residents), (b) a corporation or other entity (other than a partnership) created or organized in or under the laws of the United States or any political subdivision thereof, (c) an estate, the income of which is subject to United States federal income taxation regardless of its source, or (d) a trust if (1) a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust, or (2) the trust has a valid election in effect under applicable Treasury regulations to be treated as a United States person. A "Non-U.S. Holder" is a beneficial owner of notes that is not a U.S. Holder. PAYMENT OF INTEREST ON NOTES AND ORIGINAL ISSUE DISCOUNT In general, stated interest paid or payable on a note will be taxable to a U.S. Holder as ordinary interest income from domestic sources, generally at the time it is received or accrued, in accordance with such U.S. Holder's regular method of accounting for United States federal income tax purposes. The notes were issued with original issue discount ("OID") for United States federal income tax purposes. Consequently, persons holding the notes are required to include that OID in income as ordinary interest as it accrues under a constant yield method in advance of receipt of cash payments attributable to that 106 income. In general, a note will be treated as issued with OID under the Code if the excess of its "stated redemption price at maturity" over its "issue price" equals or exceeds 0.25% of the stated redemption price at maturity multiplied by the number of complete years to the maturity date of the note. The amount of OID on a note will be equal to such excess. The stated redemption price at maturity of a note is its face amount. The issue price of a note is the first price at which a substantial amount of the notes are sold to the public for cash. In general, persons holding the notes are required to include OID in income for any period in an amount equal to the sum of the accrued OID allocated to each day in that period, regardless of payments made on the notes during that period. Consequently, persons holding the notes may be required to include OID in income prior to the receipt of payments representing that income. Under Section 1272(a)(6) of the Code, special provisions apply to debt instruments on which payments may be accelerated due to prepayments of other obligations securing those debt instruments. However, no regulations have been issued interpreting those provisions, and the manner in which those provisions would apply to the notes, including the accrual of OID, is unclear. Our failure to consummate the Registered Exchange Offer or to file or cause to be declared effective the shelf registration statement as described under "Description of the Exchange Notes -- Registration Rights; Special Interest" will cause a U.S. Holder to recognize as ordinary income the additional interest payable as a result of such failure when that amount is accrued or paid, in accordance with such U.S. Holder's regular method of accounting. According to United States Treasury regulations, the possibility of a change in the interest rate will not affect the amount of interest income recognized by a U.S. Holder (or the timing of such recognition) if the likelihood of the change, as of the date the notes are issued, is remote. We believe that the likelihood of a change in the interest rate on the notes is remote and do not intend to treat the possibility of a change in the interest rate as affecting the yield to maturity of any note. In certain circumstances, as described under "Description of the Exchange Notes -- Repurchase at the Option of Holders; Change of Control" we will become obligated to make payments on the notes in excess of the stated interest and principal. According to United States Treasury regulations, the possibility that any such additional payments will be made will not affect the amount of interest income recognized by a U.S. Holder (or the timing of such recognition) if the likelihood that such payments will be made, as of the date the notes are issued, is remote. We believe that the likelihood that we will be obligated to make any such payments is remote and therefore we do not intend to treat the potential payment of such additional amounts as affecting the yield to maturity on any note. SALE, EXCHANGE OR RETIREMENT OF THE NOTES Upon the sale, exchange, redemption, retirement at maturity or other disposition of a note, the U.S. Holder generally will recognize taxable gain or loss equal to the difference between the sum of cash plus the fair market value of all other property received on such disposition (except to the extent such cash or property is attributable to accrued but unpaid stated interest, which will be taxable as ordinary income) and such U.S. Holder's adjusted tax basis in the note. A U.S. Holder's adjusted tax basis in a note generally will equal the cost of the note to such holder, increased by the OID previously included in income by the holder with respect to the note, and less any payments of principal or OID received by such U.S. Holder. Gain or loss recognized by a U.S. Holder on the disposition of a note generally will be capital gain or loss and will be long-term capital gain or loss if, at the time of such disposition, the U.S. Holder's holding period for the note is more than one year. Long-term capital gains of individuals generally may be subject to tax at a lower tax rate. The deduction of capital losses is subject to certain limitations. U.S. Holders of notes should consult their tax advisors regarding the treatment of capital gains and losses. The exchange of a note by a U.S. Holder for an exchange note pursuant to the Registered Exchange Offer should not constitute a taxable exchange. Accordingly, there should be no United States federal income tax consequences to holders who exchange notes for exchange notes pursuant to the Exchange Offer Registration Statement, and any such holder should have the same adjusted tax basis and holding period in the exchange notes as such holder had in the notes immediately before the exchange. Under existing Treasury regulations relating to modifications and exchanges of debt instruments, any increase in the interest rate of the 107 notes resulting from the Registered Exchange Offer not being consummated, or a shelf registration statement not being declared effective, would not be treated as a taxable exchange, as such change in interest rate would occur pursuant to the original terms of the notes. BACKUP WITHHOLDING AND INFORMATION REPORTING Backup withholding and information reporting requirements may apply to certain payments ("reportable payments") of principal, premium, if any, and interest (including OID) on a note to a U.S. Holder, and to proceeds paid to a U.S. Holder from the sale or redemption of a note before maturity. We, our agent, a broker, the Trustee or any paying agent, as the case may be, will be required to deduct and withhold the applicable tax from any reportable payment that is subject to backup withholding tax, if, among other things, a U.S. Holder fails to furnish his taxpayer identification number (social security or employer identification number), certify that such number is correct, certify that such holder is not subject to backup withholding or otherwise comply with the applicable requirements of the backup withholding rules. Certain holders, including all corporations and financial institutions, are not subject to backup withholding and reporting requirements. Any amounts withheld under the backup withholding rules from a reportable payment to a U.S. Holder will be allowed as a credit against such U.S. Holder's United States federal income tax and may entitle the U.S. Holder to a refund, provided that the required information is furnished to the Internal Revenue Service. The amount of any reportable payments, including interest and OID, made to the record U.S. Holders of notes (other than to holders that are exempt recipients) and the amount of tax withheld, if any, with respect to such payments will be reported to such U.S. Holders and to the Internal Revenue Service for each calendar year. UNITED STATES FEDERAL INCOME TAXATION OF NON-U.S. HOLDERS The following discussion is a summary of certain United States federal income tax and estate tax consequences to a Non-U.S. Holder that holds a note. PAYMENT OF INTEREST ON NOTES In general, no United States federal withholding tax under Sections 1441 and 1442 of the Code will be imposed with respect to the payment by us or our paying agent of principal, premium, if any, or interest (including OID) on a note owned by an Non-U.S. Holder (the "Portfolio Interest Exception"), provided that (1) the Non-U.S. Holder or the Financial Institution holding the note on behalf of the Non-U.S. Holder provides a statement, which may be provided on IRS Form W-8BEN, IRS Form W-8EXP, or IRS Form W-8IMY, as applicable (an "Owner's Statement"), to us, our paying agent or the person who would otherwise be required to withhold tax, certifying, under penalties of perjury, that such Non-U.S. Holder is not a United States person and providing the name and address of the Non-U.S. Holder, (2) such interest is treated as not effectively connected with the Non-U.S. Holder's United States trade or business, (3) such interest payments are not made to a Non-U.S. Holder within a foreign country that the Internal Revenue Service has listed on a list of countries having provisions inadequate to prevent United States tax evasion, (4) interest payable with respect to the notes is not deemed contingent interest within the meaning of the portfolio debt provisions, (5) such Non-U.S. Holder does not actually or constructively own 10% or more of the total combined voting power of all classes of our stock entitled to vote, (6) such Non-U.S. Holder is not a controlled foreign corporation within the meaning of Section 957 of the Code that is related to us within the meaning of Section 864(d)(4) of the Code, and (7) the beneficial owner is not a bank whose receipt of interest on a note is described in Section 881(c)(3)(A) of the Code. As used herein, the term "Financial Institution" means a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business that holds a note on behalf of the owner of the note. A Non-U.S. Holder who does not qualify for the Portfolio Interest Exception would, under current law, generally be subject to United States federal withholding tax at a flat rate of 30% (or lower applicable treaty rate) on interest payments (including payments of OID). However, a Non-U.S. Holder will not be subject to the 30% withholding tax if such Non-U.S. Holder provides us with a properly executed (1) IRS 108 Form W-8BEN (or other applicable form) claiming an exemption from or reduction in withholding under the benefit of a tax treaty, or (2) IRS Form W-8ECI (or substitute form) stating that the interest paid on the notes is not subject to withholding tax because it is effectively connected with the beneficial owner's conduct of a trade or business in the United States. The 30% United States federal withholding tax will generally not apply to any gain that a Non-U.S. Holder recognizes upon the redemption, retirement, sale, exchange or other disposition of a note. SALE, EXCHANGE OR RETIREMENT OF THE NOTES In general, gain recognized by a Non-U.S. Holder upon the redemption, retirement, sale, exchange or other disposition of a note will not be subject to United States federal income tax unless such gain or loss is effectively connected with a trade or business in the United States of such Non-U.S. Holder (and, if an income tax treaty applies, such gain is attributable to a U.S. "permanent establishment" maintained by the Non-U.S. Holder). However, a Non-U.S. Holder may be subject to United States federal income tax at a flat rate of 30% (unless a lower applicable treaty rate applies) on any such gain if the Non-U.S. Holder is an individual deemed to be present in the United States for 183 days or more during the taxable year of the disposition of the note and certain other requirements are met. If a Non-U.S. Holder is engaged in a trade or business in the United States and if interest or gain on a note is effectively connected with the conduct of such trade or business (and, if an income tax treaty applies, such interest or gain is attributable to a U.S. "permanent establishment" maintained by the Non-U.S. Holder), the Non-U.S. Holder, although exempt from United States federal withholding tax as discussed above, will be subject to United States federal income tax on such interest on a net income basis in the same manner as if the holder were a U.S. Holder. In addition, if such holder is a foreign corporation, it may be subject to a branch profits tax equal to 30%, or applicable lower tax treaty rate, of its effectively connected earnings and profits for the taxable year, subject to adjustments. For this purpose, interest and gain on a note will be included in such foreign corporation's effectively connected earnings and profits. The exchange of a note by a Non-U.S. Holder for an exchange note pursuant to the Registered Exchange Offer should not constitute a taxable exchange. Accordingly, there should be no United States federal income tax consequences to holders who exchange notes for exchange notes pursuant to the Exchange Offer Registration Statement, and any such holder should have the same adjusted tax basis and holding period in the exchange notes as such holder had in the notes immediately before the exchange. Under existing Treasury regulations relating to modifications and exchanges of debt instruments, any increase in the interest rate of the notes resulting from the Registered Exchange Offer not being consummated, or a shelf registration statement not being declared effective, would not be treated as a taxable exchange, as such change in interest rate would occur pursuant to the original terms of the notes. BACKUP WITHHOLDING AND INFORMATION REPORTING Backup withholding and information reporting requirements generally do not apply to payments of principal and interest (including OID) made by us or a paying agent to a Non-U.S. Holder if the Owner's Statement described above is received, provided that the payor does not have actual knowledge that the holder is a U.S. Holder. If any payments of principal and interest (including OID) are made to the beneficial owner of a note by or through the foreign office of a foreign custodian, foreign nominee, broker (as defined in applicable Treasury regulations), or other foreign agent of such beneficial owner, backup withholding and information reporting also will not apply, assuming the applicable Owner's Statement described above is received (and the payor does not have actual knowledge that the beneficial owner is a United States person) or the beneficial owner otherwise establishes an exemption. Information reporting requirements (but not backup withholding) may apply, however, to a payment by a foreign office of such a custodian, nominee, broker or agent that is (1) a United States person, (2) a foreign person that derives 50% or more of its gross income for certain periods from the conduct of a trade or business in the United States, (3) a foreign partnership in which one or more United States persons, in the aggregate, own more than 50% of the income or capital interests in the partnership or a foreign partnership that is engaged in a trade or business in the United States, or (4) a controlled foreign corporation within the meaning of Section 957 of the Code unless 109 the holder is a Non-U.S. Holder and certain other conditions are met or the holder otherwise establishes an exemption. Payment of principal and interest (including OID) on a note to a Non-U.S. Holder by a United States office of a custodian, nominee or agent, or the payment by the United States office of a broker of the proceeds of sale of a note, will be subject to both backup withholding and information reporting unless the beneficial owner provides the Owner's Statement described above (and the payor does not have actual knowledge that the beneficial owner is a United States person) or otherwise establishes an exemption. FEDERAL ESTATE TAXES Subject to applicable estate tax treaty provisions, notes beneficially owned by an individual Non-U.S. Holder at the time of death will not be included in such Non-U.S. Holder's gross estate for United States federal estate tax purposes provided that (1) such individual Non-U.S. Holder does not actually or constructively own 10% or more of the total combined voting power of all classes of our stock entitled to vote within the meaning of the Code and applicable Treasury regulations and (2) the interest payments with respect to such note would not have been, if received at the time of such individual's death, effectively connected with the conduct of a United States trade or business by such individual Non-U.S. Holder. PLAN OF DISTRIBUTION Each broker-dealer that receives exchange notes for its own account in the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for the outstanding 8% notes where the outstanding 8% notes were acquired as a result of market-making activities or other trading activities. We have agreed that, after the consummation of the exchange offer, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale, if required under applicable securities laws and upon prior written request. We will not receive any proceeds from any sale of exchange notes by broker-dealers. Exchange notes received by broker-dealers for their own account in the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the exchange notes or in a combination of these methods of resale, at market prices prevailing at the time of resale, at prices related to those prevailing market prices or at negotiated prices. Any resale may be made directly to purchasers or to or through brokers-dealers who may receive compensation in the form of commissions or concessions from any broker-dealer or the purchasers of any exchange notes. Any broker-dealer that resells exchange notes that were received by it for its own account in the exchange offer and any broker-dealer that participates in a distribution of the exchange notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any resale of exchange notes and any commission or concessions received by such person may be considered underwriting compensation under the Securities Act. The letter of transmittal states that, by acknowledging that it will be delivering a prospectus, a broker-dealer will not be regarded as admitting that it is an "underwriter", within the meaning of the Securities Act. As required by applicable securities laws, after the consummation of the exchange offer, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such documents in the letter of transmittal. We have agreed to pay all expenses incident to the exchange offer and will indemnify the holders of the outstanding 8% notes, including any broker-dealers, against certain liabilities, including liabilities under the Securities Act. LEGAL MATTERS The validity of the exchange notes will be passed upon for us by Fulbright & Jaworski L.L.P., Houston, Texas. 110 EXPERTS The financial statements incorporated in this prospectus by reference from the Annual Report on Form 10-K for the year ended December 31, 2002 of Tesoro Petroleum Corporation have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report, which is incorporated herein by reference, and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The financial statements as of December 31, 2001 and 2000 and for the year ended December 31, 2001 and the four month period ended December 31, 2000 of the Golden Eagle Refining and Marketing Assets Business included in Tesoro Petroleum Corporation's Current Report on Form 8-K filed on February 25, 2002, as amended by Amendment No. 1 to Tesoro Petroleum Corporation's Current Report on Form 8-K filed on April 22, 2002, incorporated by reference in this prospectus, have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report with respect thereto, and are incorporated herein in reliance upon the authority of such firm as experts in accounting and auditing in giving such report. After reasonable efforts, we have not been able to obtain Arthur Andersen LLP's consent to the incorporation by reference of its audit report dated February 14, 2002 (Note 16 is dated February 20, 2002) into this prospectus. However, Rule 437a under the Securities Act of 1933 permits us to file the registration statement of which this prospectus is a part without Arthur Andersen LLP's written consent. Accordingly, investors will not be able to sue Arthur Andersen LLP pursuant to Section 11(a)(4) of the Securities Act of 1933, and any recovery under that section you may have may be limited as a result of the lack of Arthur Andersen LLP's consent. 111 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- $375,000,000 (TESORO COLOR LOGO) TESORO PETROLEUM CORPORATION 8% SENIOR SECURED NOTES DUE 2008, SERIES B -------------------- PROSPECTUS -------------------- , 2003 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145 of the Delaware General Corporation Law provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement in connection with specified actions, rules, or proceedings, whether civil, criminal, administrative, or investigative (other than action by or in the right of the corporation -- a "derivative action"), if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. A similar standard is applicable in the case of derivative actions, except that indemnification only extends to expenses (including attorneys' fees) incurred in connection with the defense or settlement of such action, and the statute requires court approval before there can be any indemnification where the person seeking indemnification has been found liable to the corporation. The statute provides that it is not exclusive of other indemnification that may be granted by a corporation's charter, by-laws, disinterested director vote, stockholder vote, agreement, or otherwise. Article II, Section 2.9 of the Company's By-laws requires indemnification to the full extent authorized or permitted by the laws of the State of Delaware of any person who is made, or threatened to be made, a party to an action, suit or proceeding (whether civil, criminal, administrative or investigative) by reason of the fact that he, his testator or intestate is or was a director, officer, or employee of the Company or serves or served any other enterprise at the request of the Company. Section 102(b)(7) of the Delaware General Corporation Law permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for (i) any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) payment of unlawful dividends or unlawful stock purchases or redemptions, or (iv) any transaction from which the director derived an improper personal benefit. Article Ninth of the Company's Restated Certificate of Incorporation, as amended, provides that a director will not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Company or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, which concerns unlawful payment of dividends, stock purchases or redemptions or (iv) for any transaction from which the director derived an improper personal benefit. The Company maintains directors' and officers' liability insurance which provides for payment, on behalf of the directors and officers of the Company and its subsidiaries, of certain losses of such persons (other than matters uninsurable under law) arising from claims, including claims arising under the Securities Act, for acts or omissions by such persons while acting as directors or officers of the Company and/or its subsidiaries, as the case may be. The Company has entered into indemnification agreements with its directors and certain of its officers. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES *1.1 Purchase Agreement, dated April 7, 2002, among the Company, Goldman, Sachs & Co. and Banc One Capital Markets, Inc. 2.1 Stock Sale Agreement, dated March 18, 1998, among the Company, BHP Hawaii Inc. and BHP Petroleum Pacific Islands Inc. (incorporated by reference herein to Exhibit 2.1 to Registration Statement No. 333-51789).
II-1 2.2 Stock Sale Agreement, dated May 1, 1998, among Shell Refining Holding Company, Shell Anacortes Refining Company and the Company (incorporated by reference herein to the Company's Quarterly Report on Form 10-Q for the period ended March 31, 1998, File No. 1-3473). 2.3 Stock Purchase Agreement, dated as of October 8, 1999, but effective as of July 1, 1999 among the Company, Tesoro Gas Resources Company, Inc., EEX Operating LLC and EEX Corporation (incorporated by reference herein to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on January 3, 2000, File No. 1-3473). 2.4 First Amendment to Stock Purchase Agreement dated December 16, 1999, but effective as of October 8, 1999, among the Company, Tesoro Gas Resources Company, Inc., EEX Operating LLC and EEX Corporation (incorporated by reference herein to Exhibit 2.2 to the Company's Current Report on Form 8-K filed on January 3, 2000, File No. 1-3473). 2.5 Purchase Agreement dated as of December 17, 1999 among the Company, Tesoro Gas Resources Company, Inc. and EEX Operating LLC (Membership Interests in Tesoro Grande LLC) (incorporated by reference herein to Exhibit 2.3 to the Company's Current Report on Form 8-K filed on January 3, 2000, File No. 1-3473). 2.6 Purchase Agreement dated as of December 17, 1999 among the Company, Tesoro Gas Resources Company, Inc. and EEX Operating LLC (Membership Interests in Tesoro Reserves Company LLC) (incorporated by reference herein to Exhibit 2.4 to the Company's Current Report on Form 8-K filed on January 3, 2000, File No. 1-3473). 2.7 Purchase Agreement dated as of December 17, 1999 among the Company, Tesoro Gas Resources Company, Inc. and EEX Operating LLC (Membership Interests in Tesoro Southeast LLC) (incorporated by reference herein to Exhibit 2.5 to the Company's Current Report on Form 8-K filed on January 3, 2000, File No. 1-3473). 2.8 Stock Purchase Agreement, dated as of November 19, 1999, by and between the Company and BG International Limited (incorporated by reference herein to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on January 13, 2000, File No. 1-3473). 2.9 Asset Purchase Agreement, dated July 16, 2001, by and among the Company, BP Corporation North America Inc. and Amoco Oil Company (incorporated by reference herein to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on September 21, 2001, File No. 1-3473). 2.10 Asset Purchase Agreement, dated July 16, 2001, by and among the Company, BP Corporation North America Inc. and Amoco Oil Company (incorporated by reference herein to Exhibit 2.2 to the Company's Current Report on Form 8-K filed on September 21, 2001, File No. 1-3473). 2.11 Asset Purchase Agreement, dated July 16, 2001, by and among the Company, BP Corporation North America Inc. and BP Pipelines (North America) Inc. (incorporated by reference herein to Exhibit 2.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2001, File No. 1-3473). 2.12 Sale and Purchase Agreement for Golden Eagle Refining and Marketing Assets, dated February 4, 2002, by and among Ultramar Inc. and Tesoro Refining and Marketing Company, including First Amendment dated February 20, 2002 and related Purchaser Parent Guaranty dated February 4, 2002, and Second Amendment dated May 3, 2002 (incorporated by reference herein to Exhibit 2.12 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001, File No. 1-3473, and Exhibit 2.1 to the Company's Current Report on Form 8-K filed on May 9, 2002, File No. 1-3473). 3.1 Restated Certificate of Incorporation of the Company (incorporated by reference herein to Exhibit 3 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, File No. 1-3473). 3.2 By-Laws of the Company, as amended through June 6, 1996 (incorporated by reference herein to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, File No. 1-3473). 3.3 Amendment to Restated Certificate of Incorporation of the Company adding a new Article IX limiting Directors' Liability (incorporated by reference herein to Exhibit 3(b) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, File No. 1-3473).
II-2 3.4 Certificate of Designation Establishing a Series A Participating Preferred Stock, dated as of December 16, 1985 (incorporated by reference herein to Exhibit 3(d) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, File No. 1-3473). 3.5 Certificate of Amendment, dated as of February 9, 1994, to Restated Certificate of Incorporation of the Company amending Article IV, Article V, Article VII and Article VIII (incorporated by reference herein to Exhibit 3(e) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, File No. 1-3473). 3.6 Certificate of Amendment, dated as of August 3, 1998, to Certificate of Incorporation of the Company, amending Article IV, increasing the number of authorized shares of Common Stock from 50,000,000 to 100,000,000 (incorporated by reference herein to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 1998, File No. 1-3473). 3.7 Certificate of Incorporation of Digicomp, Inc. (incorporated by reference herein to Exhibit 3.9 to Registration Statement No. 333-75056). 3.8 Bylaws of Digicomp, Inc., as amended (incorporated by reference herein to Exhibit 3.10 to Registration Statement No. 333-75056). 3.9 Certificate of Incorporation of Far East Maritime Company (incorporated by reference herein to Exhibit 3.11 to Registration Statement No. 333-75056). 3.10 Bylaws of Far East Maritime Company (incorporated by reference herein to Exhibit 3.12 to Registration Statement No. 333-75056). 3.11 Certificate of Incorporation of Gold Star Maritime Company (incorporated by reference herein to Exhibit 3.13 to Registration Statement No. 333-75056). 3.12 Bylaws of Gold Star Maritime Company (incorporated by reference herein to Exhibit 3.14 to Registration Statement No. 333-75056). 3.13 Certificate of Incorporation of Kenai Pipe Line Company (incorporated by reference herein to Exhibit 3.15 to Registration Statement No. 333-75056). 3.14 Bylaws of Kenai Pipe Line Company, as amended (incorporated by reference herein to Exhibit 3.16 to Registration Statement No. 333-75056). 3.15 Articles of Incorporation of Smiley's Super Service, Inc. (incorporated by reference herein to Exhibit 3.17 to Registration Statement No. 333-75056). 3.16 Bylaws of Smiley's Super Service, Inc. (incorporated by reference herein to Exhibit 3.18 to Registration Statement No. 333-75056). 3.17 Certificate of Incorporation of Tesoro Alaska Company, as amended (incorporated by reference herein to Exhibit 3.19 to Registration Statement No. 333-75056). 3.18 Bylaws of Tesoro Alaska Company, as amended (incorporated by reference herein to Exhibit 3.20 to Registration Statement No. 333-75056). 3.19 Certificate of Incorporation of Tesoro Alaska Pipeline Company, as amended (incorporated by reference herein to Exhibit 3.21 to Registration Statement No. 333-75056). 3.20 Bylaws of Tesoro Alaska Pipeline Company, as amended (incorporated by reference herein to Exhibit 3.22 to Registration Statement No. 333-75056). 3.21 Certificate of Incorporation of Tesoro Aviation Company, as amended (incorporated by reference herein to Exhibit 3.23 to Registration Statement No. 333-75056). 3.22 Bylaws of Tesoro Aviation Company (incorporated by reference herein to Exhibit 3.24 to Registration Statement No. 333-75056). 3.23 Certificate of Tesoro Financial Services Holding Company (incorporated by reference herein to Exhibit 3.25 to Registration Statement No. 333-75056). 3.24 Bylaws of Tesoro Financial Services Holding Company (incorporated by reference herein to Exhibit 3.26 to Registration Statement No. 333-75056). 3.25 Certificate of Incorporation of Tesoro Gas Resources Company, Inc. (incorporated by reference herein to Exhibit 3.27 to Registration Statement No. 333-75056). 3.26 Bylaws of Tesoro Gas Resources Company, Inc. (incorporated by reference herein to Exhibit 3.28 to Registration Statement No. 333-75056).
II-3 3.27 Articles of Incorporation of Tesoro Hawaii Corporation, as amended (incorporated by reference herein to Exhibit 3.29 to Registration Statement No. 333-75056). 3.28 Bylaws of Tesoro Hawaii Corporation, as amended (incorporated by reference herein to Exhibit 3.30 to Registration Statement No. 333-75056). 3.29 Certificate of Incorporation of Tesoro High Plains Pipeline Company, as amended (incorporated by reference herein to Exhibit 3.31 to Registration Statement No. 333-75056). 3.30 Bylaws of Tesoro High Plains Pipeline Company (incorporated by reference herein to Exhibit 3.32 to Registration Statement No. 333-75056). 3.31 Certificate of Incorporation of Tesoro Marine Services Holding Company, as amended (incorporated by reference herein to Exhibit 3.33 to Registration Statement No. 333-75056). 3.32 Bylaws of Tesoro Marine Services Holding Company (incorporated by reference herein to Exhibit 3.34 to Registration Statement No. 333-75056). 3.33 Certificate of Formation of Tesoro Marine Services, LLC (formerly Tesoro Marine Services, Inc)(incorporated by reference herein to Exhibit 3.35 to Registration Statement No. 333-75056). 3.34 Limited Liability Company Agreement of Tesoro Marine Services, LLC (incorporated by reference herein to Exhibit 3.36 to Registration Statement No. 333-75056). 3.35 Certificate of Incorporation of Tesoro Maritime Company (incorporated by reference herein to Exhibit 3.37 to Registration Statement No. 333-75056). 3.36 Bylaws of Tesoro Maritime Company (incorporated by reference herein to Exhibit 3.38 to Registration Statement No. 333-75056). 3.37 Articles of Incorporation of Tesoro Northstore Company, as amended (incorporated by reference herein to Exhibit 3.39 to Registration Statement No. 333-75056). 3.38 Bylaws of Tesoro Northstore Company, as amended (incorporated by reference herein to Exhibit 3.40 to Registration Statement No. 333-75056). 3.39 Certificate of Incorporation of Tesoro Petroleum Companies, Inc., as amended (incorporated by reference herein to Exhibit 3.41 to Registration Statement No. 333-75056). 3.40 Bylaws of Tesoro Petroleum Companies, Inc., as amended (incorporated by reference herein to Exhibit 3.9 to Registration Statement No. 333-75056). 3.41 Certificate of Incorporation of Tesoro Refining and Marketing Company (formerly Tesoro West Coast Company), as amended (incorporated by reference herein to Exhibit 3.51 to Registration Statement No. 333-75056). 3.42 Bylaws of Tesoro Refining and Marketing Company (formerly Tesoro West Coast Company), as amended (incorporated by reference herein to Exhibit 3.52 to Registration Statement No. 333-75056). 3.43 Certificate of Incorporation of Tesoro Technology Company, as amended (incorporated by reference herein to Exhibit 3.47 to Registration Statement No. 333-75056). 3.44 Bylaws of Tesoro Technology Company, as amended (incorporated by reference herein to Exhibit 3.48 to Registration Statement No. 333-75056). 3.45 Certificate of Incorporation of Tesoro Trading Company, as amended (incorporated by reference herein to Exhibit 3.1 to Amendment No. 1 to Registration Statement No. 333-84018). 3.46 Bylaws of Tesoro Trading Company (incorporated by reference herein to Exhibit 3.2 to Amendment No. 1 to Registration Statement No. 333-84018). *3.47 Certificate of Formation of Tesoro Wasatch, LLC. *3.48 Limited Liability Company Agreement of Tesoro Wasatch, LLC. 3.49 Certificate of Incorporation of Tesoro Vostock Company, as amended (incorporated by reference herein to Exhibit 3.49 to Registration Statement No. 333-75056). 3.50 Bylaws of Tesoro Vostock Company, as amended (incorporated by reference herein to Exhibit 3.50 to Registration Statement No. 333-75056). 3.51 Certificate of Incorporation of Victory Finance Company, as amended (incorporated by reference herein to Exhibit 3.53 to Registration Statement No. 333-75056).
II-4 3.52 Bylaws of Victory Finance Company (incorporated by reference herein to Exhibit 3.54 to Registration Statement No. 333-75056). 4.1 Indenture, dated as of July 2, 1998, between Tesoro Petroleum Corporation and U.S. Bank Trust National Association, as Trustee (incorporated by reference herein to Exhibit 4.4 to Registration Statement No. 333-59871). 4.2 Form of 9% Senior Subordinated Notes due 2008 and 9% Senior Subordinated Notes due 2008, Series B (incorporated by reference herein to Exhibit 4.5 to Registration Statement No. 333-59871). 4.3 Indenture, dated as of November 6, 2001, between Tesoro Petroleum Corporation and U.S. Bank Trust National Association, as Trustee (incorporated by reference herein to Exhibit 4.8 to Registration Statement No. 333-75056). 4.4 Form of 9 5/8% Senior Subordinated Notes due 2008 and 9 5/8% Senior Subordinated Notes due 2008, Series B (incorporated by reference herein to Exhibit 4.7 to Registration Statement No. 333-92468). 4.5 Indenture, dated as of April 9, 2002, between Tesoro Escrow Corp. and U.S. Bank National Association, as Trustee (incorporated by reference herein to Exhibit 4.9 to Registration Statement No. 333-84018). 4.6 Supplemental Indenture, dated as of May 17, 2002, among Tesoro Escrow Corp., Tesoro Petroleum Corporation, the subsidiary guarantors and U.S. Bank National Association, as Trustee (incorporated by reference herein to Exhibit 4.10 to Registration Statement No. 333-92468). 4.7 Form of 9 5/8% Senior Subordinated Notes due 2012 (incorporated by reference herein to Exhibit 4.10 to Registration Statement No. 333-84018). *4.8 Indenture, dated as of April 17, 2003, among Tesoro Petroleum Corporation, certain subsidiary guarantors and The Bank of New York, as Trustee. *4.9 Form of 8% Senior Secured Notes due 2008 (incorporated by reference herein to Exhibit 4.8). *4.10 Registration Rights Agreement, dated as of April 17, 2003, among Tesoro Petroleum Corporation, certain subsidiary guarantors, and Goldman, Sachs & Co., as representative of the initial purchasers. *4.11 Credit and Guaranty Agreement related to Senior Secured Term Loans Due 2008, dated as of April 17, 2003, among Tesoro Petroleum Corporation, certain subsidiary guarantors, Goldman Sachs Credit Partners L.P., as Administrative Agent, and Goldman Sachs Credit Partners L.P., as Sole Lead Arranger, Sole Bookrunner and Syndication Agent. *4.12 Pledge and Security Agreement related to Senior Secured Term Loans Due 2008 and 8% Senior Secured Notes due 2008, dated as of April 17, 2003, among Tesoro Petroleum Corporation, certain subsidiary guarantors and Wilmington Trust Company, as Collateral Agent. *4.13 Collateral Agency Agreement related to Senior Secured Term Loans Due 2008 and 8% Senior Secured Notes due 2008, dated as of April 17, 2003, among Tesoro Petroleum Corporation, certain subsidiary guarantors, Goldman Sachs Credit Partners L.P., The Bank of New York Trust Company and Wilmington Trust Company. **4.14 Control Agreement related to Senior Secured Term Loans Due 2008 and 8% Senior Secured Notes due 2008, dated as of , among Tesoro Petroleum Corporation, Wilmington Trust Company, as Collateral Agent, and Frost Bank, as Depositary Agent. *5.1 Opinion of Fulbright & Jaworski L.L.P. 10.1 $100 million Promissory Note, dated as of May 17, 2002, payable by the Company to Ultramar Inc. (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 24, 2002, File No. 1-3473). 10.2 $50 million Promissory Note, dated as of May 17, 2002, payable by the Company to Ultramar Inc. (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on May 24, 2002, File No. 1-3473). +10.3 The Company's Amended Executive Security Plan, as amended through November 13, 1989, and Funded Executive Security Plan, as amended through February 28, 1990, for executive officers and key personnel (incorporated by reference herein to Exhibit 10(f) to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1990, File No. 1-3473).
II-5 +10.4 Sixth Amendment to the Company's Amended Executive Security Plan and Seventh Amendment to the Company's Funded Executive Security Plan, both dated effective March 6, 1991 (incorporated by reference herein to Exhibit 10(g) to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1991, File No. 1-3473). +10.5 Seventh Amendment to the Company's Amended Executive Security Plan and Eighth Amendment to the Company's Funded Executive Security Plan, both dated effective December 8, 1994 (incorporated by reference herein to Exhibit 10(f) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, File No. 1-3473). +10.6 Eighth Amendment to the Company's Amended Executive Security Plan and Ninth Amendment to the Company's Funded Executive Security Plan, both dated effective June 6, 1996 (incorporated by reference herein to Exhibit 10.5 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, File No. 1-3473). +10.7 Ninth Amendment to the Company's Amended Executive Security Plan and Tenth Amendment to the Company's Funded Executive Security Plan, both dated effective October 1, 1998 (incorporated by reference herein to Exhibit 10.6 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, File No. 1-3473). +10.8 Amended and Restated Employment Agreement between the Company and Bruce A. Smith dated November 1, 1997 (incorporated by reference therein to Exhibit 10.4 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, File No. 1-3473). +10.9 First Amendment dated October 28, 1998 to Amended and Restated Employment Agreement between the Company and Bruce A. Smith dated November 1, 1997 (incorporated by reference herein to Exhibit 10.8 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, File No. 1-3473). +10.10 Amended and Restated Employment Agreement between the Company and William T. Van Kleef dated as of October 28, 1998 (incorporated by reference herein to Exhibit 10.9 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, File No. 1-3473). +10.11 Amended and Restated Employment Agreement between the Company and James C. Reed, Jr. dated as of October 28, 1998 (incorporated by reference herein to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, File No. 1-3473). +10.12 Management Stability Agreement between the Company and Thomas E. Reardon dated November 6, 2002 (incorporated by reference herein to Exhibit 10.16 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-3473). +10.13 Management Stability Agreement between the Company and Donald A. Nyberg dated December 12, 1996 (incorporated by reference herein to Exhibit 10.7 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, File No. 1-3473). +10.14 Management Stability Agreement between the Company and Susan A. Lerette dated November 6, 2002 (incorporated by reference herein to Exhibit 10.19 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-3473). +10.15 Management Stability Agreement between the Company and Stephen L. Wormington dated November 6, 2002 (incorporated by reference herein to Exhibit 10.20 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-3473). +10.16 Management Stability Agreement between the Company and Gregory A. Wright dated November 6, 2002 (incorporated by reference herein to Exhibit 10.21 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-3473). +10.17 Management Stability Agreement between the Company and W. Eugene Burden dated November 6, 2002 (incorporated by reference herein to Exhibit 10.23 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-3473). +10.18 Management Stability Agreement between the Company and Everett D. Lewis dated November 6, 2002 (incorporated by reference herein to Exhibit 10.24 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-3473). +10.19 Management Stability Agreement between the Company and James L. Taylor dated November 6, 2002 (incorporated by reference herein to Exhibit 10.25 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-3473).
II-6 +10.20 Management Stability Agreement between the Company and Daniel J. Porter dated September 6, 2001 (incorporated by reference herein to Exhibit 10.25 to Registration Statement No. 333-75056). +10.21 Management Stability Agreement between the Company and Rick D. Weyen dated September 6, 2001 (incorporated by reference herein to Exhibit 10.26 to Registration Statement No. 333-75056). +10.22 Management Stability Agreement between the Company and Otto C. Schwethelm dated November 6, 2002 (incorporated by reference herein to Exhibit 10.28 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-3473). +10.23 Management Stability Agreement between the Company and Rodney S. Cason dated November 6, 2002 (incorporated by reference herein to Exhibit 10.29 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-3473). +10.24 Management Stability Agreement between the Company and Joseph M. Monroe dated November 6, 2002 (incorporated by reference herein to Exhibit 10.30 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-3473). +10.25 Management Stability Agreement between the Company and Alan R. Anderson dated November 6, 2002 (incorporated by reference herein to Exhibit 10.31 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-3473). +10.26 Management Stability Agreement between the Company and J. William Haywood dated November 6, 2002 (incorporated by reference herein to Exhibit 10.32 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-3473). +10.27 Management Stability Agreement between the Company and G. Scott Spendlove dated January 24, 2002 (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, 2002, File No. 1-3473.) +10.28 The Company's Amended Incentive Stock Plan of 1982, as amended through February 24, 1988 (incorporated by reference herein to Exhibit 10(t) to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1988, File No. 1-3473). +10.29 Resolution approved by the Company's stockholders on April 30, 1992 extending the term of the Company's Amended Incentive Stock Plan of 1982 to February 24, 1994 (incorporated by reference herein to Exhibit 10(o) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, File No. 1-3473). +10.30 Copy of the Company's Key Employee Stock Option Plan dated November 12, 1999 (incorporated by reference herein to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2002, File No. 1-3473.) +10.31 Copy of the Company's Amended and Restated Executive Long-Term Incentive Plan, as amended through May 25, 2000 (incorporated by reference herein to Exhibit 99.1 to the Company's Registration Statement No. 333-39070 filed on Form S-8). +10.32 Amendment to the Company's Amended and Restated Executive Long-Term Incentive Plan effective as of June 20, 2002 (incorporated by reference herein to Exhibit 10.31 to the Company's Registration Statement No. 333-92468). *10.33 Second Amendment to the Company's Amended and Restated Executive Long-Term Incentive Plan effective as of May 1, 2003. +10.34 Copy of the Company's Non-Employee Director Retirement Plan dated December 8, 1994 (incorporated by reference herein to Exhibit 10(t) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, File No. 1-3473). +10.35 Amended and Restated 1995 Non-Employee Director Stock Option Plan, as amended through March 15, 2000 (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, 2002, File No. 1-3473.) +10.36 Amendment to the Company's Amended and Restated 1995 Non-Employee Director Stock Option Plan (incorporated by reference herein to Exhibit 10.40 to the Company's Registration Statement No. 333-92468). +10.37 Copy of the Company's Board of Directors Deferred Compensation Plan dated February 23, 1995 (incorporated by reference herein to Exhibit 10(u) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, File No. 1-3473).
II-7 +10.38 Copy of the Company's Board of Directors Deferred Compensation Trust dated February 23, 1995 (incorporated by reference herein to Exhibit 10(v) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, File No. 1-3473). +10.39 Copy of the Company's Board of Directors Deferred Phantom Stock Plan (incorporated by reference herein to Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1997, File No. 1-3473). +10.40 Phantom Stock Option Agreement between the Company and Bruce A. Smith dated effective October 29, 1997 (incorporated by reference herein to Exhibit 10.20 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, File No. 1-3473). +10.41 Form of Indemnification Agreement between the Company and its officers and directors (incorporated by reference herein to Exhibit B to the Company's Proxy Statement for the Annual Meeting of Stockholders held on February 25, 1987, File No. 1-3473). 10.42 Letter dated May 5, 2002 from the Company to the State of California Department of Justice, Office of Attorney General (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on May 24, 2002, File No. 1-3473; portions of this document have been omitted pursuant to a request for confidential treatment). **10.43 $650,000,000 Credit Agreement, dated as of , among the Company, Goldman Sachs Credit Partners L.P. (the syndication agent), Bank One, NA (the administrative agent) and a syndicate of banks, financial institutions and other entities. **10.44 Security Agreement dated as of , by and between the company, certain of its subsidiary parties thereto and Bank One NA as Agent. *12.1 Statement of Computation of Ratio of Earnings to Fixed Charges. 21.1 Subsidiaries of the Company (incorporated by reference herein to Exhibit 21.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-3473). *23.1 Consent of Deloitte & Touche LLP. *23.3 Consent of Fulbright & Jaworski L.L.P. (included in its opinion filed as Exhibit 5.1). *24.1 Powers of Attorney of certain officers and directors of Tesoro Petroleum Corporation and other Registrants (included on the signature pages hereof). *25.1 Form T-1, Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York. *99.1 Form of Letter of Transmittal and Consent. *99.2 Form of Notice of Guaranteed Delivery. *99.3 Form of Letter from Tesoro Petroleum Corporation to Registered Holders and Depository Trust Company Participants. *99.4 Form of Instructions from Beneficial Owners to Registered Holders and Depository Trust Company Participants. *99.5 Form of Letter to Clients.
- --------------- * Filed herewith. ** To be filed by Amendment. + Identifies management contracts or compensatory plans or arrangements. As permitted by Item 601(b)(4)(iii)(A) of Regulation S-K, the Registrant has not filed with this prospectus certain instrument defining the rights of holders of long-term debt of the Registrant and its subsidiaries because the total amount of securities authorized under any of such instruments does not exceed 10% of the total assets of the Registrant and its subsidiaries on a consolidated basis. The Registrant agrees to furnish a copy of any such agreements to the Securities and Exchange Commission upon request. Schedules not listed above are omitted because of the absence of the conditions under which they are required or because the information required by such omitted schedules is set forth in the financial statements or the notes thereto. II-8 ITEM 22. UNDERTAKINGS The each of the undersigned co-registrants hereby undertakes: (1) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrants pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by final adjudication of such issue. (2) To respond to requests for information that is incorporated by reference into this prospectus pursuant to Items 4, 10(b), 11, or 13 of Form S-4, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This undertaking also includes documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (3) To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. (4) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement. (5) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (6) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. II-9 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly cause this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, State of Texas, on June 2, 2003. TESORO PETROLEUM CORPORATION By: /s/ GREGORY A. WRIGHT ------------------------------------ Gregory A. Wright Senior Vice President and Chief Financial Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign, execute and file this registration statement under the Securities Act and any and all amendments (including, without limitation, post-effective amendments and any amendment or amendments or additional registration statement filed pursuant to Rule 462 under the Securities Act increasing the amount of securities for which registration is being sought) to this registration statement, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices or other documents necessary or advisable to comply with the applicable state security laws, and to file the same, together with other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intends and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates as indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ BRUCE A. SMITH Chairman of the Board of Directors, June 2, 2003 - -------------------------------------- President and Chief Executive Bruce A. Smith Officer (Principal Executive Officer) /s/ STEVEN H. GRAPSTEIN Lead Director June 2, 2003 - -------------------------------------- Steven H. Grapstein /s/ GREGORY A. WRIGHT Senior Vice President and Chief June 2, 2003 - -------------------------------------- Financial Officer (Principal Gregory A. Wright Financial Officer) /s/ OTTO C. SCHWETHELM Vice President and Controller June 2, 2003 - -------------------------------------- (Principal Accounting Officer) Otto C. Schwethelm
II-11
SIGNATURE TITLE DATE --------- ----- ---- /s/ WILLIAM J. JOHNSON Director June 2, 2003 - -------------------------------------- William J. Johnson /s/ A. MAURICE MYERS Director June 2, 2003 - -------------------------------------- A. Maurice Myers /s/ DONALD H. SCHMUDE Director June 2, 2003 - -------------------------------------- Donald H. Schmude /s/ PATRICK J. WARD Director June 2 2003 - -------------------------------------- Patrick J. Ward
II-11 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly cause this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, State of Texas, on June 2, 2003. DIGICOMP INC. By: /s/ GREGORY A. WRIGHT ------------------------------------ Gregory A. Wright Senior Vice President and Chief Financial Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign, execute and file this registration statement under the Securities Act and any and all amendments (including, without limitation, post-effective amendments and any amendment or amendments or additional registration statement filed pursuant to Rule 462 under the Securities Act increasing the amount of securities for which registration is being sought) to this registration statement, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices or other documents necessary or advisable to comply with the applicable state security laws, and to file the same, together with other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intends and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates as indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ BRUCE A. SMITH Director, President June 2, 2003 - -------------------------------------- (Principal Executive Officer) Bruce A. Smith /s/ WILLIAM T. VAN KLEEF Director, Executive Vice President June 2, 2003 - -------------------------------------- William T. Van Kleef /s/ JAMES C. REED, JR. Director, Executive Vice President, June 2, 2003 - -------------------------------------- General Counsel and Secretary James C. Reed, Jr.
II-12
SIGNATURE TITLE DATE --------- ----- ---- /s/ GREGORY A. WRIGHT Senior Vice President and Chief June 2, 2003 - -------------------------------------- Financial Officer (Principal Gregory A. Wright Financial Officer) /s/ OTTO C. SCHWETHELM Vice President and Controller June 2, 2003 - -------------------------------------- (Principal Accounting Officer) Otto C. Schwethelm
II-13 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly cause this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, State of Texas, on June 2, 2003. TESORO PETROLEUM COMPANIES, INC. By: /s/ BRUCE A. SMITH ------------------------------------ Bruce A. Smith Chairman of the Board of Directors and President POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign, execute and file this registration statement under the Securities Act and any and all amendments (including, without limitation, post-effective amendments and any amendment or amendments or additional registration statement filed pursuant to Rule 462 under the Securities Act increasing the amount of securities for which registration is being sought) to this registration statement, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices or other documents necessary or advisable to comply with the applicable state security laws, and to file the same, together with other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intends and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates as indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ BRUCE A. SMITH Chairman of the Board of Directors June 2, 2003 - -------------------------------------- and President Bruce A. Smith /s/ WILLIAM T. VAN KLEEF Director, Executive Vice President June 2, 2003 - -------------------------------------- William T. Van Kleef /s/ JAMES C. REED, JR. Director, Executive Vice President, June 2, 2003 - -------------------------------------- General Counsel and Secretary James C. Reed, Jr.
II-14
SIGNATURE TITLE DATE --------- ----- ---- /s/ GREGORY A. WRIGHT Senior Vice President and Chief June 2, 2003 - -------------------------------------- Financial Officer (Principal Gregory A. Wright Financial Officer) /s/ OTTO C. SCHWETHELM Vice President and Controller June 2, 2003 - -------------------------------------- (Principal Accounting Officer) Otto C. Schwethelm
II-15 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly cause this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, State of Texas, on June 2, 2003. FAR EAST MARITIME COMPANY GOLD STAR MARITIME COMPANY By: /s/ TIMOTHY F. PLUMMER ------------------------------------ Timothy F. Plummer President POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign, execute and file this registration statement under the Securities Act and any and all amendments (including, without limitation, post-effective amendments and any amendment or amendments or additional registration statement filed pursuant to Rule 462 under the Securities Act increasing the amount of securities for which registration is being sought) to this registration statement, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices or other documents necessary or advisable to comply with the applicable state security laws, and to file the same, together with other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intends and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates as indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ TIMOTHY F. PLUMMER Chairman of the Board of Directors June 2, 2003 - -------------------------------------- and President (Principal Executive Timothy F. Plummer Officer) /s/ GREGORY A. WRIGHT Director June 2, 2003 - -------------------------------------- Gregory A. Wright /s/ JAMES B. WILCOX Treasurer (Principal Financial and June 2, 2003 - -------------------------------------- Accounting Officer) James B. Willcox
II-16 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly cause this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, State of Texas, on June 2, 2003. KENAI PIPE LINE COMPANY By: /s/ RODNEY S. CASON ------------------------------------ Rodney S. Cason President POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign, execute and file this registration statement under the Securities Act and any and all amendments (including, without limitation, post-effective amendments and any amendment or amendments or additional registration statement filed pursuant to Rule 462 under the Securities Act increasing the amount of securities for which registration is being sought) to this registration statement, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices or other documents necessary or advisable to comply with the applicable state security laws, and to file the same, together with other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intends and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates as indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ BRUCE A. SMITH Chairman of the Board of Directors June 2, 2003 - -------------------------------------- Bruce A. Smith /s/ WILLIAM T. VAN KLEEF Director, Executive Vice President June 2, 2003 - -------------------------------------- William T. Van Kleef /s/ JAMES C. REED, JR. Director, Executive Vice President June 2, 2003 - -------------------------------------- and Secretary James C. Reed, Jr.
II-17
SIGNATURE TITLE DATE --------- ----- ---- /s/ RODNEY S. CASON President (Principal Executive June 2, 2003 - -------------------------------------- Officer) Rodney S. Cason /s/ OTTO C. SCHWETHELM Vice President and Controller June 2, 2003 - -------------------------------------- (Principal Financial and Accounting Otto C. Schwethelm Officer)
II-18 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly cause this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, State of Texas, on June 2, 2003. SMILEY'S SUPER SERVICE, INC. By: /s/ GREGORY A. WRIGHT ------------------------------------ Gregory A. Wright Senior Vice President, Chief Financial Officer and Treasurer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign, execute and file this registration statement under the Securities Act and any and all amendments (including, without limitation, post-effective amendments and any amendment or amendments or additional registration statement filed pursuant to Rule 462 under the Securities Act increasing the amount of securities for which registration is being sought) to this registration statement, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices or other documents necessary or advisable to comply with the applicable state security laws, and to file the same, together with other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intends and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates as indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ BRUCE A. SMITH Director, President June 2, 2003 - -------------------------------------- (Principal Executive Officer) Bruce A. Smith /s/ WILLIAM T. VAN KLEEF Director, Executive Vice President June 2, 2003 - -------------------------------------- William T. Van Kleef /s/ JAMES C. REED, JR. Director, Executive Vice President June 2, 2003 - -------------------------------------- and Secretary James C. Reed, Jr.
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SIGNATURE TITLE DATE --------- ----- ---- /s/ GREGORY A. WRIGHT Senior Vice President, June 2, 2003 - -------------------------------------- Chief Financial Officer and Gregory A. Wright Treasurer (Principal Financial Officer) /s/ OTTO C. SCHWETHELM Vice President and Controller June 2, 2003 - -------------------------------------- (Principal Accounting Officer) Otto C. Schwethelm
II-20 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly cause this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, State of Texas, on June 2, 2003. TESORO ALASKA COMPANY By: /s/ GREGORY A. WRIGHT ------------------------------------ Gregory A. Wright Senior Vice President and Chief Financial Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign, execute and file this registration statement under the Securities Act and any and all amendments (including, without limitation, post-effective amendments and any amendment or amendments or additional registration statement filed pursuant to Rule 462 under the Securities Act increasing the amount of securities for which registration is being sought) to this registration statement, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices or other documents necessary or advisable to comply with the applicable state security laws, and to file the same, together with other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intends and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates as indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ BRUCE A. SMITH Chairman of the Board of Directors June 2, 2003 ------------------------------------------------ Bruce A. Smith /s/ WILLIAM T. VAN KLEEF Director, Executive Vice President June 2, 2003 ------------------------------------------------ William T. Van Kleef /s/ JAMES C. REED, JR. Director, Executive Vice President June 2, 2003 ------------------------------------------------ and Secretary James C. Reed, Jr. /s/ RODNEY S. CASON President (Principal Executive June 2, 2003 ------------------------------------------------ Officer) Rodney S. Cason /s/ GREGORY A. WRIGHT Senior Vice President and Chief June 2, 2003 ------------------------------------------------ Financial Officer (Principal Gregory A. Wright Financial Officer) /s/ OTTO C. SCHWETHELM Vice President and Controller June 2, 2003 ------------------------------------------------ (Principal Accounting Officer) Otto C. Schwethelm
II-21 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly cause this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, State of Texas, on June 2, 2003. TESORO ALASKA PIPELINE COMPANY TESORO NORTHSTORE COMPANY By: /s/ GREGORY A. WRIGHT ------------------------------------ Gregory A. Wright Senior Vice President and Chief Financial Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign, execute and file this registration statement under the Securities Act and any and all amendments (including, without limitation, post-effective amendments and any amendment or amendments or additional registration statement filed pursuant to Rule 462 under the Securities Act increasing the amount of securities for which registration is being sought) to this registration statement, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices or other documents necessary or advisable to comply with the applicable state security laws, and to file the same, together with other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intends and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates as indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ BRUCE A. SMITH Chairman of the Board of Directors June 2, 2003 ------------------------------------------------ Bruce A. Smith /s/ WILLIAM T. VAN KLEEF Director, Executive Vice President June 2, 2003 ------------------------------------------------ William T. Van Kleef /s/ JAMES C. REED, JR. Director, Executive Vice President June 2, 2003 ------------------------------------------------ and Secretary James C. Reed, Jr. /s/ RODNEY S. CASON President (Principal Executive June 2, 2003 ------------------------------------------------ Officer) Rodney S. Cason /s/ GREGORY A. WRIGHT Senior Vice President and Chief June 2, 2003 ------------------------------------------------ Financial Officer (Principal Gregory A. Wright Financial Officer) /s/ OTTO C. SCHWETHELM Vice President and Controller June 2, 2003 ------------------------------------------------ (Principal Accounting Officer) Otto C. Schwethelm
II-22 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly cause this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, State of Texas, on June 2, 2003. TESORO AVIATION COMPANY By: /s/ GREGORY A. WRIGHT ------------------------------------ Gregory A. Wright Senior Vice President and Chief Financial Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign, execute and file this registration statement under the Securities Act and any and all amendments (including, without limitation, post-effective amendments and any amendment or amendments or additional registration statement filed pursuant to Rule 462 under the Securities Act increasing the amount of securities for which registration is being sought) to this registration statement, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices or other documents necessary or advisable to comply with the applicable state security laws, and to file the same, together with other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intends and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates as indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ BRUCE A. SMITH Chairman of the Board of Directors June 2, 2003 - -------------------------------------- and President (Principal Executive Bruce A. Smith Officer) /s/ WILLIAM T. VAN KLEEF Director, Executive Vice President June 2, 2003 - -------------------------------------- William T. Van Kleef /s/ JAMES C. REED, JR. Director, Executive Vice President, June 2, 2003 - -------------------------------------- General Counsel and Secretary James C. Reed, Jr. /s/ GREGORY A. WRIGHT Senior Vice President and Chief June 2, 2003 - -------------------------------------- Financial Officer (Principal Gregory A. Wright Financial Officer) /s/ OTTO C. SCHWETHELM Vice President and Controller June 2, 2003 - -------------------------------------- (Principal Accounting Officer) Otto C. Schwethelm
II-23 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly cause this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, State of Texas, on June 2, 2003. TESORO FINANCIAL SERVICES HOLDING COMPANY VICTORY FINANCE COMPANY By: /s/ CHARLES L. MAGEE ------------------------------------ Charles L. Magee President POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign, execute and file this registration statement under the Securities Act and any and all amendments (including, without limitation, post-effective amendments and any amendment or amendments or additional registration statement filed pursuant to Rule 462 under the Securities Act increasing the amount of securities for which registration is being sought) to this registration statement, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices or other documents necessary or advisable to comply with the applicable state security laws, and to file the same, together with other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intends and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates as indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ CHARLES L. MAGEE Director and President June 2, 2003 - -------------------------------------- (Principal Executive, Financial and Charles L. Magee Accounting Officer) /s/ HEATHER R. HILL Director June 2, 2003 - -------------------------------------- Heather R. Hill
II-24 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly cause this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, State of Texas, on June 2, 2003. TESORO GAS RESOURCES COMPANY, INC. By: /s/ BRUCE A. SMITH ------------------------------------ Bruce A. Smith Chairman of the Board of Directors and President POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign, execute and file this registration statement under the Securities Act and any and all amendments (including, without limitation, post-effective amendments and any amendment or amendments or additional registration statement filed pursuant to Rule 462 under the Securities Act increasing the amount of securities for which registration is being sought) to this registration statement, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices or other documents necessary or advisable to comply with the applicable state security laws, and to file the same, together with other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intends and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates as indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ BRUCE A. SMITH Chairman of the Board of Directors June 2, 2003 - -------------------------------------- and President Bruce A. Smith (Principal Executive Officer) /s/ JAMES C. REED, JR. Director, Executive Vice President, June 2, 2003 - -------------------------------------- General Counsel and Secretary James C. Reed, Jr. /s/ OTTO C. SCHWETHELM Vice President and Controller June 2, 2003 - -------------------------------------- (Principal Financial and Otto C. Schwethelm Accounting Officer)
II-25 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly cause this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, State of Texas, on June 2, 2003. TESORO HAWAII CORPORATION By: /s/ GREGORY A. WRIGHT ------------------------------------ Gregory A. Wright Senior Vice President, Chief Financial Officer and Treasurer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign, execute and file this registration statement under the Securities Act and any and all amendments (including, without limitation, post-effective amendments and any amendment or amendments or additional registration statement filed pursuant to Rule 462 under the Securities Act increasing the amount of securities for which registration is being sought) to this registration statement, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices or other documents necessary or advisable to comply with the applicable state security laws, and to file the same, together with other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intends and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates as indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ BRUCE A. SMITH Director, President and Chief June 2, 2003 - -------------------------------------- Executive Officer (Principal Bruce A. Smith Executive Officer) /s/ WILLIAM T. VAN KLEEF Director, Executive Vice President June 2, 2003 - -------------------------------------- William T. Van Kleef /s/ JAMES C. REED, JR. Director, Executive Vice President June 2, 2003 - -------------------------------------- and Secretary James C. Reed, Jr.
II-26
SIGNATURE TITLE DATE --------- ----- ---- /s/ GREGORY A. WRIGHT Senior Vice President, June 2, 2003 - -------------------------------------- Chief Financial Officer and Gregory A. Wright Treasurer (Principal Financial Officer) /s/ OTTO C. SCHWETHELM Vice President and Controller June 2, 2003 - -------------------------------------- (Principal Accounting Officer) Otto C. Schwethelm
II-27 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly cause this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, State of Texas, on June 2, 2003. TESORO HIGH PLAINS PIPELINE COMPANY By: /s/ BRUCE A. SMITH ------------------------------------ Bruce A. Smith Chairman of the Board of Directors and President POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign, execute and file this registration statement under the Securities Act and any and all amendments (including, without limitation, post-effective amendments and any amendment or amendments or additional registration statement filed pursuant to Rule 462 under the Securities Act increasing the amount of securities for which registration is being sought) to this registration statement, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices or other documents necessary or advisable to comply with the applicable state security laws, and to file the same, together with other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intends and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates as indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ BRUCE A. SMITH Chairman of the Board of Directors June 2, 2003 - -------------------------------------- and Bruce A. Smith President (Principal Executive Officer) /s/ WILLIAM T. VAN KLEEF Director, Executive Vice President June 2, 2003 - -------------------------------------- William T. Van Kleef /s/ JAMES C. REED, JR. Director, Executive Vice President, June 2, 2003 - -------------------------------------- General Counsel and Secretary James C. Reed, Jr.
II-28
SIGNATURE TITLE DATE --------- ----- ---- /s/ GREGORY A. WRIGHT Senior Vice President and June 2, 2003 - -------------------------------------- Chief Financial Officer Gregory A. Wright (Principal Financial Officer) /s/ OTTO C. SCHWETHELM Vice President and Controller June 2, 2003 - -------------------------------------- (Principal Accounting Officer) Otto C. Schwethelm
II-29 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly cause this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, State of Texas, on June 2, 2003. TESORO MARINE SERVICES, LLC ("LLC") by Tesoro Marine Services Holding Company, its sole member TESORO MARINE SERVICES HOLDING COMPANY ("Holding Co.") By: /s/ GREGORY A. WRIGHT ------------------------------------ Gregory A. Wright Senior Vice President and Chief Financial Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign, execute and file this registration statement under the Securities Act and any and all amendments (including, without limitation, post-effective amendments and any amendment or amendments or additional registration statement filed pursuant to Rule 462 under the Securities Act increasing the amount of securities for which registration is being sought) to this registration statement, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices or other documents necessary or advisable to comply with the applicable state security laws, and to file the same, together with other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intends and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates as indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ BRUCE A. SMITH Chairman of the Board of Directors June 2, 2003 ------------------------------------------------ of Holding Co. Bruce A. Smith /s/ WILLIAM T. VAN KLEEF Director of Holding Co. and June 2, 2003 ------------------------------------------------ Executive Vice President of LLC and William T. Van Kleef Holding Co. /s/ JAMES C. REED, JR. Director of Holding Co. and June 2, 2003 ------------------------------------------------ Executive Vice President, General James C. Reed, Jr. Counsel and Secretary of LLC and Holding Co.
II-30
SIGNATURE TITLE DATE --------- ----- ---- /s/ DONALD A. NYBERG Director of Holding Co. and June 2, 2003 ------------------------------------------------ President Donald A. Nyberg of LLC and Holding Co. (Principal Executive Officer) /s/ GREGORY A. WRIGHT Senior Vice President and Chief June 2, 2003 ------------------------------------------------ Financial Officer of LLC and Holding Gregory A. Wright Co. (Principal Financial Officer) /s/ DEAN M. KRAKOSKY Controller of LLC and Holding Co. June 2, 2003 ------------------------------------------------ (Principal Accounting Officer) Dean M. Krakosky
II-31 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly cause this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, State of Texas, on June 2, 2003. TESORO MARITIME COMPANY By: /s/ GREGORY A. WRIGHT ------------------------------------ Gregory A. Wright Senior Vice President and Chief Financial Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign, execute and file this registration statement under the Securities Act and any and all amendments (including, without limitation, post-effective amendments and any amendment or amendments or additional registration statement filed pursuant to Rule 462 under the Securities Act increasing the amount of securities for which registration is being sought) to this registration statement, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices or other documents necessary or advisable to comply with the applicable state security laws, and to file the same, together with other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intends and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates as indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ TIMOTHY F. PLUMMER Chairman of the Board of Directors June 2, 2003 - -------------------------------------- and President (Principal Executive Timothy F. Plummer Officer) /s/ GREGORY A. WRIGHT Director, Senior Vice President and June 2, 2003 - -------------------------------------- Chief Financial Officer (Principal Gregory A. Wright Financial Officer) /s/ OTTO C. SCHWETHELM Vice President and Controller June 2, 2003 - -------------------------------------- (Principal Accounting Officer) Otto C. Schwethelm
II-32 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly cause this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, State of Texas, on June 2, 2003. TESORO REFINING AND MARKETING COMPANY By: /s/ GREGORY A. WRIGHT ------------------------------------ Gregory A. Wright Senior Vice President and Chief Financial Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign, execute and file this registration statement under the Securities Act and any and all amendments (including, without limitation, post-effective amendments and any amendment or amendments or additional registration statement filed pursuant to Rule 462 under the Securities Act increasing the amount of securities for which registration is being sought) to this registration statement, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices or other documents necessary or advisable to comply with the applicable state security laws, and to file the same, together with other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intends and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates as indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ BRUCE A. SMITH Chairman of the Board of Directors June 2, 2003 - -------------------------------------- Bruce A. Smith /s/ WILLIAM T. VAN KLEEF Director, President (Principal June 2, 2003 - -------------------------------------- Executive Officer) William T. Van Kleef /s/ JAMES C. REED, JR. Director, Executive Vice President June 2, 2003 - -------------------------------------- and Secretary James C. Reed, Jr. /s/ GREGORY A. WRIGHT Senior Vice President and Chief June 2, 2003 - -------------------------------------- Financial Officer (Principal Gregory A. Wright Financial Officer)
II-33
SIGNATURE TITLE DATE --------- ----- ---- /s/ OTTO C. SCHWETHELM Vice President and Controller June 2, 2003 - -------------------------------------- (Principal Accounting Officer) Otto C. Schwethelm
II-34 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly cause this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, State of Texas, on June 2, 2003. TESORO TECHNOLOGY COMPANY By: /s/ BRUCE A. SMITH ------------------------------------ Bruce A. Smith Chairman of the Board of Directors and President POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign, execute and file this registration statement under the Securities Act and any and all amendments (including, without limitation, post-effective amendments and any amendment or amendments or additional registration statement filed pursuant to Rule 462 under the Securities Act increasing the amount of securities for which registration is being sought) to this registration statement, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices or other documents necessary or advisable to comply with the applicable state security laws, and to file the same, together with other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intends and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates as indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ BRUCE A. SMITH Chairman of the Board of Directors June 2, 2003 - -------------------------------------- and President (Principal Executive Bruce A. Smith Officer) /s/ WILLIAM T. VAN KLEEF Director, Executive Vice President June 2, 2003 - -------------------------------------- William T. Van Kleef /s/ JAMES C. REED, JR. Director, Executive Vice President, June 2, 2003 - -------------------------------------- General Counsel and Secretary James C. Reed, Jr. /s/ OTTO C. SCHWETHELM Vice President and Controller June 2, 2003 - -------------------------------------- (Principal Financial and Accounting Otto C. Schwethelm Officer)
II-35 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly cause this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, State of Texas, on June 2, 2003. TESORO TRADING COMPANY By: /s/ BRUCE A. SMITH ------------------------------------ Bruce A. Smith Chairman of the Board of Directors and President POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign, execute and file this registration statement under the Securities Act and any and all amendments (including, without limitation, post-effective amendments and any amendment or amendments or additional registration statement filed pursuant to Rule 462 under the Securities Act increasing the amount of securities for which registration is being sought) to this registration statement, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices or other documents necessary or advisable to comply with the applicable state security laws, and to file the same, together with other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intends and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates as indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ BRUCE A. SMITH Chairman of the Board of Directors June 2, 2003 - -------------------------------------- and President (Principal Executive Bruce A. Smith Officer) /s/ WILLIAM T. VAN KLEEF Director, Executive Vice President June 2, 2003 - -------------------------------------- William T. Van Kleef /s/ JAMES C. REED, JR. Director, Executive Vice President, June 2, 2003 - -------------------------------------- General Counsel and Secretary James C. Reed, Jr. /s/ OTTO C. SCHWETHELM Vice President and Controller June 2, 2003 - -------------------------------------- (Principal Financial and Accounting Otto C. Schwethelm Officer)
II-36 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly cause this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, State of Texas, on June 2, 2003. TESORO VOSTOK COMPANY By: /s/ BRUCE A. SMITH ------------------------------------ Bruce A. Smith Chairman of the Board of Directors and President POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign, execute and file this registration statement under the Securities Act and any and all amendments (including, without limitation, post-effective amendments and any amendment or amendments or additional registration statement filed pursuant to Rule 462 under the Securities Act increasing the amount of securities for which registration is being sought) to this registration statement, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices or other documents necessary or advisable to comply with the applicable state security laws, and to file the same, together with other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intends and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates as indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ BRUCE A. SMITH Chairman of the Board of Directors June 2, 2003 - -------------------------------------- and President (Principal Executive Bruce A. Smith Officer) /s/ WILLIAM T. VAN KLEEF Director, Executive Vice President June 2, 2003 - -------------------------------------- William T. Van Kleef /s/ JAMES C. REED, JR. Director, Executive Vice President June 2, 2003 - -------------------------------------- and Secretary James C. Reed, Jr. /s/ GREGORY A. WRIGHT Senior Vice President and Chief June 2, 2003 - -------------------------------------- Financial Officer (Principal Gregory A. Wright Financial Officer)
II-37
SIGNATURE TITLE DATE --------- ----- ---- /s/ OTTO C. SCHWETHELM Vice President and Controller June 2, 2003 - -------------------------------------- (Principal Accounting Officer) Otto C. Schwethelm
II-38 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly cause this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, State of Texas, on June 2, 2003. TESORO WASATCH, LLC By: /s/ BRUCE A. SMITH ------------------------------------ Bruce A. Smith Chairman of the Board of Directors and President POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign, execute and file this registration statement under the Securities Act and any and all amendments (including, without limitation, post-effective amendments and any amendment or amendments or additional registration statement filed pursuant to Rule 462 under the Securities Act increasing the amount of securities for which registration is being sought) to this registration statement, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices or other documents necessary or advisable to comply with the applicable state security laws, and to file the same, together with other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intends and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates as indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ BRUCE A. SMITH Chairman of the Board of Directors, June 2, 2003 - -------------------------------------- President (Principal Executive Bruce A. Smith Officer) /s/ WILLIAM T. VAN KLEEF Director, Executive Vice President June 2, 2003 - -------------------------------------- William T. Van Kleef /s/ JAMES C. REED, JR. Director, Executive Vice President, June 2, 2003 - -------------------------------------- General Counsel and Secretary James C. Reed, Jr. /s/ OTTO C. SCHWETHELM Vice President and Controller June 2, 2003 - -------------------------------------- (Principal Financial and Accounting Otto C. Schwethelm Officer)
II-39 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- *1.1 Purchase Agreement, dated April 7, 2002, among the Company, Goldman, Sachs & Co. and Banc One Capital Markets, Inc. 2.1 Stock Sale Agreement, dated March 18, 1998, among the Company, BHP Hawaii Inc. and BHP Petroleum Pacific Islands Inc. (incorporated by reference herein to Exhibit 2.1 to Registration Statement No. 333-51789). 2.2 Stock Sale Agreement, dated May 1, 1998, among Shell Refining Holding Company, Shell Anacortes Refining Company and the Company (incorporated by reference herein to the Company's Quarterly Report on Form 10-Q for the period ended March 31, 1998, File No. 1-3473). 2.3 Stock Purchase Agreement, dated as of October 8, 1999, but effective as of July 1, 1999 among the Company, Tesoro Gas Resources Company, Inc., EEX Operating LLC and EEX Corporation (incorporated by reference herein to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on January 3, 2000, File No. 1-3473). 2.4 First Amendment to Stock Purchase Agreement dated December 16, 1999, but effective as of October 8, 1999, among the Company, Tesoro Gas Resources Company, Inc., EEX Operating LLC and EEX Corporation (incorporated by reference herein to Exhibit 2.2 to the Company's Current Report on Form 8-K filed on January 3, 2000, File No. 1-3473). 2.5 Purchase Agreement dated as of December 17, 1999 among the Company, Tesoro Gas Resources Company, Inc. and EEX Operating LLC (Membership Interests in Tesoro Grande LLC) (incorporated by reference herein to Exhibit 2.3 to the Company's Current Report on Form 8-K filed on January 3, 2000, File No. 1-3473). 2.6 Purchase Agreement dated as of December 17, 1999 among the Company, Tesoro Gas Resources Company, Inc. and EEX Operating LLC (Membership Interests in Tesoro Reserves Company LLC) (incorporated by reference herein to Exhibit 2.4 to the Company's Current Report on Form 8-K filed on January 3, 2000, File No. 1-3473). 2.7 Purchase Agreement dated as of December 17, 1999 among the Company, Tesoro Gas Resources Company, Inc. and EEX Operating LLC (Membership Interests in Tesoro Southeast LLC) (incorporated by reference herein to Exhibit 2.5 to the Company's Current Report on Form 8-K filed on January 3, 2000, File No. 1-3473). 2.8 Stock Purchase Agreement, dated as of November 19, 1999, by and between the Company and BG International Limited (incorporated by reference herein to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on January 13, 2000, File No. 1-3473). 2.9 Asset Purchase Agreement, dated July 16, 2001, by and among the Company, BP Corporation North America Inc. and Amoco Oil Company (incorporated by reference herein to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on September 21, 2001, File No. 1-3473). 2.10 Asset Purchase Agreement, dated July 16, 2001, by and among the Company, BP Corporation North America Inc. and Amoco Oil Company (incorporated by reference herein to Exhibit 2.2 to the Company's Current Report on Form 8-K filed on September 21, 2001, File No. 1-3473). 2.11 Asset Purchase Agreement, dated July 16, 2001, by and among the Company, BP Corporation North America Inc. and BP Pipelines (North America) Inc. (incorporated by reference herein to Exhibit 2.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2001, File No. 1-3473). 2.12 Sale and Purchase Agreement for Golden Eagle Refining and Marketing Assets, dated February 4, 2002, by and among Ultramar Inc. and Tesoro Refining and Marketing Company, including First Amendment dated February 20, 2002 and related Purchaser Parent Guaranty dated February 4, 2002, and Second Amendment dated May 3, 2002 (incorporated by reference herein to Exhibit 2.12 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001, File No. 1-3473, and Exhibit 2.1 to the Company's Current Report on Form 8-K filed on May 9, 2002, File No. 1-3473). 3.1 Restated Certificate of Incorporation of the Company (incorporated by reference herein to Exhibit 3 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, File No. 1-3473).
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 3.2 By-Laws of the Company, as amended through June 6, 1996 (incorporated by reference herein to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, File No. 1-3473). 3.3 Amendment to Restated Certificate of Incorporation of the Company adding a new Article IX limiting Directors' Liability (incorporated by reference herein to Exhibit 3(b) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, File No. 1-3473). 3.4 Certificate of Designation Establishing a Series A Participating Preferred Stock, dated as of December 16, 1985 (incorporated by reference herein to Exhibit 3(d) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, File No. 1-3473). 3.5 Certificate of Amendment, dated as of February 9, 1994, to Restated Certificate of Incorporation of the Company amending Article IV, Article V, Article VII and Article VIII (incorporated by reference herein to Exhibit 3(e) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, File No. 1-3473). 3.6 Certificate of Amendment, dated as of August 3, 1998, to Certificate of Incorporation of the Company, amending Article IV, increasing the number of authorized shares of Common Stock from 50,000,000 to 100,000,000 (incorporated by reference herein to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 1998, File No. 1-3473). 3.7 Certificate of Incorporation of Digicomp, Inc. (incorporated by reference herein to Exhibit 3.9 to Registration Statement No. 333-75056). 3.8 Bylaws of Digicomp, Inc., as amended (incorporated by reference herein to Exhibit 3.10 to Registration Statement No. 333-75056). 3.9 Certificate of Incorporation of Far East Maritime Company (incorporated by reference herein to Exhibit 3.11 to Registration Statement No. 333-75056). 3.10 Bylaws of Far East Maritime Company (incorporated by reference herein to Exhibit 3.12 to Registration Statement No. 333-75056). 3.11 Certificate of Incorporation of Gold Star Maritime Company (incorporated by reference herein to Exhibit 3.13 to Registration Statement No. 333-75056). 3.12 Bylaws of Gold Star Maritime Company (incorporated by reference herein to Exhibit 3.14 to Registration Statement No. 333-75056). 3.13 Certificate of Incorporation of Kenai Pipe Line Company (incorporated by reference herein to Exhibit 3.15 to Registration Statement No. 333-75056). 3.14 Bylaws of Kenai Pipe Line Company, as amended (incorporated by reference herein to Exhibit 3.16 to Registration Statement No. 333-75056). 3.15 Articles of Incorporation of Smiley's Super Service, Inc. (incorporated by reference herein to Exhibit 3.17 to Registration Statement No. 333-75056). 3.16 Bylaws of Smiley's Super Service, Inc. (incorporated by reference herein to Exhibit 3.18 to Registration Statement No. 333-75056). 3.17 Certificate of Incorporation of Tesoro Alaska Company, as amended (incorporated by reference herein to Exhibit 3.19 to Registration Statement No. 333-75056). 3.18 Bylaws of Tesoro Alaska Company, as amended (incorporated by reference herein to Exhibit 3.20 to Registration Statement No. 333-75056). 3.19 Certificate of Incorporation of Tesoro Alaska Pipeline Company, as amended (incorporated by reference herein to Exhibit 3.21 to Registration Statement No. 333-75056). 3.20 Bylaws of Tesoro Alaska Pipeline Company, as amended (incorporated by reference herein to Exhibit 3.22 to Registration Statement No. 333-75056). 3.21 Certificate of Incorporation of Tesoro Aviation Company, as amended (incorporated by reference herein to Exhibit 3.23 to Registration Statement No. 333-75056). 3.22 Bylaws of Tesoro Aviation Company (incorporated by reference herein to Exhibit 3.24 to Registration Statement No. 333-75056). 3.23 Certificate of Tesoro Financial Services Holding Company (incorporated by reference herein to Exhibit 3.25 to Registration Statement No. 333-75056).
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 3.24 Bylaws of Tesoro Financial Services Holding Company (incorporated by reference herein to Exhibit 3.26 to Registration Statement No. 333-75056). 3.25 Certificate of Incorporation of Tesoro Gas Resources Company, Inc. (incorporated by reference herein to Exhibit 3.27 to Registration Statement No. 333-75056). 3.26 Bylaws of Tesoro Gas Resources Company, Inc. (incorporated by reference herein to Exhibit 3.28 to Registration Statement No. 333-75056). 3.27 Articles of Incorporation of Tesoro Hawaii Corporation, as amended (incorporated by reference herein to Exhibit 3.29 to Registration Statement No. 333-75056). 3.28 Bylaws of Tesoro Hawaii Corporation, as amended (incorporated by reference herein to Exhibit 3.30 to Registration Statement No. 333-75056). 3.29 Certificate of Incorporation of Tesoro High Plains Pipeline Company, as amended (incorporated by reference herein to Exhibit 3.31 to Registration Statement No. 333-75056). 3.30 Bylaws of Tesoro High Plains Pipeline Company (incorporated by reference herein to Exhibit 3.32 to Registration Statement No. 333-75056). 3.31 Certificate of Incorporation of Tesoro Marine Services Holding Company, as amended (incorporated by reference herein to Exhibit 3.33 to Registration Statement No. 333-75056). 3.32 Bylaws of Tesoro Marine Services Holding Company (incorporated by reference herein to Exhibit 3.34 to Registration Statement No. 333-75056). 3.33 Certificate of Formation of Tesoro Marine Services, LLC (formerly Tesoro Marine Services, Inc)(incorporated by reference herein to Exhibit 3.35 to Registration Statement No. 333-75056). 3.34 Limited Liability Company Agreement of Tesoro Marine Services, LLC (incorporated by reference herein to Exhibit 3.36 to Registration Statement No. 333-75056). 3.35 Certificate of Incorporation of Tesoro Maritime Company (incorporated by reference herein to Exhibit 3.37 to Registration Statement No. 333-75056). 3.36 Bylaws of Tesoro Maritime Company (incorporated by reference herein to Exhibit 3.38 to Registration Statement No. 333-75056). 3.37 Articles of Incorporation of Tesoro Northstore Company, as amended (incorporated by reference herein to Exhibit 3.39 to Registration Statement No. 333-75056). 3.38 Bylaws of Tesoro Northstore Company, as amended (incorporated by reference herein to Exhibit 3.40 to Registration Statement No. 333-75056). 3.39 Certificate of Incorporation of Tesoro Petroleum Companies, Inc., as amended (incorporated by reference herein to Exhibit 3.41 to Registration Statement No. 333-75056). 3.40 Bylaws of Tesoro Petroleum Companies, Inc., as amended (incorporated by reference herein to Exhibit 3.9 to Registration Statement No. 333-75056). 3.41 Certificate of Incorporation of Tesoro Refining and Marketing Company (formerly Tesoro West Coast Company), as amended (incorporated by reference herein to Exhibit 3.51 to Registration Statement No. 333-75056). 3.42 Bylaws of Tesoro Refining and Marketing Company (formerly Tesoro West Coast Company), as amended (incorporated by reference herein to Exhibit 3.52 to Registration Statement No. 333-75056). 3.43 Certificate of Incorporation of Tesoro Technology Company, as amended (incorporated by reference herein to Exhibit 3.47 to Registration Statement No. 333-75056). 3.44 Bylaws of Tesoro Technology Company, as amended (incorporated by reference herein to Exhibit 3.48 to Registration Statement No. 333-75056). 3.45 Certificate of Incorporation of Tesoro Trading Company, as amended (incorporated by reference herein to Exhibit 3.1 to Amendment No. 1 to Registration Statement No. 333-84018). 3.46 Bylaws of Tesoro Trading Company (incorporated by reference herein to Exhibit 3.2 to Amendment No. 1 to Registration Statement No. 333-84018). *3.47 Certificate of Formation of Tesoro Wasatch, LLC. *3.48 Limited Liability Company Agreement of Tesoro Wasatch, LLC.
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 3.49 Certificate of Incorporation of Tesoro Vostock Company, as amended (incorporated by reference herein to Exhibit 3.49 to Registration Statement No. 333-75056). 3.50 Bylaws of Tesoro Vostock Company, as amended (incorporated by reference herein to Exhibit 3.50 to Registration Statement No. 333-75056). 3.51 Certificate of Incorporation of Victory Finance Company, as amended (incorporated by reference herein to Exhibit 3.53 to Registration Statement No. 333-75056). 3.52 Bylaws of Victory Finance Company (incorporated by reference herein to Exhibit 3.54 to Registration Statement No. 333-75056). 4.1 Indenture, dated as of July 2, 1998, between Tesoro Petroleum Corporation and U.S. Bank Trust National Association, as Trustee (incorporated by reference herein to Exhibit 4.4 to Registration Statement No. 333-59871). 4.2 Form of 9% Senior Subordinated Notes due 2008 and 9% Senior Subordinated Notes due 2008, Series B (incorporated by reference herein to Exhibit 4.5 to Registration Statement No. 333-59871). 4.3 Indenture, dated as of November 6, 2001, between Tesoro Petroleum Corporation and U.S. Bank Trust National Association, as Trustee (incorporated by reference herein to Exhibit 4.8 to Registration Statement No. 333-75056). 4.4 Form of 9 5/8% Senior Subordinated Notes due 2008 and 9 5/8% Senior Subordinated Notes due 2008, Series B (incorporated by reference herein to Exhibit 4.7 to Registration Statement No. 333-92468). 4.5 Indenture, dated as of April 9, 2002, between Tesoro Escrow Corp. and U.S. Bank National Association, as Trustee (incorporated by reference herein to Exhibit 4.9 to Registration Statement No. 333-84018). 4.6 Supplemental Indenture, dated as of May 17, 2002, among Tesoro Escrow Corp., Tesoro Petroleum Corporation, the subsidiary guarantors and U.S. Bank National Association, as Trustee (incorporated by reference herein to Exhibit 4.10 to Registration Statement No. 333-92468). 4.7 Form of 9 5/8% Senior Subordinated Notes due 2012 (incorporated by reference herein to Exhibit 4.10 to Registration Statement No. 333-84018). *4.8 Indenture, dated as of April 17, 2003, among Tesoro Petroleum Corporation, certain subsidiary guarantors and The Bank of New York, as Trustee. *4.9 Form of 8% Senior Secured Notes due 2008 (incorporated by reference herein to Exhibit 4.8). *4.10 Registration Rights Agreement, dated as of April 17, 2003, among Tesoro Petroleum Corporation, certain subsidiary guarantors, and Goldman, Sachs & Co., as representative of the initial purchasers. *4.11 Credit and Guaranty Agreement related to Senior Secured Term Loans Due 2008, dated as of April 17, 2003, among Tesoro Petroleum Corporation, certain subsidiary guarantors, Goldman Sachs Credit Partners L.P., as Administrative Agent, and Goldman Sachs Credit Partners L.P., as Sole Lead Arranger, Sole Bookrunner and Syndication Agent. *4.12 Pledge and Security Agreement related to Senior Secured Term Loans Due 2008 and 8% Senior Secured Notes due 2008, dated as of April 17, 2003, among Tesoro Petroleum Corporation, certain subsidiary guarantors and Wilmington Trust Company, as Collateral Agent. *4.13 Collateral Agency Agreement related to Senior Secured Term Loans Due 2008 and 8% Senior Secured Notes due 2008, dated as of April 17, 2003, among Tesoro Petroleum Corporation, certain subsidiary guarantors, Goldman Sachs Credit Partners L.P., The Bank of New York Trust Company and Wilmington Trust Company. **4.14 Control Agreement related to Senior Secured Term Loans Due 2008 and 8% Senior Secured Notes due 2008, dated as of , among Tesoro Petroleum Corporation, Wilmington Trust Company, as Collateral Agent, and Frost Bank, as Depositary Agent. *5.1 Opinion of Fulbright & Jaworski L.L.P. 10.1 $100 million Promissory Note, dated as of May 17, 2002, payable by the Company to Ultramar Inc. (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 24, 2002, File No. 1-3473).
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 10.2 $50 million Promissory Note, dated as of May 17, 2002, payable by the Company to Ultramar Inc. (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on May 24, 2002, File No. 1-3473). +10.3 The Company's Amended Executive Security Plan, as amended through November 13, 1989, and Funded Executive Security Plan, as amended through February 28, 1990, for executive officers and key personnel (incorporated by reference herein to Exhibit 10(f) to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1990, File No. 1-3473). +10.4 Sixth Amendment to the Company's Amended Executive Security Plan and Seventh Amendment to the Company's Funded Executive Security Plan, both dated effective March 6, 1991 (incorporated by reference herein to Exhibit 10(g) to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1991, File No. 1-3473). +10.5 Seventh Amendment to the Company's Amended Executive Security Plan and Eighth Amendment to the Company's Funded Executive Security Plan, both dated effective December 8, 1994 (incorporated by reference herein to Exhibit 10(f) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, File No. 1-3473). +10.6 Eighth Amendment to the Company's Amended Executive Security Plan and Ninth Amendment to the Company's Funded Executive Security Plan, both dated effective June 6, 1996 (incorporated by reference herein to Exhibit 10.5 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, File No. 1-3473). +10.7 Ninth Amendment to the Company's Amended Executive Security Plan and Tenth Amendment to the Company's Funded Executive Security Plan, both dated effective October 1, 1998 (incorporated by reference herein to Exhibit 10.6 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, File No. 1-3473). +10.8 Amended and Restated Employment Agreement between the Company and Bruce A. Smith dated November 1, 1997 (incorporated by reference therein to Exhibit 10.4 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, File No. 1-3473). +10.9 First Amendment dated October 28, 1998 to Amended and Restated Employment Agreement between the Company and Bruce A. Smith dated November 1, 1997 (incorporated by reference herein to Exhibit 10.8 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, File No. 1-3473). +10.10 Amended and Restated Employment Agreement between the Company and William T. Van Kleef dated as of October 28, 1998 (incorporated by reference herein to Exhibit 10.9 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, File No. 1-3473). +10.11 Amended and Restated Employment Agreement between the Company and James C. Reed, Jr. dated as of October 28, 1998 (incorporated by reference herein to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, File No. 1-3473). +10.12 Management Stability Agreement between the Company and Thomas E. Reardon dated November 6, 2002 (incorporated by reference herein to Exhibit 10.16 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-3473). +10.13 Management Stability Agreement between the Company and Donald A. Nyberg dated December 12, 1996 (incorporated by reference herein to Exhibit 10.7 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, File No. 1-3473). +10.14 Management Stability Agreement between the Company and Susan A. Lerette dated November 6, 2002 (incorporated by reference herein to Exhibit 10.19 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-3473). +10.15 Management Stability Agreement between the Company and Stephen L. Wormington dated November 6, 2002 (incorporated by reference herein to Exhibit 10.20 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-3473). +10.16 Management Stability Agreement between the Company and Gregory A. Wright dated November 6, 2002 (incorporated by reference herein to Exhibit 10.21 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-3473).
EXHIBIT NUMBER DESCRIPTION - ------- ----------- +10.17 Management Stability Agreement between the Company and W. Eugene Burden dated November 6, 2002 (incorporated by reference herein to Exhibit 10.23 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-3473). +10.18 Management Stability Agreement between the Company and Everett D. Lewis dated November 6, 2002 (incorporated by reference herein to Exhibit 10.24 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-3473). +10.19 Management Stability Agreement between the Company and James L. Taylor dated November 6, 2002 (incorporated by reference herein to Exhibit 10.25 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-3473). +10.20 Management Stability Agreement between the Company and Daniel J. Porter dated September 6, 2001 (incorporated by reference herein to Exhibit 10.25 to Registration Statement No. 333-75056). +10.21 Management Stability Agreement between the Company and Rick D. Weyen dated September 6, 2001 (incorporated by reference herein to Exhibit 10.26 to Registration Statement No. 333-75056). +10.22 Management Stability Agreement between the Company and Otto C. Schwethelm dated November 6, 2002 (incorporated by reference herein to Exhibit 10.28 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-3473). +10.23 Management Stability Agreement between the Company and Rodney S. Cason dated November 6, 2002 (incorporated by reference herein to Exhibit 10.29 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-3473). +10.24 Management Stability Agreement between the Company and Joseph M. Monroe dated November 6, 2002 (incorporated by reference herein to Exhibit 10.30 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-3473). +10.25 Management Stability Agreement between the Company and Alan R. Anderson dated November 6, 2002 (incorporated by reference herein to Exhibit 10.31 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-3473). +10.26 Management Stability Agreement between the Company and J. William Haywood dated November 6, 2002 (incorporated by reference herein to Exhibit 10.32 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-3473). +10.27 Management Stability Agreement between the Company and G. Scott Spendlove dated January 24, 2002 (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, 2002, File No. 1-3473.) +10.28 The Company's Amended Incentive Stock Plan of 1982, as amended through February 24, 1988 (incorporated by reference herein to Exhibit 10(t) to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1988, File No. 1-3473). +10.29 Resolution approved by the Company's stockholders on April 30, 1992 extending the term of the Company's Amended Incentive Stock Plan of 1982 to February 24, 1994 (incorporated by reference herein to Exhibit 10(o) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, File No. 1-3473). +10.30 Copy of the Company's Key Employee Stock Option Plan dated November 12, 1999 (incorporated by reference herein to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2002, File No. 1-3473.) +10.31 Copy of the Company's Amended and Restated Executive Long-Term Incentive Plan, as amended through May 25, 2000 (incorporated by reference herein to Exhibit 99.1 to the Company's Registration Statement No. 333-39070 filed on Form S-8). +10.32 Amendment to the Company's Amended and Restated Executive Long-Term Incentive Plan effective as of June 20, 2002 (incorporated by reference herein to Exhibit 10.31 to the Company's Registration Statement No. 333-92468). *10.33 Second Amendment to the Company's Amended and Restated Executive Long-Term Incentive Plan effective as of May 1, 2003. +10.34 Copy of the Company's Non-Employee Director Retirement Plan dated December 8, 1994 (incorporated by reference herein to Exhibit 10(t) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, File No. 1-3473).
EXHIBIT NUMBER DESCRIPTION - ------- ----------- +10.35 Amended and Restated 1995 Non-Employee Director Stock Option Plan, as amended through March 15, 2000 (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, 2002, File No. 1-3473.) +10.36 Amendment to the Company's Amended and Restated 1995 Non-Employee Director Stock Option Plan (incorporated by reference herein to Exhibit 10.40 to the Company's Registration Statement No. 333-92468). +10.37 Copy of the Company's Board of Directors Deferred Compensation Plan dated February 23, 1995 (incorporated by reference herein to Exhibit 10(u) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, File No. 1-3473). +10.38 Copy of the Company's Board of Directors Deferred Compensation Trust dated February 23, 1995 (incorporated by reference herein to Exhibit 10(v) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, File No. 1-3473). +10.39 Copy of the Company's Board of Directors Deferred Phantom Stock Plan (incorporated by reference herein to Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1997, File No. 1-3473). +10.40 Phantom Stock Option Agreement between the Company and Bruce A. Smith dated effective October 29, 1997 (incorporated by reference herein to Exhibit 10.20 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, File No. 1-3473). +10.41 Form of Indemnification Agreement between the Company and its officers and directors (incorporated by reference herein to Exhibit B to the Company's Proxy Statement for the Annual Meeting of Stockholders held on February 25, 1987, File No. 1-3473). 10.42 Letter dated May 5, 2002 from the Company to the State of California Department of Justice, Office of Attorney General (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on May 24, 2002, File No. 1-3473; portions of this document have been omitted pursuant to a request for confidential treatment). **10.43 $650,000,000 Credit Agreement, dated as of , among the Company, Goldman Sachs Credit Partners L.P. (the syndication agent), Bank One, NA (the administrative agent) and a syndicate of banks, financial institutions and other entities. **10.44 Security Agreement dated as of , by and between the company, certain of its subsidiary parties thereto and Bank One NA as Agent. *12.1 Statement of Computation of Ratio of Earnings to Fixed Charges. 21.1 Subsidiaries of the Company (incorporated by reference herein to Exhibit 21.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-3473). *23.1 Consent of Deloitte & Touche LLP. *23.3 Consent of Fulbright & Jaworski L.L.P. (included in its opinion filed as Exhibit 5.1). *24.1 Powers of Attorney of certain officers and directors of Tesoro Petroleum Corporation and other Registrants (included on the signature pages hereof). *25.1 Form T-1, Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York. *99.1 Form of Letter of Transmittal and Consent. *99.2 Form of Notice of Guaranteed Delivery. *99.3 Form of Letter from Tesoro Petroleum Corporation to Registered Holders and Depository Trust Company Participants. *99.4 Form of Instructions from Beneficial Owners to Registered Holders and Depository Trust Company Participants. *99.5 Form of Letter to Clients.
- --------------- * Filed herewith. ** To be filed by Amendment. + Identifies management contracts or compensatory plans or arrangements. EX-1.1 3 h05116exv1w1.txt PURCHASE AGREEMENT DATED APRIL 7, 2002 EXHIBIT 1.1 TESORO PETROLEUM CORPORATION 8% SENIOR SECURED NOTES DUE 2008 PURCHASE AGREEMENT April 7, 2003 Goldman, Sachs & Co., As representative of the several Purchasers named in Schedule I hereto, c/o Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004 Ladies and Gentlemen: Tesoro Petroleum Corporation, a Delaware corporation (the "Company"), proposes, subject to the terms and conditions stated herein, to issue and sell to the Purchasers named in Schedule I hereto (the "Purchasers"), an aggregate of $375,000,000 principal amount of the Company's 8% Senior Secured Notes due 2008 (the "Securities"). The Securities will be unconditionally guaranteed as to the payment of principal, premium and interest (including special interest), if any, (the "Guarantees") by Digicomp Inc., Far East Maritime Company, Gold Star Maritime Company, Kenai Pipe Line Company, Tesoro Alaska Company, Tesoro Alaska Pipeline Company, Tesoro Aviation Company, Tesoro Financial Services Holding Company, Tesoro Gas Resources Company, Inc., Tesoro High Plains Pipeline Company, Tesoro Marine Services Holding Company, Tesoro Marine Services, LLC, Tesoro Maritime Company, Tesoro Petroleum Companies, Inc., Tesoro Refining and Marketing Company, Tesoro Technology Company, Tesoro Trading Company, Tesoro Vostok Company, Tesoro Wasatch, LLC and Victory Finance Company (each a "Delaware Guarantor" and, collectively, the "Delaware Guarantors") Smiley's Super Service, Inc., and Tesoro Hawaii Corporation, each a Hawaii corporation (together, the "Hawaii Guarantors") and Tesoro Northstore Company, an Alaska corporation (the "Alaska Guarantor" and, collectively with the Delaware Guarantors and the Hawaii Guarantors, the "Guarantors"). Capitalized terms used but not defined herein shall have the meanings assigned to them in the Description of the Notes section of the Offering Circular (as defined below). The Company, simultaneously with the sale of the Securities pursuant to an indenture to be dated as of April 17, 2003 (the "Indenture") among the Company, the Guarantors and The Bank of New York as Trustee (the "Trustee"), proposes to borrow an aggregate amount of $200,000,000 in term loans (the "Term Loans") from lenders pursuant to a term loan agreement among the Company, the Guarantors and Goldman Sachs Credit Partners L.P., as the term loan administrative agent (the "Term Loan Agreement") (it being understood and agreed that neither Goldman Sachs Credit Partners L.P. nor any of its affiliates is, as of the date of this Agreement, obligated to enter into the Term Loan Agreement or to provide any funding thereunder), and an aggregate amount of approximately $330,000,000 from lenders under a new $650,000,000 senior credit facility (the "New Credit Facility"), pursuant to a Three-Year Credit Agreement, to be dated as of April 17, 2003, by and among the Company, certain subsidiaries of the Company, certain lenders party thereto and Bank One, NA, as administrative agent (the "New Credit Facility Agreement"), the proceeds of which, along with the proceeds from the Term Loans and the sale of the Securities, will be used to repay all outstanding amounts under the Company's Amended and Restated Credit Agreement dated as of May 17, 2002, by and among the Company, the lenders party thereto, Lehman Brothers Inc., as arranger, Lehman Commercial Paper Inc., as syndication agent, ABN AMRO Bank N.V., Bank of America, N.A., Credit Lyonnais New York Branch and The Bank of Nova Scotia, as co-documentation agents, and Bank One, NA, as administrative agent, as amended by that certain First Amendment dated as of September 30, 2002, and that certain Second Amendment dated as of December 13, 2002 (as amended, the "Existing Senior Secured Credit Facility") and purchase approximately $25,000,000 of the Company's existing senior subordinated notes. Collectively, the repayment of the Existing Senior Secured Credit Facility and purchase by the Company of approximately $25,000,000 of the Company's existing senior subordinated notes with the proceeds from the sale of the Securities, borrowings under the Term Loan Agreement and borrowings under the New Credit Facility, are referred to herein as the "Financing Transaction." The Company and each of the Guarantors have agreed to secure, equally and ratably, the Securities and the Term Loans, by granting to the Collateral Agent, for the benefit of the holders of the Securities, the Trustee, the lenders under the Term Loan Agreement and the Term Loan Administrative Agent (collectively, the "Secured Parties"), a first priority lien (subject to Permitted Prior Liens) as such term is defined in the Description of the Notes section of the Offering Circular on certain of their assets as evidenced by the Security Agreement to be dated April 17, 2003 among the Company, the Guarantors and the Collateral Agent (the "Security Agreement"), the Control Agreement among the Company, Wilmington Trust Corporation or one of its affiliates, as Collateral Agent (the "Collateral Agent") and an institution reasonably acceptable to the Purchasers, as Depository Agent (the "Control Agreement"), and the mortgages or deeds of trust as listed on Schedule A attached hereto (the "Mortgages"), the Collateral Agency Agreement among the Obligors (as such term will be defined in the Credit Agreement), the Trustee, the Term Loan Administrative Agent, and the Collateral Agent (the "Collateral Agency Agreement" and together with the Security Agreement, the Control Agreement, and the Mortgages, collectively, the "Security Documents"). 1. Each of the Company and the Guarantors, jointly and severally, represents and warrants to, and agrees with, each of the Purchasers that: (a) A preliminary offering circular, dated April 2, 2003 (the "Preliminary Offering Circular"), and an offering circular, dated April 7, 2003 (the "Offering Circular"), have been prepared in connection with the offering of the Securities. Any reference to the Preliminary Offering Circular or the Offering Circular shall be deemed to refer to and include the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (the "2002 10-K"), filed pursuant to the United States Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company's Current Report on Form 8-K filed on February 25, 2002, as amended by Amendment No. 1 to the Current Report on Form 8-K filed on April 22, 2002, the Company's Current Report on Form 8-K filed on May 24, 2002, as amended by Amendment No. 1 to the Current Report on Form 8-K filed on July 16, 2002 and Amendment No. 2 to the Current Report on Form 8-K filed on July 24, 2002, and the Company's Current Report on Form 8-K filed on April 2, 2003, each of which is incorporated by reference in and made a part of the Preliminary Offering Circular and the Offering Circular, and any reference to the Preliminary Offering Circular or the Offering Circular, as the case may be, as amended or supplemented, as of any specified date, shall be deemed to include any documents filed with the United States Securities and Exchange Commission (the "Commission") pursuant to 2 Section 13(a), 13(c) or 15(d) of the Exchange Act after the date of the Preliminary Offering Circular or the Offering Circular, as the case may be, and prior to the completion of the distribution of the Securities; and all documents filed under the Exchange Act and so deemed to be included in the Preliminary Offering Circular or the Offering Circular, as the case may be, or any amendment or supplement thereto are hereinafter called the "Exchange Act Reports." The Exchange Act Reports, when they were or are filed with the Commission, conformed or will conform in all material respects to the applicable requirements of the Exchange Act and the applicable rules and regulations of the Commission thereunder. The Preliminary Offering Circular or the Offering Circular and any amendments or supplements thereto and the Exchange Act Reports did not and will not, as of their respective dates, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by a Purchaser through Goldman, Sachs & Co. expressly for use therein; (b) Neither the Company nor any of its subsidiaries has sustained since the date of the latest audited financial statements included in the Offering Circular any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Offering Circular; and, since the respective dates as of which information is given in the Offering Circular, there has not been any change in the capital stock or long-term debt of the Company or any of its subsidiaries or any material adverse change, or any development involving a prospective material adverse change, in or affecting the general affairs, management, consolidated financial position, stockholders' equity or results of operations of the Company and its subsidiaries, otherwise than as set forth or contemplated in the Offering Circular; (c) As of the date of this Agreement, and at the Time of Delivery (as defined below), each of the Company's subsidiaries that are not named as Guarantors under this Agreement and are not guarantors of the Securities, either (i) is not a "Domestic Subsidiary" as such term is defined in the Description of the Notes section of the Offering Circular or (ii) qualifies as an "Immaterial Subsidiary" as such term is defined in the Description of the Notes section of the Offering Circular; (d) The Company and its subsidiaries have good and indefeasible title in fee simple to all real property and good and defensible title to all personal property owned by them, in each case free and clear of all liens, encumbrances and defects except such as are described in, or permitted by, the Offering Circular or such as do not materially adversely affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and all real property, buildings and vessels held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property, buildings and vessels by the Company and its subsidiaries subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights or providing for the relief of debtors and to general equity principles; (e) The Company and the Guarantors have each been duly incorporated or formed, as the case may be, and are validly existing as a corporation or limited liability company, as the case may be, in good standing under the laws of their respective jurisdictions of incorporation or organization, as the case may be, with corporate or limited liability company 3 power and authority to own or lease their properties and conduct their business as described in the Offering Circular, and have been duly qualified as a foreign corporation or limited liability company, as the case may be, for the transaction of business and are in good standing under the laws of each other jurisdiction in which the character of business conducted by it or the location of properties owned or leased make such qualification or registration necessary (except where the failure to so qualify would not have a material adverse effect on (i) the condition (financial or otherwise), results of operations, business, earnings or prospects of the Company and its subsidiaries, taken as a whole, (ii) the value of the Collateral or (iii) the validity or enforceability of the Security Documents or any lien purporting to be created thereby or any right or remedy arising thereunder (a "Material Adverse Effect")); (f) The Company has an authorized capitalization as set forth in the Offering Circular, and all of the issued shares of capital stock of the Company have been duly and validly authorized and issued and are fully paid and non-assessable; all of the issued shares of capital stock of each Guarantor that is a corporation have been duly and validly authorized and issued, are fully paid and non-assessable and (except as described in the Offering Circular and except for one share of Tesoro Petroleum (Singapore) Pte Ltd.) are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims (each, a "Lien"); and all of the outstanding limited liability company interests of each Guarantor that is a limited liability company are owned directly or indirectly by the Company, free and clear of all Liens (except as described in the Offering Circular); (g) The Securities have been duly authorized by the Company and, at the Time of Delivery, will have been duly executed and delivered by the Company. When the Securities have been issued, executed and authenticated in accordance with the terms of the Indenture, and delivered against payment therefor in accordance with the terms hereof and thereof, the Securities will constitute valid and legally binding obligations of the Company, entitled to the benefits provided by the Indenture, enforceable against the Company in accordance with their terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights and to general equity principles; (h) The Indenture has been duly authorized by the Company and each of the Guarantors, and, when executed and delivered by the Company and each of the Guarantors will have been duly executed and delivered (assuming due authorization, delivery and performance by the Trustee) and will constitute a valid and legally binding obligation of the Company and the Guarantors, enforceable against the Company in accordance with its terms, subject, as to enforcement against the Company, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights or providing for the relief of debtors and to general equity principles, and enforceable against the Guarantors in accordance with its terms, subject, as to enforcement against the Guarantors, to bankruptcy, insolvency, fraudulent transfer, fraudulent conveyance, reorganization and other laws of general applicability relating to or affecting creditors' rights or providing for the relief of debtors and to general equity principles; (i) The Guarantees have been duly authorized by each of the Guarantors and, when issued and delivered pursuant to this Agreement and the Indenture, will have been duly executed, issued and delivered and will constitute valid and legally binding obligations of such Guarantors, entitled to the benefits provided by the Indenture and enforceable against them in accordance with their terms, subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, fraudulent conveyance, reorganization and other laws of general applicability relating to or affecting creditors' rights or providing for the relief of debtors and to general equity principles; 4 (j) The exchange and registration rights agreement to be dated April 17, 2003, among the Company, the Guarantors and the Purchasers (the "Registration Rights Agreement") has been duly authorized by the Company and each of the Guarantors and, when executed and delivered by the Company and such Guarantors, will have been duly executed and delivered and will constitute a valid and legally binding obligation of the Company and such Guarantors, enforceable against them in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights or providing for the relief of debtors and to general equity principles; (k) The Company's 8% Senior Secured Notes due 2008 to be issued in exchange for the Securities in accordance with the Registration Rights Agreement, which will have terms substantially identical in all material respects to the Securities (the "Exchange Securities"), have been duly authorized for issuance by the Company and, when issued and delivered pursuant to this Agreement, the Registration Rights Agreement and the Indenture, will have been duly executed. When the Exchange Securities have been issued, executed and authenticated in accordance with the terms of the Indenture, they will constitute valid and legally binding obligations of the Company, entitled to the benefits provided by the Indenture and enforceable in accordance with their terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights or providing for the relief of debtors and to general equity principles; (l) The guarantees of the Company's obligations under the Exchange Securities (the "Exchange Guarantees") to be offered in exchange for the Guarantees in the Exchange Offer have been duly authorized by each of the Guarantors and, when issued and delivered pursuant to this Agreement and the Indenture, will have been duly executed, issued and delivered and will constitute valid and legally binding obligations of each such the Guarantor, entitled to the benefits provided by the Indenture and enforceable in accordance with their terms, subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, fraudulent conveyance, reorganization and other laws of general applicability relating to or affecting creditors' rights or providing for the relief of debtors and to general equity principles; (m) The Security Documents to which the Company and the Guarantors are a party have each been duly authorized by each of the Company and such Guarantors and, when executed and delivered by the Company and each of the Guarantors, will constitute valid and legally binding obligations of the Company and such Guarantors, respectively, enforceable against the Company and such Guarantors in accordance with their respective terms, subject, as to enforcement and the Liens created thereby, to bankruptcy, insolvency, fraudulent transfer, fraudulent conveyance, reorganization and other laws of general applicability relating to or affecting creditors' rights or providing for the relief of debtors and to general equity principles; (n) The Mortgages have each been duly authorized by the Guarantors party thereto and, when executed and delivered by such Guarantors, will constitute valid and legally binding obligations of such Guarantors, respectively, enforceable against such Guarantors in accordance with their respective terms, subject, as to enforcement and the Liens created thereby, to bankruptcy, insolvency, fraudulent transfer, fraudulent conveyance, reorganization and other laws of general applicability relating to or affecting creditors' rights or providing for the relief of debtors and to general equity principles; (o) None of the transactions contemplated by this Agreement (including, without limitation, the use of the proceeds from the sale of the Securities) will violate or result in a violation of Section 7 of the Exchange Act, or any regulation promulgated thereunder, 5 including, without limitation, Regulations T, U, and X of the Board of Governors of the Federal Reserve System; (p) Neither the Company nor the Guarantors has taken, nor will any of them take, directly or indirectly, any action prohibited by Regulation M under the Securities Act of 1933, as amended (the "Securities Act"); (q) The issue and sale of the Securities and the Guarantees, the grant and perfection of security interests in the Collateral pursuant to the Security Documents, the performance by the Company and the Guarantors with their respective obligations pursuant to provisions of the Securities, the Indenture, the Guarantees, the Registration Rights Agreement, the Security Documents, and this Agreement (collectively, the "Operative Documents"), the consummation by the Company and the Guarantors of the transactions contemplated by the Financing Transaction or the transactions contemplated by this Agreement will not: (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject; (ii) result in any violation of the provisions of the Certificate of Incorporation or Certificate of Formation or By-laws or other organizational documents, as applicable, of the Company or any of its subsidiaries; (iii) result in any violation of the applicable provisions of any law or statute or any order, rule or regulation, judgment or decree of any court or governmental agency or body having jurisdiction over, and applicable to, the Company or any of its subsidiaries or any of their respective properties or assets; or (iv) result in the imposition or creation of (or the obligation to create or impose) a Lien under any agreement or instrument to which the Company or any subsidiary is a party or by which the Company or any of their respective properties or assets is bound (other than as provided in favor of the holders of the Securities and lenders under the Term Loan Agreement, and as provided in favor of the lenders under the New Credit Facility); except in the case of clauses (i), (iii) and (iv) for such conflicts, breaches, violations, defaults or Liens which, individually or in the aggregate, would not result in a Material Adverse Effect; (r) No consent, approval, authorization, order, registration or qualification of or with any court or governmental agency or body is required for the issue and sale of the Securities and the Guarantees, the grant and perfection of security interests in the Collateral pursuant to the provisions of the Security Documents, the performance by the Company and the Guarantors with their respective obligations pursuant to the Securities, the Guarantees, the Indenture, the Registration Rights Agreement and the Security Documents or the consummation by the Company and the Guarantors of the transactions contemplated by the Financing Transaction or the transactions contemplated by this Agreement except for (1) the filing and effectiveness of a registration statement by the Company with the Commission under the Securities Act pursuant to the Registration Rights Agreement, (2) the filings required to perfect the Collateral Agent's security interests granted pursuant to the Security Documents, (3) the filings required to release existing Liens, (4) such consents, approvals, authorizations, 6 registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Securities by the Purchasers, (5) those regulatory approvals from the North Dakota Public Service Commission required for the grant of security interest in the Company's 700-mile pipeline system in North Dakota and Montana, and the Capital Stock of Tesoro High Plains Pipeline Company, and (6) such consents required in connection with the assignment and transfer of leases related to the waterfront rights at the Hawaii, Alaska, California and Washington refineries of subsidiaries of the Company; (s) Neither the Company nor any of the subsidiaries is in violation of its Certificate of Incorporation or By-laws or in default in the performance or observance of any obligation, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party or by which it or any of its properties may be bound, except where such violation or default would not have a Material Adverse Effect; (t) The statements set forth in the Offering Circular under the captions "Business-Government Regulation and Legislation," "Description of Other Indebtedness," "Description of the Notes" and "Certain Federal Income Tax Considerations" are accurate in all material respects and present fairly the information described therein; (u) Other than as set forth in the Offering Circular, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or to which any property or assets of the Company or any of its subsidiaries is the subject which (i) could reasonably be expected to have a Material Adverse Effect or (ii) could materially and adversely affect the consummation by the Company and each of the Guarantors of their obligations pursuant to this Agreement or the other Operative Documents; and, to the Company's and each of the Guarantors' knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others; (v) When the Securities and the Guarantees are issued and delivered pursuant to this Agreement, neither the Securities nor the Guarantees will be of the same class (within the meaning of Rule 144A under the Securities Act) as securities of the Company or the Guarantors which are listed on a national securities exchange registered under Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer quotation system; (w) The Company is subject to Section 13 or 15(d) of the Exchange Act; (x) Neither the Company nor any of its subsidiaries is, or after giving effect to the offering and sale of the Securities, will be, subject to the Public Utility Holding Company Act of 1935, as amended, and the rules and regulations thereunder; (y) Neither the Company, nor any of its subsidiaries, is, or, after giving effect to the offering and sale of the Securities and the application of the proceeds therefrom as described under "Use of Proceeds" in the Offering Circular, will be, an "investment company" or an entity "controlled by an investment company," as such terms are defined in the United States Investment Company Act of 1940, as amended, and the rules and regulations thereunder (the "Investment Company Act"); (z) The Company and the Guarantors (i) make and keep accurate books and records and (ii) maintain internal accounting controls which provide reasonable assurance that (A) transactions are executed in accordance with management's authorization, (B) transactions are recorded as necessary to permit preparation of its financial statements and to 7 maintain accountability for its assets, (C) access to its assets is permitted only in accordance with management's authorization and (D) the reported accountability for its assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any difference; (aa) Neither the Company nor any Guarantor nor any their respective affiliates nor any person acting on its or their behalf has engaged or will engage in any "directed selling efforts" within the meaning of Regulation S under the Securities Act with respect to the Securities or the Guarantees. The Company and the Guarantors, each of their affiliates and any person acting on its or their behalf (other than the Purchasers, as to whom the Company and the Guarantors make no representation) has complied and will comply with the offering restriction requirements of Regulation S. To the Company's and Guarantor's knowledge, the sale of the Securities and the Guarantees pursuant to Regulation S is not part of a plan or scheme to evade the registration provisions of the Securities Act; (bb) Neither the Company nor any of the Guarantor or any of its or their respective affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act, an "Affiliate") has directly, or through any agent, (i) sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security (as defined in the Securities Act) which is or will be integrated with the sale of the Securities or the Guarantees in a manner that would require the registration under the Securities Act of the Securities or the Guarantees or (ii) engaged in any form of general solicitation or general advertising in connection with the offering of the Securities or the Guarantees (as those terms are used in Regulation D under the Securities Act), or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act; provided, however, no representation is made as to the Initial Purchasers or any person acting on their behalf. No securities of the same class as the Securities and the Guarantees have been issued and sold by the Company or the Guarantors within the six-month period immediately prior to the date hereof; (cc) Deloitte & Touche LLP, who have certified certain financial statements of the Company and its subsidiaries, are independent public accountants as defined in the AICPA's Code of Professional Conduct; (dd) Except as described in the Offering Circular and except for such matters as would not, singly or in the aggregate, result in a Material Adverse Effect, (i) neither the Company nor any of its subsidiaries is in violation of any federal, state, local or foreign statute, law, rule, regulation, ordinance, code, policy or rule of common law or any judicial or administrative order, consent, decree or judgment thereof, including any judicial or administrative order, consent, decree or judgment relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products (collectively, "Hazardous Materials") or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, "Environmental Laws"), (ii) the Company and each of its subsidiaries have all permits, authorizations and approvals required under any applicable Environmental Laws and are each in compliance with their requirements, (iii) to the knowledge of the Company, there are no pending or overtly threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Law against the Company or any of its subsidiaries and (iv) to the knowledge of the Company, there are no events or circumstances that might reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or 8 proceeding by any private party or governmental body or agency, against or affecting the Company or any of the subsidiaries relating to Hazardous Materials or Environmental Laws; (ee) The Company and each of its subsidiaries own or possess adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights and licenses necessary for the conduct of their respective businesses, except where the failure to have such rights would not have a Material Adverse Effect, and have no reason to believe that the conduct of their respective businesses will conflict with, and have not received any notice of any claim of conflict with, any such rights of others which, in the aggregate, could reasonably be expected to have a Material Adverse Effect; (ff) The pro forma financial statements which are included and incorporated by reference in the Offering Circular present fairly in all material respects the historical and proposed transactions previously consummated by the Company or contemplated by this Agreement and the Offering Circular; and such pro forma financial statements comply as to form in all material respects with the applicable accounting requirements of the Securities Act, the Exchange Act and the Rules and Regulations and have been prepared on a basis consistent with the historical consolidated financial statements of the Company; (gg) The financial statements, including the notes thereto, included or incorporated by reference in the Offering Circular comply as to form in all material respects with the applicable accounting requirements of the Securities Act, the Exchange Act, and the rules and regulations of the Commission thereunder, and present fairly in all material respects the financial position of the Company and its consolidated subsidiaries and the other entities for which financial statements are included in the Offering Circular as of the dates indicated and condition and results of operations for the periods specified; said financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America applied on a consistent basis throughout the periods involved except as noted therein; and the other historical financial and statistical information and operating data of the Company which appear in and are included and incorporated in by reference in the Offering Circular are in all material respects accurately presented and prepared on a basis consistent with the financial statements included and incorporated by reference in the Offering Circular and the books and records of the Company; (hh) The Company and its subsidiaries, collectively (the "Consolidated Company"), and each of the Guarantors has not, and, as a result of consummation of the transactions herein contemplated and the consummation of the Financing Transaction, will not have, incurred debts beyond its ability to pay as they mature; (ii) The present fair saleable value of the assets of the Consolidated Company and each of the Guarantors, exceeds the amount required to pay the probable liability on its and their existing debts, respectively (whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent), as they become absolute and matured, and as a result of consummation of the transactions herein contemplated and after giving effect to the Financing Transaction, will exceed such amount; (jj) The Consolidated Company and each of the Guarantors, does not, and, as a result of consummation of the transactions herein contemplated and the consummation of the Financing Transaction, will not, have unreasonably small capital for it to carry on its business as proposed to be conducted; 9 (kk) Neither the Consolidated Company nor any of the Guarantors are incurring obligations or making transfers under any evidence of indebtedness with the intent to hinder, delay or defraud any entity to which it is or will become indebted; (ll) Except for such matters which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, (i) no labor disturbance by the employees of the Company or any of its subsidiaries exists or, to the best of the Company's knowledge, is imminent, (ii) except as disclosed in the Offering Circular, neither the Company nor any of its subsidiaries is party to a collective bargaining agreement, and (iii) except as disclosed in the Offering Circular, there are no unfair labor practice complaints pending against the Company or any of its subsidiaries or, to the Company's knowledge, threatened against any of them; (mm) No "prohibited transaction" (as defined in Section 406 of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as amended from time to time (the "Code")), or "accumulated funding deficiency" (as defined in Section 302 of ERISA) or any of the events set forth in Section 4043(b) of ERISA (other than events with respect to which the 30-day notice requirement under Section 4043 of ERISA has been waived) has occurred with respect to any "employee benefit plan", (as defined in Section 3(3) of ERISA), or any "employee benefit plan" of any entity which is considered one employer with the Company under Section 4001 of ERISA or Section 414 of the Code (an "ERISA Affiliate"); each such "employee benefit plan" is in compliance in all material respects with its terms and applicable law, including ERISA and the Code; and the Company or any ERISA Affiliate has not participated in any multiemployer plan (as defined in Section 3(37) of ERISA); the Company or any ERISA Affiliate has not incurred and does not expect to incur liability under Title IV of ERISA with respect to the termination of, or withdrawal from any "pension plan" (as defined in Section 3(2) of ERISA) and each "pension plan" for which the Company would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which could cause the loss of such qualification; (nn) Neither the Company nor any of its subsidiaries nor, to the Company's knowledge, any of its employees or agents has at any time during the last five years (i) made any unlawful contribution to any candidate for foreign office, or failed to disclose fully any contribution in violation of law or (ii) made any payment to any Federal or state governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments required or permitted by the laws of the United States or any jurisdiction thereof; (oo) At the Time of Delivery, no Pipeline Subsidiary will have guaranteed or granted or agreed to grant any security interest in any of its present or future property to secure any of the Obligations under the New Credit Facility and the New Credit Facility will be governed by an agreement that includes the provisions described in clause (1) of the definition of "Qualified Credit Facility" in the Description of the Notes section of the Offering Circular; (pp) As of the Time of Delivery, the Company and the Guarantors will own the Collateral free and clear of all Liens (other than Permitted Liens), and no Financing Statements (as defined below) in respect of any property or assets of the Company or any Guarantor will be on file in favor of any person other than those in respect of Permitted Prior Liens (as such term is defined in the Description of the Notes section of the Offering Circular) and those to be terminated with respect to existing indebtedness; 10 (qq) When executed and delivered to the Collateral Agent at the Time of Delivery, the Security Documents grant and create, in favor of the Collateral Agent for the benefit of the Secured Parties as security for all of the Secured Obligations, a valid and enforceable security interest in the Collateral, and when the filings referred to in the following sentences are made, such security interests will be perfected first priority security interests (subject to Permitted Prior Liens). When delivered at the Time of Delivery, each Mortgage will be delivered, duly acknowledged and, if required for recordation, attested and otherwise will be in recordable form, and when such Mortgage is filed for record and recorded in the filing office identified therein, the security interest of the Collateral Agent in the real property described therein will be duly perfected. Each of the Company and Guarantors is a "registered organization" (as defined in Article 9 of the California Uniform Commercial Code) under the law of the state in which it is identified in the Indenture, as being organized, and at the Time of Delivery all security interests granted under the Security Documents in Collateral consisting of personal property or fixtures will be duly perfected to the extent such security interests may be perfected by filing upon the filing of the financing statements referred to in Section 7(m) hereof. At the Time of Delivery, (i) all Collateral consisting of Capital Stock of Pipeline Subsidiaries will be represented by certificated securities and (ii) all such certificated securities and all promissory notes and other instruments then evidencing or representing any Collateral will be delivered to the Collateral Agent in pledge for the benefit of the Secured Parties as security for all of the Secured Obligations, duly endorsed by an effective endorsement (unless such certificated securities, promissory notes and instruments are Excluded Assets); (rr) All Obligations under or in respect of the Securities and the Term Loans constitute "Senior Debt" as such term is defined in, and for the purposes of, the indentures governing the Company's outstanding 9-5/8% senior subordinated notes due 2012, 9-5/8% senior subordinated notes due 2008 and 9% senior subordinated notes due 2008 and the promissory notes constituting the Company's junior subordinated notes due 2012; (ss) As of the Time of Delivery, the representations and warranties contained in the Security Documents will be true and correct in all respects; and (tt) The Securities, the Guarantees, the Indenture, the Registration Rights Agreement, the Security Documents, the Term Loan Agreement and the New Credit Facility Agreement will conform in all material respects to the descriptions thereof in the Offering Circular. 2. Subject to the terms and conditions herein set forth, the Company agrees to issue and sell to each of the Purchasers, and each of the Purchasers agrees, severally and not jointly, to purchase from the Company, at a purchase price of 96.494% of the principal amount thereof, plus accrued interest, if any, from April 17, 2003 to the Time of Delivery hereunder, the principal amount of Securities (and the Guarantees thereof) set forth opposite the name of such Purchaser in Schedule I hereto. 3. Upon the authorization by you of the release of the Securities and the Guarantees, the several Purchasers propose to offer the Securities and the Guarantees for sale upon the terms and conditions set forth in this Agreement and the Offering Circular and each Purchaser hereby represents and warrants to, and agrees with the Company that: (a) It will offer and sell the Securities (i) only to persons who it reasonably believes are "qualified institutional buyers" ("QIBs") within the meaning of Rule 144A under the Securities Act in transactions meeting the requirements of Rule 144A and (ii) through its selling agents, outside the United States, to non-U.S. persons in reliance on Regulation S under the Securities Act; 11 (b) It is an Institutional Accredited Investor; and (c) It will not solicit offers for, or offer or sell, the Securities or the Guarantees by means of any form of general solicitation or general advertising or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act. (d) In connection with the transactions described in subsection (a)(ii) of this Section 3, you have offered and sold the Securities and the Guarantees, and will offer and sell the Securities and the Guarantees, (i) as part of your distribution at any time and (ii) otherwise until 40 days after the later of the commencement of the offering and the Closing Date (as defined herein) (the "Distribution Compliance Period"), only in accordance with Rule 903 of Regulation S. Accordingly, the Purchasers represent and agree that, with respect to the transactions described in subsection (a)(ii) of this Section 3, neither they, nor any of their Affiliates, nor any person acting on their behalf has engaged or will engage in any directed selling efforts with respect to the Securities and the Guarantees, and that they have complied and will comply with the offering restrictions requirements of Regulation S. The Purchasers agree that, at or prior to the confirmation of sale of the Securities and the Guarantees pursuant to subsection (a)(iii)(B) of this Section 3, they shall have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Securities and Guarantees from the Purchasers during the Distribution Compliance Period a confirmation or notice to substantially the following effect: "The Securities covered hereby have not been registered under the U.S. Securities Act of 1933 (the "Securities Act") and may not be offered or sold within the United States to, or for the account or benefit of, U.S. Persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and the time of delivery of the Securities, except in either case in accordance with Regulation S or Rule 144A under the Securities Act. The terms used above have the meaning given to them by Regulation S." 4. (a) The Securities to be purchased by each Purchaser hereunder will be represented by one or more definitive global Securities in book-entry form which will be deposited by or on behalf of the Company with The Depository Trust Company ("DTC") or its designated custodian. The Company will deliver the Securities and the Guarantees to Goldman, Sachs & Co., for the account of each Purchaser, against payment by or on behalf of such Purchaser of the purchase price therefor by wire transfer in immediately available funds, by causing DTC to credit the Securities and the Guarantees to the account of Goldman, Sachs & Co. at DTC. The Company and the Guarantors will cause the certificates representing the Securities and the Guarantees to be made available to Goldman, Sachs & Co. for checking at least 24 hours prior to the Time of Delivery at the office of DTC or its designated custodian (the "Designated Office"). The time and date of such delivery and payment shall be 9:30 a.m., New York City time, on April 17, 2003 or such other time and date as Goldman, Sachs & Co. and the Company may agree upon in writing. Such time and date are herein called the "Time of Delivery;" and (b) The documents to be delivered at the Time of Delivery by or on behalf of the parties hereto pursuant to Section 7 hereof, including the cross-receipt for the Securities and any additional documents requested by the Purchasers pursuant to Section 7(u) hereof, will be delivered at such time and date at the offices of Latham & Watkins LLP, 885 Third Avenue, New York, New York 10022 (the "Closing Location"), and the Securities will be delivered at the Designated Office, all at the Time of Delivery. A meeting will be held at the Closing Location at 5:00 p.m., New York City time, on the New York Business Day next preceding the Time of Delivery, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence will be available for review by the 12 parties hereto. For the purposes of this Section 4, "New York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York are generally authorized or obligated by law or executive order to close. 5. Each of the Company and the Guarantors, jointly and severally, agrees with each of the Purchasers: (a) To prepare the Offering Circular in a form approved by you; to make no amendment or any supplement to the Offering Circular which shall be disapproved by you promptly after reasonable notice thereof; and to furnish you with such number of copies thereof as you shall reasonably request; (b) Promptly, from time to time, to take such action as you may reasonably request to qualify the Securities and the Guarantees for offering and sale (or obtain an exemption from registration) under the securities laws of such jurisdictions as you may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Securities and the Guarantees, provided that in connection therewith, neither the Company, nor any of the Guarantors, shall be required to qualify as a foreign corporation or dealer in securities or to execute a general consent to service of process in any jurisdiction; (c) If, at any time prior to the expiration of nine months after the date of the Offering Circular, any event shall have occurred as a result of which the Offering Circular as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Offering Circular is delivered, not misleading, or, if for any other reason it shall be necessary or desirable during such same period to amend or supplement the Offering Circular, to notify you and upon your request to prepare and furnish without charge to each Purchaser and to any dealer in securities as many written and electronic copies as you may from time to time reasonably request of an amended Offering Circular or a supplement to the Offering Circular which will correct such statement or omission or effect such compliance; (d) To take such steps as shall be necessary to ensure that neither the Company nor any Guarantor shall become an "investment company" within the meaning of such term under the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission thereunder; (e) At any time when the Company is not subject to Section 13 or 15(d) of the Exchange Act, for the benefit of holders from time to time of Securities, to furnish at its expense, upon request, to holders of Securities and prospective purchasers of securities information (the "Additional Issuer Information") satisfying the requirements of subsection (d)(4)(i) of Rule 144A under the Securities Act; (f) To use its reasonable best efforts to cause the Securities to be eligible for the PORTAL trading system of the National Association of Securities Dealers, Inc.; (g) To furnish to the Purchasers as soon as practicable after the end of each fiscal year an annual report (including a balance sheet and statements of income, stockholders' equity and cash flows of the Company and its consolidated subsidiaries certified by independent public accountants) and, as soon as practicable after the end of each of the first three quarters of each fiscal year (beginning with the fiscal quarter ending after the date of the 13 Offering Circular), to make available to the Purchasers consolidated summary financial information of the Company and its subsidiaries for such quarter in reasonable detail; (h) During a period of five years from the date of the Offering Circular, to furnish to you copies of all reports or other communications (financial or other) furnished to stockholders of the Company, and to deliver to you as soon as they are available, copies of any reports and financial statements furnished to or filed with the Commission or any securities exchange on which the Securities, or any class of securities of the Company or any of the Guarantors is listed; (i) Not to, and to cause its affiliates not to, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the Securities Act) in a transaction that could be integrated with the sale of the Securities or Guarantees in a manner that would require the registration under the Securities Act of the Securities or the Guarantees; (j) To do and perform all things required to be done and performed under this Agreement, the Securities, the Guarantees, the Indenture, the Registration Rights Agreement and the Security Documents prior to and after the Time of Delivery; (k) To comply with all agreements set forth in the representation letters of the Company to DTC relating to the approval of the Securities by DTC for "book entry" transfer; (l) To use the net proceeds received by it from the sale of the Securities pursuant to this Agreement in the manner specified in the Offering Circular under the caption "Use of Proceeds"; and (m) For a period of 180 days from the date of the Offering Circular, neither the Company, nor any of its subsidiaries or other affiliates over which it exercises management or voting control, nor any person acting on its behalf will, without the prior written consent of Goldman, Sachs & Co., offer, sell, contract to sell or otherwise dispose of any securities that are substantially similar to the Securities, except for the Exchange Securities in connection with the Exchange Offer. 6. Each of the Company and the Guarantors, jointly and severally, covenants and agrees with the several Purchasers that the Company and the Guarantors will pay or cause to be paid all reasonable expenses incident to the performance of the obligations of the Company and the Guarantors under this Agreement, including the following: (i) the fees, disbursements and expenses of the Company's counsel and accountants in connection with the issue of the Securities and the Guarantees, and all other expenses in connection with the preparation, printing and filing of the Preliminary Offering Circular and the Offering Circular and any amendments and supplements thereto and the mailing and delivering of copies thereof to the Purchasers and persons designated by them; (ii) the cost of printing or producing any Agreement among Purchasers, this Agreement, the Indenture, the Registration Rights Agreement, the Security Documents, the Blue Sky and Legal Investment Memoranda, closing documents (including any compilations thereof) and any other documents in connection with the offering, purchase, sale and delivery of the Securities; (iii) all expenses in connection with the qualification of the Securities, the Exchange Securities, the Guarantees and the Exchange Guarantees for offering and sale under state securities laws as provided in Section 5(b) hereof, including the reasonable fees and disbursements of counsel for the Purchasers in connection with such qualification and in connection with the Blue Sky and legal investment surveys; (iv) all expenses associated with the creation and perfection of security interests and associated documents, including, without limitation, the Security Documents and all Financing Statements (as defined below), including filing fees and the reasonable fees and disbursements of Latham & Watkins LLP incurred in connection therewith and the fees and disbursements of local counsel to the Purchasers incurred in 14 connection therewith; (v) any fees charged by securities rating services for rating the Securities and the Exchange Securities; (vi) the cost of printing the Securities and the Guarantees; (vii) the fees and expenses of the Trustee and any agent of the Trustee and the fees and disbursements of counsel for the Trustee in connection with the Indenture and the Securities; (viii) the fees and expenses of the Collateral Agent and any agent of the Collateral Agent and the fees and expenses of counsel for the Collateral Agent in connection with the Security Documents, the Financing Statements and the Collateral; (ix) any expense or listing fee incurred in connection with the designation of the Securities for trading in PORTAL; and (x) all other costs and expenses incident to the performance of its obligations hereunder which are not otherwise specifically provided for in this Section 6. It is understood, however, that, except as provided in this Section 6, and Sections 8 and 11 hereof, the Purchasers will pay all of their own costs and expenses, including the fees of their counsel, transfer taxes on resale of any of the Securities by them, and any advertising expenses connected with any offers they may make. 7. The obligations of the Purchasers hereunder shall be subject, in their discretion, to the condition that all representations and warranties of the Company and the Guarantors herein are, at and as of the Time of Delivery, true and correct, the condition that the Company and the Guarantors shall have performed all of their respective obligations hereunder theretofore to be performed, and the following additional conditions: (a) Latham & Watkins LLP, counsel for the Purchasers, shall have furnished to you such opinion or opinions, dated the Time of Delivery, with respect to the matters covered in paragraphs (i), (ii), (iii), (iv), (v), (vii), (x) and (xix) of subsection (b) below and paragraphs (i), (ii), (iii), (ix), (x), (xi), (xii), (xiii), (xiv), (xv), (xvi), (xvii), and (xviii) of subsection (c) below, as well as such other related matters as you may reasonably request, and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters; (b) Fulbright & Jaworski L.L.P., counsel for the Company, shall have furnished to you their written opinion, dated the Time of Delivery, in form and substance reasonably satisfactory to you, to the effect that, and subject to customary exceptions, qualifications, limitations and assumptions in relation thereto: (i) The Securities (assuming due authorization, execution, authentication, delivery and issuance) constitute valid and legally binding obligations of the Company, entitled to the benefits provided by the Indenture, enforceable against the Company in accordance with their terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights or providing relief of debtors and to general equity principles; (ii) The Guarantees (assuming due authorization, execution, delivery and issuance) constitute valid and legally binding obligations of each of the Guarantors, entitled to the benefits provided by the Indenture, enforceable against such Guarantors in accordance with their terms, subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, fraudulent conveyance, reorganization and other laws of general applicability relating to or affecting creditors' rights or providing relief of debtors and to general equity principles; (iii) The Indenture (assuming due authorization, execution and delivery) constitutes a valid and legally binding obligation of the Company and each of the Guarantors, enforceable against the Company in accordance with its terms, subject, as to enforcement against the Company, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights or providing for 15 the relief of debtors and to general equity principles, and enforceable against the Guarantors in accordance with its terms, subject, as to enforcement against the Guarantors, to bankruptcy, insolvency, fraudulent transfer, fraudulent conveyance, reorganization and other laws of general applicability relating to or affecting creditors' rights or providing for the relief of debtors and to general equity principles; (iv) The Registration Rights Agreement (assuming due authorization, execution, and delivery) constitutes a valid and legally binding obligation of the Company and each of the Guarantors, enforceable against the Company and such Guarantors in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights or providing for relief of debtors and to general equity principles; (v) The Security Documents (assuming due authorization, execution and delivery) constitute valid and legally binding obligations of the Company and each Guarantor that is a party thereto, respectively, enforceable against the Company and such Guarantors in accordance with their respective terms, subject, as to enforcement and the Liens created thereby, to bankruptcy, insolvency, fraudulent transfer, fraudulent conveyance, reorganization and other laws of general applicability relating to or affecting creditors' rights or providing for relief to debtors and to general equity principles; (vi) No consent, approval, authorization, order, registration or qualification of or with any court or governmental agency or body is required to be obtained or made by the Company or any Guarantor by any material statutory law applicable to it as a condition to its and their issuance of the Securities or the Guarantees or the consummation by the Company and the Guarantors of the Financing Transactions or the transactions contemplated by this Agreement, the Security Documents, the Registration Rights Agreement or the Indenture, except, such consents, approvals, authorizations, registrations or qualifications as (a) have been obtained or as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Securities by the Purchasers and (b) such as may be required under the Securities Act or the Exchange Act or the rules and regulations of the Commission promulgated thereunder in connection with (i) the filing of a registration statement for the Exchange Securities and consummation of the Exchange Offer pursuant to the Registration Rights Agreement or (ii) the filing and effectiveness of a shelf registration statement pursuant to the Registration Rights Agreement, and such filings as are (x) required to perfect the Collateral Agent's security interests granted pursuant to the Security Documents and (y) required to release existing Liens; provided that for purposes of the opinion expressed in this clause 7(b)(vi), such counsel may assume that the purchase of senior subordinated notes by Goldman, Sachs & Co. was done in compliance with all applicable securities laws; (vii) The statements set forth in the Offering Circular under the caption "Certain Federal Income Tax Considerations", insofar as they refer to statements of law or legal conclusions, are accurate in all material respects and present fairly the information described therein; (viii) To such counsel's knowledge, there are no contracts or other documents that are required to be described in the Company's filings under the Exchange Act or filed as exhibits to the Company's filings under the Exchange Act that have not been so described or filed; 16 (ix) The Indenture, the Registration Rights Agreement, the Security Documents, the Securities and the Guarantees conform, in all material respects to the descriptions thereof in the Offering Circular; (x) Assuming (a) the Securities are not offered to you by means of any form of general solicitation or general advertising or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act and (b) neither the Company nor any affiliate (as such term is defined in Rule 501(b) of Regulation D under the Securities Act) of the Company has directly or though any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security that is or could be integrated with the Securities in a manner that would require registration under the Securities Act, no registration of the Securities under the Securities Act, and no qualification of the Indenture under the United States Trust Indenture Act of 1939 with respect thereto, is required for the offer, sale and initial resale of the Securities by the Purchasers in the manner contemplated by this Agreement; (xi) The Company is not, and after giving effect to the offering and sale of the Securities and application of the net proceeds therefrom as described in the Offering Circular, will not be, an "investment company," as such term is defined in the Investment Company Act; (xii) Neither the Company, nor any of its subsidiaries, is, or after giving effect to the offering and sale of the Securities, will be, a "public utility holding company" or an entity "controlled by a public utility holding company," as such terms are defined in the United States Public Utility Holding Company Act of 1935, as amended, and the rules and regulations thereunder; (xiii) Assuming the Company applies the net proceeds as described in the "Use of Proceeds" section of the Offering Circular, to their knowledge, neither the Purchase Agreement nor the issuance or sale of the Securities will violate Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of Governors of the Federal Reserve System; provided that for purposes of the opinion expressed in this clause 7(b)(xiii), such counsel may assume that the purchase of senior subordinated notes by Goldman, Sachs & Co. was done in compliance with all applicable securities laws; (xiv) Each of the Security Agreement and the Control Agreement, at the Time of Delivery, will create a valid security interest in favor of the Collateral Agent in that portion of the collateral described in Section 2.1 of the Security Agreement in which the Obligor has rights and a valid security interest may be created under Article 9 of the New York UCC or California UCC, as applicable (the "UCC Collateral"), which security interest will secure the Secured Obligations as defined in the Security Agreement; (xv) The UCC-1 financing statement for each Obligor that is organized under the laws of Delaware, together with all schedules and exhibits to such financing statement, is in appropriate form for filing in the Office of the Secretary of State of the State of Delaware. Upon the proper filing of each such financing statement in the Office of the Secretary of State of the State of Delaware, the security interest in favor of the Collateral Agent for the benefit of the Secured Parties in the UCC Collateral described in such financing statement will be perfected to the extent a security interest in such Collateral may be perfected under the Delaware UCC by the filing of a financing statement in that office; 17 (xvi) To the extent governed by the laws of the State of Delaware, (a) the transmitting utility filing for each Pipeline Subsidiary that is organized under the laws of Delaware, together with all schedules and exhibits to such filing, is in appropriate form for filing in the Office of the Secretary of State of the State of Delaware and (b) upon the proper filing of each such filing in the Office of the Secretary of State of the State of Delaware, the security interest in favor of the Collateral Agent for the benefit of the Secured Parties in the UCC Collateral described in such filing will be perfected to the extent a security interest in such Collateral may be perfected under the Delaware UCC by the filing of such financing statement in that office; (xvii) Upon delivery of the certificates in registered form representing the Pipeline Subsidiaries that constitute "certificated securities" representing the Collateral within the meaning of Section 8-102(a)(4) of New York UCC and that are listed on Schedule 1 to the Security Agreement (the "Pledged Securities") in, and while located in, the State of New York, pursuant to the Security Agreement, indorsed to the Collateral Agent or in blank, in each case, by an effective endorsement, or accompanied by undated stock powers with respect thereto duly indorsed in blank by an effective endorsement, the security interest in favor of the Collateral Agent for the benefit of the Secured Parties in the Pledged Securities will be perfected. The Collateral Agent's security interest in the Pledged Securities has priority over any other security interest in the Pledged Securities granted by the Company and the Tesoro Alaska Company assuming no other secured party has control of, and the absence of any other control agreement with respect to, the Pledged Securities; (xviii) The Control Agreement is sufficient in form and substance to provide for the perfection by control, the security interest in favor of the Collateral Agent in the Asset Sale Proceeds Account and deposits therein will be perfected; and (xix) Such counsel shall also state that they have participated in conferences with certain officers and representatives of the Company, counsel to the Purchasers, representatives of the independent public accountants of the Company, and representatives of the Purchasers at which the contents of the Offering Circular and related matters were discussed and, although they are not passing upon and do not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Offering Circular (except as stated in subsections (vii) and (ix) above), on the basis of the foregoing (relying as to materiality, to the extent such counsel deems appropriate, upon the statements of officers and other representatives of the Company); no information has come to our attention that has caused us to believe that the Offering Circular contained as of its date or contains as of the Time of Delivery an untrue statement of a material fact or omitted or omits, as the case may be, to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; it being understood that we make no comment as to the financial statements, schedules and other financial or statistical data included in the Offering Circular; (c) James C. Reed, Jr., General Counsel of the Company, shall have furnished to you his written opinion, dated the Time of Delivery, in form and substance reasonably satisfactory to you, to the effect that: (i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, with corporate power and authority to own its properties and conduct its business as described in the Offering Circular; 18 (ii) The Company has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it is required to be so qualified, except where the failure to do so would not have a Material Adverse Effect (such counsel being entitled to rely in respect of the opinion in this clause upon opinions of local counsel and in respect of matters of fact upon certificates of officers of the Company); (iii) Each of the Guarantors has been duly incorporated or formed and is validly existing as a corporation or limited liability company, as the case may be, in good standing under the laws of its jurisdiction of incorporation or formation, with corporate or limited liability company power and authority to own its properties and conduct its business as described in the Offering Circular, and has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except where the failure to do so would not have a Material Adverse Effect (such counsel being entitled to rely in respect of the opinion in this clause upon opinions of local counsel and in respect of matters of fact upon certificates of officers of the Company); (iv) To such counsel's knowledge and other than as set forth in the Offering Circular, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property of the Company or any of its subsidiaries is the subject which, if determined adversely to the Company or any of its subsidiaries, would, individually or in the aggregate, have a Material Adverse Effect; (v) The Company has an authorized capitalization as set forth in the Offering Circular, and all of the issued shares of capital stock of the Company have been duly and validly authorized and issued and are fully paid and non-assessable; (vi) All of the issued shares of capital stock of each of the Guarantors that is a corporation have been duly and validly authorized and issued, are fully paid and non-assessable and (except as described in the Offering Circular and except for one share of Tesoro Petroleum (Singapore) Pte Ltd.), and, to such counsel's knowledge, are owned by the Company directly or indirectly through one of the other Guarantors, free and clear of all Liens except as described in the Offering Circular. All of the outstanding limited liability company interests of each of the Guarantors that is a limited liability company are owned directly or indirectly by the Company, free and clear of all Liens except as disclosed in the Offering Circular. Except as described in the Offering Circular and pursuant to the Company's employee benefit plans, there are no outstanding subscriptions, rights, warrants, calls, commitments of sale or options to acquire, or instruments convertible into or exchangeable for, nor any restriction on the voting or transfer of, any capital stock or other equity interest of the Company or any subsidiary created or held by the Company or any subsidiary; (vii) To such counsel's knowledge, neither the Company nor any of the Guarantors is (i) in violation of its Certificate of Incorporation or Certificate of Formation or By-laws or other organizational documents or (ii) in default in the performance or observance of any of its material obligations pursuant to the express provisions of any covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other material agreement or instrument to which it is a party or by which it may be bound where such default, singly or in the aggregate, would have a Material Adverse Effect; 19 (viii) Except for the Registration Rights Agreement, to such counsel's knowledge, there are no contracts, agreements or understandings between the Company or any of the Guarantors and any person granting such person the right to require the Company or such Guarantor to file a registration statement under the Securities Act with respect to any securities of the Company or such Guarantor, owned or to be owned by such person or to require the Company or such Guarantor to include such securities with any securities being registered pursuant to any registration statement filed by the Company or such Guarantor under the Securities Act; (ix) The Purchase Agreement has been duly authorized, executed and delivered by the Company and each of the Guarantors; (x) The Indenture has been duly authorized, executed and delivered by the Company and each of the Guarantors; (xi) The Securities have been duly authorized, executed, authenticated, issued and delivered by the Company; (xii) The Guarantees have been duly authorized, executed, issued and delivered by the Guarantors; (xiii) The Registration Rights Agreement has been duly authorized, executed and delivered by the Company and each of the Guarantors; (xiv) The Security Documents to which it is a party have been duly authorized, executed and delivered by each of the Company and the Guarantors; (xv) The Financing Statements have been duly authorized and delivered by the Company and each of the Guarantors; (xvi) The Exchange Securities have been duly authorized by the Company; (xvii) The Exchange Guarantees have been duly authorized by each of the Guarantors; (xviii) To such counsel's knowledge, the issue and sale of the Securities and the Guarantees and the performance by the Company and each of the Guarantors of their respective obligations pursuant to the express provisions of the Securities, the Guarantees, the Indenture, the Registration Rights Agreement, the Security Documents and this Agreement to which each is a party, the consummation of the transactions herein and therein contemplated and the consummation of the Financing Transaction will not (i) result in a breach of, or constitute a default under, the obligations of any of them under the express provisions of any indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument known to such counsel to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, (ii) result in any violation of the provisions of the Certificate of Incorporation or Certificate of Formation, By-laws or other organizational document of the Company or any of the Guarantors or (iii) result in the violation of any applicable statute or, to such counsel's knowledge, any order, rule or regulation of any court or governmental agency or body having jurisdiction over, and is applicable to, the Company or any of the Guarantors; provided that for purposes of the opinion expressed in this clause 7(c)(xviii), such counsel may assume that the 20 purchase of senior subordinated notes by Goldman, Sachs & Co. was done in compliance with all applicable securities laws; and (xix) The Exchange Act Reports (other than the financial statements and related schedules therein, as to which such counsel need express no opinion), when they were filed with the Commission, complied as to form in all material respects with the requirements of the Exchange Act, and the rules and regulations of the Commission thereunder; (d) A counsel to be named by the Company and reasonably satisfactory to the Purchasers shall have furnished to you their written opinion, dated the Time of Delivery, in form and substance reasonably satisfactory to you to the effect that: (i) The creation and perfection of security interests in the stock of Tesoro High Plains Pipeline Company and all of the fixtures and equipment comprising the pipeline facilities owned by Tesoro High Plains Pipeline Company, including the North Dakota-Montana Pipeline System, and the Guarantee by Tesoro High Plains Pipeline Company, will not violate, or require any consent, approval, notice or other filing under the Interstate Commerce Act or the regulations promulgated thereby related to or implemented by the Federal Energy Regulatory Commission, ("FERC"); and such opinion will be accompanied by a certificate of an officer of the Company, dated the Time of Delivery, in form and substance reasonably satisfactory to the Purchasers, certifying that the only oil pipeline facilities that the Company or its subsidiaries own, operate or control that constitute interstate pipeline facilities subject to regulation by the FERC are the facilities owned and operated by the Tesoro High Plains Pipeline Company located in North Dakota and Montana; (e) Local counsel to the Company in the States of Hawaii, Alaska, California, Washington, North Dakota, Utah, Idaho and Montana shall have furnished to you their written opinion, dated the Time of Delivery, in form and substance reasonably satisfactory to the Purchasers, as to such matters under the laws of their respective states as such Purchasers may reasonably request; (f) Valuation Research Corporation shall have furnished to you its written opinion, dated the Time of Delivery, in form and substance reasonably satisfactory to you, to the effect that: (i) The Consolidated Company has not, and, as a result of consummation of the transactions herein contemplated and the consummation of the Financing Transaction, will not have, incurred debts beyond its ability to pay as they mature; (ii) The present fair saleable value of the assets of the Consolidated Company exceeds the amount required to pay the probable liability on its existing debts, (whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent), as they become absolute and matured, and as a result of consummation of the transactions herein contemplated and the consummation of the Financing Transaction, will continue to exceed such amount; and (iii) The Consolidated Company does not, and, as a result of consummation of the transactions herein contemplated and the consummation of the Financing Transaction, will not, have unreasonably small capital to carry on its business as presently conducted; 21 (g) On the date of the Offering Circular prior to the execution of this Agreement and also at the Time of Delivery, Deloitte & Touche LLP shall have furnished to you a letter or letters, dated the respective dates of delivery thereof, in form and substance reasonably satisfactory to you, to the effect set forth in Annex I hereto; (h) The Chief Financial Officer of the Company shall have furnished a certificate, dated the Closing Date, in form and substance reasonably satisfactory to you, to the effect that: (i) The Consolidated Company does not intend to or believe that it has incurred or will incur, debts that will be beyond its and their ability to pay as they mature; (ii) No Significant Subsidiary (as defined in the Description of Notes Section of the Offering Circular) intends to or believes that it has incurred or will incur, debts that will be beyond its ability to pay as they mature; (iii) The present fair saleable value of the assets of the Consolidated Company exceeds the amount that will be required to pay the probable liability on its and their existing debts, respectively (whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent), as they become absolute and matured; (iv) The present fair saleable value of the assets of each Significant Subsidiary exceeds the amount that will be required to pay the probable liability on its existing debts (whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent), as they become absolute and matured; (v) The Consolidated Company does not have unreasonably small capital for it or them, respectively, to carry on its and their respective businesses as proposed to be conducted; (vi) No Significant Subsidiary has unreasonably small capital for it to carry on its business as proposed to be conducted; (vii) The Consolidated Company is not incurring obligations or making transfers under any evidence of indebtedness with the intent to hinder, delay or defraud any entity to which it is or will become indebted; and (viii) No Significant Subsidiary is incurring obligations or making transfers under any evidence of indebtedness with the intent to hinder, delay or defraud any entity to which it is or will become indebted; (i) (i) Neither the Company nor any of its subsidiaries shall have sustained since the date of the latest audited financial statements included in the Offering Circular any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Offering Circular, and (ii) since the respective dates as of which information is given in the Offering Circular there shall not have been any change in the capital stock or long-term debt of the Company or any of its subsidiaries or any change, or any development involving a prospective change, in or affecting the general affairs, management, consolidated financial position, stockholders' equity or results of operations of the Company and its subsidiaries, taken as a whole, otherwise than as set forth or contemplated in the Offering Circular, the effect of which, in any such case 22 described in clause (i) or (ii), is in the reasonable judgment of the Representatives so material and adverse as to make it impracticable or inadvisable to proceed with the offering or the delivery of the Securities on the terms and in the manner contemplated in this Agreement and in the Offering Circular; (j) On or after the date hereof (i) no downgrading shall have occurred in the rating accorded the Company's debt securities by any "nationally recognized statistical rating organization," as that term is defined by the Commission for purposes of Rule 436(g)(2) under the Securities Act, and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company's debt securities; (k) On or after the date hereof there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally on the New York Stock Exchange (the "NYSE"); (ii) a suspension or material limitation in trading in the Company's securities on the NYSE; (iii) a general moratorium on commercial banking activities declared by either Federal or New York State authorities or a material disruption in commercial banking or securities settlement or clearance services in the United States; (iv) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war or (v) the occurrence of any other calamity or crisis or any change in financial, political or economic conditions in the United States or elsewhere, if the effect of any such event specified in clause (iv) or (v) in the judgment of the Representatives makes it impracticable or inadvisable to proceed with the offering or the delivery of the Securities on the terms and in the manner contemplated in the Offering Circular; (l) The Securities have been designated for trading on PORTAL; (m) The Collateral Agent shall have received (with a copy for the Purchasers) at the Time of Delivery: (i) appropriately completed copies, which have been duly authorized for filing by the appropriate Person, of Uniform Commercial Code Financing Statements naming the Company and each Guarantor as a debtor and the Collateral Agent as the secured party, or other similar instruments or documents to be filed under the UCC of all jurisdictions as may be necessary or, in the reasonable opinion of the Trustee and its counsel, desirable to perfect the security interests of the Trustee pursuant to the Security Documents; (ii) appropriately completed copies, which have been duly authorized for filing by the appropriate Person, of Uniform Commercial Code Form UCC-3 termination statements, if any, necessary to release all Liens (other than Permitted Prior Liens) of any Person in any collateral described in the Security Documents previously granted by any Person, except to the extent that the administrative agent under the Existing Senior Secured Credit Facility has not delivered such termination statements as of the Time of Delivery but has agreed to pursuant to a release, reconveyance, satisfaction or other instrument described in clause (iv) below; (iii) certified copies of Uniform Commercial Code Requests for Information or Copies (Form UCC-11), or a similar search report certified by a party acceptable to the Trustee, dated a date reasonably near to the Time of Delivery, listing all effective Financing Statements which name the Company or any Guarantor (under its present name and any previous names) as the debtor, together with copies of such Financing Statements (none of which shall cover any collateral described in the Security 23 Documents, other than such Financing Statements that evidence Permitted Prior Liens); (iv) such releases, reconveyances, satisfactions or other instruments as it may request to confirm the release, satisfaction and discharge in full of all mortgages and deeds of trust at any time delivered by the Company or any Guarantor to secure any Obligations in respect of the Existing Senior Secured Credit Facility, duly executed, delivered and acknowledged in recordable form by the grantee named therein or its of record successors or assigns; (v) a letter (in form and substance reasonably satisfactory to the Purchasers) addressed to the Collateral Agent, the Trustee and the Term Loan Administrative Agent, executed and delivered by Bank One, N.A. as administrative agent under the Existing Senior Secured Credit Facility, stating the amount (the "Payout Amount") required to pay in full in cash at the Time of Delivery all outstanding Obligations under or in respect of the Existing Senior Secured Credit Facility and confirming and agreeing that upon payment of such amount all Liens securing such Obligations will be forever released and discharged; (vi) confirmation reasonably satisfactory to the Purchasers that First American Title Insurance Company has accepted the Mortgages for recording and will cause the Mortgages to be duly filed and recorded within ten days following the Time of Delivery and has agreed to issue to the Collateral Agent for the benefit of the Secured Parties, a policy of title insurance in form and substance reasonably satisfactory to the Purchasers, insuring each Mortgage to be a valid, enforceable and perfected Lien upon all real property described therein, free from all prior Liens except Permitted Prior Liens, for the full amount of the Secured Obligations; (vii) a certificate of insurance reasonably satisfactory to the Purchasers confirming that all insurance requirements of the Security Documents are satisfied; (viii) an agreement (in form and substance reasonably satisfactory to the Purchasers) executed and delivered by the Collateral Agent and the Credit Facility Agent under the New Credit Facility, by which such Credit Facility Agent certifies to the Collateral Agent that the New Credit Facility is governed by an agreement that includes the provisions described in clause (1) of the definition of "Qualified Credit Facility" and that such Credit Facility Agent agrees to be bound by and will perform the obligations of the Credit Facility Agent set forth in the intercreditor provisions of the Indenture and the Collateral Agent agrees to be bound by and will perform the obligations of the Collateral Agent set forth in the intercreditor provisions of the indenture; and (ix) such other approvals, opinions, or documents as the Purchasers, the Trustee or the Collateral Agent may reasonably request in form and substance reasonably satisfactory to each of them. (n) All Uniform Commercial Code Financing Statements or other similar Financing Statements and Uniform Commercial Code Form UCC-3 termination statements required pursuant to clause (o)(i) and (ii) above (collectively, the "Financing Statements") shall have been delivered to CT Corporation System or another similar filing service company acceptable to the Trustee (the "Filing Agent"). The Filing Agent shall have acknowledged in a writing reasonably satisfactory to the Trustee and its counsel (i) the Filing Agent's receipt of all Financing Statements, (ii) that the Financing Statements have either been submitted for filing in the appropriate filing offices or will be submitted for filing in the appropriate offices within ten 24 days following the Time of Delivery and (iii) that the Filing Agent will notify the Trustee and its counsel of the results of such submissions within 30 days following the Time of Delivery; (o) The Company shall have furnished or caused to be furnished to you at the Time of Delivery certificates of officers of the Company reasonably satisfactory to you as to the accuracy of the representations and warranties of the Company herein at and as of such Time of Delivery, as to the performance by the Company of all of its obligations hereunder to be performed at or prior to such Time of Delivery, as to the matters set forth in subsection (n) of this Section and as to such other matters as you may reasonably request; (p) The Company shall have consummated the Term Loan Agreement, and such Term Loans shall have been funded prior to, or shall be funded simultaneously with, the Time of Delivery on substantially the terms described in the Offering Circular and other terms reasonably satisfactory to the Purchasers, and the Purchasers shall have received counterparts, conformed as executed, of the Term Loan Agreement and such other documentation as they deem necessary to evidence the consummation thereof; (q) The Company shall have consummated the New Credit Facility, and such New Credit Facility shall have been funded prior to, or shall be funded simultaneously with, the Time of Delivery on substantially the terms described in the Offering Circular and other terms reasonably satisfactory to the Purchasers, the Purchasers shall have received counterparts, conformed as executed, of the New Credit Facility Agreement and such other documentation as they deem necessary to evidence the consummation thereof; (r) Prior to or simultaneously with the Time of Delivery, the Company shall have received cash proceeds from borrowings of the Term Loans and borrowings under the New Credit Facility in an amount sufficient, when added to the cash proceeds from the sale of the Securities (net of underwriting discounts and commissions), to pay in full in cash the Payout Amount and all other fees, costs and expenses payable by the Company in connection with the closing of the Financing Transaction and shall have authorized disbursement of such cash proceeds directly to pay the Payout Amount and such fees, costs and expenses pursuant to a disbursement authorization letter (in form and substance reasonably satisfactory to the Purchasers) executed and delivered by the Company and the Guarantors, and the Purchasers shall have received such other confirmation as any of them may reasonably request as to the termination and discharge of the Existing Senior Secured Credit Facility and the release and discharge of all Liens securing Obligations thereunder; and (s) The Company and each of the Guarantors shall have delivered executed copies of the Securities, the Guarantees, the Indenture, the Registration Rights Agreement and the Security Documents (with all Mortgages duly acknowledged in recordable form) to the Purchasers, in each case in form and substance reasonably satisfactory to the Company and the Purchasers. 8. (a) The Company and each of the Guarantors will, jointly and severally indemnify, and hold harmless each Purchaser against any losses, claims, damages or liabilities, joint or several, to which such Purchaser may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Offering Circular or the Offering Circular, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading, and will reimburse each Purchaser for any legal or other expenses reasonably incurred by such Purchaser in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that neither the Company nor any of the 25 Guarantors shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Offering Circular or the Offering Circular or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by any Purchaser through Goldman, Sachs & Co. expressly for use therein;provided further, that with respect to any such untrue statement or omission made in the Preliminary Offering Circular, the indemnity agreement contained in this Section 8(a) shall not inure to the benefit of such Purchaser from whom the person asserting any such losses, claims, damages or liabilities purchased the Securities concerned if, to the extent that such sale was an initial sale by such Purchaser and any such loss, claim, damage or liability of that Purchaser is a result of the fact that both (A) a copy of the Offering Circular was not sent or given to such person at or prior to written confirmation of the sale of such Securities to such person and (B) the untrue statement or omission in the Preliminary Offering Circular was corrected in the Offering Circular unless, in either case, such failure to deliver the Offering Circular was a result (x) of noncompliance by the Company with Section 5(c) hereof or (y) the Company not previously furnishing copies of the Offering Circular to such Purchaser on a timely basis to permit the Offering Circular to be sent or given to such person at or prior to written confirmation of the sale of such Securities to such person; (b) Each Purchaser will indemnify and hold harmless the Company and the Guarantors against any losses, claims, damages or liabilities to which the Company and the Guarantors may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Offering Circular or the Offering Circular, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Preliminary Offering Circular or the Offering Circular or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such Purchaser through Goldman, Sachs & Co. expressly for use therein; and will reimburse the Company and the Guarantors for any legal or other expenses reasonably incurred by the Company and such Guarantors in connection with investigating or defending any such action or claim as such expenses are incurred; (c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under such subsection. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation; provided, however, that the indemnified party shall have the right to employ counsel to represent all indemnified parties who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the indemnified parties against the indemnifying party under this Section 8 if, (i) the employment of such counsel shall have been authorized by the indemnifying party in connection with the defense of such action, (ii) the indemnifying party shall not have engaged counsel reasonably promptly to take charge of the defense 26 of such action or (iii) counsel for any of the indemnified parties shall have reasonably concluded that there may be defenses available to the indemnified parties that are in addition to or in conflict with those available to the indemnifying party, and, in that event, the fees and expenses of such separate counsel shall be paid by the indemnifying party; provided, further, that in connection with any proceedings or related proceedings in the same jurisdiction, the indemnifying party shall not be liable for the legal fees and expenses of more than one separate firm of attorneys (in addition to any local counsel). No indemnifying party shall (i) without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld), effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (a) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (b) does not include a statement as to, or an admission of, fault, culpability or a failure to act, by or on behalf of any indemnified party or (ii) be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent or if there be a final judgment of the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss of liability by reason of such settlement or judgment; (d) If the indemnification provided for in this Section 8 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors on the one hand and the Purchasers on the other from the offering of the Securities. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (c) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company and the Guarantors on the one hand and the Purchasers on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company and the Guarantors on the one hand and the Purchasers on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Purchasers, in each case as set forth in the Offering Circular. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Guarantors on the one hand or the Purchasers on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Guarantors and the Purchasers agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation (even if the Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), no Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Securities underwritten by it and distributed to investors were offered to investors exceeds the amount of any damages which such Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. 27 The Purchasers' obligations in this subsection (d) to contribute are several in proportion to their respective underwriting obligations and not joint. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation; and (e) The obligations of the Company and the Guarantors under this Section 8 shall be in addition to any liability which the Company and the Guarantors may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Purchaser within the meaning of the Securities Act; and the obligations of the Purchasers under this Section 8 shall be in addition to any liability which the respective Purchasers may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company or any Guarantor and to each person, if any, who controls the Company or any Guarantor within the meaning of the Securities Act. 9. (a) If any Purchaser shall default in its obligation to purchase the Securities which it has agreed to purchase hereunder, you may in your discretion arrange for you or another party or other parties to purchase such Securities on the terms contained herein. If within thirty-six hours after such default by any Purchaser you do not arrange for the purchase of such Securities, then the Company shall be entitled to a further period of thirty-six hours within which to procure another party or other parties reasonably satisfactory to you to purchase such Securities on such terms. In the event that, within the respective prescribed periods, you notify the Company that you have so arranged for the purchase of such Securities, or the Company notifies you that it has so arranged for the purchase of such Securities, you or the Company shall have the right to postpone the Time of Delivery for a period of not more than seven days, in order to effect whatever changes may thereby be made necessary in the Offering Circular, or in any other documents or arrangements, and the Company agrees to prepare promptly any amendments to the Offering Circular which in your opinion may thereby be made necessary. The term "Purchaser" as used in this Agreement shall include any person substituted under this Section with like effect as if such person had originally been a party to this Agreement with respect to such Securities; (b) If, after giving effect to any arrangements for the purchase of the Securities of a defaulting Purchaser or Purchasers by you and the Company as provided in subsection (a) above, the aggregate principal amount of such Securities which remains unpurchased does not exceed one-eleventh of the aggregate principal amount of all the Securities, then the Company shall have the right to require each non-defaulting Purchaser to purchase the principal amount of Securities which such Purchaser agreed to purchase hereunder and, in addition, to require each non-defaulting Purchaser to purchase its pro rata share (based on the principal amount of Securities which such Purchaser agreed to purchase hereunder) of the Securities of such defaulting Purchaser or Purchasers for which such arrangements have not been made; but nothing herein shall relieve a defaulting Purchaser from liability for its default; and (c) If, after giving effect to any arrangements for the purchase of the Securities of a defaulting Purchaser or Purchasers by you and the Company as provided in subsection (a) above, the aggregate principal amount of Securities which remains unpurchased exceeds one-eleventh of the aggregate principal amount of all the Securities, or if the Company shall not exercise the right described in subsection (b) above to require non-defaulting Purchasers to purchase Securities a defaulting Purchaser or Purchasers, then this Agreement shall thereupon terminate, without liability on the part of any non-defaulting Purchaser or the Company, except for the expenses to be borne by the Company and the Purchasers as provided in Section 6 hereof and the indemnity and contribution agreements in Section 8 hereof; but nothing herein shall relieve a defaulting Purchaser from liability for its default; 28 10. The respective indemnities, agreements, representations, warranties and other statements of the Company, the Guarantors and the several Purchasers, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Purchaser or any controlling person of any Purchaser, the Company, or any Guarantor, or any officer or director or controlling person of the Company or a Guarantor, and shall survive delivery of and payment for the Securities. 11. If this Agreement shall be terminated pursuant to Section 9 hereof, the Company, the Guarantors and the Purchasers shall not then be under any liability to any other Party except for the expenses to be borne by the Company and the Purchasers as provided in Section 6 hereof and the indemnity and contribution agreements in Section 8 hereof; but, if for any other reason, the Securities and the Guarantees are not delivered by or on behalf of the Company as provided herein, the Company will reimburse the Purchasers through you for all out-of-pocket expenses approved in writing by you, including fees and disbursements of counsel, reasonably incurred by the Purchasers in making preparations for the purchase, sale and delivery of the Securities and the Guarantees but the Company shall then be under no further liability to any Purchaser except as provided in Sections 6 and 8 hereof. 12. In all dealings hereunder, you shall act on behalf of each of the Purchasers, and the parties hereto shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Purchaser made or given by you jointly or by Goldman, Sachs & Co. on behalf of you as the representatives. All statements, requests, notices and agreements hereunder shall be in writing, and if to the Purchasers shall be delivered or sent by mail, telex or facsimile transmission to you as the representatives at in care of Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004, Attention: Registration Department; and if to the Company or any Guarantor shall be delivered or sent by mail, telex or facsimile transmission to the address of the Company set forth in the Offering Circular, Attention: Secretary; provided, however, that any notice to a Purchaser pursuant to Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile transmission to such Purchaser at its address set forth in its Purchasers' Questionnaire, or telex constituting such Questionnaire, which address will be supplied to the Company by you upon request. Any such statements, requests, notices or agreements shall take effect upon receipt thereof. 13. This Agreement shall be binding upon, and inure solely to the benefit of, the Purchasers, the Company, the Guarantors and, to the extent provided in Sections 8 and 10 hereof, the officers and directors of the Company and the Guarantors and each person who controls the Company, any Guarantor or any Purchaser, and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No purchaser of any of the Securities from any Purchaser shall be deemed a successor or assign by reason merely of such purchase. 14. Time shall be of the essence of this Agreement. 15. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. 16. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such respective counterparts shall together constitute one and the same instrument. 29 17. The Company (and each employee, representative or other agent of the Company) is authorized, except as is necessary to comply with applicable securities laws, to disclose any and all aspects of this potential transaction that are necessary to support any U.S. federal income tax benefits expected to be claimed with respect to such transaction, and all materials of any kind (including tax opinions and other tax analyses) related to those benefits, without the Purchasers imposing any limitation of any kind. If the foregoing is in accordance with your understanding, please sign and return to us five counterparts hereof, and upon the acceptance hereof by you, on behalf of each of the Purchasers, this letter and such acceptance hereof shall constitute a binding agreement among each of the Purchasers, the Company and the Guarantors. It is understood that your acceptance of this letter on behalf of each of the Purchasers is pursuant to the authority set forth in a form of Agreement among Purchasers, the form of which shall be submitted to the Company for examination upon request, but without warranty on your part as to the authority of the signers thereof. 30 Very truly yours, TESORO PETROLEUM CORPORATION By: /s/ GREGORY A. WRIGHT -------------------------------- Name: Gregory A. Wright Title: Senior Vice President and Chief Financial Officer 31 FAR EAST MARITIME COMPANY GOLD STAR MARITIME COMPANY TESORO FINANCIAL SERVICES HOLDING COMPANY VICTORY FINANCE COMPANY Very truly yours, By: /s/ GREGORY A. WRIGHT -------------------------------- Name: Gregory A. Wright, Attorney-in-Fact DIGICOMP INC. SMILEY'S SUPER SERVICE, INC. TESORO ALASKA COMPANY TESORO ALASKA PIPELINE COMPANY TESORO AVIATION COMPANY TESORO HAWAII CORPORATION TESORO HIGH PLAINS PIPELINE COMPANY TESORO MARINE SERVICES HOLDING COMPANY TESORO MARINE SERVICES, LLC By: Tesoro Marine Services Holding Company, as sole member TESORO MARITIME COMPANY TESORO NORTHSTORE COMPANY TESORO PETROLEUM COMPANIES, INC. TESORO REFINING AND MARKETING COMPANY TESORO TRADING COMPANY TESORO VOSTOK COMPANY By: Tesoro Petroleum Corporation, as sole member By: /s/ GREGORY A. WRIGHT ------------------------------ Name: Gregory A. Wright Title: Senior Vice President and Chief Financial Officer 32 KENAI PIPE LINE COMPANY TESORO GAS RESOURCES COMPANY, INC. TESORO TECHNOLOGY COMPANY TESORO WASATCH, LLC By: Tesoro Petroleum Corporation, as sole member By: /s/ SHARON L. LAYMAN -------------------------------- Name: Sharon L. Layman Title: Vice President and Treasurer 33 Accepted as of the date hereof: GOLDMAN, SACHS & CO. BY: /s/ GOLDMAN, SACHS & CO. ----------------------------- (Goldman, Sachs & Co.) 34 SCHEDULE I
PRINCIPAL AMOUNT OF SECURITIES TO BE PURCHASER PURCHASED --------- --------- Goldman, Sachs & Co........................................ $ 300,000,000 Banc One Capital Markets, Inc.............................. 75,000,000 ------------- TOTAL...................................................... $ 375,000,000 =============
35 Schedule A a. The Mortgage and Security Agreement in respect of the Alaska Refinery dated as of April 17, 2003 (the "Alaska Refinery Mortgage") between Tesoro Alaska Company, formerly known as Tesoro Alaska Petroleum Company, and the Collateral Agent; b. The Mortgage and Security Agreement in respect of the Kenai Pipeline Company Terminal owned by Kenai Pipeline Company dated as of April 17, 2003 (the "Alaska Refinery Mortgage") between Tesoro Alaska Company and the Collateral Agent; c. The Mortgage and Security Agreement in respect of the California Refinery dated as of April 17, 2003 (the "California Refinery Mortgage") between Tesoro Refining and Marketing Company and the Collateral Agent; d. The Mortgage and Security Agreement in respect of the Hawaii Refinery dated as of April 17, 2003 (the "Hawaii Refinery Mortgage") between Tesoro Hawaii Corporation and the Collateral Agent; e. The Mortgage and Security Agreement in respect of the North Dakota Refinery dated as of April 17, 2003 (the "North Dakota Refinery Mortgage") between Tesoro Refining and Marketing Company and the Collateral Agent; f. The Mortgage and Security Agreement in respect of the Utah Refinery dated as of April 17, 2003 (the "Utah Refinery Mortgage") between Tesoro Refining and Marketing Company and the Collateral Agent; g. The Mortgage and Security Agreement in respect of the Washington Refinery dated as of April 17, 2003 (the "Washington Refinery Mortgage") between Tesoro Refining and Marketing Company and the Collateral Agent; h. The Mortgage and Security Agreement in respect of the Boise, Idaho Terminal dated as of April 17, 2003 (the "Boise Terminal Mortgage") between Tesoro Refining and Marketing Company and the Collateral Agent; and i. The Mortgage and Security Agreement in respect of the Burley, Idaho Terminal dated as of April 17, 2003 (the "Burley Terminal Mortgage") between Tesoro Refining and Marketing Company and the Collateral Agent. ANNEX I Pursuant to Section 7(g) of the Purchase Agreement, the accountants shall furnish letters to the Purchasers to the effect that: (i) They are independent certified public accountants with respect to the Company and its subsidiaries under Rule 101 of the American Institute of Certified Public Accountants' Code of Professional Conduct, and its interpretations and rulings; (ii) In our opinion, the consolidated financial statements audited by us and included in the Offering Circular comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the Exchange Act and the related published rules and regulations adopted by the Commission; (iii) On the basis of limited procedures not constituting an audit in accordance with generally accepted auditing standards, consisting of a reading of the unaudited financial statements and other information referred to below, a reading of the latest available interim financial statements of the Company and its subsidiaries, inspection of the minute books of the Company and its subsidiaries since the date of the latest audited financial statements included in the Offering Circular, inquiries of officials of the Company and its subsidiaries responsible for financial and accounting matters and such other inquiries and procedures as may be specified in such letter, nothing came to their attention that caused them to believe that: (A) the unaudited consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Offering Circular are not in conformity with generally accepted accounting principles applied on the basis substantially consistent with the basis for the unaudited condensed consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Offering Circular; (B) any other unaudited income statement data and balance sheet items included in the Offering Circular do not agree with the corresponding items in the unaudited consolidated financial statements from which such data and items were derived, and any such unaudited data and items were not determined on a basis substantially consistent with the basis for the corresponding amounts in the audited consolidated financial statements included in the Offering Circular; (C) the unaudited financial statements which were not included in the Offering Circular but from which were derived any unaudited condensed financial statements referred to in clause (A) and any unaudited income statement data and balance sheet items included in the Offering Circular and referred to in clause (B) were not determined on a basis substantially consistent with the basis for the audited consolidated financial statements included in the Offering Circular; (D) any unaudited pro forma consolidated condensed financial statements included in the Offering Circular do not comply as to form in all material respects with the applicable accounting requirements or the pro forma adjustments have not been properly applied to the historical amounts in the compilation of those statements; (E) as of a specified date not more than five days prior to the date of such letter, there have been any changes in the consolidated capital stock (other than issuances of capital stock upon exercise of options and stock appreciation rights, upon earn-outs of performance shares and upon conversions of convertible securities, in each case which were outstanding on the date of the latest financial statements included in the Offering Circular or any increase in the consolidated long-term debt of the Company and its subsidiaries, or any decreases in consolidated net current assets or stockholders' equity or other items specified by the Representatives, or any increases in any items specified by the Representatives, in each case as compared with amounts shown in the latest balance sheet included in the Offering Circular except in each case for changes, increases or decreases which the Offering Circular discloses have occurred or may occur or which are described in such letter; and (F) for the period from the date of the latest financial statements included in the Offering Circular to the specified date referred to in clause (E) there were any decreases in consolidated net revenues or operating profit or the total or per share amounts of consolidated net income or other items specified by the Representatives, or any increases in any items specified by the Representatives, in each case as compared with the comparable period of the preceding year and with any other period of corresponding length specified by the Representatives, except in each case for decreases or increases which the Offering Circular discloses have occurred or may occur or which are described in such letter; and (v) In addition to the examination referred to in their report(s) included in the Offering Circular and the limited procedures, inspection of minute books, inquiries and other procedures referred to in paragraphs (iii) and (iv) above, they have carried out certain specified procedures, not constituting an audit in accordance with generally accepted auditing standards, with respect to certain amounts, percentages and financial information specified by the Representatives, which are derived from the general accounting records of the Company and its subsidiaries, which appear in the Offering Circular, and have compared certain of such amounts, percentages and financial information with the accounting records of the Company and its subsidiaries and have found them to be in agreement. 2 March 21, 2003 Dear Deloitte & Touche LLP: Goldman, Sachs & Co., as representatives of the Purchasers of 8% Senior Secured Notes to be issued by Tesoro Petroleum Corporation (the "Company"), will be reviewing certain information relating to the Company that will be included in the Offering Circular, which may be delivered to investors and utilized by them as a basis for their investment decision. This review process, applied to the information relating to the issue, will be substantially consistent with the due diligence review process that we would perform if this placement of securities were being registered pursuant to the Securities Act of 1933 (the Securities Act).(1) We are knowledgeable with respect to the due diligence review process that would be performed if this placement of securities were being registered pursuant to the Securities Act. We hereby request that you deliver to us a "comfort" letter concerning the financial statements of the issuer and certain statistical and other data included in the offering document. We will contact you to identify the procedures we wish you to follow and the form we wish the comfort letter to take. Very truly yours, ______________________________________ (Goldman, Sachs & Co) - ------------------ (1) It is recognized however that what is "substantially consistent" may vary from situation to situation and may not be the same as that done in a registered offering of the same securities for the same issuer and whether the procedures being, or to be, followed will be "substantially consistent" will be determined by us on a case-by-case basis. F-1 EX-3.47 4 h05116exv3w47.txt CERTIFICATE OF FORMATION OF TESORO WASATCH, LLC EXHIBIT 3.47 CERTIFICATE OF FORMATION OF TESORO WASATCH, LLC This Certificate of Formation of Tesoro Wasatch, LLC (the "LLC"), dated December 19, 2002, is being duly executed and filed to form a limited liability company under the Delaware Limited Liability Company Act (6 Del.C. ss. 18-101, et seq.). FIRST. The name of the limited liability company formed hereby is Tesoro Wasatch, LLC. SECOND. The address of the registered office of the LLC in the State of Delaware is c/o The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, County of New Castle, Wilmington, Delaware 19801. THIRD. The name and address of the registered agent for service of process on the LLC in the State of Delaware is The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, County of New Castle, Wilmington, Delaware 19801. IN WITNESS WHEREOF, the undersigned has executed this Certificate of Formation as of the date first above written. By: /s/ CHARLES S. PARRISH ---------------------------------------- Charles S. Parrish, Assistant Secretary EX-3.48 5 h05116exv3w48.txt LIMITED LIABILITY COMPANY AGREEMENT EXHIBIT 3.48 LIMITED LIABILITY COMPANY AGREEMENT OF TESORO WASATCH, LLC This Limited Liability Company Agreement (this "Agreement") of Tesoro Wasatch, LLC (the "Company"), is entered into by Tesoro Petroleum Corporation to hereby form a Delaware limited liability company pursuant to and in accordance with the Delaware Limited Liability Company Act (6 Del.C. ss. 18-101, et seq.) (the "Act"), which hereby agrees as follows: 1. Name. The name of the limited liability company formed hereby is Tesoro Wasatch, LLC. 2. Purpose. The purpose for which the Company is organized is to transact any and all lawful business for which limited liability companies may be organized under the Act. 3. No State Law Partnership. The Company is not intended to be a partnership (including a limited partnership) or joint venture for any purposes other than U.S. federal and state tax purposes, and this Agreement may not be construed to suggest otherwise. 4. Registered Office. The registered office of the Company in the State of Delaware is c/o The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. 5. Registered Agent. The name and address of the registered agent of the Company for service of process on the Company in the State of Delaware is The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. 6. Member. The Member shall refer to the owner of all the outstanding ownership interests of the Company. The name and the mailing address of the initial Member is as follows: Tesoro Petroleum Corporation 300 Concord Plaza Drive San Antonio, TX 78216-6999 7. Powers. The Company shall have the power and authority to take any and all actions necessary, appropriate, proper, advisable, convenient or incidental to or for the furtherance of the purposes set forth in Section 2. 8. Term. The term of the Company shall commence on the date of the filing of a Certificate of Formation in the Office of the Secretary of State of the State of Delaware and shall be perpetual, unless it is dissolved sooner as a result of (a) the written election of the Member, (b) the Company selling or otherwise disposing of its interest in all or substantially all of its property or (c) any other event causing dissolution under the Act. 9. Capital Contributions. The Member shall make capital contributions to the Company at such times and in such amounts as determined by the Member. All capital contributions made by the Member to the Company shall be credited to the Member's account. 1 10. Management. Subject to the provisions of the Act and any limitations in this Agreement as to action to be authorized or approved by the Member, all management powers over the business and affairs of the Company shall be exclusively vested in a board of managers (the "Board of Directors"), comprised of a number of individuals (no less than one) (each, a "Director") determined by the Member and each of whom shall be appointed by the Member. Collectively, the Directors shall constitute "managers" of the Company within the meaning of the Act. The Board of Directors may delegate certain of its powers to officers (the "Officers"), who shall be agents of the Company. Except as otherwise specifically provided in this Agreement, the authority and functions of the Board of Directors and of the Officers shall be identical to the authority and functions of the board of directors and officers, respectively, of a corporation organized under the Delaware General Corporation Law. Thus, except as otherwise specifically provided in this Agreement, the business and affairs of the Company shall be managed under the direction of the Board of Directors, and the day-to-day activities of the Company shall be conducted on the Company's behalf by the Officers. In addition to the powers that now or hereafter may be granted to managers under the Act and to all other powers granted under any other provision of this Agreement, the Board of Directors (subject to Section 11 of this Agreement) and the Officers (subject to Section 12 of this Agreement and the direction of the Board of Directors) shall have full power and authority to do all things on such terms as they, in their sole discretion, may deem necessary or appropriate to conduct, or cause to be conducted, the business and affairs of the Company. The Member, by virtue of its status of a member of the Company, shall not have any management power over the business and affairs of the Company or actual or apparent authority to enter into contracts on behalf of, or to otherwise bind, the Company. 11. Board of Directors. (a) Election and Removal of Directors. Upon election by the Member, each Director shall hold office until death, disability, resignation or removal at any time at the pleasure of the Member. If a vacancy occurs on the Board of Directors, the Member shall elect a successor so that the Board of Directors remains fully constituted at all times. (b) Meetings and Approval Requirements. (i) Regular Meetings. Regular meetings of the Board of Directors shall be held as the Board of Directors may determine and, if so determined, no notice thereof need be given. Special meetings of the Board of Directors shall be held at the written request of any Director. (ii) Telephonic Meetings. Any meeting of the Board of Directors may be held by conference telephone call or through similar communications equipment by means of which all persons participating in the meeting are able to hear each other. Participation in a telephonic or videographic meeting held pursuant to this section shall constitute presence in person at such meeting. (iii) Notices. Notices of regularly scheduled meetings of the Board of Directors shall not be required unless the time or place of a particular regular meeting is other than as set forth in the schedule of regular meetings previously 2 approved by the Board of Directors. Notices of special meetings shall be required and shall state the place, date and hour of the meeting and the purpose or purposes for which the meeting is called. Special meetings shall be held at the address specified in the notice of such meeting or at such other place as shall be agreed by the Directors. Notice of a special meeting shall be given in writing to each Director not less than two (2) nor more than fifteen (15) days before the date of the meeting. Directors may waive in writing the requirements for notice before, at or after the special meeting involved. The presence of a Director at a meeting shall constitute waiver of notice unless said Director expressly states otherwise at the outset of such meeting. (iv) Quorum. At each meeting of the Board of Directors, the presence in person or by electronic means, as the case may be, of a majority of the Directors shall be necessary to constitute a quorum for the transaction of business by the Board of Directors. (v) Approval Requirements. The Board of Directors may act either through the presence of Directors voting at a meeting or by written consent without a meeting as described in clause (vi) below. In the case of actions taken at a meeting, the affirmative vote of at least a majority of the Directors present in person or by electronic means, as the case may be, and voting at a duly held meeting of the Board of Directors where a quorum is present shall be necessary for any action of the Board of Directors. (vi) Written Consents. Any action required or permitted to be taken at a meeting of the Board of Directors may be taken without a meeting, without prior notice and without a vote if a consent or consents in writing, setting forth the action so taken, shall be signed by at least a majority of the Directors. Such consents shall be filed with the minutes of the proceedings of the Board of Directors. (c) Compensation and Reimbursement. Except as determined by the Board of Directors, no compensation or fees shall be paid by the Company to any individual for serving as a Director, nor shall any Director be entitled to reimbursement by the Company for expenses incurred in attending meetings of the Board of Directors. (d) Initial Director. The initial Directors, as of the effectiveness of this Agreement, are Bruce A. Smith, James C. Reed, Jr. and William T. Van Kleef. 12. Officers. (a) Appointment and Tenure. (i) The Member shall, from time to time, designate Officers of the Company to carry out the day-to-day business of the Company, such designation to be reflected by written action of the Member and filed in the minute books of the Company. 3 (ii) The Officers of the Company shall be comprised of one or more individuals designated from time to time by the Member. No Officer need be a resident of the State of Delaware. Each Officer shall hold his offices for such terms and shall have such authority and exercise such powers and perform such duties as shall be determined from time to time by the Member. Any number of offices may be held by the same individual. The salaries or other compensation, if any, of the Officers and agents of the Company shall be fixed from time to time by the Member. (iii) The Officers of the Company may consist of a president, a secretary and a treasurer. The Member may also designate one or more vice presidents, assistant secretaries, and assistant treasurers. The Member may designate such other officers and assistant officers and agents as the Member shall deem necessary. (b) Removal. Any Officer may be removed as such at any time by the Member, either with or without cause, in the discretion of the Member. (c) President. The president, if one is designated, shall be the chief executive officer of the Company, shall have general and active management of the day-to-day business and affairs of the Company as authorized from time to time by the Member and shall be authorized and directed to implement all orders, resolutions and business plans adopted by the Member. (d) Vice Presidents. The vice presidents, if any are designated, in the order of their seniority, unless otherwise determined by the Member, shall, in the absence or disability of the president, perform the duties and have the authority and exercise the powers of the president. They shall perform such other duties and have such other authority and powers as the Member may from time to time prescribe. (e) Secretary; Assistant Secretaries. The secretary, if one is designated, shall perform such duties and have such powers as the Member may from time to time prescribe. The assistant secretaries, if any are designated, in the order of their seniority, unless otherwise determined by the Member, shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary. They shall perform such other duties and have such other powers as the Member may from time to time prescribe. (f) Treasurer; Assistant Treasurers. The treasurer, if one is designated, shall have custody of the Company's funds and securities and shall keep full and accurate accounts and records of receipts, disbursements and other transactions in books belonging to the Company, and shall deposit all moneys and other valuable effects in the name and to the credit of the Company in such depositories as may be designated from time to time by the Member. The treasurer shall disburse the funds of the Company as may be ordered by the Member, taking proper vouchers for such disbursements, and shall render the president and the Member, when so directed, an account of all his transactions as treasurer and of the financial condition of the Company. The treasurer shall perform such 4 other duties and have such other powers as the Member may from time to time prescribe. If required by the Member, the treasurer shall give the Company a bond of such type, character and amount as the Member may require. The assistant treasurers, if any are designated, in the order of their seniority, unless otherwise determined by the Member, shall, in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer. They shall perform such other duties and have such other powers as the Member may from time to time prescribe. 13. Distributions. The Company shall distribute to the Member any cash held by it which is not reasonably necessary for the operation of the Company. 14. Securities Act Notice. The membership interests of the Member referenced herein have not been registered under the Securities Act of 1933, as amended, or under the provisions of any state securities act. 15. Governing Law. This Agreement shall be governed by, and construed under, the laws of the State of Delaware, all rights and remedies being governed by said laws. 16. Severability. If any provision of this Agreement, or the application of such provision to any person or circumstance, shall be held invalid, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby. 17. Certificates. Certificates representing membership interests of the Company shall be in such form or forms as the Member shall approve. 18. Free Transferability of Membership Interests; Effect of Transfer. The membership interest in the Company, including without limitation the membership interest owned by the Member, shall be fully and freely transferable. Upon transfer of the certificates representing a membership interest, the transferee shall succeed immediately to all rights of the membership interest represented thereby, including without limitation all rights to receive distributions and management rights. (continued on following page) 5 IN WITNESS WHEREOF, the undersigned, intending to be bound hereby, has duly executed this Limited Liability Company Agreement as of the day of December, 2002. TESORO PETROLEUM CORPORATION By: /s/ WILLIAM T. VAN KLEEF ---------------------------------- William T. Van Kleef Executive Vice President and Chief Operating Officer EX-4.8 6 h05116exv4w8.txt INDENTURE DATED APRIL 17, 2003 EXHIBIT 4.8 ================================================================================ TESORO PETROLEUM CORPORATION 8% SENIOR SECURED NOTES DUE 2008 INDENTURE Dated as of April 17, 2003 The Bank of New York Trustee ================================================================================ TABLE OF CONTENTS
PAGE ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions.................................................................. 1 SECTION 1.02. Other Definitions............................................................ 33 SECTION 1.03. Incorporation by Reference of Trust Indenture Act............................ 34 SECTION 1.04. Rules of Construction........................................................ 34 ARTICLE II THE NOTES SECTION 2.01. Form and Dating.............................................................. 35 SECTION 2.02. Execution and Authentication................................................. 36 SECTION 2.03. Registrar and Paying Agent................................................... 36 SECTION 2.04. Paying Agent to Hold Money in Trust.......................................... 37 SECTION 2.05. Holder Lists................................................................. 37 SECTION 2.06. Transfer and Exchange........................................................ 37 SECTION 2.07. Replacement Notes............................................................ 50 SECTION 2.08. Outstanding Notes............................................................ 50 SECTION 2.09. Treasury Notes............................................................... 51 SECTION 2.10. Temporary Notes.............................................................. 51 SECTION 2.11. Cancellation................................................................. 51 SECTION 2.12. Defaulted Interest........................................................... 51 SECTION 2.13. CUSIP Numbers................................................................ 52 ARTICLE III REDEMPTION AND PREPAYMENT SECTION 3.01. Notices to Trustee........................................................... 52 SECTION 3.02. Selection of Notes to be Redeemed............................................ 52 SECTION 3.03. Notice of Redemption......................................................... 53 SECTION 3.04. Effect of Notice of Redemption............................................... 54 SECTION 3.05. Deposit of Redemption Price.................................................. 54 SECTION 3.06. Notes Redeemed in Part....................................................... 54 SECTION 3.07. Optional Redemption.......................................................... 54 SECTION 3.08. Mandatory Redemption......................................................... 55 SECTION 3.09. Offer to Purchase by Application of Excess Asset Sale Proceeds and Excess Proceeds from the Sale of Collateral.............................. 55
i ARTICLE IV COVENANTS SECTION 4.01. Payment of Notes............................................................. 57 SECTION 4.02. Maintenance of Office or Agency.............................................. 57 SECTION 4.03. Reports...................................................................... 58 SECTION 4.04. Compliance Certificate....................................................... 59 SECTION 4.05. Taxes........................................................................ 59 SECTION 4.06. Waiver of Stay, Extension and Usury Laws..................................... 60 SECTION 4.07. Restricted Payments.......................................................... 60 SECTION 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries............... 64 SECTION 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock................... 65 SECTION 4.10. Asset Sales.................................................................. 66 SECTION 4.11. Transactions with Affiliates................................................. 69 SECTION 4.12. Liens........................................................................ 70 SECTION 4.13. Business Activities.......................................................... 70 SECTION 4.14. Corporate Existence.......................................................... 70 SECTION 4.15. Offer to Repurchase upon Change of Control................................... 70 SECTION 4.16. [Section Intentionally Deleted].............................................. 72 SECTION 4.17. Additional Subsidiary Guarantees and Liens................................... 72 SECTION 4.18. Payments for Consent......................................................... 73 SECTION 4.19. Suspension of Covenants...................................................... 73 ARTICLE V SUCCESSORS SECTION 5.01. Merger, Consolidation, or Sale of Assets..................................... 74 SECTION 5.02. Successor Corporation Substituted............................................ 74 ARTICLE VI DEFAULTS AND REMEDIES SECTION 6.01. Events of Default............................................................ 75 SECTION 6.02. Acceleration................................................................. 77 SECTION 6.03. Other Remedies............................................................... 78 SECTION 6.04. Waiver of Past Defaults...................................................... 78 SECTION 6.05. Control by Majority.......................................................... 78 SECTION 6.06. Limitation on Suits.......................................................... 78 SECTION 6.07. Rights of Holders of Notes to Receive Payment................................ 79 SECTION 6.08. Collection Suit by Trustee................................................... 79 SECTION 6.09. Trustee May File Proofs of Claim............................................. 79 SECTION 6.10. Priorities................................................................... 80
ii SECTION 6.11. Undertaking for Costs........................................................ 80 ARTICLE VII TRUSTEE SECTION 7.01. Duties of Trustee............................................................ 81 SECTION 7.02. Rights of Trustee............................................................ 82 SECTION 7.03. Individual Rights of Trustee................................................. 83 SECTION 7.04. Trustee's Disclaimer......................................................... 83 SECTION 7.05. Notice of Defaults........................................................... 83 SECTION 7.06. Reports by Trustee to Holders of the Notes................................... 84 SECTION 7.07. Compensation and Indemnity................................................... 84 SECTION 7.08. Replacement of Trustee....................................................... 85 SECTION 7.09. Successor Trustee by Merger, Etc............................................. 86 SECTION 7.10. Eligibility; Disqualification................................................ 86 SECTION 7.11. Preferential Collection of Claims Against Company............................ 86 ARTICLE VIII SATISFACTION AND DISCHARGE; DEFEASANCE SECTION 8.01. Satisfaction and Discharge of Indenture...................................... 86 SECTION 8.02. Application of Trust Money................................................... 88 SECTION 8.03. Option to Effect Legal Defeasance or Covenant Defeasance..................... 88 SECTION 8.04. Legal Defeasance and Discharge............................................... 88 SECTION 8.05. Covenant Defeasance.......................................................... 89 SECTION 8.06. Conditions to Legal or Covenant Defeasance................................... 89 SECTION 8.07. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions............................................... 90 SECTION 8.08. Repayment to Company......................................................... 91 SECTION 8.09. Reinstatement................................................................ 91 ARTICLE IX AMENDMENT, SUPPLEMENT AND WAIVER SECTION 9.01. Without Consent of Holders of Notes.......................................... 92 SECTION 9.02. With Consent of Holders of Notes............................................. 93 SECTION 9.03. Compliance with Trust Indenture Act.......................................... 94 SECTION 9.04. Revocation and Effect of Consents............................................ 94 SECTION 9.05. Notation on or Exchange of Notes............................................. 95 SECTION 9.06. Trustee to Sign Amendments, Etc.............................................. 95
iii ARTICLE X COLLATERAL AND sECURITY SECTION 10.01. Security Documents........................................................... 95 SECTION 10.02. Further Assurances........................................................... 96 SECTION 10.03. Collateral Agent............................................................. 97 SECTION 10.04. Security Documents and Guarantee............................................. 98 SECTION 10.05. Regulatory and Governmental Approvals........................................ 98 SECTION 10.06. Release of Collateral Agent's Lien........................................... 99 SECTION 10.07. Environmental Indemnity...................................................... 100 ARTICLE XI INTERCREDITOR PROVISIONS RELATING TO QUALIFIED CREDIT FACILITY SECTION 11.01. Agreement Between the Collateral Agent and Credit Facility Agent............. 101 SECTION 11.02. Disclaimer of Consensual Liens............................................... 102 SECTION 11.03. Notice of Intent to Foreclose................................................ 103 SECTION 11.04. Consent to License to Use Intellectual Property; Access to Information; Access to Real Property to Process and Sell Inventory........................ 104 SECTION 11.05. Complete Agreement........................................................... 107 SECTION 11.06. No Subrogation, Marshalling or Duty.......................................... 107 SECTION 11.07. Limitation on Certain Relief, Defenses and Damage Claims..................... 107 SECTION 11.08. Amendment; Waiver............................................................ 108 SECTION 11.09. Enforcement.................................................................. 108 SECTION 11.10. Relative Rights.............................................................. 109 ARTICLE XII COLLATERAL SHARING SECTION 12.01. Equal and Ratable Lien Sharing by Holders of Notes and Holders of Term Loans................................................................... 110 SECTION 12.02. Enforcement.................................................................. 110 SECTION 12.03. Amendment.................................................................... 110 ARTICLE XIII GUARANTEES
iv SECTION 13.01. Subsidiary Guarantees........................................................ 111 SECTION 13.02. Execution and Delivery of Additional Subsidiary Guarantee or Supplemental Indenture; Notation of Subsidiary Guarantee..................... 114 SECTION 13.03. Guarantors May Consolidate, Etc., on Certain Terms........................... 115 SECTION 13.04. Releases..................................................................... 116 SECTION 13.05. Limitation on Guarantor Liability; Contribution.............................. 117 SECTION 13.06. Trustee to Include Paying Agent.............................................. 118 ARTICLE XIV MISCELLANEOUS SECTION 14.01. Trust Indenture Act Controls................................................. 118 SECTION 14.02. Notices...................................................................... 118 SECTION 14.03. Communication by Holders of Notes with Other Holders of Notes................ 119 SECTION 14.04. Certificate and Opinion as to Conditions Precedent........................... 120 SECTION 14.05. Statements Required in Certificate or Opinion................................ 120 SECTION 14.06. Rules by Trustee and Agents.................................................. 120 SECTION 14.07. No Personal Liability of Directors, Officers, Employees and Stockholders................................................................. 120 SECTION 14.08. Governing Law................................................................ 121 SECTION 14.09. No Adverse Interpretation of Other Agreements................................ 121 SECTION 14.10. Successors................................................................... 121 SECTION 14.11. Severability................................................................. 121 SECTION 14.12. Counterpart Originals........................................................ 121 SECTION 14.13. Table of Contents, Headings, Etc............................................. 121
EXHIBIT A Form of Note................................................................. A-1 EXHIBIT B Form of Certificate of Transfer.............................................. B-1 EXHIBIT C Form of Certificate of Exchange.............................................. C-1 EXHIBIT D Form of Certificate from Acquiring Institutional Accredited Investor......... D-1 EXHIBIT E Form of Supplemental Indenture - Additional Subsidiary Guarantees............ E-1 EXHIBIT F Registration Rights Agreement................................................ F-1 EXHIBIT G Form of Mortgage............................................................. G-1
v CROSS-REFERENCE TABLE
Trust Indenture Act Section Indenture Section 310 (a)(1) ............................................................ 7.10 (a)(2) ............................................................ 7.10 (a)(3) ............................................................ N.A. (a)(4) ............................................................ N.A. (a)(5) ............................................................ 7.10 (b) ............................................................... 7.10 (c) ............................................................... N.A. 311 (a) ............................................................... 7.11 (b) ............................................................... 7.11 (c) ............................................................... N.A. 312 (a) ............................................................... 2.05 (b) ............................................................... 14.03 (c) ............................................................... 14.03 313 (a) ............................................................... 7.06 (b)(2) ............................................................ 7.06, 7.07 (c) ............................................................... 7.06, 14.02 (d) ............................................................... 7.06 314 (a) ............................................................... 4.03 (a)(4) ............................................................ 14.04 (c)(1) ............................................................ N.A. (c)(2) ............................................................ N.A. (c)(3) ............................................................ N.A. (e) ............................................................... 14.05 (f) .............................................................. N.A. 315 (a) ............................................................... 7.01 (b) ............................................................... 7.05 (c) ............................................................... 7.01 (d) ............................................................... 7.01 (e) ............................................................... 6.11 316 (a)(last sentence) ................................................ 2.09 (a)(1)(A) ......................................................... 6.05 (a)(1)(B) ......................................................... 6.04 (a)(2) ............................................................ N.A. (b) ............................................................... 6.07 (c) ............................................................... 2.12 317 (a)(1) ............................................................ 6.09 (a)(2) ............................................................ 6.09 (b) ............................................................... 2.04 318 (a) ............................................................... 14.01 (b) ............................................................... 14.01 (c) ............................................................... 14.01
N.A. means not applicable. - ------------------ This Cross-Reference Table shall not, for any purpose, be deemed to be part of this Indenture. vi INDENTURE dated as of April 17, 2003 among Tesoro Petroleum Corporation, a Delaware corporation (the "Company"), the Guarantors (as defined), and The Bank of New York, a New York banking corporation, as trustee (the "Trustee"). The Company, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of (i) the 8% Senior Secured Notes due 2008 (the "Initial Notes") and (ii) if and when issued, each series of the 8% Senior Secured Notes due 2008 issued in exchange for any Initial Notes in an Exchange Offer or upon transfer pursuant to a Shelf Registration Statement (the "Exchange Notes" and, together with the Initial Notes, the "Notes"): ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions. "Acquired Debt" means, with respect to any specified Person, (1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Restricted Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Restricted Subsidiary of such specified Person and (2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person, but excluding, in each case, Indebtedness that is extinguished, retired or repaid in connection with such Person merging with or becoming a Restricted Subsidiary of such specified Person. "Adjusted Net Assets" of a Guarantor at any date means the lesser of the amount by which (i) the fair value of the property of such Guarantor exceeds the total amount of liabilities, including contingent liabilities (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date), but excluding liabilities under its Subsidiary Guarantee, of such Guarantor at such date and (ii) the present fair salable value of the assets of such Guarantor at such date exceeds the amount that will be required to pay the probable liability of such Guarantor on its debts (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date and after giving effect to any collection from any Subsidiary of such Guarantor in respect of the obligations of such Subsidiary under such Subsidiary Guarantee), excluding debt in respect of such Subsidiary Guarantee, as they become absolute and matured. "Administrative Agent" means Goldman Sachs Credit Partners L.P., as administrative agent under the Term Loan Agreement, together with its successors in such capacity. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that, for purposes of Section 4.11 hereof and the use of the term "Affiliates" thereunder, beneficial ownership of 10% or more of the voting securities of a specified Person shall be deemed to be control by the owner thereof. "Agent" means any Registrar, Paying Agent or Authenticating Agent. "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange. "Asset Sale" means (i) the sale, lease, conveyance or other disposition of any assets or rights (including, without limitation, by way of a sale and leaseback) other than in the ordinary course of business, or any damage or loss of property resulting in the payment of property insurance or condemnation proceeds to the Company or any Restricted Subsidiary (provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole will be governed by Sections 4.15 and 5.01 hereof and not by the provisions in Section 4.10 hereof); and (ii) the issue or sale by the Company or any of its Restricted Subsidiaries of Equity Interests of any of the Company's Restricted Subsidiaries, in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions, (a) that have a Fair Market Value in excess of $5,000,000 or (b) for Net Proceeds in excess of $5,000,000; provided that the following will not be deemed to be Asset Sales: (1) any transfer, conveyance, sale, lease or other disposition of Credit Facility Collateral; (2) any sale or exchange of production of crude oil, natural gas and natural gas liquids, or refined products or residual hydrocarbons, or any other asset or right constituting inventory, made in the ordinary course of the Permitted Business; (3) (A) any disposition of assets (other than Collateral) in trade or exchange for assets of comparable Fair Market Value used or usable in any Permitted Business (including, without limitation, the trade or exchange for a controlling interest in another business or all or substantially all of the assets of a business, in each case, engaged in a Permitted Business or for other non-current assets to be used in a Permitted Business, including, without limitation, assets or Investments of the nature or type described in clause (m) of the definition of "Permitted Investments") and (B) any disposition of assets constituting Collateral in trade or exchange for assets constituting Refinery Assets of comparable Fair Market Value; provided that, in each such case (x) except for trades or exchanges of oil and gas properties and interests therein for other oil and gas properties and interests therein, if the Fair Market Value of the assets so disposed of, in a single transaction or in a series of related transactions, is in excess of $35,000,000, the Company shall obtain an opinion or report from an Independent Financial Advisor confirming that the assets received by the Company and the Restricted Subsidiaries in such trade or exchange have a fair market value of at least the fair market value of the assets so disposed, (y) any cash or Cash Equivalents received by the Company or a Restricted Subsidiary in connection with such trade or exchange (net of any transaction costs of the type deducted under the definition of "Net Proceeds") shall be treated as Net Proceeds of an Asset Sale and shall be applied in the manner set forth in Section 4.10 hereof and (z) in the case of clause (B) above, the Collateral Agent shall concurrently be granted a perfected first priority security interest (subject to Permitted Prior Liens) in such Refinery Assets (other than assets constituting Credit Facility Collateral) as additional Collateral under the Security Documents to secure the Secured Obligations, all on terms and pursuant to 2 arrangements reasonably satisfactory to the Collateral Agent in its reasonable determination (which may include, at the Collateral Agent's request, customary Officers' Certificates and legal opinions); (4) a transfer of assets by the Company to a Restricted Subsidiary of the Company or by a Restricted Subsidiary of the Company to the Company or to a Restricted Subsidiary of the Company; (5) an issuance or sale of Equity Interests by a Restricted Subsidiary of the Company to the Company or to another Restricted Subsidiary of the Company; (6) (A) a Permitted Investment or (B) a Restricted Payment that is permitted by Section 4.07 hereof; (7) the trade, sale or exchange of Cash Equivalents; (8) the sale, exchange or other disposition of obsolete assets not integral to any Permitted Business; (9) the abandonment or relinquishment of assets or property in the ordinary course of business, including without limitation the abandonment, relinquishment or farm-out of oil and gas leases, concessions or drilling or exploration rights or interests therein; (10) any lease of assets entered into in the ordinary course of business and with respect to which the Company or any Restricted Subsidiary of the Company is the lessor and the lessee has no option to purchase such assets for less than Fair Market Value at any time the right to acquire such asset occurs; (11) the disposition of assets received in settlement of debts accrued in the ordinary course of business; (12) the creation or perfection of a Lien on any properties or assets (or any income or profit therefrom) of the Company or any of its Restricted Subsidiaries that is not prohibited by any provision hereof; (13) the surrender or waiver in the ordinary course of business of contract rights or the settlement, release or surrender of contractual, non-contractual or other claims of any kind; and (14) the grant in the ordinary course of business of any non-exclusive license of patents, trademarks, registrations therefor and other similar intellectual property. "Associated Leased Terminals" shall have the meaning provided in the definition of "Collateral." "Bankruptcy Code" means Title 11, U.S. Code, as amended, or any similar federal or state law for the relief of debtors. "Board of Directors" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board. "Borrowing Base" means, as of any date, an amount equal to: (1) 85% of the face amount of all accounts receivable owned by the Company and its Domestic Subsidiaries as of the end of the most recent fiscal quarter preceding such date that were not more than 90 days past due; plus (2) 80% of the book value (before any reduction from current cost to LIFO cost) of all inventory owned by the Company and its Domestic Subsidiaries as of the end of the most recent fiscal quarter preceding such date; plus (3) 100% of the cash and Cash Equivalents owned by the Company and its Domestic Subsidiaries as of the end of the most recent fiscal quarter preceding such date. "Business Day" means any day other than a Legal Holiday. 3 "Calculation Date" shall have the meaning provided in the definition of "Fixed Charge Coverage Ratio." "Capital Lease Obligations" means, at the time any determination thereof is to be made, the amount of the liability in respect of one or more capital leases that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than one year from the date of acquisition, (iii) certificates of deposit and Eurodollar time deposits with maturities of not more than one year from the date of acquisition, bankers' acceptances with maturities of not more than one year from the date of acquisition and overnight bank deposits, in each case, with any domestic commercial bank having capital and surplus in excess of $500,000,000 and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above, (v) commercial paper having the highest rating obtainable from Moody's or S&P with maturities of not more than one year from the date of acquisition. "Change of Control" means the occurrence of one or more of the following events: (i) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a "Group") together with any Affiliates thereof (whether or not otherwise in compliance with the provisions hereof) unless immediately following such sale, lease, exchange or other transfer in compliance with this Indenture such assets are owned, directly or indirectly, by the Company or a Subsidiary of the Company; (ii) the approval by the holders of Capital Stock of the Company of any plan or proposal for the liquidation or dissolution of the Company; (iii) the acquisition in one or more transactions, of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of Voting Securities of the Company by any Person or Group that either (A) beneficially owns (within the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, at least 50% of the Company's then outstanding voting securities entitled to vote on a regular basis for the board of directors of the Company, or (B) otherwise has the ability to elect, directly or indirectly, a majority of the members of the Company's board of directors, including, without limitation, by the acquisition of revocable proxies for the election of directors; (iv) during any period of two consecutive years, individuals who at the beginning of such period constituted the board of directors of the Company (together with any new directors whose election by such board of directors or whose nomination for election by the shareholders (or members, as applicable) of the Company was approved by a vote of 66-2/3% of the directors of the Company then still in office 4 who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the board of directors then in office; or (v) the Company consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges with or into, the Company, in any such event pursuant to a transaction in which any of the outstanding Voting Stock of the Company or such other Person is converted into or exchanged for cash, securities or other property, other than any such transaction where the Voting Stock of the Company outstanding immediately prior to such transaction is converted into or exchanged for Voting Stock (other than Disqualified Stock) of the surviving or transferee Person constituting a majority of the outstanding shares of such Voting Stock of such surviving or transferee Person (immediately after giving effect to such issuance). Notwithstanding the foregoing, a Change of Control shall not be deemed to occur upon the consummation of any actions undertaken by the Company or any of its Restricted Subsidiaries solely for the purpose of changing the legal structure of the Company or such Restricted Subsidiary. "Clearstream" means Clearstream Banking, societe anonyme. "Collateral" means: (1) the real property, fixtures and equipment comprising or used or useful for or in connection with the six refineries and connected terminal assets owned on the Issue Date by Domestic Subsidiaries and located in or near Martinez, California, Anacortes, Washington, Kenai, Alaska, Kapolei, Hawaii, Mandan, North Dakota, and Salt Lake City, Utah (the "Existing Refineries"); (2) the real property, fixtures and equipment comprising or used or useful for or in connection with the two terminals owned on the Issue Date by a Domestic Subsidiary and located in Burley, Idaho and Boise, Idaho (the "Owned Terminals"); (3) (a) all real property, fixtures or equipment acquired at any time after the Issue Date by the Company or any Guarantor (i) located on, or contiguous to or connected with and in reasonable proximity to, any of the Existing Refineries or Owned Terminals and (ii) necessary, used or useful for or in connection with the ownership, expansion, operation, use or maintenance of any of the Existing Refineries or Owned Terminals and (b) any owned or acquired interest in leases or contracts with governmental authorities, where such leases or contracts are in real estate in navigable waters contiguous to or connected with and in reasonable proximity to any of the Existing Refineries or Owned Terminals; (4) all fixtures and equipment at any time owned or acquired by the Company or any Domestic Subsidiary comprising or acquired for use with (a) the pipelines serving and connected to the Existing Refineries on the Issue Date, which are a 71-mile pipeline from the Kenai refinery to Anchorage, Alaska, a 24-mile pipeline from Swanson River Field to the Kenai refinery, a 23-mile pipeline system connected to the Kapolei refinery and a 700-mile pipeline system in North Dakota and Montana, or (b) any other pipeline acquired at any time after the Issue Date by the Company or any Domestic Subsidiary to serve and that is connected to any of the Existing Refineries (collectively, the "Pipelines"); 5 (5) (i) all outstanding Capital Stock of each of Tesoro Alaska Pipeline Company, Kenai Pipe Line Company, and each additional Pipeline Subsidiary (other than Tesoro High Plains Pipeline Company), (ii) all intercompany Indebtedness owed by any Pipeline Subsidiary (other than Tesoro High Plains Pipeline Company) at any time owned or acquired by the Company or any Domestic Subsidiary, and (iii) 66-2/3% of all outstanding Capital Stock of, and 66-2/3% of all intercompany Indebtedness owed by, Tesoro High Plains Pipeline Company, in each case, at any time owned or acquired by the Company or any Domestic Subsidiary; (6) all fixtures and equipment at any time owned or acquired by the Company or any Guarantor located at any of the terminals or any other facilities at which any inventory is stored or distributed that are leased by the Company or any Guarantor and that are necessary for or used in connection with the operation, use or maintenance of any of the Existing Refineries (the "Associated Leased Terminals") or the transportation of any inventory to or from any Existing Refinery, Owned Terminal or Associated Leased Terminal; (7) all general intangibles (including patents, copyrights, trade secrets and other intellectual property, whether owned or licensed, customer and supplier contracts, drawings, plans, books and records, employment, consulting, operating, maintenance or services agreements and other contractual rights, public and private licenses, permits, franchises, powers, authorities, pollution or environmental credits and allowances, goodwill and other intangible property of every type or description) at any time owned or acquired by the Company or any Guarantor necessary, used or useful for or in connection with, or in any respect related, incidental or ancillary to, the ownership, expansion, operation, use, maintenance or sale or other disposition of any of the Existing Refineries, the Owned Terminals, the Associated Leased Terminals or the Pipelines; (8) all rights to payment at any time owned or acquired by the Company or any Subsidiary of the Company constituting (a) intercompany Indebtedness resulting from the declaration of a dividend or a debt distribution on account of Capital Stock of a Subsidiary of the Company or a redemption, reclassification or recapitalization of the Capital Stock of any such Subsidiary and (b) intercompany Indebtedness resulting from the funding of proceeds of any transaction raising capital (whether by the issuance of debt or equity) for the Company or any Subsidiary of the Company as an intercompany loan to the Company or any such Subsidiary (other than the funding of proceeds of any extension of credit or borrowing under a Credit Facility), in each case, whether such rights to payment constitute accounts or payment intangibles, or arise under or in connection with chattel paper or instruments (collectively, the "Specified Intercompany Debt"); (9) each Asset Sale Proceeds Account and all deposits therein and interest thereon and investments thereof, and all property of every type and description in which any proceeds of any Sale of Collateral or other disposition of Collateral are invested or upon which the Collateral Agent is at any time granted, or required to be granted, a Lien to secure the Secured Obligations as set forth in Section 4.10 or in clause (3) of the proviso in the definition of "Asset Sale"; and (10) all proceeds of any of the foregoing; 6 provided, that the Collateral will not at any time include any property that is, at such time, an Excluded Asset. "Collateral Agency Agreement" means a declaration of trust for a collateral trust, a collateral trust agreement or a collateral agency agreement, dated the Issue Date, executed and delivered by the Company, the Guarantors and the Collateral Agent on customary terms reasonably satisfactory to the Trustee and the Administrative Agent, in each case, as amended, modified, renewed, restated or replaced, in whole or in part, from time to time, in accordance with its terms. "Collateral Agent" means Wilmington Trust Company, in its capacity as collateral agent under the Collateral Agency Agreement, together with its successors in such capacity. "Collateral Agent's Lien" means a Lien granted to the Collateral Agent as security for Secured Obligations. "Commodity Hedging Agreements" means agreements or arrangements designed to protect such Person against fluctuations in the price of (i) crude oil, natural gas, or other hydrocarbons, including refined hydrocarbon products; (ii) electricity and other sources of energy or power used in the Company's refining or processing operations; or (iii) any other commodity; in each case, in connection with the conduct of its business and not for speculative purposes. "Commodity Hedging Obligations" means, with respect to any Person, the net payment Obligations of such Person under Commodity Hedging Agreements. "Company" means the Person named as the "Company" in the introductory paragraph of this Indenture until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter, the term "Company" shall mean such successor Person and each successive successor Person. "Consolidated Cash Flow" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period, plus (i) an amount equal to any extraordinary, unusual or non-recurring expenses or losses (including, whether or not otherwise includable as a separate item in the statement of Consolidated Net Income for such period, losses on sales of assets outside of the ordinary course of business) plus any net loss realized in connection with an Asset Sale (to the extent such losses were deducted in computing such Consolidated Net Income), plus (ii) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was included in computing such Consolidated Net Income, plus (iii) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income, plus 7 (iv) depreciation and amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation and amortization were deducted in computing such Consolidated Net Income, minus (v) non-cash items increasing such Consolidated Net Income for such period, in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the foregoing, the provision for taxes on the income or profits of, and the depreciation and amortization and other non-cash charges of, a Restricted Subsidiary of the referent Person shall be added to Consolidated Net Income to compute Consolidated Cash Flow only to the extent (and in same proportion) that the Net Income of such Restricted Subsidiary was included in calculating the Consolidated Net Income of such Person and only if a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Restricted Subsidiary without prior governmental approval (that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Restricted Subsidiary or its stockholders. "Consolidated Net Income" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries (for such period, on a consolidated basis, determined in accordance with GAAP); provided that (i) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Restricted Subsidiary; (ii) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders; (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded; (iv) the cumulative effect of a change in accounting principles shall be excluded; and (v) any ceiling limitation writedowns under SEC guidelines shall be treated as capitalized costs, as if such writedown had not occurred. "Control Agreement" means a control agreement relating to any Asset Sale Proceeds Account, by and among the applicable Obligor, the Collateral Agent and the Depository Agent, substantially in the form of Exhibit B to the Security Agreement and otherwise with such changes as are reasonably satisfactory to the Collateral Agent. "Corporate Trust Office of the Trustee" shall be at the address of the Trustee specified in Section 14.02 hereof or such other address as to which the Trustee may give notice to the Company. "Credit Facility" means, with respect to the Company or any Restricted Subsidiary of the Company, one or more debt facilities (including, without limitation, the Senior Credit Facility) or commercial paper facilities with banks or other institutional lenders providing for revolving credit loans, other borrowings (including term loans), receivables financing (including through 8 the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, extended, refunded, replaced or refinanced (in each case, without limitation as to amount) in whole or in part from time to time. "Credit Facility Agent" means, at any time in respect of any Qualified Credit Facility, the administrative agent, collateral agent or collateral trustee for holders of Obligations under such Qualified Credit Facility that holds the Liens securing such Obligations. "Credit Facility Collateral" means, at any time in respect of any Credit Facility: (1) all now owned and hereafter acquired inventory (as defined in Article 9 of the Uniform Commercial Code as in effect in any applicable jurisdiction), all documents (as defined in Article 9 of the Uniform Commercial Code as in effect in any applicable jurisdiction) related thereto and all rights under any existing or future policy of property loss or casualty insurance on such inventory; (2) all now owned and hereafter acquired rights to payment from inventory sold or leased and services rendered (whether such rights to payment constitute accounts or payment intangibles, or arise under or in connection with chattel paper or instruments, each as defined in Article 9 of the Uniform Commercial Code as in effect in any applicable jurisdiction, and whether or not such rights to payment constitute Indebtedness or conform to the underlying contract), together with (i) all rights in and to any merchandise or goods which such rights to payment may represent, whether as returned or repossessed goods or otherwise; and (ii) all Liens, letters of credit, insurance, guarantees and other obligations securing or supporting such rights to payment; (3) all now owned and hereafter acquired money, deposit accounts (as defined in Article 9 of the Uniform Commercial Code as in effect in any applicable jurisdiction) and deposits therein and Cash Equivalents (whether held directly or in securities accounts (as defined in Article 9 of the Uniform Commercial Code as in effect in any applicable jurisdiction)), except (i) the Asset Sale Proceeds Account and deposits therein and (ii) money, deposit accounts, deposits and Cash Equivalents (whether held directly or in securities accounts) constituting identifiable proceeds of Collateral; (4) all now owned and hereafter acquired rights to payment constituting intercompany debt obligations (whether such rights to payment constitute accounts or payment intangibles, or arise under or in connection with chattel paper or instruments, and whether or not such rights to payment constitute Indebtedness), together with all Liens, letters of credit, insurance, guarantees and other obligations securing or supporting such rights to payment; provided, however, that such intercompany debt obligations shall not include (x) Specified Intercompany Debt, (y) any Liens, letters of credit, insurance, guarantees and other obligations securing or supporting Specified Intercompany Debt or (z) any cash or non-cash proceeds of Specified Intercompany Debt; (5) all now owned and hereafter acquired rights under contracts and other general intangibles, but only to the extent necessary, used or useful in (i) the collection, sale or 9 other disposition of the rights to payment described in clause (2) above or (ii) the processing, shipment (including any rights of stoppage in transit), offtake, storage, completion, supply, lease, sale or other disposition (collectively, "Inventory Disposition Actions") of inventory which is owned or has been sold as of the date of any such Inventory Disposition Action; and (6) all cash and non-cash proceeds (as defined in Article 9 of the Uniform Commercial Code as in effect in any applicable jurisdiction) of the foregoing. "Credit Facility Liens" means Liens securing the Credit Facility Obligations. "Credit Facility Obligations" means Indebtedness under a Credit Facility permitted to be incurred under clauses (i) or (xii) of the definition of "Permitted Debt" and other Obligations (not constituting Indebtedness) under such Credit Facility (which may, but need not, include Hedging Obligations and obligations under deposit account services agreements and cash management contracts with any lender that is or at any time was party to such Credit Facility or any of its Affiliates). "Custodian" means any receiver, trustee, assignee, liquidator, sequester or similar official under the Bankruptcy Code. "Default" means any event that is or with the passage of time or the giving of notice (or both) would be an Event of Default. "Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, in the form of Exhibit A hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "Depositary Agent" means a commercial bank designated by the Company and reasonably satisfactory to the Collateral Agent, in its capacity as depositary agent under the Collateral Agency Agreement, together with its successors in such capacity. "Designated Proceeds" means the amount of net cash proceeds received by the Company from each issuance or sale since the Issue Date of mandatorily convertible preferred stock of the Company (other than Disqualified Stock), that at the time of such issuance was designated by the Company as "Designated Proceeds" pursuant to an Officer's Certificate delivered to the Trustee; provided, however, that if the mandatorily convertible preferred stock providing such Designated Proceeds is thereafter converted into common stock of the Company, that portion of the Designated Proceeds that has not been paid as dividends pursuant to clause (x) of the second paragraph of Section 4.07 hereof will no longer be considered to be Designated Proceeds. "Disqualified Stock" means, with respect to any Person, any Capital Stock to the extent that by its terms (or by the terms of any security into which it is convertible or for which it is 10 exchangeable) or upon the happening of any event, it matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature, except such Capital Stock that is solely redeemable with, or solely exchangeable for, any Capital Stock of such Person that is not Disqualified Stock. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require the Company or any of its Restricted Subsidiaries to repurchase Capital Stock upon the occurrence of a change of control or an asset sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company or such Restricted Subsidiary may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.07 hereof. "Domestic Subsidiary" means any Restricted Subsidiary of the Company that was formed under the laws of the United States or any state of the United States or the District of Columbia or that guarantees or otherwise provides direct credit support for any Indebtedness of the Company. "Environmental Claim" means any investigation, notice, notice of violation, claim, action, suit, proceeding, demand, abatement order or other order or directive (conditional or otherwise), by any Governmental Authority or any other Person, arising (i) pursuant to or in connection with any actual or alleged violation of any Environmental Law; (ii) in connection with any Hazardous Material or any actual or alleged Hazardous Materials Activity; or (iii) in connection with any actual or alleged damage, injury, threat or harm to health, safety, natural resources or the environment. "Environmental Laws" means any and all current or future foreign or domestic, federal or state (or any subdivision of either of them), statutes, ordinances, orders, rules, regulations, judgments, Governmental Authorizations, or any other requirements of Governmental Authorities relating to (i) environmental matters, including those relating to any Hazardous Materials Activity; (ii) the generation, use, storage, transportation or disposal of Hazardous Materials; or (iii) occupational safety and health, industrial hygiene, land use or the protection of human, plant or animal health or welfare, in any manner applicable to the Company or any of its Restricted Subsidiaries or any Facility. "Equally and Ratably" means, in reference to sharing of any Liens or proceeds thereof as between the holders of Note Obligations, on the one hand, and Term Loan Obligations, on the other hand, that such Liens or proceeds: (1) shall be allocated and distributed first to the Trustee for account of the Holders of Notes, on the one hand, and to the Administrative Agent for the account of holders of the Term Loans, on the other hand, ratably in proportion to the principal of and interest and premium (if any) outstanding on the Notes when the allocation or distribution is made, on the one hand, and the principal of and interest (including special interest) and premium (if any) outstanding on the Term Loans when the allocation or distribution is made, on the other hand; and thereafter (2) shall be allocated and distributed (if any remain after payment in full of all of the principal of and interest (including special interest) and premium on the Notes and the Term 11 Loans) to the Trustee for account of the holders of any remaining Note Obligations, on the one hand, and to the Administrative Agent for account of the holders of any remaining Term Loan Obligations, on the other hand, ratably in proportion to the aggregate unpaid amount of such remaining Note Obligations due and demanded (with written notice to the Trustee, the Administrative Agent and the Collateral Agent) prior to the date such distribution is made, on the one hand, and the aggregate unpaid amount of such remaining Term Loan Obligations due and demanded (with written notice to the Trustee, the Administrative Agent and the Collateral Agent) prior to the date such distribution is made, on the other hand. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Equity Offering" means any public or private sale of Capital Stock of the Company (other than sales made to any Restricted Subsidiary of the Company and sales of Disqualified Stock) made for cash after the Issue Date. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor thereto. "Euroclear" means Euroclear Bank S.A./N.V. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Notes" has the meaning set forth in the preamble of this Indenture. "Exchange Offer" has the meaning set forth in a corresponding Registration Rights Agreement. "Exchange Offer Registration Statement" has the meaning set forth in a corresponding Registration Rights Agreement. "Excluded Assets" means: (1) Credit Facility Collateral; (2) any lease of premises used only as office space or to warehouse inventory; (3) all easements, rights-of-way, licenses and other real property interests for or pertaining to the construction, operation, use or maintenance of any pipeline over, upon or under land owned by another; (4) the fixtures and equipment of any pipeline and the Capital Stock of Tesoro High Plains Pipeline Company if, to the extent that and for as long as (i) the ownership or operation of such pipeline is regulated by any federal or state regulatory authority and (ii) under the law applicable to such regulatory authority the grant of a security interest in such fixtures and equipment or such Capital Stock, respectively, is prohibited or a security interest in such fixtures and equipment or such Capital Stock, respectively, may be granted only after completion of a 12 filing with, or receipt of consent from, such regulatory authority which has not been effectively completed or received; provided, however, that (a) such fixtures and equipment or such Capital Stock, respectively, will be an Excluded Asset only to the extent and for as long as the conditions set forth in clauses (i) and (ii) in this definition are and remain satisfied and to the extent such assets otherwise constitute Collateral, will cease to be an Excluded Asset, and will become subject to the security interests granted to the Collateral Agent under the Security Documents, immediately and automatically at such time as the such conditions cease to exist, including by reason of the effective completion of any required filing or effective receipt of any required regulatory approval; and (b) unless prohibited by law, the proceeds of any sale, lease or other disposition of any such fixtures, equipment or Capital Stock that are Excluded Assets shall not be an Excluded Asset and shall at all times be and remain subject to the security interests granted to the Collateral Agent under the Security Documents; (5) with respect to personal property, any lease, license, permit, franchise, power, authority or right if, to the extent that and for as long as (i) the grant of a security interest therein constitutes or would result in the abandonment, invalidation or unenforceability of such lease, license, interest, permit, franchise, power, authority or right or the termination of or a default under the instrument or agreement by which such lease, license, interest, permit, franchise, power, authority or right is governed and (ii) such abandonment, invalidation, unenforceability, breach, termination or default is not rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the Uniform Commercial Code (or any successor provision) of any relevant jurisdiction or any other applicable law (including the United States Bankruptcy Code) or principles of equity; provided, however, that (a) such lease, license, interest, permit, franchise, power, authority or right will be an Excluded Asset only to the extent and for as long as the conditions set forth in clauses (i) and (ii) in this definition are and remain satisfied and to the extent such assets otherwise constitute Collateral, will cease to be an Excluded Asset, and will become subject to the security interests granted to the Collateral Agent under the Security Documents, immediately and automatically at such time as such conditions cease to exist, including by reason of any waiver or consent under the applicable instrument or agreement, and (b) the proceeds of any sale, lease or other disposition of any such lease, license, interest, permit, franchise, power, authority or right that is or becomes an Excluded Asset shall not be an Excluded Asset and shall at all times be and remain subject to the security interests granted to the Collateral Agent under the Security Documents; (6) with respect to any real property, any lease, license, permit, franchise, power, authority or right if, to the extent that and for as long as the grant of a security interest therein (i) requires a third party consent or (ii) constitutes or would result in the abandonment, invalidation or unenforceability of such lease, license, interest, permit, franchise, power, authority or right or the termination of or a default under the instrument or agreement by which such lease, license, interest, permit, franchise, power, authority or right is governed; provided, however, that such lease, license, interest, permit, franchise, power, authority or right will be an Excluded Asset only to the extent and for as long as the conditions set forth in this definition are and remain satisfied and to the extent such assets otherwise constitute Collateral, will cease to be an Excluded Asset, and will become subject to the security interests granted to the Collateral Agent under the Security Documents, immediately and automatically at such time as such conditions cease to exist, including by reason of any waiver or consent under the applicable instrument or agreement; 13 (7) all trademarks; (8) the Marine Services Business; (9) the Retail Properties; and (10) (a) other property in which a security interest cannot be perfected by the filing of a financing statement under the Uniform Commercial Code and (b) without duplication, motor vehicles, that have, in the aggregate for all such property and motor vehicles, a fair market value (as determined in good faith by the Company) not exceeding $10,000,000. "Existing Indebtedness" means the aggregate Indebtedness of the Company and its Restricted Subsidiaries (other than Indebtedness under the Senior Credit Facility) in existence on the Issue Date. "Existing Refineries" shall have the meaning provided in the definition of "Collateral." "Facility" means any real property (including all buildings, fixtures or other improvements located thereon) now, hereafter or heretofore owned, leased, operated or used by the Company or any of its Restricted Subsidiaries or any of their respective predecessors or Affiliates. "Fair Market Value" means, with respect to consideration received or to be received, or given or to be given, pursuant to any transaction by the Company or any Restricted Subsidiary, the fair market value of such consideration as determined in good faith by the Board of Directors of the Company. "Financial Hedging Agreements" means (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates or currency exchange rates in connection with the conduct of its business and not for speculative purposes. "Financial Hedging Obligations" means, with respect to any Person, the net payment Obligations of such Person under Financial Hedging Agreements. "Fixed Charge Coverage Ratio" means, with respect to any Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the Company or any of its Restricted Subsidiaries incurs, assumes, guarantees or redeems any Indebtedness (other than revolving credit borrowings under any Credit Facility) or issues or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee or redemption of Indebtedness, or such issuance or redemption of preferred stock, as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of making the computation referred to above: (i) acquisitions that have been made by the Company or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing 14 transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated without giving effect to clause (iii) of the proviso set forth in the definition of "Consolidated Net Income"; (ii) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded; and (iii) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the referent Person or any of its Restricted Subsidiaries following the Calculation Date. "Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of: (i) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation or duplication, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations); (ii) the consolidated interest of such Person and its Restricted Subsidiaries that was capitalized during such period; (iii) any interest expense on Indebtedness of another Person that is guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries (whether or not such guarantee or Lien is called upon); and (iv) the product of: (a) all dividend payments, whether or not in cash, on any series of preferred stock of such Person or any of its Restricted Subsidiaries, other than dividend payments on Equity Interests payable solely in Equity Interests of the Company (other than Disqualified Stock), times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, the statements and pronouncements of the Financial Accounting Standards Board and such other statements by such other entities as have been approved by a significant segment of the accounting profession, which are applicable at the date of determination. "Global Note Legend" means the legend set forth in Section 2.06(g)(ii) hereof, which is required to be placed on all Global Notes issued under this Indenture. "Global Notes" means, individually and collectively, each of the Notes (which may be either Restricted Global Notes or Unrestricted Global Notes) issued or issuable in the global form of Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv), 2.06(d)(iv) or 2.06(f) hereof. "Governmental Authority" means any federal, state, municipal, national or other government, governmental department, commission, board, bureau, court, agency or 15 instrumentality or political subdivision thereof or any entity or officer exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case whether associated with a state of the United States, the United States, or a foreign entity or government. "Governmental Authorization" means any permit, license, authorization, plan, directive, consent order or consent decree of or from any Governmental Authority. "Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America for the payment of which guarantees or obligations the full faith and credit of the United States is pledged. "Guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof or pledging assets to secure), of all or any part of any Indebtedness. "Guarantors" means: (i) each of Digicomp Inc., Far East Maritime Company, Gold Star Maritime Company, Kenai Pipe Line Company, Smiley's Super Service, Inc., Tesoro Alaska Company, Tesoro Alaska Pipeline Company, Tesoro Aviation Company, Tesoro Financial Services Holding Company, Tesoro Gas Resources Company, Inc., Tesoro Hawaii Corporation, Tesoro High Plains Pipeline Company, Tesoro Marine Services Holding Company, Tesoro Marine Services, LLC, Tesoro Maritime Company, Tesoro Northstore Company, Tesoro Petroleum Companies, Inc., Tesoro Refining and Marketing Company, Tesoro Technology Company, Tesoro Trading Company, Tesoro Vostok Company, Tesoro Wasatch, LLC and Victory Finance Company, (ii) each of the Company's Restricted Subsidiaries that becomes a guarantor of the Notes pursuant to Section 4.17 or Section 13.02 hereof; and (iii) each of the Company's Restricted Subsidiaries executing a supplemental indenture in which such Restricted Subsidiary agrees to be bound by the terms of this Indenture; provided that any Person constituting a Guarantor as described above shall cease to constitute a Guarantor when its respective Subsidiary Guarantee is released in accordance with the terms thereof. "Hazardous Materials" means any chemical, material or substance, exposure to which is prohibited, limited or regulated by any Governmental Authority or which may or could pose a hazard to the health and safety of the owners, occupants or any Persons in the vicinity of any Facility or to the indoor or outdoor environment. "Hazardous Materials Activity" means any past, current, proposed or threatened activity, event or occurrence involving any Hazardous Materials, including the use, manufacture, possession, storage, holding, presence, existence, location, Release, threatened Release, discharge, placement, generation, transportation, processing, construction, treatment, abatement, 16 removal, remediation, disposal, disposition or handling of any Hazardous Materials, and any corrective action or response action with respect to any of the foregoing. "Hedging Obligations" means, with respect to any Person, collectively, the Commodity Hedging Obligations of such Person and the Financial Hedging Obligations of such Person. "Holder" means a Person in whose name a Note is registered. "IAI Global Note" means a permanent global Note in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to zero dollars. "Immaterial Subsidiary" means any Domestic Subsidiary for so long as: (1) such Domestic Subsidiary has total assets with a fair market value (as determined by the Company in good faith) of less than $1,000,000; (2) such Domestic Subsidiary has total revenues for each of its annual fiscal periods ending after the Issue Date of less than $1,000,000; and (3) such Domestic Subsidiary has not guaranteed or otherwise provided direct or indirect credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries. "Indebtedness" means, with respect to any Person, without duplication, (i) the principal of and premium, if any, with respect to indebtedness of such Person for borrowed money or evidenced by bonds, notes, debentures or similar instruments; (ii) reimbursement obligations of such Person for letters of credit or banker's acceptances; (iii) Capital Lease Obligations of such Person; (iv) obligations of such Person for the payment of the balance deferred and unpaid of the purchase price of any property except any such balance that constitutes an accrued expense or trade payable; or (v) Hedging Obligations, in each case of the foregoing clauses (i) through (v) if and to the extent any of the foregoing obligations or indebtedness (other than letters of credit, banker's acceptances and Hedging Obligations), but excluding amounts recorded in accordance with Statement of Financial Accounting Standard No. 133, would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP. In addition, the term "Indebtedness" includes: (A) obligations or indebtedness of others of the type referred to in the foregoing clauses (i) through (v) that are secured by a Lien on any asset of such Person (whether or not such Indebtedness is assumed by such Person), but in an amount not to exceed the lesser of the amount of such other Person's obligation or indebtedness or the Fair Market Value of such asset; and (B) to the extent not otherwise included, the guarantee by such Person of any obligations or indebtedness of others of the type referred to in the foregoing clauses (i) through (v), whether or not such guarantee is contingent, and whether or not such guarantee appears on the balance sheet of such Person. "Indemnified Liabilities" means, collectively, any and all liabilities, obligations, losses, damages (including natural resource damages), penalties, claims (including Environmental Claims), costs (including the costs of any investigation, study, sampling, testing, abatement, cleanup, removal, remediation or other response action necessary to remove, remediate, clean up 17 or abate any Hazardous Materials Activity), expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened by any Person, and any fees or expenses incurred by Indemnitees in enforcing this indemnity), whether direct, indirect or consequential and whether based on Environmental Laws, on common law or equitable cause or on contract or otherwise, that may be imposed on, incurred by, or asserted against any such Indemnitee, in any manner relating to or arising out of any Environmental Claim or any Hazardous Materials Activity relating to or arising from, directly or indirectly, any past or present activity, operation, land ownership, or practice of the Company or any of its Restricted Subsidiaries. "Indenture" means this Indenture, as amended or supplemented from time to time. "Independent Financial Advisor" means a nationally recognized accounting, appraisal or investment banking firm that is, in the reasonable judgment of the Board of Directors, qualified to perform the task for which such firm has been engaged hereunder and disinterested and independent with respect to the Company and its Affiliates; provided, that providing accounting, appraisal or investment banking services to the Company or any of its Affiliates or having an employee, officer or other representative serving as a member of the Board of Directors of the Company or any of its Affiliates will not disqualify any firm from being an Independent Financial Advisor. "Indirect Participant" means a Person who holds a beneficial interest in a Global Note through a Participant. "Initial Notes" has the meaning set forth in the preamble of this Indenture. "Initial Purchaser" has the meaning set forth in the respective Purchase Agreement. "Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Intercreditor Agreement" means any agreement at any time entered into between the Collateral Agent and a Credit Facility Agent pursuant to Section 11.01(e), in each case, as amended, modified, renewed, restated or replaced, in whole or in part, from time to time, in accordance with its terms. "Inventory Disposition Actions" shall have the meaning provided in the definition of "Credit Facility Collateral." "Investment Grade Rating" means a rating equal to or higher than Baa3 (or the equivalent) by Moody's or BBB- (or the equivalent) by S&P. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including guarantees of Indebtedness or other Obligations), advances (other than advances to customers in the ordinary course of business which are recorded as accounts receivable on the balance sheet of the lender and commissions, moving, travel and similar advances to employees and officers made in the 18 ordinary course of business) or capital contributions, purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any of its Restricted Subsidiaries sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a direct or indirect Restricted Subsidiary of the Company, the Company, or such Restricted Subsidiary, as the case may be, shall be deemed to have made an Investment on the date of any such sale or disposition equal to the Fair Market Value of the Equity Interests of such Restricted Subsidiary not sold or disposed of in an amount determined as provided in the fourth paragraph of Section 4.07 hereof. "Issue Date" means the first date on which the Notes are issued, authenticated and delivered under this Indenture. "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in the City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. "Letter of Transmittal" means the letter of transmittal to be prepared by the Company and sent to all Holders of Initial Notes for use by such Holders in connection with an Exchange Offer. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in any asset and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "Marine Services Business" means (1) all assets involved in the marketing and distribution of petroleum products and provision of logistical support services to the marine and offshore exploration and production industries operating in the Gulf of Mexico, including, without limitation, the 15 terminals located on the Texas and Louisiana coast and all related tugboats, barges and trucks, provided that such assets are owned by either entity referred to in clauses (2) or (3) of this definition and such assets are located on or near either the Texas or Louisiana coast, (2) the Capital Stock of Tesoro Marine Services Holding Company and (3) the membership interests of Tesoro Marine Services, LLC; provided that such assets will not include any assets relating to the sale of petroleum products in bulk and wholesale markets. "Moody's" means Moody's Investors Service, Inc., or any successor to the rating agency business thereof. "Mortgages" means a mortgage substantially in the form of Exhibit G hereto. "Net Income" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock 19 dividends, excluding, however, (i) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions); or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries; and (ii) any extraordinary or nonrecurring gain (but not loss), together with any related provision for taxes on such extraordinary or nonrecurring gain (but not loss). "Net Proceeds" means the aggregate cash proceeds or Cash Equivalents received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of (i) the direct costs relating to such Asset Sale (including, without limitation, legal, accounting, investment banking and brokers fees, sales and underwriting commissions and other reasonable costs incurred in preparing such asset for sale) and any relocation expenses incurred as a result thereof, and any related severance and associated costs, expenses and charges of personnel related to the sold assets and related operations, (ii) taxes paid or reserved as payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), (iii) distributions and payments required to be made to minority interest holders in Restricted Subsidiaries as a result of such Asset Sale, (iv) amounts paid in order to satisfy any Lien attaching to an asset in connection with such Asset Sale and (v) any reserve for adjustment (whether or not placed in escrow) in respect of the sale price of such asset or assets established in accordance with GAAP. "Net Sale Consideration" means the aggregate cash proceeds, Cash Equivalents and other consideration received by the Company or any of its Restricted Subsidiaries in respect of any Sale of Collateral, net of (i) the direct costs relating to such Sale of Collateral (including, without limitation, legal, accounting, investment banking and brokers fees, sales and underwriting commissions and other reasonable costs incurred in preparing such asset for sale), any relocation expenses incurred as a result thereof and any related severance and associated costs, expenses and charges of personnel related to the sold assets and related operations, (ii) taxes paid or reserved as payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), (iii) amounts paid in order to satisfy any Lien attaching to an asset in connection with such Sale of Collateral and (iv) distributions and payments required to be made to minority interest holders in Restricted Subsidiaries as a result of such Sale of Collateral. "Non-Recourse Indebtedness" means Indebtedness: (i) as to which neither the Company nor any of its Restricted Subsidiaries, (a) provides any guarantee or credit support of any kind (including any undertaking, guarantee, indemnity, agreement or instrument that would constitute Indebtedness); or (b) is directly or indirectly liable (as a guarantor or otherwise); (ii) the incurrence of which will not result in any recourse against any of the assets of the Company or its Restricted Subsidiaries; and (iii) no default with respect to which would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Company or any of its Restricted Subsidiaries to declare pursuant to the express terms governing such Indebtedness a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its Stated Maturity. 20 "Non-U.S. Person" means a person who is not a U.S. Person. "Note Custodian" means the Trustee, as custodian for the Depositary with respect to the Notes in global form, or any successor entity thereto. "Note Documents" means this Indenture, the Notes, the Exchange Notes, the Subsidiary Guarantees and the Security Documents. "Note Obligations" means the Notes (including all additional Notes and all Exchange Notes therefor), the Subsidiary Guarantees and all other Obligations of any Obligor under the Note Documents. "Notes" has the meaning assigned to it in the preamble to this Indenture. "Obligations" means any principal, premium (if any), interest (including Special Interest, if any, and interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company or its Restricted Subsidiaries whether or not a claim for post-filing interest is allowed in such proceeding), penalties, fees, charges, expenses, indemnifications, reimbursement obligations, damages (including Special Interest), guarantees (including the Subsidiary Guarantees, as applicable) and other liabilities or amounts payable under the documentation governing any Indebtedness or in respect thereof. "Obligor" means the Company, the Guarantors and each other Subsidiary of the Company that has granted the Collateral Agent a Lien upon any of the Collateral as security for any Secured Obligation. "Offering" means the offering of the Original Notes by the Company on the Issue Date. "Offering Circular" means (i) the Offering Circular of the Company dated April 7, 2003 with respect to the Offering, and (ii) any similar document of the Company dated subsequent to the Issue Date with respect to the offering of Initial Notes other than the Original Notes. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. "Officers' Certificate" means a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company, that meets the requirements of Section 14.05 hereof. "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 14.05 hereof. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee. "Owned Terminals" shall have the meaning provided in the definition of "Collateral." 21 "Participant" means, with respect to DTC, Euroclear or Clearstream, a Person who has an account with DTC, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream). "Participating Broker-Dealer" has the meaning set forth in a Registration Rights Agreement. "Permitted Business" means, with respect to the Company and its Restricted Subsidiaries, the businesses of (i) the acquisition, development, operation and disposition of interests in oil, gas and other hydrocarbon properties, (ii) the acquisition, gathering, treating, processing, storage, transportation of production from such interests or properties, (iii) the acquisition, processing, marketing, refining, distilling, storage and/or transportation of hydrocarbons and/or royalty or other interests in crude oil or refined or associated products related thereto, (iv) the acquisition, operation, improvement, leasing and other use of convenience stores, retail service stations, truck stops and other public accommodations in connection therewith, (v) the marketing and distribution of petroleum and marine products and the provision of logistical services to marine and offshore exploration and production industries, (vi) any business currently engaged in by the Company or its Restricted Subsidiaries and (vii) any activity or business that is a reasonable extension, development or expansion of, or reasonably related to, any of the foregoing. "Permitted Debt" means (i) the incurrence by the Company or any Guarantor of additional Indebtedness and letter of credit reimbursement obligations under one or more Credit Facilities (with letter of credit reimbursement obligations being deemed to have a principal amount equal to the maximum potential liability of the Company or its Restricted Subsidiaries for reimbursement obligations thereunder) in an aggregate principal amount at any one time outstanding under this clause (i) not to exceed the greater of: (A) $700,000,000; or (B) the amount of the Borrowing Base as of the date of such incurrence; (ii) the incurrence by the Company and the Guarantors of Indebtedness represented by the Original Notes, the Exchange Notes and the Subsidiary Guarantees, in each case, together with the related Note Obligations; (iii) the incurrence by the Company and the Guarantors of Indebtedness under the Term Loan Agreement or represented by the Term Loans and the other Term Loan Obligations on the Issue Date in an aggregate principal amount not to exceed $200,000,000; (iv) the incurrence by the Company or any of its Restricted Subsidiaries of Existing Indebtedness; (v) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness, the net proceeds of which are applied to refinance any Indebtedness other than Indebtedness incurred pursuant to clause (i) above; (vi) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries; provided, however, that (A) if the Company or any Guarantor is the obligor and a Restricted Subsidiary of the Company that is not a Guarantor is the obligee on such Indebtedness, such Indebtedness will be subordinated to the payment in full of all Obligations with respect to the Notes, (B) if such intercompany Indebtedness constitutes Specified Intercompany Debt, a perfected first priority security interest (subject to Permitted Prior Liens) is granted to the Collateral Agent in such intercompany Indebtedness and (C) (1) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary of the Company and (2) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary of the Company shall be deemed, in each case, to constitute an incurrence of such 22 Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that is not then permitted by this clause (vi); (vii) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations (including any Acquired Debt), in each case, incurred in connection with the purchase of, or for the purpose of financing the purchase price of, the cost of construction, improvement or development of, property, plant or equipment used in the Permitted Business (including, without limitation, oil and gas properties) of the Company or a Restricted Subsidiary of the Company or incurred to extend, refinance, renew, replace, defease or refund any such purchase price or cost of construction, improvement or development, in an aggregate principal amount not to exceed $100,000,000 at any time outstanding; (viii) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness consisting of Hedging Obligations entered into in the ordinary course of business and not for speculative purposes; (ix) Indebtedness arising from agreements of the Company or any of its Restricted Subsidiaries providing for indemnification, adjustment of purchase price or similar obligations, in each case, incurred in connection with the disposition or acquisition of any business, assets or a Restricted Subsidiary of the Company or any business or assets of its Restricted Subsidiaries, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or a Restricted Subsidiary of the Company or any of its Restricted Subsidiaries for the purposes of financing such acquisition; provided, however, that (A) such Indebtedness is not reflected on the balance sheet of the Company or any of its Restricted Subsidiaries (contingent obligations referred to in a footnote to financial statements and not otherwise reflected on the balance sheet will not be deemed to be reflected on such balance sheet for purposes of this clause (A)) and (B) the maximum liability in respect of all such Indebtedness incurred in connection with a disposition shall at no time exceed the gross proceeds including noncash proceeds (the Fair Market Value of such noncash proceeds being measured at the time received and without giving effect to any subsequent changes in value) actually received by the Company and its Restricted Subsidiaries in connection with such disposition; (x) the guarantee by the Company or any of the Guarantors of, or the grant by the Company or any of the Guarantors of Security Interests with respect to, Indebtedness of the Company or a Restricted Subsidiary of the Company that was permitted to be incurred by Section 4.09 hereof (other than pursuant to this clause (x); provided, that the guarantee of, or the grant of Security Interests with respect to, any Indebtedness of a Restricted Subsidiary of the Company that ceases to be such a Restricted Subsidiary shall be deemed a Restricted Investment at the time such Restricted Subsidiary's status terminates in an amount equal to the maximum principal amount so guaranteed or liened against, for so long as, and to the extent that, such guarantee or security interest remains outstanding; (xi) the issuance by a Restricted Subsidiary of the Company of preferred stock to the Company or to any of its Restricted Subsidiaries; provided, however, that any subsequent event or issuance or transfer of any Equity Interests that results in the owner of such preferred stock ceasing to be the Company or any of its Restricted Subsidiaries or any subsequent transfer of such preferred stock to a Person, other than the Company or one of its Restricted Subsidiaries, shall be deemed to be an issuance of preferred stock by such Subsidiary that was not permitted by this clause (xi); and (xii) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness (in addition to Indebtedness permitted by any other clause of this paragraph) in an aggregate principal amount (or accreted value, as applicable) at any time outstanding not to exceed $75,000,000. 23 "Permitted Investments" means (a) any Investment in the Company or in a Restricted Subsidiary of the Company that is a Guarantor; (b) any Investment in Cash Equivalents or deposit accounts maintained in the ordinary course of business consistent with past practices; (c) any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment (i) such Person becomes a Restricted Subsidiary of the Company and a Guarantor; or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys all or substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company that is a Guarantor; (d) any security or other Investment received or Investment made as a result of the receipt of non-cash consideration from (i) an Asset Sale that was made pursuant to and in compliance with Section 4.10 hereof; or (ii) a disposition of assets that do not constitute an Asset Sale; (e) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; (f) any Investment received in settlement of debts, claims or disputes owed to the Company or any Restricted Subsidiary of the Company that arose out of transactions in the ordinary course of business; (g) any Investment received in connection with or as a result of a bankruptcy, workout or reorganization of any Person; (h) advances and extensions of credit in the nature of accounts receivable arising from the sale or lease of goods or services or the licensing of property in the ordinary course of business; (i) relocation allowances for, and advances and loans to, employees, officers and directors (including, without limitation, loans and advances the net cash proceeds of which are used solely to purchase Equity Interests of the Company in connection with restricted stock or employee stock purchase plans, or to exercise stock received pursuant thereto or other incentive plans in a principal amount not to exceed the aggregate exercise or purchase price), or loans to refinance principal and accrued interest on any such loans, provided that the aggregate principal amount of such loans, advances and allowances shall not exceed at any time $20,000,000; (j) other Investments by the Company or any Restricted Subsidiary of the Company in any Person having an aggregate Fair Market Value (measured as of the date each such Investment is made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (j) (net of returns of capital, dividends and interest paid on Investments and sales, liquidations and redemptions of Investments), not in excess of $50,000,000; (k) Investments in the form of intercompany Indebtedness or Guarantees of Indebtedness of a Restricted Subsidiary of the Company permitted under clauses (vi) and (xi) of the definition of "Permitted Debt"; (l) Investments arising in connection with Hedging Obligations that are incurred in the ordinary course of business for the purpose of fixing or hedging currency, commodity or interest rate risk in connection with the conduct of the business of the Company and its Subsidiaries and not for speculative purposes; (m) Investments in the form of, or pursuant to, operating agreements, joint ventures, partnership agreements, working interests, royalty interests, mineral leases, processing agreements, farm-out agreements, contracts for the sale, transportation or exchange of oil and natural gas, unitization agreements, pooling agreements, area of mutual interests agreements, production sharing agreements or other similar or customary agreements, transactions, properties, interests or arrangements, and Investments and expenditures in connection therewith or pursuant thereto, in each case, made or entered into the ordinary course of the business described in clauses (i) and (ii) of the definition of "Permitted Business" excluding, however, investments in corporations; (n) any Investments in prepaid expenses, negotiable instruments held for collection and lease, utility, worker's compensation, performance and other similar deposits and prepaid expenses 24 made in the ordinary course of business; and (o) Investments pursuant to agreements and obligations of the Company and any Restricted Subsidiary in effect on the Issue Date. "Permitted Liens" means: (1) Liens on Credit Facility Collateral of the Company and any Guarantor (other than a Pipeline Subsidiary) securing the Credit Facility Obligations; (2) Liens created pursuant to the Security Documents securing, Equally and Ratably, the Notes and the Term Loans, having an aggregate principal amount at any one time outstanding not to exceed $725,000,000, together with all other Secured Obligations; (3) Liens (not securing Obligations under a Credit Facility) in favor of the Company or the Guarantors; (4) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (vii) of the definition of "Permitted Debt" covering only the assets acquired with such Indebtedness; (5) Liens existing on the Issue Date; (6) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings diligently pursued, provided that any reserve or other appropriate provision as is required in conformity with GAAP has been made therefore; (7) Liens on the Marine Services Business; (8) Liens on the Retail Properties; (9) carriers', warehousemen's, mechanics', materialmen's, repairman's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 30 days or that are being contested in good faith by appropriate proceedings; (10) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation; (11) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (12) easements, rights of way, restrictions and other similar encumbrances incurred in the ordinary course of business that, in the aggregate, do not materially interfere with the ordinary conduct of the business of the Company or any of its Subsidiaries; (13) any interest or title of a lessor under any lease entered into by the Company or any of its Subsidiaries in the ordinary course of its business and covering only the assets so leased; 25 (14) any Lien securing Indebtedness, neither assumed nor guaranteed by the Company or any of its Subsidiaries nor on which it customarily pays interest, existing upon real estate or rights in or relating to real estate acquired by the Company for substation, metering station, pump station, storage, gathering line, transmission line, transportation line, distribution line or for right-of-way purposes, any Liens reserved in leases for rent and for compliance with the terms of the leases in the case of leasehold estates, to the extent that any such Lien referred to in this clause (14) does not materially impair the use of the property covered by such Lien for the purposes of which such property is held by the Company or any of its Subsidiaries; (15) inchoate Liens arising under ERISA; (16) any obligations or duties affecting any of the property of the Company or its Subsidiaries to any municipality or public authority with respect to any franchise, grant, license or permit which do not materially impair the use of such property for the purposes for which it is held; (17) defects, irregularities and deficiencies in title of any rights of way or other property of the Company or any of its Subsidiaries which, in the aggregate, do not materially impair the use of such rights of way or other property for the purposes for which such rights of way and other property are held by the Company or any of its Subsidiaries and defects, irregularities and deficiencies in title to any property of the Company or any of its Subsidiaries, which defects, irregularities or deficiencies have been cured by possession under applicable statutes of limitation; (18) Liens in favor of collecting or payor banks having a right of setoff, revocation, refund or chargeback with respect to money or instruments of the Company or any of its Subsidiaries on deposit with or in possession of such bank; (19) Liens on cash or cash equivalents to secure obligations of the Company and its Subsidiaries in respect of Commodity Hedging Agreements and Financial Hedging Agreements, in each case entered into in the ordinary course of business and not for speculative purposes, and Liens with respect to hedging accounts maintained with dealers of NYMEX or similar contracts which require the maintenance of cash margin account balances; and (20) Liens incurred in the ordinary course of business of the Company or any Subsidiary of the Company with respect to obligations that do not exceed $5,000,000 at any one time outstanding. "Permitted Prior Liens" means (a) Liens described in clauses (4), (5), (12), (13), (17) or (18) of the definition of "Permitted Liens" and (b) Liens that arise by operation of law and are not voluntarily granted, to the extent entitled by law to priority over the security interests created by the Security Documents. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries, or portion of such Indebtedness, issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness), including Indebtedness that extends, refinances, renews, replaces, defeases or 26 refunds Permitted Refinancing Indebtedness, provided that: (i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus accrued and unpaid interest on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus fees and expenses incurred in connection therewith, including any premium or defeasance cost); (ii) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iv) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is secured, the Liens securing such Permitted Refinancing Indebtedness (a) are not materially less favorable to the Holders of the Notes and are not materially more favorable to the lienholders with respect to such Liens than the Liens in respect of the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded and (b) do not extend to or cover any property or assets of the Company or any of its Subsidiaries not securing the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded; and (v) such Indebtedness is incurred either by the Company or a Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Person" means any individual, corporation, partnership, joint venture, association, joint stock company, trust, limited liability company, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Pipelines" shall have the meaning provided in the definition of "Collateral." "Pipeline Subsidiary" means (i) each of Kenai Pipe Line Company, Tesoro Alaska Pipeline Company and Tesoro High Plains Pipeline Company, and (ii) each other Restricted Subsidiary of the Company which acquires any of the Pipelines after the Issue Date. "preferred stock" means any Capital Stock of a Person, however designated, which entitles the holder thereof to a preference with respect to dividends, distributions or liquidation proceeds of such Person over the holders of the other Capital Stock issued by such Person. "Private Placement Legend" means the legend set forth in Section 2.06(g)(i) hereof to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture. "Purchase Agreement" means (i) the Purchase Agreement dated April 7, 2003 among the Company, the Guarantors and Goldman, Sachs & Co., as representative of the several Initial Purchasers relating to the Offering, and (ii) any similar agreement dated subsequent to the Issue Date among the Company, the Guarantors and each Initial Purchaser relating to the offering of 27 Initial Notes other than the Original Notes, in each case as such agreement may be amended, modified or supplemented from time to time. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Qualified Credit Facility" means the Senior Credit Facility or any other Credit Facility: (1) which is governed by an agreement that provides for the benefit of the Holders of the Notes, the Trustee, the Collateral Agent, the holders of the Term Loans and the Administrative Agent, as third party beneficiaries thereof, unless and until the Notes and Term Loans are paid in full and the Collateral Agent's Liens are released, that: (a) the Credit Facility Agent shall be bound by and shall perform each of the obligations of the Credit Facility Agent as set forth in Article XI of this Indenture and (b) neither the Credit Facility Agent nor any lender or other holder of Credit Facility Obligations will ever accept, enforce or claim or retain any benefit of (i) any guarantee of any Credit Facility Obligation from any subsidiary that was a Pipeline Subsidiary on the date of such agreement, (ii) any Lien upon any assets of any such Pipeline Subsidiary as security for any Credit Facility Obligations or (iii) any consensual security interest in any Capital Stock of any Subsidiary of the Company; and (2) in respect of which such Credit Facility Agent has delivered to the Trustee, the Administrative Agent and the Collateral Agent: (a) written notice (that has not been withdrawn by such agent or representative) certifying that such Credit Facility is a Qualified Credit Facility and that such Credit Facility Agent is bound by and will perform the obligations of the Credit Facility Agent set forth in Article XI of this Indenture; and (b) if any other Credit Facility Agent previously delivered such notice and certification in respect of any predecessor Credit Facility, an instrument reasonably satisfactory to the Collateral Agent signed by such previous Credit Facility Agent withdrawing the previous notice and certification and forever renouncing and discharging all rights and benefits under this Indenture that otherwise would have been enforceable by such previous Credit Facility Agent or the holders of Obligations under such previous Credit Facility, in each case, as amended, modified, renewed, restated, refunded, replaced or refinanced (in each case, without limitation as to amount), in whole or in part, from time to time. "Rating Agency" means each of S&P and Moody's, or if S&P or Moody's or both shall not make a rating on the Notes publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, selected by the Company (as certified by a resolution of the Board of Directors) which shall be substituted for S&P or Moody's, or both, as the case may be. 28 "Refinery Assets" means property, plant and equipment used or to be used in the business of gathering, wholesale marketing, refining, distilling, wholesale distributing, terminalling, treating, processing, storing or transporting oil, gas or other hydrocarbons or related products, and other assets that are reasonably related thereto. "Registration Rights Agreement" means (i) the Exchange and Registration Rights Agreement, dated as of the Issue Date, by and among the Company, the Guarantors and the other parties named on the signature pages thereof relating to the Original Notes, attached hereto as Exhibit F, and (ii) any similar agreement that the Company and other parties may enter into in relation to any other Initial Notes, in each case as such agreement may be amended, modified or supplemented from time to time. "Regulation S" means Regulation S promulgated under the Securities Act. "Regulation S Global Note" means a global Note in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal the outstanding principal amount of the Notes initially sold in reliance on Rule 903 of Regulation S. "Representative" means the administrative agent under the Senior Credit Facility or its successor thereunder. "Responsible Officer", when used with respect to the Trustee, means any officer, including, without limitation, any vice president, assistant vice president, assistant treasurer or secretary within the Corporate Trust Administration of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to particular corporate trust matter, any other officer or employee to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Definitive Note" means a Definitive Note bearing the Private Placement Legend. "Restricted Global Note" means a Global Note bearing the Private Placement Legend. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Period" means the 40-day distribution compliance period as set forth in Regulation S. "Restricted Subsidiary" means any Subsidiary of the Company that is not an Unrestricted Subsidiary or a direct or indirect Subsidiary of an Unrestricted Subsidiary; provided that, on the Issue Date, all Subsidiaries of the Company shall be Restricted Subsidiaries. "Retail Properties" means all assets directly related to the retail sale of gasoline and diesel fuel in retail markets in the mid-continental and western United States (including Alaska and Hawaii), including, without limitation, all related gas stations, convenience stores, merchandise items, tow trucks, auto maintenance facilities, oil change facilities, and car washes; 29 provided that such assets will not include any assets relating to the sale of petroleum products in bulk and wholesale markets. "Rule 144" means Rule 144 promulgated under the Securities Act. "Rule 144A" means Rule 144A promulgated under the Securities Act. "Rule 144A Global Note" means the Global Note in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with and registered in the name of the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A. "Rule 903" means Rule 903 promulgated under the Securities Act. "Rule 904" means Rule 904 promulgated under the Securities Act. "S&P" means Standard & Poor's Ratings Group, Inc., or any successor to the rating agency business thereof. "Sale of Collateral" means any Asset Sale to the extent involving assets, rights or other property that constitutes Collateral under the Security Documents. "SEC" means the Securities and Exchange Commission. "Secured Obligations" means, collectively, the Note Obligations and the Term Loan Obligations. "Security Agreement" means the Pledge and Security Agreement dated the Issue Date among the Company, the Guarantors and the Collateral Agent. "Security Documents" means the Collateral Agency Agreement, the Security Agreement, the Control Agreement, mortgages or deeds of trust covering real property, and all other grants or transfers for security, instruments, documents and agreements delivered by any Obligor pursuant to this Indenture, the other Note Documents, the Term Loan Agreement or the other Term Loan Documents in order to grant to the Collateral Agent, Equally and Ratably, for the benefit of the holders of Secured Obligations, a Lien on any Collateral as security for the Secured Obligations, in each case, as amended, modified, renewed, restated or replaced, in whole or in part, from time to time, in accordance with its terms. "Securities Act" means the Securities Act of 1933, as amended. "Senior Credit Facility" means those certain senior secured credit facilities of the Company available pursuant to the Credit Agreement, by and among the Company, Bank One, NA, as Administrative Agent, Banc One Capital Markets, Inc., as Sole Lead Arranger and Sole Bookrunner, Goldman Credit Partners L.P., as Syndication Agent, and certain other financial institutions from time to time parties thereto, as lenders, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith and, in each case, as amended, modified, renewed, restated, refunded, replaced or refinanced (in each case, 30 without limitation as to amount), in whole or in part, from time to time and any agreements (and related documents) governing Indebtedness incurred to refund or refinance credit extensions and commitments then outstanding or permitted to be outstanding under such Senior Credit Facility, whether by the same or any other lender or group of lenders. The Company shall promptly notify the Trustee of any such refunding or refinancing of the existing Senior Credit Facility. "Shelf Registration Statement" has the meaning set forth in a corresponding Registration Rights Agreement. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the Issue Date. "Special Interest" means all special interest then owing pursuant to Section 5 of the Registration Rights Agreement. "Specified Intercompany Debt" shall have the meaning provided in the definition of "Collateral." "Stated Maturity" means, with respect to any installment of interest or principal, or sinking fund or mandatory redemption of principal, on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid or made, as applicable, in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "Subsidiary" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or an entity described in clause (i) and related to such Person or (b) the only general partners of which are such Person or of one or more entities described in clause (i) and related to such Person (or any combination thereof). "Subsidiary Guarantee" means the guarantee of the Notes (including any Exchange Notes) by each of the Guarantors pursuant to Article XIII hereof and, if applicable, in the related form of guarantee notation endorsed on the form of Note attached hereto as Exhibit A and any additional guarantee of the Notes (including any Exchange Notes) to be executed by any Restricted Subsidiary of the Company pursuant to Section 4.17 or Section 13.02. "Term Loan Agreement" means that certain Credit and Guaranty Agreement dated the Issue Date among the Company, the Guarantors and the Administrative Agent, relating to $200,000,000 in aggregate principal amount of Term Loans, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, as amended, modified, renewed, restated or replaced, in whole or in part, from time to time. 31 "Term Loan Documents" means the Term Loan Agreement, the Term Loan Notes and the Security Documents. "Term Loan Obligations" means the Term Loans (including additional Term Loans), the related guarantees and all other Obligations of any Obligor under the Term Loan Documents. "Term Loans" means the principal of and interest and premium (if any) on Indebtedness of the Company incurred under the Term Loan Agreement. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date on which this Indenture iS qualified under the TIA. "Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "Unrestricted Definitive Note" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend. "Unrestricted Global Note" means a permanent Global Note in the form of Exhibit A attached hereto that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing a series of Notes that do not bear the Private Placement Legend. "Unrestricted Subsidiary" means (i) any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary of the Company) that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a resolution of the Board of Directors as certified in an Officers' Certificate delivered to the Trustee and (ii) each Subsidiary of an Unrestricted Subsidiary, whenever it shall become such a Subsidiary. The Board of Directors may designate any Subsidiary of the Company to become an Unrestricted Subsidiary if it (a) has no Indebtedness other than Non-Recourse Indebtedness; (b) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained, in light of all the circumstances, at the time from Persons who are not Affiliates of the Company; (c) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (x) to subscribe for additional Equity Interests or (y) to maintain or preserve such Person's financial condition or to cause such Persons to achieve any specified levels of operating results; (d) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries; and (e) does not own any Capital Stock of or own or hold any Lien on any property of, the Company or any Restricted Subsidiary of the Company; and (f) would constitute an Investment which the Company could make in compliance with Section 4.07. Notwithstanding the foregoing, if, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted 32 Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred as of such date. "U.S." means the United States of America. "U.S. Person" means a U.S. person as defined in Rule 902(o) under the Securities Act. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. SECTION 1.02. Other Definitions.
DEFINED IN TERM SECTION - ------------------------------------------------------------------------------------------------ "Affiliate Transaction"....................................................... 4.11 "Asset Sale Offer"............................................................ 3.09 "Asset Sale Proceeds Account"................................................. 4.10 "Change of Control Offer"..................................................... 4.15 "Change of Control Payment"................................................... 4.15 "Change of Control Payment Date".............................................. 4.15 "Collateral Proceeds Offer" .................................................. 4.10 "Covenant Defeasance"......................................................... 8.03 "DTC"......................................................................... 2.03 "Event of Default"............................................................ 6.01 "Excess Asset Sale Proceeds".................................................. 4.10 "Excess Proceeds from the Sale of Collateral" ................................ 4.10 "Funding Guarantor"........................................................... 13.05 "incur"....................................................................... 4.09 "Indemnitee".................................................................. 10.07 "Joinder Agreement"........................................................... 4.17 "Legal Defeasance"............................................................ 8.02 "Offer Amount"................................................................ 3.09 "Offer Period"................................................................ 3.09 "Original Notes".............................................................. 2.02 "Paying Agent"................................................................ 2.03 "Payment Default"............................................................. 6.01 "Permitted Debt".............................................................. 4.09 "Processing and Sale Period".................................................. 11.04 "Purchase Date"............................................................... 3.09
33
DEFINED IN TERM SECTION - ------------------------------------------------------------------------------------------------ "Registrar"................................................................... 2.03 "Restricted Payments"......................................................... 4.07 "Suspended Covenants" ........................................................ 4.19
SECTION 1.03. Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes; "indenture security Holder" means a Holder of a Note; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the Notes means the Company and any successor obligor upon the Notes. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. SECTION 1.04. Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive, and "including" means "including without limitation," "including but not limited to" or words of similar import; (4) the word "will" shall be construed to have the same meaning and effect as the word "shall;" (5) words in the singular include the plural, and in the plural include the singular; (6) provisions apply to successive events and transactions; (7) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time; 34 (8) references to "Sections," "clauses," "Articles," "Exhibits" and "Schedules" shall be to Sections, clauses, Articles, Exhibits and Schedules, repectively, of this Indenture unless otherwise specifically provided; (9) the use in this Indenture of the words "herein," "hereof" and "hereunder," and words of similar import, shall be construed to refer to this Indenture in its entirety and not to any particular provision hereof; and (10) this Indenture, the other Note Documents and any documents or instruments delivered pursuant hereto shall be construed without regard to the identity of the party who drafted the various provisions of the same. Each and every provision of this Indenture, the other Note Documents and instruments and documents entered into and delivered in connection therewith shall be construed as though the parties participated equally in the drafting of the same. Consequently, each of the parties acknowledges and agrees that any rule of construction that a document is to be construed against the drafting party shall not be applicable either to this Indenture or the other Note Documents and instruments and documents entered into and delivered in connection therewith. ARTICLE II THE NOTES SECTION 2.01. Form and Dating. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. Subject to Section 4.17 and 13.02 hereof, the Notes may bear notations of Subsidiary Guarantees. The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture, and the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note or any notation of Subsidiary Guarantees thereon conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. Notes issued in global form shall be substantially in the form of Exhibit A attached hereto (including the Global Note Legend and the "Schedule of Exchanges in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Note Legend and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such aggregate principal amount of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. 35 Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee, the Depositary or the Note Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Clearstream Bank" and "Customer Handbook" of Clearstream shall be applicable to transfers of beneficial interests in Regulation S Global Notes that are held by members of, or Participants, in DTC through Euroclear or Clearstream. SECTION 2.02. Execution and Authentication. One Officer shall sign the Notes for the Company by manual or facsimile signature. If an Officer of the Company whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall authenticate (i) the Initial Notes for original issue on the Issue Date in the aggregate principal amount of $375,000,000 (the "Original Notes"), (ii) additional Initial Notes for original issue from time to time after the Issue Date in such principal amounts as may be set forth in a written order of the Company described in this sentence (such Notes, together with the Original Notes, the "Initial Notes"); provided that the issuance of such additional Initial Notes shall be subject to Section 4.09 and (iii) any Exchange Notes from time to time for issue only in exchange for a like principal amount of Initial Notes, in each case, upon a written order of the Company signed by one Officer, which written order shall specify (a) the amount of Notes to be authenticated and the date of original issue thereof, (b) whether the Notes are Initial Notes or Exchange Notes and (c) the amount of Notes to be issued in global form or definitive form. The aggregate principal amount of Notes and Term Loans outstanding at any time may not exceed $725,000,000, except as provided in Section 2.07 hereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. SECTION 2.03. Registrar and Paying Agent. The Company shall maintain an office or agency within the City and State of New York where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Notes may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The 36 Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall promptly notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. The Trustee has been appointed by DTC to act as Note Custodian with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent. SECTION 2.04. Paying Agent to Hold Money in Trust. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal of, or premium or Special Interest, if any, or interest on, the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or an Affiliate of the Company (including any Subsidiary) acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes. SECTION 2.05. Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company shall provide to a Responsible Officer of the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA Section 312(a). SECTION 2.06. Transfer and Exchange. (a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged by the Company for Definitive Notes if (i) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary for the Global Notes or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 90 days after the date of such notice from the Depositary or (ii) the Company in its sole 37 discretion notifies the Trustee in writing that it elects to cause issuance of the Notes in certificated form. Upon the occurrence of either of the preceding events in (i) or (ii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.11 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to Section 2.07 or 2.11 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof. (b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs as applicable: (i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period transfers of beneficial interests in the Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred only to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(i). (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests (other than a transfer of a beneficial interest in a Global Note to a Person who takes delivery thereof in the form of a beneficial interest in the same Global Note), the transferor of such beneficial interest must deliver to the Registrar (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be 38 registered to effect the transfer or exchange referred to in (1) above. Upon an Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon notification from the Registrar that all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture, the Notes and otherwise applicable under the Securities Act have been satisfied, the Trustee shall adjust the principal amount of the relevant Global Notes pursuant to Section 2.06(h) hereof. (iii) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of clause (ii) above and the Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in the Rule 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in Item (1) thereof; (B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in Item (2) thereof; and (C) if the transferee will take delivery in the form of a beneficial interest in the IAI Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications and certificates and Opinion of Counsel required by (3) thereof, in each case, if applicable. (iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in the Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of clause (ii) above and: (A) such exchange or transfer is effected pursuant to an Exchange Offer in accordance with the corresponding Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to a Shelf Registration Statement in accordance with the corresponding Registration Rights Agreement; 39 (C) any such transfer is effected by a Participating Broker-Dealer pursuant to an Exchange Offer Registration Statement in accordance with the corresponding Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in Item (1)(a) thereof; (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in Item (4) thereof; and (3) in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Trustee and the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are not required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an authentication order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note. (c) Transfer or Exchange of Beneficial Interests for Definitive Notes. (i) If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon receipt by the Registrar of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in Item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (1) thereof; 40 (C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (3)(a) thereof; (E) if such beneficial interest is being transferred to an Institutional Accredited Investor or in reliance on any other exemption from the registration requirements of the Securities Act, in either case other than those listed in subparagraphs (B) through (D) above, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and any Opinion of Counsel required by Item (3) thereof, if applicable; (F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (3)(b) thereof; or (G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (3)(c) thereof, the Trustee, upon notice of receipt of such documentation by the Registrar, shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and make available for delivery to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall make available for delivery such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (ii) Notwithstanding 2.06(c)(i) hereof, a holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to an Exchange Offer in accordance with the corresponding Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, 41 in the case of a transfer, is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to a Shelf Registration Statement in accordance with the corresponding Registration Rights Agreement; (C) any such transfer is effected by a Participating Broker-Dealer pursuant to an Exchange Offer Registration Statement in accordance with the corresponding Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C hereto, including the certifications in Item (1)(b) thereof; (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit B hereto, including the certifications in Item (4) thereof; and (3) in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Trustee and the Company, to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are not required in order to maintain compliance with the Securities Act. (iii) If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon notice by the Registrar of satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and make available for delivery to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall make available for delivery such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall not bear the Private Placement Legend. A beneficial interest in an Unrestricted Global Note cannot be exchanged for a Definitive Note bearing the Private Placement Legend or transferred 42 to a Person who takes delivery thereof in the form of a Definitive Note bearing the Private Placement Legend. (d) Transfer and Exchange of Definitive Notes for Beneficial Interests. (i) If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in Item (2)(b) thereof; (B) if such Definitive Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (1) thereof; (C) if such Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (2) thereof; (D) if such Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (3)(a) thereof; (E) if such Definitive Note is being transferred to an Institutional Accredited Investor or in reliance on any other exemption from the registration requirements of the Securities Act, in either case, other than those listed in subparagraphs (B) through (D) above, a certificate in the form of Exhibit B hereto, including certifications, certificates, and any Opinion of Counsel required by Item (3) thereof, if applicable; (F) if such Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (3)(b) thereof; or (G) if such Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (3)(c) thereof, the Trustee, upon notice of receipt of such documentation by the Registrar, shall cancel the Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of subparagraph (A) above, the appropriate Restricted Global Note and, in the case of 43 subparagraph (B) above, the Rule 144A Global Note, and, in the case of subparagraph (C) above, the Regulation S Global Note. (ii) A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: (A) such exchange or transfer is effected pursuant to an Exchange Offer in accordance with the corresponding Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to a Shelf Registration Statement in accordance with the corresponding Registration Rights Agreement; (C) any such transfer is effected by a Participating Broker-Dealer pursuant to an Exchange Offer Registration Statement in accordance with the corresponding Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in Item (1)(c) thereof; (2) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in Item (4) thereof; and (3) in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Trustee and the Company to the effect that such exchange or transfer is in compliance with the Securities Act, that the restrictions on transfer contained herein and in the Private Placement Legend are not required in order to maintain compliance with the Securities Act, and such Definitive Notes are being exchanged or transferred in compliance with any applicable blue sky securities laws of any State of the United States. Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. (iii) A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or 44 transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes. (iv) If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an authentication order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of beneficial interests transferred pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above. (e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by his attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, pursuant to the provisions of this Section 2.06(e). (i) Restricted Definitive Notes may be transferred to and registered in the name of Persons who take delivery thereof if the Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in Item (1) thereof; (B) if the transfer will be made pursuant to Rule 903 or Rule 904 of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in Item (2) thereof; and (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by Item (3) thereof, if applicable. (ii) Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to an Exchange Offer in accordance with the corresponding Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; 45 (B) any such transfer is effected pursuant to a Shelf Registration Statement in accordance with the corresponding Registration Rights Agreement; (C) any such transfer is effected by a Participating Broker-Dealer pursuant to an Exchange Offer Registration Statement in accordance with the corresponding Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in Item (1)(b) thereof; (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in Item (4) thereof; and (3) in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Trustee and the Company to the effect that such exchange or transfer is in compliance with the Securities Act, that the restrictions on transfer contained herein and in the Private Placement Legend are not required in order to maintain compliance with the Securities Act, and such Restricted Definitive Note is being exchanged or transferred in compliance with any applicable blue sky securities laws of any State of the United States. (iii) A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request for such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. Unrestricted Definitive Notes cannot be exchanged for or transferred to Persons who take delivery thereof in the form of a Restricted Definitive Note. (f) Exchange Offer. Upon the occurrence of an Exchange Offer in accordance with the corresponding Registration Rights Agreement, the Company shall issue and, upon receipt of (A) an authentication order in accordance with Section 2.02 hereof and (B) an Opinion of Counsel opining as to the enforceability of the Exchange Notes and the guarantees thereof, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes tendered for acceptance by Persons that are not (1) broker-dealers, (2) Persons participating in the distribution of the Exchange Notes or (3) Persons who are affiliates (as defined in Rule 144) of the Company and accepted for exchange in such Exchange Offer and (ii) Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in such Exchange Offer, unless the Holders of such Restricted Definitive Notes shall request the receipt of Definitive Notes, in which case the Company shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of such Restricted Definitive Notes one or more Definitive Notes without the Private Placement Legend in the appropriate principal amount. Concurrent with the issuance of such Unrestricted Global 46 Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and make available for delivery to the Persons designated by the Holders of Definitive Notes so accepted Definitive Notes in the appropriate principal amount. (g) Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (i) Private Placement Legend. (A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: "THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE ""SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (4) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS." (B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraph (b)(iv), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) of this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) Global Note Legend. Each Global Note shall bear a legend in substantially the following form: "THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO ARTICLE II OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE 47 BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF TESORO PETROLEUM CORPORATION OR ANY SUCCESSOR THERETO." Additionally, for so long as DTC is the Depositary with respect to any Global Note, each such Global Note shall also bear a legend in substantially the following form: "UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE), TO TESORO PETROLEUM CORPORATION OR ANY SUCCESSOR THERETO OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN." (h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note, by the Trustee, the Note Custodian or the Depositary at the direction of the Trustee, to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note, by the Trustee, the Note Custodian or by the Depositary at the direction of the Trustee, to reflect such increase. (i) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, subject to Section 2.06, the Company shall execute and, upon the Company's written order, signed by one or more officers of the Company, the Trustee shall authenticate Global Notes and Definitive Notes at the Registrar's request. 48 (ii) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 3.06, 4.10, 4.15 and 9.05 hereof). (iii) The Registrar shall not be required to register the transfer or exchange of any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture and the Subsidiary Guarantees, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (v) The Company and the Registrar shall not be required (A) to issue, to register the transfer of or to exchange Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part, (C) to register the transfer of or to exchange a Note between a record date and the next succeeding Interest Payment Date or (D) to register the transfer of a Note other than in denominations of $1,000 or multiple integrals thereof. (vi) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof. (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a transfer or exchange may be submitted by facsimile. (ix) The Trustee and the Registrar shall have no obligation or duty to monitor, determine or inquire as to whether any Person is or is not a Person described in clauses (1), (2) and (3) of each of Sections 2.06(b)(iv)(A), 2.06(c)(ii)(A), 2.06(d)(ii)(A), 2.06(e)(ii)(A) and 2.06(f) hereof or under applicable law (other than the TIA) with respect to any transfer of any interest in any Note (including any transfers between or among Participants or beneficial owners of interests in any Global Note) other than to 49 require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. SECTION 2.07. Replacement Notes. If any mutilated Note is surrendered to the Trustee or the Company, or the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon the written order of the Company signed by one Officer of the Company, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee and any Agent from any loss that any of them may suffer if a Note is replaced. The Company and the Trustee may charge for their respective expenses in replacing a Note. If, after the delivery of such replacement Note, a bona fide purchaser of the original Note in lieu of which such replacement Note was issued presents for payment or registration such original Note, the Trustee shall be entitled to recover such replacement Note from the Person to whom it was delivered or any Person taking therefrom, except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Company, the Trustee and any Agent in connection therewith. Subject to the provisions of the final sentence of the preceding paragraph of this Section 2.07, every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. SECTION 2.08. Outstanding Notes. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note. If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest and Special Interest, if any, on it ceases to accrue. If the Paying Agent (other than the Company, a Subsidiary of the Company or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest and Special Interest, if any. 50 SECTION 2.09. Treasury Notes. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. Notwithstanding the foregoing, Notes that the Company, a Subsidiary of the Company or an Affiliate of the Company offers to purchase or acquires pursuant to an offer, exchange offer, tender offer or otherwise shall not be deemed to be owned by the Company, such Subsidiary or such Affiliate until legal title to such Notes passes to the Company, such Subsidiary or such Affiliate, as the case may be. SECTION 2.10. Temporary Notes. Until Definitive Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes upon a written order of the Company signed by one Officer of the Company. Temporary Notes shall be substantially in the form of Definitive Notes but may have variations that the Company considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate Definitive Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. SECTION 2.11. Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall return such canceled Notes to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation other than as contemplated by an Exchange Offer. SECTION 2.12. Defaulted Interest. If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company shall promptly notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date, provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a 51 notice that states the special record date, the related payment date and the amount of such interest to be paid. SECTION 2.13. CUSIP Numbers. The Company in issuing the Notes may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption or repurchase, as the case may be, as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption or repurchase, as the case may be, and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption or repurchase, as the case may be, shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in the "CUSIP" numbers. ARTICLE III REDEMPTION AND PREPAYMENT SECTION 3.01. Notices to Trustee. If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 45 days but not more than 60 days before a redemption date, an Officers' Certificate setting forth (i) the clause of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed, (iv) the redemption price and (v) that the redemption price will be deposited with the Trustee in immediately available funds no later than 10:00 a.m., New York City time, on the redemption date. SECTION 3.02. Selection of Notes to be Redeemed. If less than all of the Notes are to be redeemed at any time, selection of Notes for redemption shall be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance with any other method the Trustee considers fair and appropriate; provided that no Notes of $1,000 or less shall be redeemed in part. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. 52 The provisions of the two preceding paragraphs of this Section 3.02 shall not apply with respect to any redemption affecting only a Global Note, whether such Global Note is to be redeemed in whole or in part. In case of any such redemption in part, the unredeemed portion of the principal amount of the Global Note shall be in an authorized denomination. SECTION 3.03. Notice of Redemption. Subject to the provisions of Section 3.09 hereof, at least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. The notice shall identify the Notes (including CUSIP numbers) to be redeemed and shall state: (a) the redemption date; (b) the redemption price; (c) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note; (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (f) that, unless the Company defaults in making such redemption payment, interest and Special Interest, if any, on Notes called for redemption cease to accrue on and after the redemption date; (g) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (h) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. If any of the Notes to be redeemed is in the form of a Global Note, then the Company shall modify such notice to the extent necessary to accord with the Applicable Procedures of the Depositary applicable to such redemption. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided, however, that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. 53 SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. SECTION 3.05. Deposit of Redemption Price. No later than 10:00 a.m. New York City Time on the redemption date, the Company shall deposit with the Trustee or with the Paying Agent immediately available funds sufficient to pay the redemption price of and accrued interest and Special Interest, if any, on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest and Special Interest, if any, on, all Notes to be redeemed. If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, interest (including Special Interest), if any, shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest (including Special Interest), if any, shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. SECTION 3.06. Notes Redeemed in Part. Upon surrender of a Note that is redeemed in part, the Company shall issue and, upon the Company's written request, the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. SECTION 3.07. Optional Redemption. (a) Except as set forth in clause (b) of this Section 3.07, the Notes shall not be redeemable at the Company's option prior to April 15, 2006. Thereafter, the Notes will be subject to redemption at any time or from time to time at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest (including Special Interest), if any, thereon, to the applicable redemption date, if redeemed during the twelve-month period beginning on April 15 of the years indicated below:
YEAR PERCENTAGE 2006................................... 104.000% 2007 and thereafter.................... 100.000%
54 (b) Notwithstanding the foregoing, at any time or from time to time on or before April 15, 2006, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under this Indenture at a redemption price of 108.000% of the principal amount thereof, plus accrued and unpaid interest (including Special Interest), if any, thereon, to the redemption date, with the net cash proceeds (other than Designated Proceeds) of any one or more Equity Offerings; provided that at least 65% of the aggregate principal amount of Notes issued under this Indenture remain outstanding immediately after each such redemption; and provided, further, that each such redemption shall occur within 90 days of the date of the closing of such Equity Offering. (c) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. SECTION 3.08. Mandatory Redemption. The Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. However, pursuant to Sections 3.09, 4.10 and 4.15 hereof, under certain circumstances, the Company may be required to offer to purchase the Notes. SECTION 3.09. Offer to Purchase by Application of Excess Asset Sale Proceeds and Excess Proceeds from the Sale of Collateral. In the event that, pursuant to Section 4.10 hereof, the Company shall be required to commence an offer to all Holders to purchase Notes (an "Asset Sale Offer"), it shall follow the procedures specified below. The Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "Offer Period"). No later than five Business Days after the termination of the Offer Period (the "Purchase Date"), the Company shall purchase the principal amount of Notes required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than the Offer Amount has been tendered, all Notes validly tendered in response to the Asset Sale Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made. If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest and Special Interest, if any, shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest or Special Interest shall be payable to Holders who tender Notes pursuant to the Asset Sale Offer. Upon the commencement of an Asset Sale Offer, the Company shall send, by first class mail, a notice to each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall state: 55 (a) that the Asset Sale Offer is being made pursuant to this Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain open; (b) the Offer Amount, the purchase price and the Purchase Date; (c) that any Note not tendered or accepted for payment shall continue to accrete or accrue interest and Special Interest, if any; (d) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrete or accrue interest and Special Interest, if any, after the Purchase Date; (e) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may only elect to have all of such Note purchased and may not elect to have only a portion of such Note purchased; (f) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed to the Company, the Depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date; (g) that Holders shall be entitled to withdraw their election if the Company, such depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (h) that, if the aggregate principal amount of Notes surrendered by Holders exceeds the Offer Amount, the Trustee shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Trustee so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and (i) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer). If any of the Notes subject to an Asset Sale Offer is in the form of a Global Note, then the Company shall modify such notice to the extent necessary to accord with the Applicable Procedures of the Depositary applicable to such repurchases. On or before the Purchase Date, the Company shall, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and shall deliver to the Trustee an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.09. The Company, the depositary (if any, and as referred to in clause (f) above of this Section 3.09) or the Paying Agent, as the case may be, shall promptly (but in 56 any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new Note, and the Trustee, upon written request from the Company, shall authenticate and make available for delivery such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Asset Sale Offer on the Purchase Date. Other than as specifically provided in this Section 3.09, any purchase pursuant to this Section 3.09 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. ARTICLE IV COVENANTS SECTION 4.01. Payment of Notes. The Company shall pay or cause to be paid the principal of, and premium, if any, interest and Special Interest, if any, on, the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, interest and Special Interest, if any, shall be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 10:00 a.m. New York City Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, interest and Special Interest, if any, then due. The Company shall pay all Special Interest, if any, in the same manner on the dates and in the amounts set forth in the corresponding Registration Rights Agreement. The Company shall pay interest (including post-petition interest in any proceeding under the Bankruptcy Code) on overdue principal at the rate borne on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under the Bankruptcy Code) on overdue installments of interest and Special Interest, if any, (without regard to any applicable grace period) at the same rate to the extent lawful. SECTION 4.02. Maintenance of Office or Agency. The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be presented or surrendered for payment, where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. 57 The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the office of the Trustee at 101 Barclay Street, Floor 8W, New York, New York, 10286, as one such office or agency of the Company in accordance with Section 2.03 hereof. SECTION 4.03. Reports. (a) Whether or not required by the SEC's rules and regulations, so long as any Notes are outstanding, the Company shall furnish to each of the Holders of Notes, within the time periods specified in the SEC's rules and regulations, beginning with quarterly financial information for the period ended March 31, 2003, (i) all quarterly and annual reports that would be required to be filed with the SEC on Forms 10-Q and 10-K if the Company were required to file such reports, and (ii) all current reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports. (b) All such reports will be prepared in all material respects in accordance with all of the rules and regulations applicable to such reports. Each annual report on Form 10-K will include a report on the Company's consolidated financial statements by the Company's certified independent accountants. In addition, the Company will file a copy of each of the reports referred to in clauses (a)(i) and (a)(ii) above with the SEC for public availability within the time periods specified in the rules and regulations applicable to such reports (unless the SEC will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. (c) If at any time, the Company is no longer subject to the periodic reporting requirements of the Exchange Act for any reason, the Company will nevertheless continue filing the reports specified in the preceding paragraph with the SEC within the time periods specified above unless the SEC will not accept such a filing. The Company agrees that it will not take any action for the purpose of causing the SEC not to accept any such filings. If, notwithstanding the foregoing, the SEC will not accept the Company's filings for any reason, the Company will post the reports referred to in the preceding paragraph on its website within the time periods that would apply if the Company were required to file those reports with the SEC. (d) The Company and the Guarantors agree that, for so long as any Notes remain outstanding, at any time they are not required to file the reports required by the preceding paragraphs with the SEC, they will furnish to the Holders of the Notes and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. 58 (e) Delivery of such reports, information and documents to the Trustee is for informational purposes only, and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). SECTION 4.04. Compliance Certificate. (a) The Company shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.03(a) above shall be accompanied by a written statement of the Company's independent public accountants that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article IV or Article V hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any future knowledge of any such violation. (c) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon any executive Officer having knowledge that an event or circumstance constitutes a Default or an Event of Default and that such event or circumstance has occurred and is existing, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. SECTION 4.05. Taxes. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, charges, assessments, and governmental levies except such as are contested in good faith and, if required, by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes. 59 SECTION 4.06. Waiver of Stay, Extension and Usury Laws. Each of the Company and the Guarantors covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and each of the Company and the Guarantors (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. SECTION 4.07. Restricted Payments. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such, in each case other than dividends or distributions declared or paid in Equity Interests (other than Disqualified Stock) of the Company or declared or paid to the Company or any of its Restricted Subsidiaries; (ii) purchase, redeem or otherwise acquire or retire for value (including without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company (other than any such Equity Interests owned by a Restricted Subsidiary of the Company); (iii) make any payment to purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes, except a payment of interest or principal at its Stated Maturity; or (iv) make any Investment other than a Permitted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (a) no Default or Event of Default shall have occurred and be continuing; and (b) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09; and (c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company or any of its Restricted Subsidiaries after the Issue Date (excluding Restricted Payments permitted by clauses (ii), (iii), (iv), (v), (vi), (viii), (x), (xi) or (xii) of the next succeeding paragraph), is less than the sum of: (1) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing immediately prior to the Issue Date to the end of the Company's most recently ended fiscal quarter for which 60 internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a loss, less 100% of such loss), plus (2) 100% of the aggregate net cash proceeds (other than Designated Proceeds), or the Fair Market Value of assets or property other than cash, received by the Company from the issue or sale, in either case, since the Issue Date of (A) Equity Interests of the Company (other than Disqualified Stock), or (B) Disqualified Stock or debt securities of the Company that have been converted into, or exchanged for, such Equity Interests, together with the aggregate cash received at the time of such conversion or exchange, or received by the Company from any such conversion or exchange of such debt securities sold or issued prior to the Issue Date other than Equity Interests (or Disqualified Stock or convertible or exchangeable debt securities) sold to a Restricted Subsidiary of the Company and other than Disqualified Stock or debt securities that have been converted or exchanged into Disqualified Stock, plus (3) in case any Unrestricted Subsidiary has been redesignated a Restricted Subsidiary pursuant to the terms hereof or has been merged, consolidated or amalgamated with or into, or transfers or conveys assets to or is liquidated into, the Company or a Restricted Subsidiary and provided that no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof, the lesser of (A) the book value (determined in accordance with GAAP) at the date of such redesignation, combination or transfer of the aggregate Investments made by the Company and its Restricted Subsidiaries in such Unrestricted Subsidiary (or of the assets transferred or conveyed, as applicable) and (B) the fair market value of such Investment in such Unrestricted Subsidiary at the time of such redesignation, combination or transfer (or of the assets transferred or conveyed, as applicable), in each case, as determined in good faith by the Board of Directors of the Company, whose determination shall be conclusive and evidenced by a resolution of such Board and, in each case, after deducting any Indebtedness of the Unrestricted Subsidiary so designated or combined or with the assets so transferred or conveyed, plus (4) to the extent not already included in Consolidated Net Income for such period, (A) if any Restricted Investment that was made by the Company or any Restricted Subsidiary after the Issue Date is sold for cash or otherwise liquidated or repaid for cash, the cash return of capital with respect to such Restricted Investment resulting from such sale or disposition (less the cost of disposition, if any) and (B) with respect to any Restricted Investment that was made by the Company or any Restricted Subsidiary after the Issue Date, the net reduction in such Restricted Investment resulting from payments of interest, dividends, principal repayments and other transfers and distributions of cash, assets or property, in an amount not to exceed the aggregate amount of such Restricted Investment. The foregoing provisions shall not prohibit: (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions hereof; (ii) the redemption, repurchase, retirement, defeasance or other acquisition, prior to its Stated Maturity, of any (y) Indebtedness (or portion thereof) which is subordinated to the Notes, or the making of any principal payment thereon, or (z) Equity Interests of the Company or any Restricted Subsidiary, in each case, in exchange for, or out of the net cash proceeds (other than Designated Proceeds) of the substantially concurrent sale or issuance (a sale or issuance will be deemed substantially concurrent if such redemption, repurchase, retirement or acquisition occurs not more than 30 days after such sale or issuance) (other than to a Restricted Subsidiary of the Company) of, Equity Interests of the Company 61 (other than any Disqualified Stock), provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition, or payments, shall be excluded from clause (c)(2) of the preceding paragraph; (iii) the making of any principal payment on, or the defeasance, redemption, repurchase or other acquisition of, prior to its Stated Maturity, Indebtedness which is subordinated to the Notes with the net cash proceeds from an incurrence of, or in exchange for the issuance of, Permitted Refinancing Indebtedness; (iv) the payment of any dividend or distribution by a Restricted Subsidiary of the Company to the holders of its Equity Interests (other than Disqualified Stock) on a pro rata basis; (v) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Restricted Subsidiary of the Company held by any current or former officer, employee or director of the Company (or any of its Subsidiaries) pursuant to the terms of agreements (including employment agreements) and plans approved by the Company's Board of Directors, including any management equity plan or stock option plan or any other management or employee benefit plan, agreement or trust, provided, however, that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests pursuant to this clause (v) shall not exceed the sum of (y) $4,000,000 in any twelve-month period and (z) the aggregate net proceeds received by the Company during such 12-month period from issuance of such Equity Interests pursuant to such agreements or plans; (vi) repurchases of Equity Interests deemed to occur upon the cashless exercise of stock options; (vii) the purchase, redemption, defeasance or retirement, in each case, prior to its Stated Maturity, of any Indebtedness that is subordinated to the Notes in right of payment by payments out of Excess Asset Sale Proceeds remaining after completion of an Asset Sale Offer and/or Excess Proceeds from the Sale of Collateral remaining after completion of a Collateral Proceeds Offer, provided that (x) in the case of payments made out of Excess Asset Sale Proceeds, any payments made or value given for such purchase, redemption, defeasance or retirement shall be made out of, or shall not be in excess of, any Excess Asset Sale Proceeds remaining after completion of an Asset Sale Offer (but for the provision of the last sentence of the third paragraph under Section 4.10 hereof), (y) in the case of payments made out of Excess Proceeds from the Sale of Collateral, any payments made or value given for such purchase, redemption, defeasance or retirement shall be made out of, or shall not be in excess of, any Excess Proceeds from the Sale of Collateral remaining after completion of a Collateral Proceeds Offer (but for the provision of the last sentence under Section 4.10 hereof) and (z) the Company would, at the time of such payment and after giving pro forma effect thereto as if such payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof; (viii) the payment of reasonable and customary directors' fees to the members of the Company's Board of Directors, provided that such fees are consistent with past practice or current requirements; (ix) the purchase by the Company of fractional shares arising out of stock dividends, splits or combinations or business combinations; (x) the declaration and payment of dividends on mandatorily convertible preferred stock of the Company (other than Disqualified Stock) issued after the Issue Date in an aggregate amount not to exceed the amount of Designated Proceeds; (xi) the repurchase by the Company on the Issue Date of a portion of the Company's outstanding 9% Senior Subordinated Notes due 2008, 9-5/8% Senior Subordinated Notes due 2008 or 9-5/8% Senior Subordinated Notes due 2012, in an aggregate principal amount not to exceed $25,000,000; and (xii) other Restricted Payments in an aggregate principal amount since the Issue Date not to exceed $50,000,000; provided, further, that, with respect to 62 clauses (ii), (iii), (v), (vi), (vii), (viii), (x), (xi) and (xii) above, no Default or Event of Default shall have occurred and be continuing. In determining whether any Restricted Payment is permitted by this Section 4.07, the Company may allocate or reallocate all or any portion of such Restricted Payment among the clauses (i) through (xii) of the preceding paragraph or among such clauses and the first paragraph of this Section 4.07 including clauses (a), (b) and (c), provided that at the time of such allocation or reallocation, all such Restricted Payments, or allocated portions thereof, would be permitted under this Section 4.07. The amount of all Restricted Payments (other than cash) shall be the Fair Market Value (as determined by the Board of Directors of the Company and as evidenced by a resolution of the Board of Directors of the Company set forth in an Officers' Certificate delivered to the Trustee) on the date of the transfer, incurrence or issuance of such non-cash Restricted Payment. Not later than (i) the end of any calendar quarter in which any Restricted Payment is made or (ii) the making of a Restricted Payment which, when added to the sum of all previous Restricted Payments made in a calendar quarter, would cause the aggregate of all Restricted Payments made in such quarter to exceed $20,000,000, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payments were permitted and setting forth the basis upon which the calculations required by this Section 4.07 were computed, which calculations may be based upon the Company's latest available financial statements. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if: (i) immediately after giving effect to such designation, the Company could incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test under the first paragraph of Section 4.09 hereof; (ii) immediately before and immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing; and (iii) the Company certifies that such designation complies with this covenant. Any such designation by the Board of Directors shall be evidenced by the Company promptly filing with the Trustee a copy of the resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. The Board of Directors may designate any Subsidiary of the Company to be an Unrestricted Subsidiary under the circumstances and pursuant to the requirements described in the definition of "Unrestricted Subsidiary," which requirements include that such designation will be made in compliance with this covenant. For purposes of making the determination as to whether such designation would be made in compliance with this covenant, all outstanding Investments by the Company and its Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary so designated will be deemed to be Restricted Payments at the time of such designation and will reduce the amount available for Restricted Payments under the first paragraph of this Section 4.07. All such outstanding Investments will be deemed to constitute Investments in an amount equal to the greatest of (i) the net book value (determined in accordance with GAAP) of such Investments at the time of such designation, (ii) the Fair Market Value of such Investments at the time of such designation and (iii) the original Fair Market Value of such Investments at the time they were made. 63 If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes hereof, and any Indebtedness of such Subsidiary shall be deemed to be incurred as of such date. SECTION 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary of the Company or the Company to: (i) (x) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (y) pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries; (ii) make loans or advances to the Company or any of its Restricted Subsidiaries; or (iii) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries. However the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of: (a) agreements in effect on the Issue Date and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings (collectively, for the purposes of this Section 4.08, "amendments") of any such agreements or any Existing Indebtedness to which such agreements relate, provided that such amendments are no more restrictive with respect to such dividend, distribution or other payment restrictions and loan or investment restrictions than those contained in such agreement, as in effect on the Issue Date; (b) any Credit Facility in effect after the Issue Date to the extent its provisions are no more restrictive with respect to such dividend, distribution or other payment restrictions and loan or investment restrictions than those contained in the Term Loan Agreement or the Senior Credit Facility as in effect on the Issue Date; (c) this Indenture, the Notes, the Exchange Notes and the Subsidiary Guarantees, or any other indenture governing debt securities issued by the Company or any Guarantor that are no more restrictive with respect to such dividend, distribution or other payment restrictions and loan or investment restrictions than those contained herein and the Notes; (d) any future Liens that may be permitted to be granted under, or incurred not in violation of, any other provisions hereof; (e) applicable law; (f) any instrument governing Indebtedness or Capital Stock, or any other agreement relating to any property or assets, of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except with respect to Indebtedness incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person or such Person's subsidiaries, so acquired, provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms hereof to be incurred; (g) restrictions of the nature described in clause (iii) above by reason of customary non-assignment provisions in contracts, agreements, licenses and leases entered into in the ordinary course of business; (h) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (iii) above on the property so acquired; (i) any restriction with respect to a Restricted Subsidiary of the Company imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition; (j) agreements relating to secured Indebtedness otherwise permitted to be incurred pursuant to Section 4.09 hereof, and not in violation of Section 4.12 hereof, that limit the right of 64 the debtor to dispose of assets securing such Indebtedness; (k) Permitted Refinancing Indebtedness in respect of Indebtedness referred to in clauses (a), (b), (c), (f), (h) and (j) of this paragraph, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive with respect to such dividend, distribution or other payment restrictions and loan or investment restrictions than those contained in the agreements governing the Indebtedness being refinanced; and (l) provisions with respect to the disposition or distribution of assets in joint venture agreements and other similar agreements entered into in the ordinary course of business. SECTION 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt), other than Permitted Debt, and the Company shall not issue, and shall not permit any of its Restricted Subsidiaries to issue, any Disqualified Stock; provided, however, that the Company or any Guarantor may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock if the Company's Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.00 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if such additional Indebtedness had been incurred, or such Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period. The provisions of the first paragraph of this Section 4.09 shall not apply to the incurrence of any Permitted Debt. Accrual of interest, the accretion of accreted value and the payment of interest in the form of additional Indebtedness will not be deemed to be an incurrence of Indebtedness for purposes of this Section 4.09. In the case an Unrestricted Subsidiary incurs Non-Recourse Indebtedness and any such Non-Recourse Indebtedness ceases to be Non-Recourse Indebtedness of such Unrestricted Subsidiary, then such event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary that is subject to this Section 4.09. The Company will not incur any Indebtedness (including Permitted Debt) that is contractually subordinated in right of payment to any other Indebtedness of the Company unless such Indebtedness is also contractually subordinated in right of payment to the Notes on substantially identical terms; provided, however, that no Indebtedness of the Company will be deemed to be contractually subordinated in right of payment to any other Indebtedness of the Company solely by virtue of being unsecured. For purposes of determining compliance with this Section 4.09, in the event that an item of Indebtedness (including Acquired Debt) meets the criteria of more than one of the categories of Permitted Debt described above or is entitled to be incurred pursuant to the first paragraph of this Section 4.09, the Company will, in its sole discretion, classify (or later reclassify) in whole or in part such item of Indebtedness in any manner that complies with this Section 4.09 and such 65 item of Indebtedness or a portion thereof may be classified (or later reclassified) in whole or in part as having been incurred under more than one of the applicable clauses or pursuant to the first paragraph of this Section 4.09. Notwithstanding the foregoing, no Pipeline Subsidiary shall incur or maintain any Indebtedness or grant or become or remain subject to any Lien upon any of its property securing Indebtedness, except (i) liabilities outstanding on the Issue Date in respect of the Company's outstanding 9% Senior Subordinated Notes due 2008, 9-5/8% Senior Subordinated Notes due 2008 and 9-5/8% Senior Subordinated Notes due 2012, (ii) guarantees of the Notes (including any additional Notes) and Term Loans (including any additional Term Loans) and Liens securing Secured Obligations and (iii) Permitted Liens. SECTION 4.10. Asset Sales. The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale (including a Sale of Collateral) unless: (i) the Company or the Restricted Subsidiary, as the case may be, receives consideration at the time of the Asset Sale at least equal to the fair market value (which, in the case of an Asset Sale for consideration exceeding $30,000,000, shall be determined in good faith by the Company's Board of Directors) of the assets or Equity Interests issued or sold or otherwise disposed of; (ii) at least 75% of the consideration therefor received by the Company or the Restricted Subsidiary is in the form of, or any combination of: (a) cash or Cash Equivalents, (b) the assumption of any liabilities (as shown on the Company's or the Restricted Subsidiary's most recent balance sheet) of the Company or any Restricted Subsidiary of the Company (other than liabilities that are by their terms subordinated to the Notes or any Subsidiary Guarantee) by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or the Restricted Subsidiary from further liability, (c) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are converted by the Company or the Restricted Subsidiary into cash or Cash Equivalents within 60 days following their receipt (to the extent of cash or Cash Equivalents received) and (d) other assets or rights used or useful in a Permitted Business, including, without limitation, assets or Investments of the nature or type described in clause (m) of the definition of "Permitted Investments" except that, in the case of a Sale of Collateral, such assets or rights shall consist solely of Refinery Assets; and (iii) in the case of a Sale of Collateral, the Collateral Agent is immediately granted a perfected first priority security interest (subject to Permitted Prior Liens) in the Net Sale Consideration therefor received by the Company or the Restricted Subsidiary as additional Collateral under the Security Documents to secure the Secured Obligations, and, in the case of cash or Cash Equivalents constituting Net Sale Consideration, such cash or Cash Equivalents must be deposited into a segregated account under the sole control of the Collateral Agent that includes only proceeds from the Sale of Collateral and interest earned thereon (an "Asset Sale Proceeds Account") and is free from all other Liens, all on terms and pursuant to arrangements reasonably satisfactory to the Collateral Agent in its reasonable determination (which may include, at the Collateral Agent's reasonable request, customary Officers' Certificates and legal opinions and shall include release provisions requiring the Collateral Agent to release deposits in the Asset Sale Proceeds Account as necessary to permit the Company or its Restricted Subsidiaries to apply such Net Sale Consideration in the manner described below, unless the Collateral Agent has received written notice that a Default or Event of Default has occurred and is continuing); 66 provided, that any Asset Sale pursuant to a condemnation, appropriation or other similar taking, including by deed in lieu of condemnation, or pursuant to the foreclosure or other enforcement of a Lien incurred not in violation of Section 4.12 hereof or exercise by the related lienholder of rights with respect thereto, including by deed or assignment in lieu of foreclosure shall not be required to satisfy the conditions set forth in clauses (i) and (ii) of this paragraph. Within 365 days after the receipt of any Net Proceeds from an Asset Sale, other than a Sale of Collateral, the Company or the Restricted Subsidiary, as the case may be, may apply such Net Proceeds, at its option: (a) to repay, repurchase or redeem any secured Indebtedness or other secured Obligations, (b) to acquire a controlling interest in another business or all or substantially all of the assets of another business, in each case engaged in a Permitted Business, (c) to make capital expenditures, or (d) to acquire other non-current assets to be used in a Permitted Business, including, without limitation, assets or Investments of the nature or type described in clause (m) of the definition of "Permitted Investments;" provided, that the Company or the applicable Restricted Subsidiary will be deemed to have complied with clause (b) or (c) if, within 365 days of such Asset Sale, the Company or such Restricted Subsidiary shall have commenced and not completed or abandoned an expenditure or Investment, or a binding agreement with respect to an expenditure or Investment, in compliance with clause (b) or (c), and that expenditure or Investment is substantially completed within a date one year and six months after the date of such Asset Sale. Pending the final application of any such Net Proceeds, the Company may temporarily reduce Indebtedness under any Credit Facility or otherwise expend or invest such Net Proceeds in any manner that is not prohibited by this Indenture. Any Net Proceeds from Asset Sales described in this paragraph that are not applied or invested as provided in the first sentence of this paragraph shall be deemed to constitute "Excess Asset Sale Proceeds." When the aggregate amount of Excess Asset Sale Proceeds exceeds $15,000,000, the Company will be required to make an offer to all Holders of Notes and holders of each other series of Indebtedness that ranks by its terms pari passu in right of payment with the Notes and the terms of which contain substantially similar requirements with respect to the application of net proceeds from asset sales as are contained herein, including the Term Loans (an "Asset Sale Offer"), to purchase on a pro rata basis (with the Excess Asset Sale Proceeds prorated between the Holders of Notes and such holders of pari passu Indebtedness based upon outstanding aggregate principal amounts) the maximum principal amount of the Notes and such other Indebtedness that may be purchased or prepaid, as applicable, out of the prorated Excess Asset Sale Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest (including Special Interest), if any, thereon, to the date of purchase, in accordance with the procedures set forth in Section 3.09 hereof. To the extent that the aggregate amount of Notes and other Indebtedness tendered (and electing to be redeemed or 67 repaid, as applicable) pursuant to an Asset Sale Offer is less than the Excess Asset Sale Proceeds, the Company and its Restricted Subsidiaries may use any remaining Excess Asset Sale Proceeds for general corporate purposes and any other purpose not prohibited by this Indenture. If the aggregate principal amount of Notes and such other Indebtedness surrendered by holders thereof exceeds the amount of the prorated Excess Asset Sale Proceeds, the Company shall select the Notes and such other Indebtedness to be purchased on a pro rata basis. Upon completion of the offer to purchase, the amount of Excess Asset Sale Proceeds shall be reset at zero. Within 365 days after the receipt of any Net Sale Consideration from an Asset Sale that constitutes a Sale of Collateral, the Company or the Restricted Subsidiary, as the case may be, may apply such Net Sale Consideration, at its option: (a) to acquire a controlling interest in another business or all or substantially all of the assets of another business, in each case engaged in a Permitted Business and principally owning Refinery Assets that have (in the good faith judgment of the Company) a value, net of the value of any Credit Facility Collateral included therein, at least equal to the amount of such Net Sale Consideration; or (b) to make capital expenditures on or acquire Refinery Assets; provided, that in each such case, the Collateral Agent shall immediately be granted a perfected first priority security interest (subject to Permitted Prior Liens) on all of the assets (other than any Credit Facility Collateral included therein) acquired with such Net Sale Consideration as Collateral under the Security Documents to secure the Secured Obligations, all on terms and pursuant to arrangements reasonably satisfactory to the Collateral Agent in its reasonable determination (which may include, at the Collateral Agent's reasonable request, customary Officers' Certificates and legal opinions). The Company or the applicable Restricted Subsidiary will be deemed to have complied with clause (a) or (b) of this paragraph if, within 365 days of such Sale of Collateral, the Company or such Restricted Subsidiary shall have commenced and not completed or abandoned an acquisition, Investment or expenditure, or a binding agreement with respect to an acquisition, Investment or expenditure, in compliance with clause (a) or (b) of this paragraph, and that acquisition, Investment or expenditure is substantially completed within a date one year and six months after the date of such Asset Sale. Any Net Sale Consideration from the Sale of Collateral that is not applied or invested as provided this paragraph shall be deemed to constitute "Excess Proceeds from the Sale of Collateral." When the aggregate amount of Excess Proceeds from the Sale of Collateral exceeds $15,000,000, the Company will be required to make an offer to all Holders of Notes and holders of Term Loans (a "Collateral Proceeds Offer") to purchase (or redeem or repay, as applicable) on a pro rata basis (with the Excess Proceeds from the Sale of Collateral prorated between the Holders of Notes and such holders of Term Loans based upon outstanding aggregate principal amounts) the maximum principal amount of the Notes that may be purchased, and the Term Loans that may be prepaid, in each case, out of the prorated Excess Proceeds from the Sale of Collateral, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest (including Special Interest), if any, thereon, to the date of purchase, in accordance with the procedures set forth in Section 3.09 hereof. To the extent that the aggregate amount of Notes and Term Loans tendered (and electing to be redeemed or repaid, 68 as applicable) pursuant to such Collateral Proceeds Offer is less than the Excess Proceeds from the Sale of Collateral, the Company and its Restricted Subsidiaries may use any remaining Excess Proceeds from the Sale of Collateral, free and clear of any Liens created by any Security Documents or otherwise for the benefit of any holder of Secured Obligations, for general corporate purposes and any other purpose not prohibited by this Indenture. If the aggregate principal amount of Notes and Term Loans surrendered by holders thereof exceeds the amount of the prorated Excess Proceeds from the Sale of Collateral, the Trustee shall select the Notes to be purchased on a pro rata basis and the Administrative Agent shall select the Term Loans to be repaid on a pro rata basis. Upon completion of the offer to purchase, the amount of Excess Proceeds from the Sale of Collateral shall be reset at zero. SECTION 4.11. Transactions with Affiliates. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, make any payment to, or sell, lease, transfer or otherwise dispose of any properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of any such Person (each of the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that could have been obtained in a transaction by the Company or such Restricted Subsidiary with an unrelated Person; and (ii) the Company delivers to the Trustee: (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of at least $5,000,000, an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above; (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $20,000,000, a resolution of its Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of its Board of Directors; and (c) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $30,000,000 and for which there are no disinterested members of its Board of Directors, an opinion as to the fairness to the Company of such Affiliate Transaction from a financial point of view issued by an Independent Financial Advisor; provided that none of the following shall be deemed to be Affiliate Transactions and therefore shall not be subject to the provisions of this Section 4.11: (1) Affiliate Transactions involving the purchase or sale of crude oil, natural gas and other hydrocarbons, and refined products therefrom, in the ordinary course of any Permitted Business, so long as such transactions are priced in line with industry accepted benchmark prices and the pricing of such transactions are equivalent to the pricing of comparable transactions with unrelated third parties; (2) any employment, equity award, equity option or equity appreciation agreement or plan, agreement or other similar compensation plan or arrangement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of its business; (3) transactions between or among (A) the Company and its Restricted Subsidiaries and (B) the Restricted Subsidiaries; (4) the performance of any agreement in effect on the Issue Date; (5) loans or advances to officers, directors and employees for moving, entertainment and travel expenses, drawing accounts and similar expenditures and other purposes, in each case in the ordinary course of business; (6) maintenance in the ordinary course of business of customary benefit programs or arrangements for employees, officers or directors, including vacation plans, 69 health and life insurance plans, deferred compensation plans and retirement or savings plans and similar plans; (7) fees and compensation paid to, and indemnity provided on behalf of, officers, directors, employees or consultants of the Company or any of its Restricted Subsidiaries in their capacity as such, to the extent such fees and compensation are reasonable and customary; (8) sales of Equity Interests of the Company (other than Disqualified Stock) to Affiliates of the Company or any of its Restricted Subsidiaries; and (9) Restricted Payments that are permitted by Section 4.07 hereof. SECTION 4.12. Liens. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien other than Permitted Liens. SECTION 4.13. Business Activities. The Company will not, and will not permit any of its Restricted Subsidiaries to, engage in any business other than a Permitted Business, except to such extent as would not be material to the Company and its Restricted Subsidiaries taken as a whole. SECTION 4.14. Corporate Existence. Subject to Article V hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, and the corporate, partnership or other existence of each of its Restricted Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Restricted Subsidiary; provided, however, that the Company shall not be required to preserve the existence of any of its Restricted Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Restricted Subsidiaries, taken as a whole. SECTION 4.15. Offer to Repurchase upon Change of Control. (a) Upon the occurrence of a Change of Control, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest (including Special Interest), if any, thereon, to the date of purchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company will mail a notice to each Holder stating: (i) the description of the transaction or transactions that constitute the Change of Control, that the Change of Control Offer is being made pursuant to this Section 4.15, and that all Notes validly tendered and not withdrawn will be accepted for payment; (ii) the purchase price and the purchase date, which shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"); (iii) that any Note not tendered will continue to accrue interest and Special Interest, if any; (iv) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest and Special 70 Interest, if any, after the Change of Control Payment Date; (v) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes properly endorsed, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes properly completed, together with other customary documents as the Company may reasonably request, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; (vi) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have the Notes purchased; and (vii) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof. If any of the Notes subject to a Change of Control Offer are in the form of a Global Note, then the Company shall modify such notice to the extent necessary to accord with the Applicable Procedures of the Depositary applicable to repurchases. In addition, the Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes as a result of a Change of Control. (b) On the Change of Control Payment Date, the Company will, to the extent lawful, (i) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent in immediately available funds an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (iii) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company. The Paying Agent will promptly mail to each Holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note will be in a principal amount of $1,000 or an integral multiple thereof. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. (c) The Change of Control provisions described above will be applicable whether or not any other provisions of this Indenture are applicable, except as set forth in Article VIII hereof. (d) The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth herein applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. 71 SECTION 4.16. [Section Intentionally Deleted]. SECTION 4.17. Additional Subsidiary Guarantees and Liens. (a) If the Company or any of its Restricted Subsidiaries acquires or creates another Domestic Subsidiary (other than any Immaterial Subsidiary) after the Issue Date, then that newly acquired or created Subsidiary will become a Guarantor and (i) execute a supplemental indenture substantially in the form of Exhibit E hereto, a "Joinder Agreement" (as such term is defined in the Security Agreement), in form and substance reasonably satisfactory to the Trustee and the Collateral agent, and a "Joinder Agreement" (as such term is defined in the Collateral Agency Agreement), in form and substance reasonably satisfactory to the Trustee and the Collateral Agent, providing that such Subsidiary shall become a Guarantor under this Indenture and a party to the Security Documents and (ii) deliver an Opinion of Counsel to the effect that such supplemental indenture has been duly authorized and executed by such Subsidiary and that this Indenture, the Subsidiary Guarantees and the Security Documents are binding and enforceable obligations of such Subsidiary, in each case, within 30 days following the date on which it was acquired or created. (b) If the Company or any of the Guarantors at any time owns or acquires Collateral that is not subject to a valid, enforceable perfected first priority Lien (subject to Permitted Prior Liens) in favor of the Collateral Agent as security for the Secured Obligations, then the Company will, or will cause such Guarantor to, concurrently: (i) execute and deliver to the Collateral Agent a Security Document upon substantially the same terms as the Security Documents delivered in connection with the issuance of the Notes, granting a Lien upon such Collateral in favor of the Collateral Agent for the benefit of the holders of Secured Obligations; (ii) cause the Lien granted in such Security Document to be duly perfected in any manner permitted by law and cause each other Lien upon such Collateral to be (a) released, unless it is a Permitted Lien or (b) subordinated to the Collateral Agent's Lien if it is a Permitted Lien but not a Permitted Prior Lien; and (iii) deliver to the Collateral Agent and the Trustee an opinion of counsel reasonably satisfactory to the Collateral Agent and the Trustee, confirming as to such Security Document and Lien the matters set forth as to the Security Documents and Liens in the opinions of counsel delivered on behalf of the Company to the Initial Purchasers on the Issue Date in connection with the original issuance of the Notes and the initial incurrence of the Term Loans and, if the property subject to such Security Document is an interest in real estate, such local counsel opinions, title and flood insurance policies, surveys and other supporting documents as may have been delivered to the Initial Purchasers on the Issue Date in connection with the original issuance of the Notes and the initial incurrence of the Term Loans, all as the Collateral Agent may reasonably request and in form and substance reasonably satisfactory to the Collateral Agent. 72 (c) If any Restricted Subsidiary of the Company ceases to be an Immaterial Subsidiary at any time, or if any Subsidiary of the Company ceases to be an Unrestricted Subsidiary at any time, such Subsidiary will promptly become a Guarantor and will (i) execute a supplemental indenture substantially in the form of Exhibit E hereto, a "Joinder Agreement" (as such term is defined in the Security Agreement), in form and substance reasonably satisfactory to the Trustee and the Collateral Agent, and a "Joinder Agreement" (as such term is defined in the Collateral Agency Agreement), in form and substance reasonably satisfactory to the Trustee and the Collateral Agent, providing that such Subsidiary shall become a Guarantor under this Indenture and a party to the Security Documents and (ii) deliver an Opinion of Counsel to the effect that such supplemental indenture has been duly authorized and executed by such Subsidiary and that this Indenture, the Subsidiary Guarantees and the Security Documents are binding and enforceable obligations of such Subsidiary, in each case, only if it would otherwise be required to be a Guarantor at that date. SECTION 4.18. Payments for Consent. The Company will not, and will not permit any of its Restricted Subsidiaries, directly or indirectly to, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder of any Notes or Term Loans for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture, the Notes, the Term Loans, the Term Loan Agreement or any Security Document unless such consideration is offered to be paid or is paid to all Holders of the Notes and/or holders of Term Loans that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. SECTION 4.19. Suspension of Covenants. (a) In the event that at any time (i) the rating assigned to the Notes and the Term Loans by each of S&P and Moody's is an Investment Grade Rating and (ii) no Default or Event of Default has occurred and is continuing under this Indenture or the Term Loan Agreement, then, beginning on that day and subject to the provisions of paragraph (b) below, the Company and its Restricted Subsidiaries will no longer be subject to Sections 4.07, 4.08, 4.09, 4.10 (provided that those provisions of Section 4.10 relating to Sales of Collateral and the application of the proceeds therefrom will remain in full force and effect and will not be suspended), 4.11, 4.13, 5.01(iv) and 13.03(b)(iii) hereof (the "Suspended Covenants"); provided, however, that all other provisions of this Indenture shall continue to be in full force and effect. (b) Notwithstanding the foregoing, if the rating assigned by either Moody's or S&P should subsequently decline to below an Investment Grade Rating, respectively, the foregoing covenants shall be reinstituted as of and from the date of such rating decline. Section 4.07 hereof will be interpreted as if it had been in effect since the Issue Date except that no Default will be deemed to have occurred solely by reason of a Restricted Payment made while that covenant was suspended. 73 ARTICLE V SUCCESSORS SECTION 5.01. Merger, Consolidation, or Sale of Assets. The Company will not consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another Person, unless: (i) the Company is the resulting, transferee or surviving Person or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (ii) the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to whom such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations and covenants of the Company under the Notes, this Indenture, all Security Documents and, if then in effect, the Registration Rights Agreement, pursuant to a supplemental indenture and other appropriate documentation in form and substance reasonably satisfactory to the Collateral Agent and the Trustee; (iii) immediately before and after such transaction no Default or Event of Default shall have occurred and be continuing; and (iv) except in the case of a merger of the Company with or into a Restricted Subsidiary, the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to whom such sale, assignment, transfer, lease, conveyance or other disposition shall have been made will, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof; provided, however, that this clause (iv) shall be suspended for so long as the Company and its Restricted Subsidiaries are not subject to the Suspended Covenants subject to Section 4.19 hereof. In addition, the Company will not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person. This Section 5.01 will not apply to a sale, assignment, transfer, conveyance or other disposition of assets between or among the Company and any of the Guarantors. SECTION 5.02. Successor Corporation Substituted. Upon any consolidation or merger, or any sale, assignment, transfer, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, the successor Person formed by such consolidation or into or with which the Company is merged or to whom such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to such successor Person and not to the Person previously defined as Company), and may exercise every right and power of, the Company under this Indenture and the Notes with the same effect as if such successor Person 74 originally had been named as the Company herein; and when such successor corporation duly assumes all of the obligations and covenants of the Company pursuant to the Notes and hereto, the predecessor Person shall be relieved of all such obligations. The successor Person thereupon may cause to be signed, and may issue either in its own name or in the name of the predecessor Person, any or all the Notes issuable hereunder which theretofore shall not have been signed by the predecessor Person and delivered to the Trustee; and, upon the order of the successor Person, instead of the predecessor Person, and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Notes which previously shall have been signed and delivered by the officers of the predecessor Person to the Trustee for authentication, and any Notes which the successor Person thereafter shall cause to be signed and delivered to the Trustee for that purpose. All the Notes so issued shall in all respects have the same legal rank and benefit under this Indenture as the Notes theretofore or thereafter issued in accordance with the terms of this Indenture as though all such Notes had been issued at the date of the execution hereof. In case of such consolidation, merger, sale, assignment, transfer, conveyance or other disposition, such changes in phraseology and form (but not in substance) may be made in the Notes thereafter to be issued as may be appropriate. ARTICLE VI DEFAULTS AND REMEDIES SECTION 6.01. Events of Default. An "Event of Default" occurs if: (a) the Company defaults in the payment when due of interest on, or Special Interest, if any, with respect to, the Notes and such default continues for a period of 30 days; (b) the Company defaults in the payment when due of principal of or premium, if any, on the Notes; (c) the Company or any of its Restricted Subsidiaries fails to comply with any of the provisions of Sections 4.15 and 5.01 hereof; (d) the Company or any of its Restricted Subsidiaries fails to observe or perform any covenant or other agreement in this Indenture, the Notes or the Security Documents (other than the provisions expressly set forth in clauses (a), (b) or (c) above) for 60 days after written notice of such failure to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding; (e) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), whether such Indebtedness or 75 guarantee now exists, or is created after the Issue Date, which default: (i) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness (a "Payment Default") or (ii) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates without duplication $20,000,000 or more, and such default shall not have been cured or waived or any such acceleration rescinded, or such Indebtedness is repaid, within ten Business Days after the running of such grace period or the occurrence of such acceleration; (f) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of its Restricted Subsidiaries, and such judgment or judgments remain unpaid, unstayed or undischarged for a period (during which execution shall not be effectively stayed) of 60 days, provided that the aggregate of all such unpaid or undischarged judgments exceeds $20,000,000 (excluding amounts covered by insurance); (g) any Security Document or any Lien purported to be granted thereby on any one or more items of Collateral having an aggregate Fair Market Value in excess of $20,000,000 is held in any judicial proceeding to be unenforceable or invalid, in whole or in part, or ceases for any reason (other than pursuant to a release that is delivered or becomes effective as set forth in this Indenture) to be fully enforceable and perfected; (h) the Company or any Guarantor, or any Person acting on behalf of any of them, denies or disaffirms, in writing, any obligation of the Company or any Guarantor set forth in or arising under any Security Document; (i) the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, when taken together, would constitute a Significant Subsidiary pursuant to or within the meaning of the Bankruptcy Code: (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or (v) generally is not paying its debts as they become due; (j) a court of competent jurisdiction enters an order or decree under the Bankruptcy Code that: 76 (i) is for relief against the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, when taken together, would constitute a Significant Subsidiary, in an involuntary case; (ii) appoints a Custodian of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, when taken together, would constitute a Significant Subsidiary, or for all or substantially all of the property of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, when taken together, would constitute a Significant Subsidiary; or (iii) orders the liquidation of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, when taken together, would constitute a Significant Subsidiary; and the order or decree remains unstayed and in effect for 60 consecutive days; or (k) except as permitted herein, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee (other than by reason of the termination of this Indenture or the release of any such Subsidiary Guarantee in accordance with this Indenture). SECTION 6.02. Acceleration. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Upon any such declaration, the Notes shall become due and payable immediately without further action or notice and the Collateral Agent shall immediately become unconditionally entitled to foreclose upon any or all of the Collateral, exercise and enforce its other rights and remedies in respect of the Collateral, subject to the provisions of this Indenture and the Security Documents, as applicable. Notwithstanding the foregoing, if an Event of Default specified in clause (i) or (j) of Section 6.01 hereof occurs with respect to the Company or any Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding Notes shall be due and payable immediately without further action or notice and the Collateral Agent shall immediately become unconditionally entitled to foreclose upon any or all of the Collateral, exercise and enforce its other rights and remedies in respect of the Collateral, subject to the provisions of this Indenture and the Security Documents, as applicable. The Holders of at least a majority in aggregate principal amount of the then outstanding Notes by written notice to the Trustee may on behalf of all of the Holders rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal or interest (including Special Interest) that has become due solely because of the acceleration) have been cured or waived. 77 SECTION 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, interest and Special Interest, if any, on the Notes or to enforce the performance of any provision of the Notes, this Indenture or the Security Documents. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. SECTION 6.04. Waiver of Past Defaults. Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of interest (including Special Interest), if any, on, or the principal of, the Notes including in connection with an offer to purchase; provided, however, that the Holders of a majority in aggregate principal amount of then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration, to the extent permitted by applicable law. Upon any such waiver, such Default or Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. SECTION 6.05. Control by Majority. Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability. SECTION 6.06. Limitation on Suits. A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if: (a) the Holder of a Note has previously given to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; 78 (c) such Holder of a Note or Holders of Notes offer provides to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense to be incurred in compliance with such request; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders. SECTION 6.07. Rights of Holders of Notes to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium, if any, and Special Interest, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase or redemption), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default specified in Section 6.01(a) or (b) hereof occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium and Special Interest, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. Trustee May File Proofs of Claim. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due 79 the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10. Priorities. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense, and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium and Special Interest, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and Special Interest, if any and interest, respectively; and Third: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the cost of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. 80 ARTICLE VII TRUSTEE SECTION 7.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) Except during the continuance of an Event of Default: (i) The Trustee need perform only those duties that are specifically set forth in this Indenture and the TIA and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee. To the extent of any conflict between the duties of the Trustee hereunder and under the TIA, the TIA shall control. (ii) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein). (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder shall 81 have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. SECTION 7.02. Rights of Trustee. (a) The Trustee may conclusively rely upon any document (whether in its original or facsimile form) believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities (including fees and expenses of its agents and counsel) that might be incurred by it in compliance with such request or direction. (g) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation. 82 (h) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Securities and this Indenture. (i) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder. (j) The Trustee may request that the Company deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any person authorized to sign an Officers' Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded. SECTION 7.03. Individual Rights of Trustee. The Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. SECTION 7.05. Notice of Defaults. If a Default or Event of Default occurs and is continuing and if it is actually known to a Responsible Officer of the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default within 90 days after the later of (a) the date the Default or Event of Default shall have occurred and (b) the date such Responsible Officer first had such actual knowledge. Except in the case of a Default or Event of Default in payment of principal of, or interest on, any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. 83 SECTION 7.06. Reports by Trustee to Holders of the Notes. Within 60 days after each April 15 beginning with the April 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the twelve months preceding the reportInG date, no report need be transmitted). The Trustee also shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by maiL all reports as required by TIA Section 313(c). A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the SEC and each stock exchange on which the Notes are listed in accordance with TIA Section 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange or delisted therefrom. SECTION 7.07. Compensation and Indemnity. The Company shall pay to the Trustee from time to time such compensation for its acceptance of this Indenture and services hereunder as such parties shall agree in writing from time to time. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company and the Guarantors shall indemnify each of the Trustee and any predecessor Trustee against any and all losses, liabilities, claims, damages or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.07) and defending itself against any claim (whether asserted by the Company or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability, claim, damage or expense may be attributable to its negligence, bad faith or willful misconduct. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim, and the Trustee shall cooperate in the defense. The Trustee may have separate counsel, and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The obligations of the Company under this Section 7.07 shall survive the satisfaction and discharge of this Indenture. To secure the Company's payment obligations in this Section, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. 84 When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under the Bankruptcy Code. The Trustee shall comply with the provisions of TIA Section 313(b)(2) to the extent applicable. SECTION 7.08. Replacement of Trustee. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of Notes of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under the Bankruptcy Code; (c) a Custodian takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee (at the expense of the Company), the Company, or the Holders of Notes of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction (in the case of the Trustee, at the expense of the Company) for the appointment of a successor Trustee. If the Trustee, after written request by any Holder of a Note who has been a Holder of a Note for at least six months, fails to comply with Section 7.10 hereof, such Holder of a Note may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to 85 Holders of the Notes. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. SECTION 7.09. Successor Trustee by Merger, Etc. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. As soon as practicable, the successor Trustee shall mail a notice of its succession to the Company and the Holders of the Notes. SECTION 7.10. Eligibility; Disqualification. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee iS subject to TIA Section 310(b). SECTION 7.11. Preferential Collection of Claims Against Company. The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who HaS resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE VIII SATISFACTION AND DISCHARGE; DEFEASANCE SECTION 8.01. Satisfaction and Discharge of Indenture. This Indenture shall upon delivery of a written request of an Officer of the Company to the Trustee cease to be of further effect with respect to the Notes (except as to any surviving rights of registration of transfer or exchange of Notes herein expressly provided for), and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture with respect to the Notes, when (a) either (i) all such Notes theretofore authenticated and delivered (other than (1) such Notes which have been destroyed, lost or stolen and which have been replaced or 86 paid as provided in Section 2.07 hereof and (2) such Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 8.08 hereof) have been delivered to the Trustee for cancellation; or (ii) all such Notes not theretofore delivered to the Trustee for cancellation (A) have become due and payable by reason of the making of a notice of redemption or otherwise, (B) will become due and payable at their final Stated Maturity within one year, or (C) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense of, the Company, and the Company, in the case of (A), (B) or (C) above, has deposited or caused to be deposited with the Trustee as trust funds, in trust solely for the purpose and the benefit of the Holders of such Notes, an amount of U.S. dollars or non-callable Government Securities, or a combination thereof, sufficient, without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on such Notes not theretofore delivered to the Trustee for cancellation, for principal and any premium and interest and Special Interest, if any, to the date of such deposit (in the case of such Notes which have become due and payable) or to the Stated Maturity or redemption date (as the case may be) of the principal of the Notes; (b) no Default or Event of Default with respect to this Indenture or the Notes shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit (other than a Default or Event of Default resulting from the incurrence of Indebtedness or the grant of Liens securing such Indebtedness, all or a portion of the proceeds of which will be used to defease all of the Outstanding Notes pursuant to this Article VIII concurrently with such incurrence or within 30 days thereof), and such deposit will not result in a breach or violation of, or constitute a default under, any material instrument to which the Company is a party or by which the Company is bound; (c) the Company has paid or caused to be paid all other sums payable hereunder by the Company with respect to such Notes; and (d) the Company has delivered to the Trustee (i) irrevocable instructions under this Indenture to apply the deposited funds toward the payment of such Notes at their Stated Maturity or the redemption date, as the case may be, and (ii) an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture with respect to the Notes, the obligations of the Company to the Trustee under Section 7.07 hereof, and, if U.S. dollars or Government Securities shall have been deposited with the Trustee pursuant to 87 subclause (ii) of clause (a) of this Section, the obligations of the Company or Trustee under Section 8.02 hereof and Section 8.08 hereof shall survive. SECTION 8.02. Application of Trust Money. Subject to the provisions of Section 8.08 hereof, all money and Government Securities deposited with the Trustee pursuant to Section 8.01 hereof shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal, any Special Interest, and any premium and interest for whose payment such money or Government Securities has been deposited with the Trustee. SECTION 8.03. Option to Effect Legal Defeasance or Covenant Defeasance. The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, exercise its right under either Section 8.04 or 8.05 hereof with respect to all outstanding Notes upon compliance with the conditions set forth below in this Article VIII. SECTION 8.04. Legal Defeasance and Discharge. Upon the Company's exercise under Section 8.03 hereof of the option applicable to this Section 8.04, each of the Company and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.06 hereof, be deemed to have discharged its obligations with respect to all outstanding Notes and, as applicable, its Subsidiary Guarantees on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that each of the Company and the Guarantors shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, and to the extent applicable, represented by the Subsidiary Guarantees, which in each case shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.07 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Notes or Subsidiary Guarantees and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.06 hereof, and as more fully set forth in such Section, payments in respect of the principal of, and premium, if any, and interest (including Special Interest), if any, on, such Notes when such payments are due (but not the Change of Control Payment or the payment pursuant to an Asset Sale Offer), (b) the Company's obligations with respect to such Notes under Sections 2.03, 2.04, 2.07, 2.10 and 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (d) this Article VIII. Subject to compliance with this Article VIII, the Company may exercise its option under this Section 8.04 notwithstanding the prior exercise of its option under Section 8.05 hereof. 88 SECTION 8.05. Covenant Defeasance. Upon the Company's exercise under Section 8.03 hereof of the option applicable to this Section 8.05, each of the Company and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.06 hereof, be released from its obligations under the covenants contained in Article IV hereof (other than those in Sections 4.01, 4.02, 4.06 and 4.14), Article V hereof and Section 13.03 hereof on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document, and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.03 hereof of the option applicable to this Section 8.05 hereof, subject to the satisfaction of the conditions set forth in Section 8.06 hereof, Sections 6.01(e) through 6.01(g) hereof and 6.01(i) hereof shall not constitute Events of Default. SECTION 8.06. Conditions to Legal or Covenant Defeasance. The following shall be the conditions to the application of either Section 8.04 or 8.05 hereof in order to exercise either Legal Defeasance or Covenant Defeasance with respect to the outstanding Notes: (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, and premium, if any, and interest (including Special Interest), if any, on, the outstanding Notes on the stated maturity or on the applicable repurchase or redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular repurchase or redemption date; (b) in the case of an election under Section 8.04 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; 89 (c) in the case of an election under Section 8.05 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the incurrence of Indebtedness or the grant of Liens securing such Indebtedness, all or a portion of the proceeds of which will be applied to such deposit) or insofar as Section 6.01(g) or 6.01(h) hereof is concerned, at any time in the period ending on the 91st day after the date of deposit; (e) such deposit will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Restricted Subsidiaries is a party or by which the Company or any of its Restricted Subsidiaries is bound, or if such breach, violation or default would occur, which is not waived as of, and for all purposes, on and after, the date of such deposit; (f) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that on the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (g) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over the other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and (h) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with. SECTION 8.07. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions. Subject to Section 8.08 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.07, the "Trustee") pursuant to Section 8.06 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest and Special Interest, if any, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited 90 pursuant to Section 8.06 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Anything in this Article VIII to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.06 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.06(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. SECTION 8.08. Repayment to Company. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, or premium, if any, or interest and Special Interest, if any, on, any Note and remaining unclaimed for two years after such principal, and premium, if any, or interest and Special Interest, if any, has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as a secured creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in The New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 8.09. Reinstatement. If the Trustee or Paying Agent is unable to apply any U.S. dollars or non-callable Government Securities in accordance with Section 8.04 or 8.05 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.04 or 8.05 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.04 or 8.05 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, or premium, if any, or interest and Special Interest, if any, on, any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. 91 ARTICLE IX AMENDMENT, SUPPLEMENT AND WAIVER SECTION 9.01. Without Consent of Holders of Notes. Notwithstanding Sections 9.02, 11.08 and 12.03 hereof, the Company and the Trustee may amend or supplement this Indenture, the Notes, the Subsidiary Guarantees or the Security Documents without the consent of any Holder of a Note: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for uncertificated Notes in addition to or in place of certificated Notes or to alter the provisions of Article II hereof (including the related definitions) in a manner that does not materially adversely affect any Holder; (c) to provide for the assumption of the Company's or any Guarantor's obligations to the Holders of the Notes in the case of a merger, consolidation or sale of all or substantially all assets of the Company pursuant to Article V hereof or of any Guarantor pursuant to Article XIII hereof or to add any Person as a Guarantor hereunder or to release any Guarantor or otherwise comply with Article XIII; (d) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights hereunder of any such Holder; (e) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; (f) or to allow any Guarantor to Guarantee the Notes; (g) to release any Guarantor from any of its obligations under its Guarantee or this Indenture pursuant to Section 13.04; (h) to evidence or provide for the acceptance of appointment of a successor Trustee pursuant to Sections 7.08 or 7.09 hereof; (i) to add any additional Events of Default; (j) to make, complete or confirm any grant of Collateral permitted or required by the Security Documents or this Indenture or any release of Collateral that becomes effective as set forth in the Security Documents or this Indenture; (k) to conform the text of this Indenture, the Notes, the Subsidiary Guarantees or the Security Documents to any provision of the Description of the Notes section of the Offering Circular for the Offering of the Original Notes to the extent that such provision in the Description of the Notes was intended to be a verbatim recitation of a provision of this Indenture, the Notes, the Subsidiary Guarantees or the Security Documents; or 92 (l) to reflect any waiver or termination of any right arising under the provisions of this Indenture that otherwise would be enforceable by any holder of a Term Loan Obligation, if such waiver or termination is set forth in the agreement governing such Term Loan Obligation, provided that no such waiver or amendment shall adversely affect the rights of Holders of Notes. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental indenture, and upon receipt by a Responsible Officer of the Trustee of an Officers' Certificate and an Opinion of Counsel, the Trustee shall join with the Company in the execution of any amended or supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties, liabilities or immunities under this Indenture or otherwise. SECTION 9.02. With Consent of Holders of Notes. Except as provided below in this Section 9.02 and in Sections 11.08 and 12.03 hereof, the Company and the Trustee may amend or supplement this Indenture (including Sections 3.09, 4.10 and 4.15 hereof), the Notes, the Subsidiary Guarantees or any Security Documents with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including consents obtained in connection with the purchase of, or a tender offer or exchange offer for, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default or compliance with any provision of this Indenture, the Notes, the Subsidiary Guarantees of any Security Docuements may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for the Notes). Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by a Responsible Officer of the Trustee of an Officers' Certificate and an Opinion of Counsel, the Trustee shall join with the Company in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture affects the Trustee's own rights, duties, liabilities or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental indenture. It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes then outstanding may waive compliance in a 93 particular instance by the Company with any provision of this Indenture, the Notes, the Subsidiary Guarantees or the Security Documents. However, without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder): (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver under any provision of this Indenture, the Notes or any Subsidiary Guarantee; (b) reduce the principal of or change the fixed maturity of any Note or alter or waive in any manner that adversely affects the rights of any Holder of Notes any of the provisions with respect to the redemption of the Notes except as provided above with respect to Sections 3.09, 4.10 and 4.15 hereof and the related definitions; (c) reduce the rate of or change the time for payment of interest, including default interest, or Special Interest, if any, on any Note; (d) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest or Special Interest, if any, on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the payment default that resulted from such acceleration); (e) make any Note payable in money other than that stated in the Notes; (f) make any change that adversely affects the rights of any Holder of Notes in the provisions of this Indenture relating to waivers of past Defaults or make any change to the rights of Holders of Notes to receive payments of principal of, or premium, if any, or interest or Special Interest, if any, on the Notes (except as permitted in clause (g) of this Section 9.02); (g) waive a redemption payment with respect to any Note (other than a payment required by Sections 3.09, 4.10 and 4.15 hereof); or (h) make any change in Section 6.04 or 6.07 hereof or in the foregoing amendment and waiver provisions. SECTION 9.03. Compliance with Trust Indenture Act. Every amendment or supplement to this Indenture or the Notes shall be set forth in a amended or supplemental indenture that complies with the TIA as then in effect. SECTION 9.04. Revocation and Effect of Consents. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written 94 notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. SECTION 9.05. Notation on or Exchange of Notes. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company, in exchange for all Notes, may issue and the Trustee shall authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.06. Trustee to Sign Amendments, Etc. The Trustee shall sign any amended or supplemental indenture authorized pursuant to this Article IX if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties, liabilities or immunities under this Indenture or otherwise. Furthermore, no amendment or supplement to the provisions of the Security Documents will impose any obligation on the Trustee or adversely affect the rights of the Trustee in its individual capacity. The Company may not sign an amendment or supplemental indenture until the Board of Directors approves it. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture. ARTICLE X COLLATERAL AND sECURITY SECTION 10.01. Security Documents. The payment of principal of, and premium and interest (including Special Interest), if any, on the Notes, the Term Loans, and all other Secured Obligations, when due, whether on an interest payment date, at maturity, by acceleration, repurchase, redemption or otherwise and whether by the Company pursuant to the Notes or the Term Loans or by any Guarantor pursuant to the Subsidiary Guarantees or the guarantees of the Term Loans, and the performance of all other obligations of the Company and its Restricted Subsidiaries under the Note Documents and the Term Loan Documents are secured as provided in the Security Documents which the Company and the Guarantors have entered into simultaneously with the execution of this Indenture and will be secured by all Security Documents hereafter delivered as required or permitted by this Indenture and the Term Loan Agreement. 95 SECTION 10.02. Further Assurances. (a) The Company will, and will cause each of its Subsidiaries to, do or cause to be done all acts and things which may be required, or which the Collateral Agent from time to time may reasonably request, to assure and confirm that the Collateral Agent holds, for the benefit of the holders of Secured Obligations, duly created, enforceable and perfected first priority Liens (subject to Permitted Prior Liens) upon the Collateral as contemplated by the Note Documents and the Term Loan Documents. (b) If the Company or any Domestic Subsidiary shall at any time acquire any real property or leasehold or other interest in real property described in the definition of "Collateral" that is not covered by the mortgages running to the benefit of the Collateral Agent that are executed on or before the Issue Date, then within 45 days of such acquisition the Company or such Domestic Subsidiary shall execute, deliver and record a (i) Mortgage or (ii) a supplement to an existing mortgage executed on or before the Issue Date, reasonably satisfactory in form and substance to the Collateral Agent, running to the benefit of the Collateral Agent and subjecting such real property or leasehold or other interests in real property to the Lien created by such mortgage. If requested by the Collateral Agent, the Company or such Subsidiary shall obtain an appropriate title policy or endorsement or supplement to the title policy insuring the Collateral Agent's Lien in such additional interests in real property, subject only to permitted prior liens and other exceptions to title approved by the Collateral Agent, provided that the Collateral Agent shall not request any such additional title policy or endorsement or supplement to the title policy in respect of such additional real property described in the definition of "Collateral" having a Fair Market Value less than $1,000,000. (c) Upon request of the Collateral Agent at any time and from time to time, the Company will, and will cause each of its Subsidiaries to, promptly execute, acknowledge and deliver such Security Documents, instruments, certificates, notices and other documents and take such other actions as shall be required or which the Collateral Agent may reasonably request to create, perfect, protect, assure or enforce the Liens and benefits intended to be conferred as contemplated by this Indenture and the Term Loan Agreement for the benefit of the holders of the Secured Obligations. If the Company or such Subsidiary fails to do so, the Collateral Agent is hereby irrevocably authorized and empowered, with full power of substitution, to execute, acknowledge and deliver such Security Documents, instruments, certificates, notices and other documents and, subject to the provisions of the Note Documents and the Term Loan Documents, take such other actions in the name, place and stead of the Company or such Subsidiary, but the Collateral Agent will have no obligation to do so and no liability for any action taken or omitted by it in good faith in connection therewith. (d) The Company will otherwise comply with the provisions of TIA Section 314(b). (e) To the extent applicable, the Company will cause TIA Section 313(b), relating to reports, and TIA Section 314(d), relating to the releAsE of property or securities or relating to the substitution therefore of any property or securities to be subjected to the Lien of the Security Documents, to be complied with. Any certificate or opinion required by TIA Section 314(d) may be made by an officer of the CompanY except in cases where TIA Section 314(d) requires that such certificate or opinion be made by an independent Person, which Person will be an independent 96 engineer, appraiser or other expert selected or reasonably satisfactory to the Trustee. Notwithstanding anything to the contrary in this paragraph, the Company will not be required to comply with all or any portion of TIA Section 314(d) if it determines, in good faith based on advice of counsel, that under the terms of TIA Section 314(d) and/or any interpretation or guidance as to the meaninG thereof of the SEC and its staff, including "no action" letters or exemptive orders, all or any portion of TIA Section 314(d) iS inapplicable to one or a series of released Collateral. (f) To the extent applicable, the Company will furnish to the Trustee, prior to each proposed release of Collateral pursuant to the Security Documents: (i) all documents required by TIA Section 314(d) ; and (ii) an opinion of counsel to the effect that such accompanying documents constitute all documents required by TIA Section 314(d). (g) If any Collateral is released in accordance with this Indenture or any Security Document and if the Company has delivered the certificates and documents required by the Security Documents and this Section 10.02, the Trustee will determine whether it has received all documentation required by TIA Section 314(d) in connection with such release and, based on such determination and the opinioN of counsel delivered pursuant to this Indenture, will deliver a certificate to the Collateral Agent setting forth such determination. SECTION 10.03. Collateral Agent. (a) The Company has appointed Wilmington Trust Company to serve as the Collateral Agent for the benefit of the holders of the Notes and Term Loans and other Secured Obligations from time to time. The Collateral Agent may not be the same institution serving as the Administrative Agent or as the Trustee under this Indenture. (b) The Collateral Agent is authorized and empowered to appoint one or more co-Collateral Agents or sub-agents or bailees to hold Collateral or to take such other action as it deems necessary or appropriate. (c) Neither the Trustee nor the Collateral Agent nor any of their respective officers, directors, employees, attorneys or agents will be responsible or liable for the existence, genuineness, value or protection of any Collateral, for the legality, enforceability, effectiveness or sufficiency of the Security Documents, for the creation, perfection, priority, sufficiency or protection of any Collateral Agent's Lien, or for any defect or deficiency as to any such matters, or for any failure to demand, collect, foreclose or realize upon or otherwise enforce any of the Collateral Agent's Liens or Security Documents or any delay in doing so. (d) The Collateral Agent will be subject to such directions as may be given it by the Trustee and by the Administrative Agent from time to time as required or permitted by this Indenture and the Term Loan Agreement. The relative rights with respect to control of the Collateral Agent will be specified in the Collateral Agency Agreement by and among the Company, the Guarantors, the Trustee, the Administrative Agent and the Collateral Agent. Except as directed by the holders of a majority in principal amount of the Notes and the Term 97 Loans then outstanding, voting together as a single class, the Collateral Agent will not be obligated: (i) to act upon directions purported to be delivered to it by any other Person; (ii) to foreclose upon or otherwise enforce any Lien; or (iii) to take any other action whatsoever with regard to any or all of the Security Documents, the Liens created thereby or Collateral. (e) The Collateral Agent will be accountable only for amounts that it actually receives as a result of the enforcement of the Collateral Agent's Lien or Security Documents. (f) In acting as Collateral Agent or co-Collateral Agent, the Collateral Agent and each co-Collateral Agent may rely upon and enforce each and all of the rights, powers, immunities, indemnities and benefits of the Trustee under Article VII. (g) The Company will deliver to the Trustee copies of all Security Documents delivered to the Collateral Agent and copies of all documents delivered to the Collateral Agent pursuant to the Security Documents. SECTION 10.04. Security Documents and Guarantee. (a) Each Holder of Notes hereby authorizes the Trustee and the Collateral Agent, as applicable, on behalf of and for the benefit of the Holders of Notes, to be the agent for and representative of the Holders of the Notes with respect to the Subsidiary Guarantees, the Collateral and the Security Documents. (b) Anything contained in any of the Note Documents to the contrary notwithstanding, each Holder of Notes hereby agrees that no Holder of Notes shall have any right individually to realize upon any of the Collateral, it being understood and agreed that all powers, rights and remedies of the Trustee hereunder may be exercised solely by the Trustee in accordance with the terms hereof and all powers, rights and remedies in respect of the Collateral under the Security Documents may be exercised solely by the Collateral Agent. SECTION 10.05. Regulatory and Governmental Approvals. (a) The Company and Tesoro High Plains Pipeline Company agree promptly to apply for and seek all necessary regulatory approvals from the North Dakota Public Service Commission to grant security interests to the Collateral Agent in the fixtures and equipment comprising the North Dakota-Montana pipeline system and the Capital Stock of Tesoro High Plains Pipeline Company and agree to use all commercially reasonable efforts to obtain all such approvals as soon as practicable, but if the Company concludes in good faith that such efforts will not be successful, the Company and Tesoro High Plains Pipeline Company will not be required to grant such security interests. 98 (b) The Company and its Domestic Subsidiaries will agree promptly to seek all necessary consents under leases and contracts with governmental authorities to grant security interests in the applicable Restricted Subsidiaries' property interests associated with (i) the wharfs and related facilities that are connected to the Martinez, California refinery and Diablo Coke Plant, California, (ii) the transportation causeway, wharf and related facilities that are connected to the Anacortes, Washington refinery and terminal, (iii) the mooring and related facilities that are connected to the Kapolei, Hawaii refinery, (iv) the wharf and related facilities that are connected to the Kenai, Alaska refinery, and (v) the real estate contiguous to or connected with and in reasonable proximity to the Existing Refineries or Owned Terminals, and agree to use all commercially reasonable efforts to obtain all such consents as soon as practicable, but if the Company concludes in good faith that such efforts will not be successful, the Company and its Domestic Subsidiaries will not be required to grant such security interests. SECTION 10.06. Release of Collateral Agent's Lien. The Collateral will be released from the Collateral Agent's Lien: (a) in whole, upon payment in full of the Notes, the Term Loans and all other Secured Obligations that are outstanding, due and payable at the time the Notes and the Term Loans are paid in full; (b) with respect to the Note Obligations only, upon satisfaction and discharge of this Indenture as set forth in Section 8.01 hereof; (c) with respect to the Note Obligations only, upon a Legal Defeasance or Covenant Defeasance as set forth in Article VIII hereof; (d) with respect to the Note Obligations only, upon payment in full of the Notes and all other Note Obligations that are outstanding, due and payable at the time the Notes are paid in full; (e) with respect to the Term Loan Obligations only, upon payment in full of the Term Loans and all other Term Loan Obligations that are outstanding, due and payable at the time the Term Loan Obligations are paid in full; (f) as to any Collateral that constitutes all or substantially all of the Collateral, with the consent of the holders of 100% in principal amount of the Notes and Term Loans then outstanding, voting together as a single class (including, without limitation, consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes); (g) as to any Collateral that constitutes less than all or substantially all of the Collateral, with the consent of the holders of a majority in principal amount of the Notes and Term Loans then outstanding, voting together as a single class (including, without limitation, consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes); (h) as to any Collateral (A) that is sold or otherwise disposed of by the Company or any of its Restricted Subsidiaries in a transaction permitted by the Term Loan Agreement and 99 this Indenture, at the time of such sale or disposition, to the extent of the interest sold or disposed of in accordance with the terms of Section 4.10 hereof, (B) that is exchanged or traded as provided in clause (3) of the proviso in the definition of "Asset Sale," (C) that constitutes Excess Proceeds from the Sale of Collateral which have been offered to, but not accepted by, the holders of Notes and Term Loans and are released as set forth in the last paragraph of Section 4.10 hereof, (D) that is owned or at any time acquired by a Subsidiary of the Company that has been released from its Subsidiary Guarantee and its guarantee of the Term Loans, concurrently with the release thereof, or (E) in accordance with Article X hereof; or (i) as to the Capital Stock of any Pipeline Subsidiary, if securing the Notes with the Capital Stock of such Pipeline Subsidiary as provided by the Security Documents would give rise to an obligation of the Company to prepare audited financial statements of such Pipeline Subsidiary in order to comply with Regulation S-X of the rules and regulations of the SEC, but only if such obligation did not arise as a result of the transfer of assets to such Pipeline Subsidiary, the transfer of pipeline assets to another Subsidiary of the Company or any recapitalization of any Subsidiary of the Company by the Company or any of its Subsidiaries. If the Collateral Agent at any time receives an Officers' Certificate stating that the Company or any Guarantor intends to incur Indebtedness that will be secured by a purchase money security interest permitted under clause (4) in the definition of "Permitted Liens" upon property identified therein with reasonable specificity to be acquired with such Indebtedness, accompanied by (a) a proposed lien subordination agreement subordinating the Liens under the Security Documents to such purchase money security interest, to the extent it attaches to such property and secures Indebtedness incurred to acquire such property, and (b) an Opinion of Counsel for the Company to the effect that the subordination of such Liens to such purchase money security interest, and to such extent, is permitted by the Loan Documents and that such proposed lien subordination agreement is effective solely to subordinate such Lien as to such property to such extent, without requiring the Collateral Agent to make any representation or warranty in respect thereof, without releasing or satisfying any such Lien or any obligation secured thereby, and without imposing any obligation or liability upon the Collateral Agent or any other Person, then, subject to the terms of the Collateral Agency Agreement, the Collateral Agent will, within ten Business Days thereafter, execute such lien subordination agreement and deliver to the Company or such Guarantor, subject to and effective upon the incurrence of such Indebtedness and the use of the proceeds thereof to acquire such property. SECTION 10.07. Environmental Indemnity. (a) Each of the Company and the Guarantors jointly and severally agrees to defend (subject to Indemnitees' selection of counsel), indemnify, pay and hold harmless the Trustee and each Holder of Notes and each of their respective Affiliates and each and all of the directors, officers, partners, trustees, employees, attorneys and agents, and (in each case) their respective heirs, representatives, successors and assigns (each of the foregoing, an "Indemnitee") from and against any and all Indemnified Liabilities; provided, no Indemnitee shall be entitled to indemnification hereunder with respect to any Indemnified Liability to the extent such Indemnified Liability is found by a final and nonappealable decision of a court of competent 100 jurisdiction to have resulted directly and primarily from the gross negligence or willful misconduct of such Indemnitee. (b) All amounts due under Section 10.07(a) hereof shall be payable not later than 10 days after written demand therefor. (c) To the extent that the undertakings to defend, indemnify, pay and hold harmless set forth in Section 10.07(a) hereof may be unenforceable in whole or in part because they are violative of any law or public policy, each of the Company and Guarantors shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of them. (d) Neither the Company nor any Guarantor shall ever assert any claim against any Indemnitee, on any theory of liability, for any lost profits or special, indirect or consequential damages or (to the fullest extent lawful) any punitive damages arising out of, in connection with, or as a result of, this Indenture or any other Note Document or any agreement or instrument or transaction contemplated hereby or relating in any respect to any Indemnified Liability, and each of the Company and Guarantors hereby forever waives, releases and agrees not to sue upon any claim for any such lost profits or special, indirect, consequential or (to the fullest extent lawful) punitive damages, whether or not accrued and whether or not known or suspected to exist in its favor. (e) The agreements in this Section 10.07 shall survive repayment of the Notes and all other amounts payable hereunder and the resignation and removal of the Trustee or Collateral Agent. ARTICLE XI INTERCREDITOR PROVISIONS RELATING TO QUALIFIED CREDIT FACILITY SECTION 11.01. Agreement Between the Collateral Agent and Credit Facility Agent. (a) If and whenever any Credit Facility becomes a Qualified Credit Facility, the Collateral Agent and the Credit Facility Agent under such Qualified Credit Facility shall become obligated to perform, each for the benefit of the other, the obligations described in this Article XI. (b) No agent or representative under any Credit Facility that is not a Qualified Credit Facility shall have the right to rely on or enforce any obligation of the Collateral Agent set forth in this Article XI. (c) The obligations of the Collateral Agent set forth in this Article XI shall be enforceable by a Credit Facility Agent under each Qualified Credit Facility, and holders of Credit Facility Obligations under a Qualified Credit Facility, as third party beneficiaries hereof, 101 without need for any additional agreement or undertaking between the Collateral Agent and such Credit Facility Agent. (d) The Collateral Agent may require the Credit Facility Agent to execute and deliver an instrument reasonably satisfactory to the Collateral Agent, by which the Credit Facility Agent confirms to the Collateral Agent its agreement to be bound by and perform the obligations of the Credit Facility Agent set forth in this Article XI. (e) A Credit Facility Agent under a Qualified Credit Facility may require the Collateral Agent to execute and deliver an instrument reasonably satisfactory to such Credit Facility Agent, by which the Collateral Agent confirms to such Credit Faculty Agent its agreement to be bound by and perform the obligations of the Collateral Agent set forth in this Article XI. (f) At the request of the Company from time to time, the Collateral Agent will enter into an agreement with the Credit Facility Agent by which each of them confirms to the other its agreement to be bound by and perform its obligations set forth in this Article XI, and the Collateral Agent is authorized, at the request of the Company, to enter into such additional agreements with the Credit Facility Agent as may be necessary or appropriate, in the opinion of the Collateral Agent, to confirm, elaborate upon, perform, implement or give further assurance for any obligations of the Collateral Agent or such Credit Facility Agent in any respect that is not materially inconsistent with the provisions, intents and purposes of this Article XI and does not impose any additional obligation or liability on the Collateral Agent or any holder of Secured Obligations. SECTION 11.02. Disclaimer of Consensual Liens. (a) The Collateral Agent will not claim or enforce any consensual Lien upon any Credit Facility Collateral. (b) The Credit Facility Agent will not claim or enforce any consensual Lien upon any property other than Credit Facility Collateral. (c) The holders of Secured Obligations shall be entitled to receive and retain, free from any Lien securing Credit Facility Obligations, all payments made in cash by the Company or any other Obligor and all amounts received with respect to Secured Obligations through the exercise of a set-off or other similar right, even if such cash constitutes proceeds of property subject to a Lien securing Credit Facility Obligations. (d) The holders of Credit Facility Obligations shall be entitled to receive and retain, free from any Collateral Agent's Lien thereon, all payments made in cash by the Company or any other Obligor and all amounts received with respect to Credit Facility Obligations through the exercise of a set-off or other similar right, even if such cash constitutes proceeds of property subject to a Collateral Agent's Lien. (e) If any cash proceeds of Credit Facility Collateral are converted into or invested in property subject to Collateral Agent's Lien (other than cash, Cash Equivalents or deposit accounts) at any time when the Collateral Agent has not received written notice from the 102 Credit Facility Agent or any holder of Indebtedness outstanding under a Qualified Credit Facility stating that such Indebtedness has become due and payable in full (whether at maturity, upon acceleration or otherwise), then all Liens upon such proceeds securing Credit Facility Obligations shall be released and discharged concurrently with such conversion or investment. (f) If any cash proceeds of Collateral are converted into or invested in property subject to the Lien of the Credit Facility Agent (other than cash, Cash Equivalents or deposit accounts) at any time when the Credit Facility Agent has not received written notice from the Collateral Agent stating that the Notes and the Term Loans have become due and payable in full (whether at maturity, upon acceleration or otherwise), then all Liens upon such proceeds securing the Secured Obligations shall be released and discharged concurrently with such conversion or investment. (g) The provisions of this Section 11.02 will not apply to, restrict or affect any judicial lien, including any attachment or judgment lien. SECTION 11.03. Notice of Intent to Foreclose. (a) The Credit Facility Agent will give the Collateral Agent notice of its intent to enforce any consensual Lien upon any Credit Facility Collateral. (b) The Collateral Agent will give the Credit Facility Agent notice of its intent to enforce any consensual Lien upon any Collateral. (c) The notice required by Sections 11.03(a) and 11.03(b) hereof: (i) shall be required to be given by a party only if it intends to: (A) deliver to the Company or a Subsidiary written notice of its intent to foreclose a consensual Lien or a written proposal to retain property subject to a consensual Lien in full or partial satisfaction of any obligation secured thereby; (B) commence legal action against the Company or a Subsidiary for foreclosure or replevin or other enforcement of a consensual Lien; or (C) take possession of goods or real property of the Company or a Subsidiary upon which it holds a consensual Lien; (ii) shall not be required in any other instance or as to any other action or event (including, for purposes of illustration and not by way of limitation, any incurrence, payment or acceleration of any Indebtedness or Obligation or any amendment or waiver of the terms thereof, any exercise of a right of setoff, any notification to account debtors to make payment directly to the secured party or any other exercise of collection rights or the institution of any other legal proceedings, including suit to collect any debt or claim or the commencement of any bankruptcy case, receivership or insolvency proceeding); 103 (iii) need only state that it is given pursuant to the provisions of Section 11.03 of this Indenture and that lien enforcement action may be taken by the party giving the notice, and need not disclose or describe the action to be taken; (iv) need only be given once by or to the Collateral Agent or the Credit Facility Agent; (v) may be given by electronic mail, telefax, postal mail or courier or personal delivery or in any other manner permitted by law for service of legal process; (vi) shall be given to a party at the address (including an e-mail address, telecopy address or office address within the State of New York) specified by such party by notice to the other party and shall not be required if no address is so specified; and (vii) shall be given at least five Business Days prior to the date on which any enforcement action described in Section 11.03(c)(i) hereof is taken, except that a party may give such notice promptly after taking such enforcement action if it in good faith believes that immediate enforcement action is or may be required to protect its interest in the property subject to its Liens. (d) The party giving any notice required by this Section 11.03 shall endeavor, promptly after delivery such notice, to deliver a copy thereof to the Company, but neither the Company nor any Subsidiary shall be entitled to demand or receive any such notice or copy thereof. (e) No liability or defense shall ever arise, no Lien shall ever be lost, invalidated or impaired, and no action taken in enforcement of a Lien shall ever be annulled, set aside, affected or impaired, if any notice required by this Section 11.03 is not given or is defectively given. (f) The provisions of this Section 11.03 do not apply to, restrict or affect any judicial lien, including any attachment or judgment lien. SECTION 11.04. Consent to License to Use Intellectual Property; Access to Information; Access to Real Property to Process and Sell Inventory. (a) If so requested at any time by the Credit Facility Agent, the Collateral Agent shall deliver its written consent (given without any representation, warranty or obligation whatsoever) to any grant by any Obligor to the Credit Facility Agent of a non-exclusive royalty-free license to use any patent, trademark or proprietary information of such Obligor that is subject to a consensual Lien held by the Collateral Agent, in connection with the enforcement of any consensual Lien held by the Credit Facility Agent upon any inventory of the Company or any Subsidiary of the Company and to the extent the use of such patent, trademark or proprietary information is necessary or appropriate, in the good faith opinion of the Credit Facility Agent, to process, ship, produce, store, complete, supply, lease, sell or otherwise dispose of any such inventory in any lawful manner. Any consent so delivered by the Collateral Agent shall be binding on its successors and assigns, including a purchaser of the patent, trademark or 104 proprietary information subject to such license at a foreclosure sale conducted in foreclosure of any Collateral Agent's Lien thereon. (b) If the Collateral Agent or a purchaser at a foreclosure sale conducted in foreclosure of any Collateral Agent's Lien takes actual possession of any documentation of the Company or a Subsidiary of the Company (whether such documentation is in the form of a writing or is stored in any data equipment or data record in the physical possession of the Collateral Agent or the foreclosure purchaser), then upon request of the Credit Facility Agent and reasonable advance notice, the Collateral Agent or such foreclosure purchaser will permit the Credit Facility Agent or its representative to inspect and copy such documentation if and to the extent the Credit Facility Agent certifies to the Collateral Agent that: (i) such documentation contains or may contain information necessary or appropriate, in the good faith opinion of the Credit Facility Agent, to the enforcement of the Credit Facility Agent's Liens upon any Credit Facility Collateral; and (ii) the Credit Facility Agent and the lenders under the Qualified Credit Facility are entitled to receive and use such information as against the Company and its Subsidiaries and their suppliers, customers and contractors and under applicable law and, in doing so, will comply with all obligations imposed by law or contract in respect of the disclosure or use of such information. (c) If, upon enforcement of any Collateral Agent's Lien held by the Collateral Agent, the Collateral Agent or a purchaser at a foreclosure sale conducted in foreclosure of any Collateral Agent's Lien takes actual possession of refinery, terminal or pipeline property of any Obligor, then, if so requested by the Credit Facility Agent and upon reasonable advance notice, the Collateral Agent or such foreclosure purchaser will allow the Credit Facility Agent and its officers, employees and agents (but not any of its transferees) reasonable and non-exclusive access to and use of such property for a period not exceeding 120 consecutive calendar days (the "Processing and Sale Period"), as necessary or reasonably appropriate to process, ship, produce, store, complete, supply, lease, sell or otherwise dispose of, in any lawful manner, any inventory upon which the Credit Facility Agent holds a Lien, subject to the following conditions and limitations: (i) The Processing and Sale Period shall commence on the date the Collateral Agent or, if the Collateral Agent has not taken possession, the foreclosure purchaser takes possession of such real property and shall terminate on the earlier of (i) the day that is 120 days thereafter and (ii) the day on which all inventory (other than inventory abandoned by the Credit Facility Agent) has been removed from such property; and (ii) Each of the Collateral Agent and foreclosure purchaser shall be entitled, as a condition of permitting such access and use, to demand and receive assurances reasonably satisfactory to it that the access or use requested and all activities incidental thereto: 105 (A) will be permitted, lawful and enforceable as against the Company and its Subsidiaries and their suppliers, customers and contractors and under applicable law and will be conducted in accordance with prudent manufacturing practices; and (B) will be adequately insured for damage to property and liability to persons, including property and liability insurance for the benefit of the Collateral Agent and the holders of the Secured Obligations, at no cost to the Collateral Agent or such holders. The Collateral Agent and/or any such purchaser (i) shall provide reasonable cooperation to the Credit Facility Agent in connection with the manufacture, production, completion, removal and sale of any Credit Facility Collateral by the Credit Facility Agent as provided above and (ii) shall be entitled to receive, from the Credit Facility Agent, fair compensation and reimbursement for their reasonable costs and expenses incurred in connection with such cooperation, support and assistance to the Credit Facility Agent. The Collateral Agent and/or any such purchaser (or its transferee or successor) shall not otherwise be required to manufacture, produce, complete, remove, insure, protect, store, safeguard, sell or deliver any inventory subject to any Lien held by the Credit Facility Agent or to provide any support, assistance or cooperation to the Credit Facility Agent in respect thereof. (d) Each of the Collateral Agent and foreclosure purchaser may condition its performance of any obligation set forth in this Section 11.04 upon its prior receipt (without cost to it) of: (i) such assurances as it may reasonably request to confirm that the performance of such obligation and all activities of the Credit Facility Agent or its officers, employees and agents in connection therewith or incidental thereto: (A) will be permitted, lawful and enforceable as against the Company and its Subsidiaries and their suppliers, customers and contractors and under applicable law; and (B) will not impose upon the Collateral Agent (or any holder of Secured Obligations) or any foreclosure purchaser any legal duty, legal liability or risk of uninsured loss; and (ii) such indemnity or insurance as the Collateral Agent or foreclosure purchaser may reasonably request in connection therewith. (e) The Company and the other Obligors consent to the performance by the Collateral Agent and foreclosure purchaser of the obligations set forth in this Section 11.04 and acknowledge and agree that neither the Collateral Agent (nor any holder of Secured Obligations) nor any foreclosure purchaser shall ever be accountable or liable for any action taken or omitted by the Credit Facility Agent or its officers, employees and agents in connection therewith or incidental thereto or in consequence thereof, including any improper use or disclosure of any proprietary information or other intellectual property by the Credit Facility Agent or its officers, 106 employees, agents, successors or assigns or any other damage to or misuse or loss of any property of the Company and its Subsidiaries as a result of any action taken or omitted by the Credit Facility Agent or its officers, employees, agents, successors or assigns. SECTION 11.05. Complete Agreement. (a) This Article XI sets forth exhaustively the complete agreement and sole contractual obligations and rights arising under this Indenture as between the Collateral Agent and the Credit Facility Agent. (b) Neither the Collateral Agent and nor the Credit Facility Agent will be restricted in any respect not expressly set forth herein as to any matter relating to the creation, perfection, protection or enforcement of their respective Liens and their rights and obligations in respect of such matters shall be based solely on the legal rights and duties, if any, that they would have if they had not entered into any agreement whatsoever with each other relating to their Liens. SECTION 11.06. No Subrogation, Marshalling or Duty. Neither the assumption nor the performance of any obligation set forth in or arising under this Article XI shall ever create or give rise to any right of subrogation, right of marshalling, duty of care, duty of loyalty, duty of disclosure or other fiduciary duty whatsoever enforceable by the Collateral Agent, the Credit Facility Agent or any holder of Secured Obligations or Credit Facility Obligations. SECTION 11.07. Limitation on Certain Relief, Defenses and Damage Claims. (a) No action taken or omitted in violation of any obligation set forth in or arising under this Article XI will constitute a breach of such obligation or expose the party taking or omitting such action to any liability whatsoever if, when such action was taken or omitted, such party received and in good faith relied on an Officers' Certificate or Opinion of Counsel to the effect that such action was permitted under this Article XI. (b) None of the Secured Obligations, Collateral Agent's Liens, Credit Facility Obligations and Credit Facility Liens will ever be forfeited, invalidated, discharged, reduced, subordinated or restricted or otherwise affected or impaired by any breach of any obligation set forth in or arising under this Article XI. (c) No claim shall ever be made against the Collateral Agent or the Credit Facility Agent for any special, indirect or consequential damages or (to the fullest extent a claim for punitive damages may lawfully be waived) for any punitive damages based on any claim arising, on any theory of liability, from or in connection with to any act, omission, breach, wrongful conduct, event or circumstance occurring relating in any respect to the performance or breach of any obligation set forth in or arising under this Article XI. 107 SECTION 11.08. Amendment; Waiver. (a) No amendment or supplement to, or waiver of, the provisions this Article XI will: (i) be effective unless set forth in a writing signed by the Collateral Agent with the consent of the holders of at least a majority in principal amount of the Notes and the Term Loans then outstanding voting as a single class, except that any such amendment, supplement or waiver that increases the obligations or adversely affects the rights of the holders of the Secured Obligations will be effective only with the consent of the holders of at least 66-2/3% in principal amount of the Notes and the Term Loans then outstanding, voting as a single class; and (ii) become effective at any time when any Credit Facility Obligations are outstanding or committed under any Qualified Credit Facility unless such amendment, supplement or waiver is consented to in a writing signed by the Credit Facility Agent acting upon the direction or with the consent of such number of the lenders thereunder as may, by the terms of such Qualified Credit Facility, have the power to bind all of such lenders thereto. Any such amendment or supplement that: (A) imposes any obligation upon the Company or any Subsidiary of the Company, or adversely affects the rights of the Company or any Subsidiary of the Company or affects the benefits, if any, specifically afforded the Company or any Subsidiary of the Company under this Article XI will become effective only with the consent of the Company and such Subsidiary; (B) imposes any obligation upon the Collateral Agent, or adversely affects the rights of the Collateral Agent in its individual capacity, will become effective only with the consent of the Collateral Agent; or (C) imposes any obligation upon the Credit Facility Agent, or adversely affects the rights of the Credit Facility Agent in its individual capacity, will become effective only with the consent of the Credit Facility Agent. (b) No exercise, delay in exercising or failure to exercise any right arising under this Article XI, no act or omission of any Obligor or holder of Secured Obligations or Credit Facility Obligations, no change, impairment, or suspension of any right or remedy, and no other lawful act, failure to act, circumstance, occurrence or event which, but for this provision, would or could act as a release or exoneration of any obligation arising under this Article XI will in any way affect, decrease, diminish or impair any such obligation. SECTION 11.09. Enforcement. The rights and obligations set forth in or arising under this Article XI are enforceable only by the Collateral Agent and Credit Facility Agent under a Qualified Credit Facility against each other (and their respective successors, including, but only to the extent expressly provided 108 herein, a purchaser at a foreclosure sale conducted in foreclosure of Collateral Agent's Liens) and against the Obligors. No other Person (including holders of Secured Obligations or Credit Facility Obligations) shall be entitled to enforce any such right or shall be obligated to perform any such obligation; however, such provisions will be binding on the holders of Secured Obligations and Credit Facility Obligations. SECTION 11.10. Relative Rights. This Article XI sets forth certain relative rights, as lienholders, of the Collateral Agent and the Credit Facility Agent. Nothing in this Indenture will: (a) impair, as between the Company, any other Obligor and Holders of Notes, the obligation of the Company, which is absolute and unconditional, to pay principal of, premium and interest and Special Interest, if any, on the Notes in accordance with their terms or to perform any other obligation of the Company or any other Obligor under the Note Documents; (b) impair, as between the Company, any other Obligor and holders of Term Loans, the obligation of the Company, which is absolute and unconditional, to pay principal of, premium and interest, on the Term Loans in accordance with their terms or to perform any other obligation of the Company or any other Obligor under the Term Loan Documents; (c) impair, as between the Company, any other obligor under a Qualified Credit Facility and holders of the loans under a Qualified Credit Facility, the obligation of the Company, which is absolute and unconditional, to pay principal of, premium and interest, on such loans in accordance with their terms or to perform any other obligation of the Company or any other obligor under a Qualified Credit Facility; (d) affect the relative rights of holders of Note Obligations, Term Loan Obligations or Credit Facility Obligations and other creditors of the Company or any of its Subsidiaries; (e) restrict the right of any holder of Secured Obligations or Credit Facility Obligations to sue for payments that are then due and owing; (f) prevent the Trustee, the Administrative Agent, the Collateral Agent or the Credit Facility Agent or any holder of Secured Obligations or Credit Facility Obligations from exercising against the Company or any other Obligor any of its other available remedies upon a Default or Event of Default; or (g) restrict the right of the Trustee, the Administrative Agent, the Collateral Agent or the Credit Facility Agent or any holder of Secured Obligations or Credit Facility Obligations to file and prosecute a petition seeking an order for relief in an involuntary bankruptcy case as to any Obligor or otherwise to commence, or seek relief commencing, any insolvency or liquidation proceeding involuntarily against any Obligor or to assert or enforce any claim, Lien, right or remedy in any voluntary or involuntary bankruptcy case or insolvency or liquidation proceeding. 109 ARTICLE XII COLLATERAL SHARING SECTION 12.01. Equal and Ratable Lien Sharing by Holders of Notes and Holders of Term Loans. Notwithstanding (i) anything to the contrary contained in the Note Documents or the Term Loan Documents, (ii) the time, order or method of attachment of the Collateral Agent's Lien, (iii) the time or order of filing or recording of financing statements or other documents filed or recorded to perfect any Lien upon any Collateral, (iv) the time of taking possession or control over any Collateral or (v) the rules for determining priority under the Uniform Commercial Code or any other law governing relative priorities of secured creditors: (1) all Liens at any time granted to secure any Secured Obligations will secure Equally and Ratably all of the Notes (including additional Notes permitted by clause (2) of the definition of "Permitted Liens"), all other present and future Note Obligations, all of the Term Loans (including additional Term Loans permitted by clause (2) of the definition of "Permitted Liens") and all other present and future Term Loan Obligations, and (2) all proceeds of Collateral encumbered by such Liens shall be allocated and distributed Equally and Ratably on account of the Note Obligations and Term Loan Obligations. SECTION 12.02. Enforcement. The provisions of Section 12.01 hereof are binding upon and intended for the benefit of the Collateral Agent and each present and future holder of Secured Obligations, each of whom shall be entitled to enforce such provisions as a third party beneficiary thereof. SECTION 12.03. Amendment. (a) No amendment or supplement to the provisions of this Article XII that adversely affects the right of any holder of Secured Obligations to share in the Collateral Equally and Ratably will become effective without the consent of each such holder. (b) Any such amendment or supplement that imposes any obligation upon the Collateral Agent or adversely affects the rights of the Collateral Agent in its individual capacity will become effective only with the consent of the Collateral Agent. No waiver of the provisions of this Article XII will in any event be effective unless set forth in a writing signed and consented to, as required for an amendment under this Section 12.03, by the party to be bound thereby. 110 ARTICLE XIII GUARANTEES SECTION 13.01. Subsidiary Guarantees. Subject to Section 13.05 hereof, each of the Guarantors hereby, jointly and severally, unconditionally guarantees, and each Person who in the future becomes a Guarantor by executing a supplemental indenture in the form attached to this Indenture as Exhibit E shall, jointly and severally, unconditionally guarantee, on a senior basis to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, the Notes and the Obligations of the Company hereunder and thereunder, that: (a) the principal of, and premium, if any, and interest (including Special Interest), if any, on, the Notes will be promptly paid in full when due, subject to any applicable grace period, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of, and premium, if any, and (to the extent permitted by law) interest (including Special Interest), if any, on, the Notes, and all other payment Obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full and performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other Obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable grace period, whether at stated maturity, by acceleration, redemption or otherwise. Failing payment when so due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors will be jointly and severally obligated to pay the same immediately. An Event of Default under this Indenture or the Notes shall constitute an event of default under the Subsidiary Guarantees, and shall entitle the Holders to accelerate the Obligations of the Guarantors hereunder and under the Notes in the same manner and to the same extent as the Obligations of the Company hereunder and under the Notes. This is a guarantee of payment and not of collection, and, to the maximum extent permitted by applicable law, each Guarantor hereby waives and agrees not to assert or take advantage of, and each Guarantor's liability under its Subsidiary Guarantee shall be absolute and unconditional irrespective of: (i) any right to require the Trustee to proceed against the Company or any other Person or to resort to, proceed against or exhaust any security held by it at any time or to pursue any other remedy in its power before proceeding against such Guarantor; (ii) the defense of the statute of limitations in any action hereunder or for the collection or performance of any of the obligations guaranteed hereunder; (iii) any defense that may arise by reason of the incapacity, lack of authority, death or disability of, or revocation hereof by such Guarantor or the revocation or repudiation of any of the Note Documents by the Company, any other Guarantor or 111 any other Person or the failure of any Guarantor to file or enforce a claim against the estate (either in administration, bankruptcy, or any other proceeding) of the Company or any other Person; (iv) the unenforceability in whole or in part of any of the Note Documents or any other instrument, document or agreement; (v) any election, in any proceeding by or against the Company or any other Person under the Bankruptcy Code, of the application of Section 1111(b)(2) of such Code; (vi) any borrowing or grant of a security interest under Section 364 of the Bankruptcy Code; (vii) demand, presentment, protest and notice of any kind, and notice of the existence, creation or incurring of any new or additional indebtedness or obligation or of any action or non-action on the part of the Company, a Guarantor or any other Person under this or any other instrument, in connection with any of the obligations guaranteed hereunder or any collateral now or hereafter given for any of such obligations; (viii) any defense based upon an election of remedies by the Trustee, including, without limitation, an election to proceed by non-judicial rather than judicial foreclosure, which destroys or otherwise impairs the subrogation rights of such Guarantor or any other Guarantor, or the right of such Guarantor, any other Guarantor or any other Person to proceed against the Company for reimbursement, or both; (ix) any suretyship defense or right of any nature otherwise available to such Guarantor under the laws of any state, including, without limitations, provisions to the effect that: (A) the obligation of a surety must not be either larger in amount or in other respects more burdensome than that of the principal; (B) a surety is not liable if for any reason other than the mere personal disability of the principal, there is no liability upon the part of the principal at the time of execution of the contract, or the liability of the principal thereafter ceases; (C) a surety is exonerated if the creditor alters the original obligation of the principal without the consent of the surety; (D) a surety is exonerated to the extent that the creditor fails to proceed against the principal, or to pursue any other remedy in the creditor's power which the surety cannot pursue and which would lighten the surety's burden; (E) a surety may compel its principal to perform the obligation when due; 112 (F) if a surety satisfies the principal obligation, or any part thereof, the principal is obligated to reimburse the surety for the amounts paid by the surety; (G) a surety, upon satisfaction of the obligation of the principal, is entitled to enforce remedies which the creditor then has against the principal; (H) a surety is entitled to the benefit of security held by the creditor for the performance of the principal obligation held by the creditor; (I) whenever the property of a surety is hypothecated with property of the principal, the surety is entitled to have the property of the principal first applied to the discharge of the obligation; and (J) the principal may designate the portion of any obligation to be satisfied by the surety in the event that the principal provides partial satisfaction of such obligation; and (x) any rights to direct the manner in which, or the order in which, the Trustee must proceed to recover against any collateral given by such Guarantor, any other Guarantor or any other Person to secure the obligations secured hereunder, including, without limitation, any prohibition against obtaining a deficiency judgment and any requirement that any deficiency judgment be obtained only through judicial proceedings, including, without limitation: (A) any rights under Section 580b or 580d of the California Code of Civil Procedure or under Section 726 of the California Code of Civil Procedure; (B) any rights under Section 32-19-06.1 of the North Dakota Century Code; (C) any rights under Sections 45-1503, 45-1505(4), 45-1512 and 6-108 of the Idaho Code; (D) any rights under Section 78-37-1 of the Utah Code; and (E) any rights under RCW 61.12.120, RCW 61.24.030(4) and RCW 61.24.100. The Company (and the Obligors) and all other Persons bound by the Note Obligations are personally obligated and fully liable for all amounts due under the Note Obligations. The Collateral Agent (and the Trustee) has the right to sue on the Note Obligations and obtain a personal judgment against the undersigned Obligors or any other Person bound by this Indenture for satisfaction of all amounts due under the Note Obligations either before, after or without a judicial foreclosure of the mortgage or deed of trust under Alaska Statute Section 09.45.170 - Section 09.45.220. Each Guarantor hereby acknowledges that none of the Trustee, any Holder and ANY other Person have a duty to disclose to such Guarantor any facts such Person may now or 113 hereafter know about the Company, regardless of whether such Person has reason to believe that any such facts materially increase the risk beyond that which such Guarantor intends to assume or has reason to believe that such facts are unknown to such Guarantor or has a reasonable opportunity to communicate such facts to such Guarantor, it being understood and agreed that each Guarantor is fully responsible for being and keeping informed of the financial condition of the Company and of all circumstances bearing on the risk of nonpayment or nonperformance of any obligations hereby guaranteed. Each Guarantor further acknowledges that the suretyship defenses and rights waived hereunder may provide partial or complete defenses to the recovery by the Trustee from such Guarantor and/or grant such Guarantor certain rights, the enforcement or realization of which could reduce or eliminate such Guarantor's liability hereunder to the Company. If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors, or any Note Custodian, Trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by the Company or any Guarantor to the Trustee or such Holder, this Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor agrees that it shall not be entitled to, and hereby waives, any right to exercise any right of subrogation in relation to the Holders in respect of any Obligations guaranteed hereby, except as provided under Section 13.05 hereof. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article VI hereof for the purposes of its Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed thereby, and (y) in the event of any declaration of acceleration of such Obligations as provided in Article VI hereof, such Obligations (whether or not due and payable) shall forthwith become due and payable by each Guarantor for the purpose of its Subsidiary Guarantee. The Guarantors shall have the right to seek contribution from any non-paying Guarantor pursuant to Section 13.05 hereof after the Notes and the Obligations hereunder shall have been paid in full to the Holders under the Subsidiary Guarantees. SECTION 13.02. Execution and Delivery of Additional Subsidiary Guarantee or Supplemental Indenture; Notation of Subsidiary Guarantee. To effect any additional Subsidiary Guarantee set forth in Section 13.01 hereof, any future Guarantor shall execute and deliver a supplemental indenture substantially in the form of Exhibit E hereto, which supplemental indenture shall be entered into in accordance with Section 4.17 hereof and shall be executed on behalf of such Guarantor, by manual or facsimile signature, by an Officer of such Guarantor. To evidence its Subsidiary Guarantee set forth in Section 13.01 hereof, each Guarantor of a Note hereby agrees that a notation of such Subsidiary Guarantee substantially in the form set forth on Exhibit A hereof shall be endorsed by manual or facsimile signature of an Officer of such Guarantor or of the Company as attorney-in fact for such Guarantor on each such Note authenticated and delivered by the Trustee, and that this Indenture shall be executed on behalf of such Guarantor, by manual or facsimile signature, by an Officer of such Guarantor. For so long as a Subsidiary Guarantee of such Guarantor remains in full force and effect, each Guarantor hereby irrevocably appoints the Company as its attorney-in-fact for the purpose of executing in 114 the name and on behalf of such Guarantor any endorsement of a notation of a Subsidiary Guarantee on any Note. If an Officer of the Company whose signature is on this Indenture or on the Subsidiary Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee shall be valid nevertheless. Each Guarantor hereby agrees that its Subsidiary Guarantee set forth in Section 13.01 hereof shall remain in full force and effect notwithstanding any failure to endorse on each or any Note a notation of such Subsidiary Guarantee. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee set forth in this Indenture on behalf of the Guarantors. For so long as a Subsidiary Guarantee of such Guarantor remains in full force and effect, each Guarantor hereby irrevocably appoints the Company as its attorney-in-fact for the purpose of executing in the name and on behalf of such Guarantor any supplemental indenture to this Indenture, or consent to any such supplemental indenture, which the Company and the Trustee are authorized to enter into pursuant to Sections 9.01 or 9.02 of this Indenture. SECTION 13.03. Guarantors May Consolidate, Etc., on Certain Terms. (a) Except as set forth in Articles IV and V hereof and this Section 13.03, nothing contained in this Indenture shall prohibit a merger between a Guarantor and another Guarantor or a merger between a Guarantor and the Company. (b) No Guarantor shall consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person, whether or not affiliated with such Guarantor, unless (i) the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) assumes all the Obligations of such Guarantor hereunder, pursuant to a supplemental indenture substantially in the form of Exhibit E hereto and other documentation in form and substance reasonably satisfactory to the Trustee, under the Notes, this Indenture, all Security Documents delivered by that Guarantor, and, if then in effect, the Registration Rights Agreement, and, in the case of a Pipeline Subsidiary, if and to the extent that a pledge in respect thereof is required to then be in effect, the Capital Stock of the successor resultant transferee Person continues to be pledged to the Collateral Agent for the benefit on the holders of the Secured Obligations; (ii) immediately after giving effect to such transaction, no Default or Event of Default exists; and (iii) the Company would be permitted by virtue of the Company's pro forma Fixed Charge Coverage Ratio, immediately after giving effect to such transaction, to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof; provided, however, that this clause (iii) shall be suspended for so long as the Company and its Restricted Subsidiaries are not subject to the Suspended Covenants subject to Section 4.19 hereof. Notwithstanding the foregoing paragraph (and in the case of clause (iii) of this paragraph, notwithstanding Section 13.03(c) hereof), (i) any Guarantor other than a Pipeline Subsidiary may consolidate with, merge into or transfer all or a part of its properties and assets to the Company 115 or any other Guarantor, (ii) any Guarantor may consolidate with, merge into or transfer all or a part of its properties and assets to a Restricted Subsidiary of the Company that has no significant assets or liabilities and was incorporated, organized or formed solely for the purpose of reincorporating or otherwise reorganizing such Guarantor in another State of the United States; provided that, in each case, such successor, resultant or transferee Person continues to be a Guarantor and to have the same obligations under the Notes, this Indenture, all of the Security Documents and, if then in effect, the Registration Rights Agreement and, in the case of a Pipeline Subsidiary, if and to the extent that a pledge in respect thereof is required to then be in effect, the Capital Stock of the successor resultant transferee Person continues to be pledged to the Collateral Agent for the benefit of the holders of the Secured Obligations, and (iii) subject to the provisions of Section 13.04 hereof, upon the disposition (including by way of merger, consolidation or otherwise) of all or substantially all of the assets or all of the Capital Stock of any Guarantor, that Guarantor shall be released from its obligations under its Subsidiary Guarantee and all of the other obligations of that Guarantor under this Indenture, the Notes, all of the other Note Documents and, if then in effect, the Registration Rights Agreement, all security interests granted by that Guarantor to the Collateral Agent shall be released and any related resultant, surviving or transferee Person shall not be required to assume any of such obligations. (c) In the case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture substantially in the form of Exhibit E hereto and other documentation in form and substance reasonably satisfactory to the Trustee, under the Notes, this Indenture, all Security Documents delivered by that Guarantor, and, if then in effect, the Registration Rights Agreement, and, in the case of a Pipeline Subsidiary, if and to the extent that a pledge in respect thereof is required to then be in effect, the Capital Stock of the successor resultant transferee Person continues to be pledged to the Collateral Agent for the benefit on the holders of the Secured Obligations, in each case executed and delivered to the Trustee or the Collateral Agent, as appropriate, and, of the Subsidiary Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Guarantor, such successor Person shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All of the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under this Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. SECTION 13.04. Releases. (a) In the event of any sale or other disposition, whether in one or a series of related transactions, of all or substantially all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition, whether in one or a series of related transactions, of all of the Capital Stock of any Guarantor in compliance with this Indenture to any entity that is not the Company or a Subsidiary of the Company, then such Guarantor and such acquiring, resulting, surviving or transferee Person will be released and relieved of any obligations under any Subsidiary Guarantee; provided, however, that the Net Proceeds of such 116 sale or other disposition will be applied in accordance with Section 4.10 hereof. Upon delivery by the Company to the Trustee of an Officers' Certificate to the effect of the foregoing, the Trustee shall execute any documents reasonably required in order to evidence the release of such Guarantor from its Obligation under its Subsidiary Guarantee and this Indenture. Any Guarantor not released from its Obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of, and premium, if any, interest and Special Interest, if any, on the Notes and for the other Obligations of such Guarantor under this Indenture as provided in this Article XIII. (b) Upon the designation of a Guarantor as an Unrestricted Subsidiary in accordance with the Terms of this Indenture, such Guarantor shall be released and relieved of its obligations under this Indenture. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that the designation of such Guarantor as an Unrestricted Subsidiary was made by the Company in accordance with the provisions of this Indenture, including, without limitation, Section 4.07 hereof, the Trustee shall execute any documents reasonably required in order to evidence the release of such Guarantor from its Obligation under its Subsidiary Guarantee and this Indenture. Any Guarantor not released from its Obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of, and premium, if any, interest and Special Interest, if any, on the Notes and for the other Obligations of such Guarantor under this Indenture as provided in this Article XIII. SECTION 13.05. Limitation on Guarantor Liability; Contribution. For purposes hereof, each Guarantor's liability under its Subsidiary Guarantee shall be limited to the lesser of (i) the aggregate amount of the Obligations of the Company under the Notes and this Indenture and (ii) the amount, if any, which would not have (A) rendered such Guarantor "insolvent" (as such term is defined in the Bankruptcy Code and in the Debtor and Creditor Law of the State of New York) or (B) left such Guarantor with unreasonably small capital at the time its Subsidiary Guarantee of the Notes was entered into; provided that, it will be a presumption in any lawsuit or other proceeding in which a Guarantor is a party that the amount guaranteed pursuant to its Subsidiary Guarantee is the amount set forth in clause (i) above unless any creditor, representative of creditors of such Guarantor, or debtor in possession or trustee in bankruptcy of such Guarantor, otherwise proves in such a lawsuit that the aggregate liability of such Guarantor is the amount set forth in clause (ii) above. In making any determination as to solvency or sufficiency of capital of a Guarantor in accordance with the previous sentence, the right of such Guarantor to contribution from other Guarantors as set forth below, and any other rights such Guarantor may have, contractual or otherwise, shall be taken into account. In order to provide for just and equitable contribution among the Guarantors, the Guarantors shall agree, inter se, that in the event any payment or distribution is made by any Guarantor (a "Funding Guarantor") under its Subsidiary Guarantee, such Funding Guarantor shall be entitled to a contribution from all other Guarantors in a pro rata amount based on the Adjusted Net Assets of each Guarantor (including the Funding Guarantor) for all payments, damages and expenses incurred by that Funding Guarantor in discharging the Company's obligations with respect to the Notes or any other Guarantor's Obligations with respect to its Subsidiary Guarantee. 117 SECTION 13.06. Trustee to Include Paying Agent. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article XIII shall in each case (unless the context shall otherwise require) be construed as extending to and including such Paying Agent within its meaning as fully and for all intents and purposes as if such Paying Agent were named in this Article XIII in place of the Trustee. ARTICLE XIV MISCELLANEOUS SECTION 14.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA Section 318(c), the imposed duties shall control. SECTION 14.02. Notices. Any notice or communication by the Company, any Guarantor or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telecopier or overnight air courier guaranteeing next day delivery, to the others' address: If to the Company or any Guarantor: Tesoro Petroleum Corporation 300 Concord Plaza Drive San Antonio, Texas 78216-6999 Attention: Corporate Secretary With a copy to: Fulbright & Jaworski L.L.P. 1301 McKinney, Suite 5100 Houston, Texas 77010 Attention: Charles L. Strauss, Esq. If to the Trustee: 118 The Bank of New York 101 Barclay Street - Floor 8 West New York, NY 10286 Fax No.: (212) 815-5707 Attention: Corporate Trust Administration If to the Collateral Agent: Wilmington Trust Company 1100 North Market Street Wilmington, Delaware 19890 Fax No.: (302) 636-4145 Attention: Mary St. Amand Ref: Tesoro Petroleum Collateral Agency The Company, any Guarantor, the Trustee or the Collateral Agent, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back; when receipt acknowledged, if faxed; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA Section 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or anY defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee, the Collateral Agent and each Agent at the same time. SECTION 14.03. Communication by Holders of Notes with Other Holders of Notes. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights undeR this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). 119 SECTION 14.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 14.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 14.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. SECTION 14.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA Section 314(e) and shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. SECTION 14.06. Rules by Trustee and Agents. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. SECTION 14.07. No Personal Liability of Directors, Officers, Employees and Stockholders. No past, present or future director, officer, employee, manager, incorporator, partner, member or stockholder or other owner of Capital Stock of the Company or any of its Subsidiaries, or of any member, partner or stockholder of any such entity, as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, this Indenture, the Subsidiary Guarantees or the Security Documents or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and 120 releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. SECTION 14.08. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES. SECTION 14.09. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 14.10. Successors. All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of each Guarantor in this Indenture and the Subsidiary Guarantees shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 14.11. Severability. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 14.12. Counterpart Originals. The parties may sign any number of copies of this Indenture, and each party hereto may sign any number of separate copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 14.13. Table of Contents, Headings, Etc. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. 121 SIGNATURES Dated as of April 17, 2003 TESORO PETROLEUM CORPORATION By: /s/ GREGORY A. WRIGHT --------------------------------- Name: Gregory A. Wright Title: Senior Vice President and Chief Financial Officer FAR EAST MARITIME COMPANY GOLD STAR MARITIME COMPANY TESORO FINANCIAL SERVICES HOLDING COMPANY VICTORY FINANCE COMPANY By: /s/ G. SCOTT SPENDLOVE --------------------------------- Name: G. Scott Spendlove Title: Attorney in Fact DIGICOMP INC. KENAI PIPE LINE COMPANY SMILEY'S SUPER SERVICE, INC. TESORO ALASKA COMPANY TESORO ALASKA PIPELINE COMPANY TESORO AVIATION COMPANY TESORO GAS RESOURCES COMPANY, INC. TESORO HAWAII CORPORATION TESORO HIGH PLAINS PIPELINE COMPANY TESORO MARINE SERVICES HOLDING COMPANY TESORO MARINE SERVICES, LLC By: Tesoro Marine Services Holding Company, as sole member TESORO MARITIME COMPANY TESORO NORTHSTORE COMPANY TESORO PETROLEUM COMPANIES, INC. TESORO REFINING AND MARKETING COMPANY TESORO TECHNOLOGY COMPANY TESORO TRADING COMPANY TESORO VOSTOK COMPANY TESORO WASATCH, LLC By: Tesoro Petroleum Corporation, as sole member By: /s/ SHARON L. LAYMAN ----------------------------------- Name: Sharon L. Layman Title: Vice President and Treasurer THE BANK OF NEW YORK, as Trustee By: /s/ VAN K. BROWN ----------------------------------- Name: Van K. Brown Title: Vice President EXHIBITS Exhibit A FORM OF NOTE Exhibit B FORM OF CERTIFICATE OF TRANSFER Exhibit C FORM OF CERTIFICATE OF EXCHANGE Exhibit D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Exhibit E FORM OF SUPPLEMENTAL INDENTURE - ADDITIONAL SUBSIDIARY GUARANTEES Exhibit F REGISTRATION RIGHTS AGREEMENT Exhibit G FORM OF MORTGAGE EXHIBIT A (FACE OF NOTE) THE SECURITIES COVERED HEREBY WERE ISSUED WITH ORIGINAL ISSUE DISCOUNT UNDER SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. YOU MAY CONTACT GREG WRIGHT, THE CHIEF FINANCIAL OFFICER OF THE COMPANY, AT TESORO PETROLEUM CORPORATION, 300 CONCORD PLAZA DRIVE, SAN ANTONIO, TEXAS 78216-6999, 210-828-8484, WHO WILL PROVIDE YOU WITH ANY REQUIRED INFORMATION REGARDING THE ISSUE PRICE, THE AMOUNT OF SUCH ORIGINAL ISSUE DISCOUNT, THE ISSUE DATE AND THE YIELD TO MATURITY. CUSIP/CINS __________ 8% Senior Secured Notes due 2008 No. [__] $__________ TESORO PETROLEUM CORPORATION promises to pay to ______________________________ or registered assigns, the principal sum of _____________________________ Dollars on April 15, 2008. Interest Payment Dates: April 15 and October15. Record Dates: April 1 and October 1. TESORO PETROLEUM CORPORATION By:_________________________ Name: Title: This is one of the Global Notes referred to in the within-mentioned Indenture: THE BANK OF NEW YORK, AS TRUSTEE By:________________________________________ Dated: A-1 Authorized Signatory A-2 (Back of Note) 8% Senior Secured Notes due 2008 [THE SECURITIES COVERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (I) AS PART OF THEIR DISTRIBUTION AT ANY TIME OR (II) OTHERWISE UNTIL 40 DAYS AFTER THE LATER OF THE COMMENCEMENT OF THE OFFERING AND THE TIME OF DELIVERY OF THE SECURITIES, EXCEPT IN EITHER CASE IN ACCORDANCE WITH REGULATION S OR RULE 144A UNDER THE SECURITIES ACT. THE TERMS USED ABOVE HAVE THE MEANING GIVEN TO THEM BY REGULATION S.] [Insert the Global Note Legend, if applicable, pursuant to the provisions of the Indenture] [Insert the Private Placement Legend, if applicable, pursuant to the provisions of the Indenture] Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. Interest. Tesoro Petroleum Corporation, a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at 8% per annum, from April 17, 2003 until maturity and shall pay the Special Interest payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company will pay interest and Special Interest, if any, semi-annually in arrears on April 15 and October 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of original issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date, except in the case of the original issuance of Notes, in which case interest shall accrue from date of authentication; provided, further, that the first Interest Payment Date shall be October 15, 2003. The Company shall pay interest (including postpetition interest in any proceeding under the Bankruptcy Code) on overdue principal and premium, if any, from time to time on demand at the rate borne on the Notes; it shall pay interest (including post-petition interest in any proceeding under the Bankruptcy Code) on overdue installments of interest and Special Interest, if any, (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment. The Company will pay interest on the Notes (except defaulted interest) and Special Interest to the Persons who are registered Holders of Notes at the close of business on the April 1 and October 1 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as A-3 provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes will be payable as to principal, premium and Special Interest, if any, and interest at the office or agency of the Company maintained for such purpose within the City and State of New York, or, at the option of the Company, payment of interest and Special Interest may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds will be required with respect to principal of, and interest, premium and Special Interest on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. Paying Agent and Registrar. Initially, The Bank of New York, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. Indenture. The Company issued the Notes under an Indenture dated as of April 17, 2003 ("Indenture") among the Company, the Guarantors and the Trustee, as the same may be amended, modified or supplemented from time to time. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subjecT to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are secured obligations of the Company limited to $725,000,000 in aggregate principal amount. The Notes are secured pursuant to the Security Documents referred to in the Indenture. 5. Optional Redemption. (a) Except as set forth in subparagraph (b) of this paragraph 5, the Notes shall not be redeemable at the Company's option prior to April 15, 2006. Thereafter, the Notes will be subject to redemption at any time or from time to time at the option of the Company, in whole or in part, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Special Interest, if any, thereon, to the applicable redemption date, if redeemed during the twelve-month period beginning on April 15 of the years indicated below:
YEAR PERCENTAGE ---- ---------- 2006............................... 104.000% 2007 and thereafter................ 100.000%
(b) Notwithstanding the foregoing, at any time or from time to time on or before to April 15, 2006, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under the Indenture at a redemption price of 108.000% of the principal amount thereof, plus accrued and unpaid interest, if any, and Special Interest thereon, if any, to the redemption date, with the net cash proceeds of any one or more A-4 Equity Offerings; provided that at least 65% of the aggregate principal amount of Notes issued under the Indenture remain outstanding immediately after each occurrence of such redemption; and provided, further, that each such redemption shall occur within 90 days of the date of the closing of such Equity Offering. 6. Mandatory Redemption. The Company shall not be required to make mandatory redemption payments with respect to the Notes. 7. Collateral and Security; Intercreditor Obligations. The Notes and the Subsidiary Guarantees will be secured together with the Term Loans and the guarantees of the Term Loans by the Guarantors, Equally and Ratably, by first priority security interests (subject to Permitted Prior Liens), granted to the Collateral Agent for the benefit of the holders of the Secured Obligations, in all of the Collateral. Holders of the Notes shall have the rights set forth in the Security Documents with respect to such Collateral. The Collateral Agent is or may become required to perform certain obligations relating to the Collateral for the benefit of the Credit Facility Agent under a Qualified Credit Facility as set forth in the Indenture. 8. Repurchase at Option of Holder. (a) Upon the occurrence of a Change of Control, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to a Change of Control Offer described in the Indenture at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Special Interest, if any, thereon to the date of purchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company shall mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as required by the Indenture. (b) If the Company or a Restricted Subsidiary consummates any Asset Sales and the aggregate amount of Excess Asset Sale Proceeds exceeds $15,000,000, the Company will commence an offer to all Holders of Notes (an "Asset Sale Offer") pursuant to Section 3.09 of the Indenture (pro rata in proportion to outstanding Indebtedness that is pari passu with the Notes that require asset sales offers, including the Term Loans) to purchase the maximum principal amount of Notes and such other Indebtedness that may be purchased or prepaid, as applicable, out of the Excess Asset Sale Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest (including Special Interest), if any, thereon, to the date of purchase, in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes and other Indebtedness tendered (and electing to be redeemed or repaid, as applicable) pursuant to an Asset Sale Offer is less than the Excess Asset Sale Proceeds, the Company and its Restricted Subsidiaries may use such deficiency for general corporate purposes and any other purpose not prohibited by the Indenture. If the aggregate principal amount of Notes and such other Indebtedness surrendered by holders thereof exceeds the amount of the prorated Excess Asset Sale Proceeds, the Company shall select the Notes and such other Indebtedness to be purchased on a pro rata basis. (c) If the Company or a Restricted Subsidiary consummates any Asset Sales that constitute a Sale of Collateral and the aggregate amount of Excess Proceeds from the Sale of A-5 Collateral exceeds $15,000,000, the Company will commence an offer to all Holders of Notes (a "Collateral Proceeds Offer") pursuant to Section 3.09 of the Indenture (with the Excess Proceeds from the Sale of Collateral prorated between the Holders of Notes and the holders of Term Loans based upon outstanding aggregate principal amounts) to purchase the maximum principal amount of Notes that may be purchased and Term Loans that may be prepaid, in each case, out of the prorated Excess Proceeds from the Sale of Collateral, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest (including Special Interest), if any, thereon, to the date of purchase, in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes and Term Loans tendered (and electing to be redeemed or repaid, as applicable) pursuant to an Collateral Proceeds Offer is less than the Excess Proceeds from the Sale of Collateral, the Company and its Restricted Subsidiaries may use such Excess Proceeds from the Sale of Collateral, free and clear of any Liens created by any Security Documents or otherwise for the benefit of any holder of Secured Obligations, for general corporate purposes and any other purpose not prohibited by the Indenture. If the aggregate principal amount of Notes and Term Loans surrendered by holders thereof exceeds the amount of the prorated Excess Proceeds from the Sale of Collateral, the Trustee shall select the Notes to be purchased on a pro rata basis and the Administrative Agent shall select the Term Loans to be repaid on a pro rata basis. (d) Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer or a Collateral Proceeds Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes. 9. Notice of Redemption. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date, interest and Special Interest, if any, cease to accrue on Notes or portions thereof called for redemption. 10. Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, it need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 11. Persons Deemed Owners. The registered Holder of a Note may be treated as its owner for all purposes. 12. Amendment, Supplement and Waiver. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority A-6 in principal amount of the then outstanding Notes, and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes. Without the consent of any Holder of a Note, the Indenture or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes or to alter the provisions of Article II of the Indenture (including the related definitions) in a manner that does not materially adversely affect any Holder, to provide for the assumption of the Company's obligations to Holders of the Notes in case of a merger, consolidation or sale of assets pursuant to Article V of the Indenture or to add any Person as a Guarantor or to release any Guarantor or otherwise comply with Article XIII of the Indenture, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA, to allow any Guarantor to Guarantee the Notes, to release any Guarantor from any of its obligations under the Indenture or its Guarantee pursuant to the terms of the Indenture, to make, complete or confirm any grant of Collateral permitted or required by the Security Documents or the Indenture or any release of Collateral that becomes effective as set forth in the Security Documents or the Indenture, to conform the text of the Indenture, the Notes, the Subsidiary Guarantees or the Security Documents to any provision of the Description of the Notes section of the Offering Circular for the Offering of the Original Notes to the extent that such provision in the Description of the Notes was intended to be a verbatim recitation of a provision of the Indenture, the Notes, the Subsidiary Guarantees or the Security Documents, or to reflect any waiver or termination of any right arising under the provisions of the Indenture that otherwise would be enforceable by any holder of a Term Loan Obligation, if such waiver or termination is set forth in the agreement governing such Term Loan Obligation, provided that no such waiver or amendment shall adversely affect the rights of Holders of Notes. 13. Defaults and Remedies. Events of Default include: (a) default in the payment when due of interest on, or Special Interest, if any, with respect to, the Notes and such default continues for a period of 30 days; (b) default in the payment when due of principal of, or premium, if any, on, the Notes; (c) failure by the Company or any of its Restricted Subsidiaries to comply with any of the provisions of Sections 4.15 and 5.01 of the Indenture; (d) failure by the Company or any of its Restricted Subsidiaries to observe or perform any other covenant or other agreement in the Indenture, the Notes or the Security Documents for 60 days after written notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding; (e) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or is created after the Issue Date, which default (i) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness (a "Payment Default") or (ii) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates without duplication $20,000,000 or more, and such default shall not have been cured or waived or any such acceleration rescinded, or such Indebtedness is A-7 repaid, within 10 Business Days after the running of such grace period or the occurrence of such acceleration; (f) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of its Restricted Subsidiaries, and such judgment or judgments remain unpaid, unstayed or undischarged for a period (during which execution shall not be effectively stayed) of 60 days, provided that the aggregate of all such unpaid or undischarged judgments exceeds $20,000,000 (excluding amounts covered by insurance); (g) any Security Document or any Lien purported to be granted thereby on any one or more items of Collateral having an aggregate Fair Market Value in excess of $20,000,000 is held in any judicial proceeding to be unenforceable or invalid, in whole or in part, or ceases for any reason (other than pursuant to a release that is delivered or becomes effective as set forth in the Indenture) to be fully enforceable and perfected; (h) the Company or any Guarantor, or any Person acting on behalf of any of them, denies or disaffirms, in writing, any obligation of the Company or any Guarantor set forth in or arising under any Security Document; (i) certain events of bankruptcy or insolvency with respect to the Company or any of its Subsidiaries that, when taken together, would constitute a Significant Subsidiary or any of its Significant Subsidiaries; or (j) except as permitted in the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee (other than by reason of termination of the Indenture or the release of such Subsidiary Guarantee in accordance with the Indenture). If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes will become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. 14. Trustee Dealings with Company. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for, the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 15. No Recourse Against Others. A director, officer, employee, manager, incorporator, partner, member or stockholder of the Company or any Subsidiary of the Company or any Guarantor, as such, shall not have any liability for any obligations of the Company or Guarantors under the Notes, the Subsidiary Guarantees, the Indenture or the Security Documents or for any A-8 claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 16. Authentication. This Note shall not be valid until authenticated by the manual signature of a Responsible Officer of the Trustee or an authenticating agent. 17. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 18. Additional Rights of Holders of Restricted Global Notes and Restricted Definitive Notes. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes that are, or were issued in exchange for, Original Notes shall have all the rights set forth in the Registration Rights Agreement dated as of April 17, 2003 among the Company, the Guarantors and the parties named on the signature pages thereof or, in the case of Initial Notes other than Original Notes, Holders of such Restricted Global Notes and Restricted Global Notes shall have the rights set forth in one or more similar agreements that the Company and other parties may enter into in relation to such other Initial Notes, in each case as such agreement may be amended, modified or supplemented from time to time (collectively, the "Registration Rights Agreement"). 19. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture, the Registration Rights Agreement and/or the Security Documents. Requests may be made to: Tesoro Petroleum Corporation 300 Concord Plaza Drive San Antonio, Texas 78216-6999 Attention: Vice President, Finance and Treasurer. 20. GOVERNING LAW. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES. A-9 NOTATION OF SUBSIDIARY GUARANTEES Payment of principal of, and premium, if any, interest and Special Interest, if any, on, this Note is jointly, severally, and unconditionally guaranteed on a senior basis to the extent and in the manner set forth in the Indenture by the Guarantors who have become parties to the Indenture, including the Guarantors duly endorsing this notation. Subsidiary Guarantees are subject to release under circumstances set forth in the Indenture. FAR EAST MARITIME COMPANY GOLD STAR MARITIME COMPANY TESORO FINANCIAL SERVICES HOLDING COMPANY VICTORY FINANCE COMPANY By:_______________________________ Name: Title: DIGICOMP INC. KENAI PIPE LINE COMPANY SMILEY'S SUPER SERVICE, INC. TESORO ALASKA COMPANY TESORO ALASKA PIPELINE COMPANY TESORO AVIATION COMPANY TESORO GAS RESOURCES COMPANY, INC. TESORO HAWAII CORPORATION TESORO HIGH PLAINS PIPELINE COMPANY TESORO MARINE SERVICES HOLDING COMPANY TESORO MARINE SERVICES, LLC By: Tesoro Marine Services Holding Company, as sole member TESORO MARITIME COMPANY TESORO NORTHSTORE COMPANY TESORO PETROLEUM COMPANIES, INC. TESORO REFINING AND MARKETING COMPANY A-10 TESORO TECHNOLOGY COMPANY TESORO TRADING COMPANY TESORO VOSTOK COMPANY TESORO WASATCH, LLC By: Tesoro Petroleum Corporation, as sole member By:______________________________ Name: Title: A-11 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to _______________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint________________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. _______________________________________________________________________________ Date: Your Signature:________________________________________________________________ (Sign exactly as your name appears on the face of this Note) SIGNATURE GUARANTEE _______________________________________________________________________________ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-12 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the box below: [ ] Section 4.10 [ ] Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $_____________________________ Date: Your Signature: ________________________________________________________________________________ (Sign exactly as your name appears on the face of the Note) Tax Identification No.:_________________________________________________________ SIGNATURE GUARANTEE ________________________________________________________________________________ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-13 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*** The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
AMOUNT OF DECREASE IN AMOUNT OF INCREASE IN PRINCIPAL AMOUNT OF THIS SIGNATURE OF AUTHORIZED PRINCIPAL AMOUNT OF THIS PRINCIPAL AMOUNT OF THIS GLOBAL NOTE FOLLOWING SUCH SIGNATORY OF TRUSTEE OR NOTE DATE OF EXCHANGE GLOBAL NOTE GLOBAL NOTE DECREASE (OR INCREASE) CUSTODIAN - -----------------------------------------------------------------------------------------------------------------------------------
- ---------- *** This should be included only if the Note is issued in global form. A-14 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Tesoro Petroleum Corporation 300 Concord Plaza Drive San Antonio, Texas 78216-6999 Attention: Corporate Secretary The Bank of New York 101 Barclay Street - Floor 8 West New York, NY 10286 Attention: Corporate Trust Administration Re: Tesoro Petroleum Corporation 8% Senior Secured Notes due 2008 Reference is hereby made to the Indenture, dated as of April 17, 2003 (the "Indenture"), among Tesoro Petroleum Corporation, as issuer (the "Company"), the Guarantors named therein and The Bank of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ____________________ (the "Transferor"), owns and proposes to transfer the Note[s] or interest in such in such Note[s] specified in Annex A hereto, in the principal amount of $__________ in such Note[s] or interests (the "Transfer"), to ____________________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A GLOBAL NOTE OR A RESTRICTED DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE REGULATION S GLOBAL NOTE OR A RESTRICTED DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the B-1 Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act and (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) [ ] such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) [ ] such Transfer is being effected to the Company or a subsidiary thereof; or (c) [ ] such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d) [ ] such Transfer is being effected to an accredited investor within the meaning of Rule (501)(a)(1), (2), (3) or (7) under the Securities Act ("Institutional Accredited Investor") or pursuant to another exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby certifies that the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by, if the Transfer is to an Institutional Accredited Investor, a B-2 certificate executed by the Transferee in the form of Exhibit D to the Indenture. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the IAI Global Note and/or the Definitive Notes and in the Indenture and the Securities Act. 4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE. (a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. B-3 _________________________________________ [Insert Name of Transferor] By:______________________________________ Name: Title: Dated:___________________________________ B-4 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Note (CUSIP ___________), or (ii) [ ] Regulation S Global Note (CUSIP ___________); or (iii) [ ] IAI Global Note (CUSIP ___________); or (b) [ ] a Restricted Definitive Note. 2. After the Transfer the Transferee will hold: [CHECK ONE] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Note (CUSIP ___________), or (ii) [ ] Regulation S Global Note (CUSIP ___________), or (iii) [ ] IAI Global Note (CUSIP ___________); or (iv) [ ] Unrestricted Global Note (CUSIP ___________); or (b) [ ] a Restricted Definitive Note. (c) [ ] an Unrestricted Definitive Note, in accordance with the terms of the Indenture. B-5 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Tesoro Petroleum Corporation 300 Concord Plaza Drive San Antonio, Texas 78216-6999 Attention: Corporate Secretary The Bank of New York 101 Barclay Street - Floor 8 West New York, NY 10286 Attention: Corporate Trust Administration Re: Tesoro Petroleum Corporation 8% Senior Secured Notes due 2008 (CUSIP ____________) Reference is hereby made to the Indenture, dated as of April 17, 2003 (the "Indenture"), among Tesoro Petroleum Corporation, as issuer (the "Company"), the Guarantors named therein and The Bank of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ____________________ (the "Owner") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $______________ in such Note[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that: 1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner C-1 hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficiary interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act. (b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the C-2 [CHECK ONE] [ ] 144A Global Note [ ] Regulation S Global Note [ ] IAI Global Note with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ____________________________ [Insert Name of Owner] By:_________________________ Name: Title: Dated:_____________________ C-3 EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Tesoro Petroleum Corporation 300 Concord Plaza Drive San Antonio, Texas 78216-6999 Attention: Corporate Secretary The Bank of New York 101 Barclay Street - Floor 8 West New York, NY 10286 Attention: Corporate Trust Administration Re: Tesoro Petroleum Corporation 8% Senior Secured Notes due 2008 Reference is hereby made to the Indenture, dated as of April 17, 2003 (the "Indenture"), among Tesoro Petroleum Corporation, as issuer (the "Company"), the Guarantors named therein and The Bank of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $______________ aggregate principal amount of: (a) [ ] a beneficial interest in a Global Note, or (b) [ ] a Definitive Note, we confirm that: 1. we are an "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities Act"), or an entity in which all of the equity owners are accredited investors within the meaning of Rule (501)(a)(1), (2), (3) or (7) under the Securities Act (an "institutional accredited investor"); 2. (A) any purchase of the Notes by us will be for our own account or for the account of one or more other institutional accredited investors or as fiduciary for the account of one or more trusts, each of which is an "accredited investor" within the meaning of Rule 501(a)(7) under the Securities Act and for each of which we exercise sole investment discretion or (B) we are a "bank," within the meaning of Section 3(a)(2) of the Securities Act, or a "savings and loan association" or other institution described in Section 3(a)(5)(A) of the Securities Act that is acquiring Notes as fiduciary for the account of one or more institutions for which we exercise sole investment discretion; 3. we have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of purchasing Notes; D-1 4. we are not acquiring the Notes with a view to any distribution thereof in a transaction that would violate the Securities Act or the securities laws of any State of the United States or any other applicable jurisdictions, provided that the disposition of our property and the property of any accounts for which we are acting as fiduciary shall remain at all times within our control; 5. we have received a copy of the Offering Circular relating to the offering of the Notes and acknowledge that we have had access to such financial and other information, and have been afforded the opportunity to ask such questions of representatives of the Company and receive answers thereto, as we deem necessary in connection with our decision to purchase the Notes; and 6. (A) we are not an employee benefit plan or other arrangement that is subject to the Employee Retirement Income Security Act of 1974, as amended, or Section 4975 of the Internal Revenue Code of 1986, as amended, or an entity whose underlying assets include assets of such a plan or arrangement (pursuant to 29 C.F.R. Section 2510.3-101 or otherwise), and we are not purchasing (and will not hold) the Notes on behalf of, or with the assets of, any such plan, arrangement or entity; or (B) our purchase and holding of the Notes are completely covered by the full exemptive relief provided by U.S. Department of Labor Prohibited Transaction Class Exemption 96-23, 95-60, 91-38, 90-1 or 84-14. We understand that the Notes were offered in a transaction not involving any public offering in the United States within the meaning of the Securities Act and that the Notes have not been registered under the Securities Act or any state securities laws, and they were offered for resale in transactions not requiring registration under the Securities Act. We agree, on our own behalf, and on behalf of each account for which we acquire any Notes, that if in the future we decide to offer, resell, pledge or otherwise transfer such Notes, such Notes may be offered, resold, pledged or otherwise transferred only (a) to the Company or a subsidiary thereof, (b) pursuant to an effective registration statement under the Securities Act, (c) inside the United States to a person who is a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in a transaction meeting the requirements of Rule 144A, (d) inside the United States, to an institutional accredited investor that, prior to such transfer, furnishes to the trustee, a signed letter similar to this letter containing certain representations relating to restrictions on transfer of the note evidenced hereby, (e) pursuant to offers and sales to Non-U.S. Persons that occur outside the United States within the meaning of Regulation S under the Securities Act, or (f) pursuant to another available exemption from the registration requirements of the Securities Act, and, in each case, in accordance with any applicable securities laws of any State or any other applicable jurisdiction and in accordance with the legends set forth on the Notes. We further agree to provide any person purchasing any of the Notes other than pursuant to clause (b) above from us a notice advising such purchaser that resales of such securities are restricted as stated herein. We understand that the registrar and transfer agent for the Notes will not be required to accept for registration of transfer any Notes, except upon presentation of evidence satisfactory to the Company that the foregoing restrictions on transfer have been complied with. We further understand that any Notes we receive will be in the form of definitive physical certificates and that such certificates will bear a legend reflecting the substance of this paragraph. D-2 THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. We acknowledge that you and the Company will rely upon the truth and accuracy of our acknowledgments, confirmations and agreements in this letter. Further, we acknowledge and agree that you and the Company are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or, official inquiry with respect to the matters covered hereby. ________________________________________ [Insert Name of Accredited Investor] By:_____________________________________ Name: Title: Dated:_____________________ D-3 EXHIBIT E FORM OF SUPPLEMENTAL INDENTURE ADDITIONAL SUBSIDIARY GUARANTEES SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of _______________, 200__ among Tesoro Petroleum Corporation, a Delaware corporation (the "Company"), [name of New Guarantor] (the "New Guarantor"), and The Bank of New York, as trustee under the indenture referred to below (the "Trustee"). Capitalized terms used herein and not defined herein shall have the meaning ascribed to them in the Indenture (as defined below). W I T N E S S E T H WHEREAS, the Company and the existing Guarantors have heretofore executed and delivered to the Trustee an indenture (as amended, supplemented and in effect, the "Indenture"), dated as of April 17, 2003, providing for the initial original issuance of an aggregate principal amount of $375,000,000 of 8% Senior Secured Notes due 2008 (the "Notes"); WHEREAS, Article XIII of the Indenture provides that under certain circumstances the Company may or must cause certain of its Subsidiaries to execute and deliver to the Trustee a supplemental indenture pursuant to which such Subsidiaries shall unconditionally guarantee all of the Company's Obligations under the Notes pursuant to a Subsidiary Guarantee on the terms and conditions set forth herein; and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Company, the New Guarantor and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. Capitalized Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. Agreement to Guarantee. The New Guarantor hereby agrees, jointly and severally with all other Guarantors, to guarantee the Company's Obligations under the Notes and the Indenture on the terms and subject to the conditions set forth in Article XIII of the Indenture and to be bound by all other applicable provisions of the Indenture as a Guarantor thereunder. 3. No Recourse Against Others. 4. No past, present or future director, officer, employee, manager, incorporator, partner, member, agent, shareholder or other owner of Capital Stock of any Guarantor, as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, any Subsidiary Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a E-1 Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. 5. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE. 6. Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 7. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. 8. The Trustee. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the correctness of the recitals of fact contained herein, all of which recitals are made solely by the New Guarantor. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. Dated: TESORO PETROLEUM CORPORATION By:_____________________________ Name: Title: [New Guarantor] By:_____________________________ Name: Title: THE BANK OF NEW YORK, as Trustee By:_____________________________ Name: Title: E-2 EXHIBIT F REGISTRATION RIGHTS AGREEMENT F-1 SCHEDULE I RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO Latham & Watkins LLP 633 West Fifth Street, Suite 4000 Los Angeles, California 90071-2007 Attn: Ane C. Priester ________________________________________________________________________________ (SPACE ABOVE RESERVED FOR RECORDER) DEED OF TRUST, FIXTURE FILING, ASSIGNMENT OF RENTS AND LEASES AND SECURITY AGREEMENT DATED AS OF __________ MADE BY _________________________________, as Grantor TO ____________________________________, as Mortgage Trustee, FOR THE BENEFIT OF WILMINGTON TRUST COMPANY, as Collateral Agent, Beneficiary The maximum amount of indebtedness secured hereby is $725,000,000. G-1 DEED OF TRUST, FIXTURE FILING, ASSIGNMENT OF RENTS AND LEASES AND SECURITY AGREEMENT THIS DEED OF TRUST, FIXTURE FILING, ASSIGNMENT OF RENTS AND LEASES AND SECURITY AGREEMENT (this "Deed of Trust") dated as of ___________, 200_ is made by TESORO [ENTITY], a ___________ corporation ("Grantor"), whose address is c/o Tesoro Petroleum Corporation, 300 Concord Plaza Drive, San Antonio, Texas 78216-6999, to First American Title Insurance Company ("Mortgage Trustee"), for the use and benefit of Wilmington Trust Company, a Delaware banking corporation, whose address is 1100 North Market Street, Wilmington, Delaware, in its capacity as Collateral Agent (in such capacity, together with its successors and assigns, "Beneficiary") under the Collateral Agency Agreement dated April 17, 2003 among Beneficiary, Tesoro Petroleum Corporation (the "Company"), each of the Guarantors (as defined below), Trustee (as defined below), and the Administrative Agent (as defined below). References to this Deed of Trust shall mean this instrument and any and all renewals, modifications, amendments, supplements, extensions, consolidations, substitutions, spreaders, restatements and replacements of this instrument. Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in that certain Indenture dated April 17, 2003 (as amended, and amended and restated, and as the same may be further amended, supplemented or otherwise modified from time to time, the "Indenture") among the Company, the Guarantors and The Bank of New York, as trustee (in such capacity, together with its successors and assigns, the "Trustee") and/or that certain Credit and Guaranty Agreement dated April 17, 2003 (as amended, and amended and restated, and as the same may be further amended, supplemented or otherwise modified from time to time, the "Term Loan Agreement") among the Company, certain subsidiaries of the Company, as guarantors, Goldman Sachs Credit Partners L.P., as administrative agent (in such capacity, together with its successors and assigns, the "Administrative Agent") the lenders from time to time party thereto (the "Lenders") and Goldman Sachs Credit Partners L.P., as sole lead arranger, sole bookrunner and syndication agent, as applicable. Background A. Grantor (i) is the owner of the interests in real property described on Schedule A attached hereto (the "Land") and (ii) owns, leases or otherwise has the right to use all of the buildings, improvements, structures and fixtures located on the Land (collectively, the "Improvements", with the Land and the Improvements being collectively referred to as the "Real Estate"). B. Company is the Issuer under the Indenture and Company is the borrower under the Term Loan Agreement. C. Pursuant to the terms and conditions of the (1) Indenture, Company will issue certain Notes in an aggregate principal amount not to exceed $375,000,000 and (2) Term Loan Agreement, Lenders will make certain Term Loans to Company in an aggregate principal amount not to exceed $200,000,000. Subject to the applicable terms and conditions of the Indenture and Term Loan Agreement, the Notes and the Term Loans are subject to an increase by an amount not to exceed $150,000,000 in the aggregate. The maximum aggregate principal G-2 amount of the Notes and Term Loans and the aggregate principal amount of the indebtedness secured hereunder shall not exceed $725,000,000. D. Pursuant to the terms and conditions of the guaranty under the Term Loan Agreement (the "Loan Guarantee"), Grantor has agreed to guaranty the obligations of Company under the Term Loan Agreement and the Term Loans. Pursuant to the terms and conditions of the Subsidiary Guarantee under the Indenture (the "Note Guarantee," and together with the Loan Guarantee, the "Guarantees"), Grantor has agreed to guaranty the obligations of Company under the Indenture and the Notes. Grantor, a subsidiary of the Company, will receive substantial direct and indirect benefit from the extensions of credit made to the Company pursuant to the Term Loan Agreement and Indenture. Grantor is executing and delivering this Deed of Trust to secure its obligations under the Guarantees. FOR GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, GRANTOR AGREES TO SECURE the payment and performance of all obligations and liabilities of Grantor, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of or in connection with the Guarantees or this Deed of Trust, including, without limitation, all fees, charges and disbursements of counsel to the Trustee, the Administrative Agent, Collateral Agent or any Secured Party, that are required to be paid by Grantor pursuant to the terms of the Guarantees, this Deed of Trust or any other Term Loan Document or Note Document (collectively, the "Obligations"). GRANTOR HEREBY IRREVOCABLY GRANTS, TRANSFERS AND ASSIGNS TO MORTGAGE TRUSTEE, IN TRUST, WITH POWER OF SALE, THE FOLLOWING: (A) the Real Estate; (B) all the estate, right, title, claim or demand whatsoever of Grantor, in possession or expectancy, in and to the Real Estate or any part thereof or in and to the gores of land, streets, ways, alleys, passages, hereditaments and appurtenances belonging, relating or appertaining to the Real Estate, including any reversions or remainders thereof, and all land lying in the bed of any street, road or avenue, in front of or adjoining the Real Estate to the center line thereof; (C) all right, title and interest of Grantor in, to and under all easements, rights of way, sewer rights, waters, water courses, water and riparian rights, development rights, air rights, mineral rights and all estates, rights, titles, interests, privileges, licenses and tenements belonging, relating or appertaining to the Real Estate; (D) all right, title and interest of Grantor, in and to all real property, fixtures or equipment owned or leased by Grantor (a) located on, contiguous to or connected with and in reasonable proximity to, the Real Estate or (b) necessary, used or useful for or in connection with the ownership, expansion, operation, use or maintenance of the Real Estate; (E) all right, title and interest of Grantor in and to any and all substitutes and replacements of, and all additions and improvements, constructed, assembled or placed G-3 by Grantor or with the permission of Grantor in, on or at the Real Estate, immediately upon such acquisition, including, without limitation, any and all building materials whether stored in, on or at the Real Estate or offsite, and, in each such case, without any further conveyance assignment or other act; (F) all right, title and interest of Grantor in, to and under all leases, subleases, underlettings, concession agreements, management agreements, licenses and other agreements relating to the use or occupancy of the Real Estate or any part thereof, now existing or subsequently entered into and whether written or oral, and all guarantees of any of the foregoing (collectively, as any of the foregoing may be amended, restated, extended, renewed or modified from time to time, the "Leases"), and all rights of Grantor in cash and securities deposited thereunder; (G) all unearned premiums to and under insurance policies now or subsequently obtained by Grantor relating to the Real Estate and Grantor's interest in and to any such insurance policies and all proceeds of any such insurance policies (including title insurance policies), including the right to collect and receive such proceeds, and all awards and other compensation, including any interest payable thereon and the right to collect and receive the same, made to the present or any subsequent owner of the Real Estate for the taking by eminent domain, condemnation or otherwise, of all or any part of the Real Estate or any easement or other right therein; (H) any and all monies now or subsequently on deposit in segregated accounts for the payment of real estate taxes or special assessments against the Real Estate or for the payment of premiums on insurance policies covering the foregoing property or otherwise on deposit with or held by Beneficiary as provided in this Deed of Trust; (I) the right to receive and collect the revenues, income, rents, issues and profits of or from the Real Estate, together with all other rents, royalties, issues, profits, revenue, income and other benefits arising from the use and enjoyment of the Trust Estate (as defined below) (collectively, the "Rents"); and (J) the Collateral (as defined in the Security Agreement); Excluding, however, from any of the assets, property and rights and interests otherwise included in paragraphs (C) through (I) above, or any of them, the Excluded Assets. (All of the foregoing property and rights and interests now owned or held or subsequently acquired by Grantor and described in the foregoing clauses (A) through (E) are collectively referred to as the Premises and the foregoing clauses (A) through (J) are collectively referred to as the "Trust Estate.") TO HAVE AND TO HOLD the Trust Estate and the rights and privileges hereby granted unto Mortgage Trustee, its successors and assigns for the uses and purposes set forth, in trust WITH POWER OF SALE. FIXTURE FILING. The personal property in which Beneficiary has a security interest includes goods which are or shall become fixtures on the Real Estate. This Deed of Trust is G-4 intended to serve as a fixture filing pursuant to the terms of Sections 9-334 and 9-502 of the Uniform Commercial Code. This filing is to be recorded in the real estate records of the county in which the Real Estate is located. This filing remains in effect as a fixture filing until this Deed of Trust is released or satisfied of record or its effectiveness otherwise terminates as to the Real Estate. In that regard, the following information is provided: Name of Debtor Tesoro [Entity] Address of Debtor c/o Tesoro Petroleum Corporation 300 Concord Plaza Drive San Antonio, Texas 78216-6999 Name of Secured Party Wilmington Trust Company in its capacity as Collateral Agent for the holders of the Notes under the Indenture and the Lenders under the Term Loan Agreement and each other Secured Party. Address of Secured Party Wilmington Trust Company Corporate Trust Administration 1100 North Market Street Wilmington, Delaware 19890 Terms and Conditions Grantor further represents, warrants, covenants and agrees with Beneficiary as follows: 1. Warranty of Title. Grantor warrants that it owns fee simple title to the Real Estate other than the parcels specifically noted as easements on Schedule A attached hereto, subject only to Permitted Liens and the matters set forth on Schedule B to the title insurance policy being issued to Beneficiary to insure the lien of this Deed of Trust (the "Permitted Exceptions"). 2. Payment of Taxes and Other Impositions. (a) Grantor shall pay prior to delinquency any and all taxes of every kind and nature (including, without limitation, all real and personal property, income, franchise, withholding, transfer, gains, profits and gross receipts taxes), all charges for any easement or agreement maintained for the benefit of any of the Trust Estate, all general and special assessments, levies, permits, inspection and license fees, all water and sewer rents and charges, vault taxes, and all other public charges even if unforeseen or extraordinary, imposed upon or assessed against or which may become a charge on any of the Trust Estate, or arising in respect of the occupancy, use or possession thereof, together with any penalties or interest on any of the foregoing (all of the foregoing are collectively referred to as the "Impositions"), and procure and deliver to Beneficiary within thirty (30) days after Beneficiary shall have given a written request to Grantor, evidence satisfactory to Beneficiary of the timely payment of all Impositions; provided, however, that Grantor shall not be required to pay any Imposition if the amount, applicability or validity thereof shall currently be contested in good faith by appropriate proceedings. Should Grantor fail to pay any Imposition, then Beneficiary, without obligation to do so and without notice to or demand upon Grantor and without releasing Grantor from any obligation hereof, may pay such Imposition G-5 after the date such Imposition shall have become past due, and add to the Obligations the amount so paid, together with interest thereon at the Default Interest rate. Any sums paid by Mortgage Trustee or Beneficiary to discharge any Impositions, together with any interest charged thereupon, shall be a charge on the Premises secured hereby prior to any right or title to, interest in, or claim upon the Premises subordinate to the charge of this Deed of Trust. (b) Grantor shall not claim, demand or be entitled to receive any credit or credits toward the satisfaction of this Deed of Trust or on any interest payable thereon for any taxes assessed against the Trust Estate or any part thereof, and shall not claim, to the extent any such claim could materially affect the lien of this Deed of Trust, any deduction from the taxable value of the Trust Estate by reason of this Deed of Trust. 3. Insurance. (a) Grantor shall keep the Trust Estate insured against damage by fire and other hazards covered by a standard extended coverage and all-risk insurance policy in such amounts, and with such self-insured retention, as shall be customary in the industry. Grantor shall also keep the Real Estate insured against loss by flood if the Premises are located in an area identified by the Federal Emergency Management Agency as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968, in the maximum limit of coverage available under said Act. All such insurance policies shall name Beneficiary as an additional insured, loss payee or mortgagee thereunder, as its interests may appear, with loss payable to Beneficiary, without contribution, under a standard mortgagee clause. (b) If Grantor is in default of its obligations to insure or deliver evidence of payment of any insurance policy or policies, then Beneficiary, at its option, may effect such insurance from year to year, and pay the premium or premiums therefor, and Grantor shall pay to the Beneficiary on demand such premium or premiums so paid by the Beneficiary with interest and the same shall be deemed to be secured by this Deed of Trust and shall be collectible in the same manner as the Obligations secured by this Deed of Trust. (c) Upon the occurrence and during the continuance of an Event of Default, Beneficiary may, upon written demand to Grantor, require Grantor to pay monthly in advance to Beneficiary the equivalent of 1/12th of the estimated annual premiums due on such insurance. Beneficiary shall retain such funds in accordance with its normal practices for holding third-party funds. Grantor shall not be entitled to any interest thereon. Any funds so collected by Beneficiary shall be used solely to pay insurance premiums as they become due. (d) Grantor shall give immediate written notice of any casualty loss in excess of Five Million Dollars ($5,000,000) to the Collateral Agent, and the use and disposition of all insurance proceeds payable under any such policy on account of such loss, net of any related costs and expenses of receiving such proceeds, shall be governed by the relevant provisions of the Indenture and the Term Loan Agreement, or the Security Documents, as applicable. (e) In the event of foreclosure of this Deed of Trust or other transfer of title to the Trust Estate in satisfaction of the Obligations, all right, title and interest of Grantor in and to any G-6 insurance policies then in force concerning the Premises shall pass to the purchaser or grantee, and Grantor hereby appoints Beneficiary its attorney-in-fact, in Grantor's name, to assign and transfer all such policies and proceeds to such purchaser or grantee. 4. Compliance with Laws. Grantor shall observe and comply with all laws, ordinances, regulations, covenants, conditions and restrictions, including Environmental Laws, applicable to the ownership, use and operation of the Trust Estate; except, however, where the failure to so comply would not have a Material Adverse Effect. 5. Maintenance, Repair, Alterations. Grantor shall continually operate, maintain and preserve the Trust Estate in good condition and repair and in a prudent and businesslike manner, consistent with the level of maintenance and repair in the industry. Without limiting the generality of the foregoing, Grantor shall: (a) conduct its turnaround programs for Improvements which constitute major processing facilities in a manner consistent with the turnaround programs, practices and time intervals of the industry; (b) cause any Improvements which constitute major processing facilities shut down other than for temporary repair, turnaround or replacement to be mothballed and preserved in accordance with the mothballing and preservation procedures used in the industry; and (c) maintain inspection and maintenance procedures to the same degree as that maintained by the industry. For purposes of this Section 5, in determining the level of maintenance and repair in the industry, the age, current condition, use, regulatory requirements applicable to, and other aspects of the Real Estate shall be taken into account; and nothing contained herein shall require Grantor to maintain or preserve any portion of the Trust Estate where the failure to do so would not have a Material Adverse Effect. 6. Rights of Tenants. This Deed of Trust is subject to the rights of any and all tenants of the Trust Estate now or hereafter existing and, for so long as said tenants are not in default under the terms of their respective leases and shall agree to attorn to Beneficiary (or Beneficiary's designee) upon its acquisition of title to the Trust Estate, Beneficiary shall not disturb the use or possession by said tenants to all or a portion of the Real Estate, as described in such tenant's lease. If an Event of Default shall have occurred and Beneficiary elects to foreclose this Deed of Trust, so long as said tenants are not in default under the terms of their respective leases, Beneficiary shall take no action or fail to take any action, as the case may be, the effect of which would be to terminate the rights of said tenants under their respective leases, provided that if, in order to validly foreclose the lien of this Deed of Trust, such lease must be terminated, Beneficiary may nevertheless proceed with such foreclosure but following the completion of such foreclosure shall enter into a new lease of the Trust Estate with such tenant on the same terms and conditions as those set forth in the then terminated lease. Grantor may, in the ordinary course of business and without the consent of Beneficiary, enter into any new leases or modify, surrender, terminate, extend or renew any lease now existing or hereafter created upon the Trust Estate, or any portion thereof, without the consent of Beneficiary. Beneficiary G-7 shall execute such other and further instruments as may be necessary to effectuate the terms of this paragraph. 7. Condemnation/Eminent Domain. The use and disposition of any and all proceeds from any condemnation or eminent domain action against the Trust Estate, net of any related costs and expenses of receiving such proceeds, in excess of Five Million Dollars ($5,000,000), shall be governed by the relevant provisions of the Indenture and the Term Loan Agreement, or the Security Documents, as applicable. Grantor shall give immediate written notice of any condemnation or eminent domain action which is likely to result in net proceeds in excess of such amount and, if an Event of Default has occurred and is continuing, Beneficiary, at its option and in its sole discretion, may elect to participate in such proceeding and Grantor shall, at its expense, diligently prosecute any such proceeding. 8. Beneficiary's Right to Perform. If Company or Grantor fails to perform certain covenants or agreements under the Indenture, Term Loan Agreement and/or Guarantees, and relating to the Trust Estate, the Beneficiary may, at any time (but shall be under no obligation to) pay or perform the same, provided that (other than in the case of an emergency), the Beneficiary shall have first given thirty (30) days' prior written notice to Company and Grantor of the Beneficiary's intention to do so, and neither Company nor Grantor shall have cured such failure within such thirty-day period. The amount of any payment or cost of performance by Beneficiary, with interest at the Default Interest rate, shall immediately be due from Grantor to Beneficiary upon written demand, and shall be added to the Obligations, and the same shall be secured by this Deed of Trust and shall be a lien on the Trust Estate prior to any right, title to, interest in or claim upon the Trust Estate attaching subsequent to the lien of this Deed of Trust. 9. Default, Remedies. (a) The occurrence of an Event of Default under the Indenture or the Term Loan Agreement shall constitute an "Event of Default" hereunder. Upon the occurrence of any Event of Default and during the continuance thereof, in addition to any other rights and remedies Beneficiary may have pursuant to the Note Documents and Term Loan Documents, or as provided by law, and without limitation, Beneficiary, to the extent permitted by applicable law, may immediately take such action, without notice or demand, as it deems advisable to protect and enforce its rights against Grantor and in and to the Trust Estate, including, but not limited to, the following actions, each of which may be pursued concurrently or otherwise, at such time and in such manner as Beneficiary may determine, in its sole discretion, without impairing or otherwise affecting the other rights and remedies of Beneficiary: (i) To the extent permitted by law, sue for or otherwise collect the rents, issues and profits thereof, including those past due and unpaid, and apply the same, less costs and expenses of operation and collection including reasonable attorneys' fees, upon the Obligations, all in such order as Beneficiary may reasonably determine. The entering upon and taking possession of the Trust Estate, the collection of such rents, issues and profits and the application thereof as aforesaid, shall not cure or waive any default or notice of default hereunder or invalidate any act done in response to such default or pursuant to such notice of default and, notwithstanding the continuance in possession of the Trust Estate or the collection, receipt and application of rents, issues or profits, G-8 Beneficiary shall be entitled to exercise every right provided for in the Note Documents or Term Loan Documents or by law; (ii) Bring an action in any court of competent jurisdiction to foreclose this Deed of Trust against all or any part of the Trust Estate or to enforce any of the covenants, terms or conditions hereof, and Beneficiary shall have the right to specific performance, injunction and any other equitable right or remedy as though other remedies were not provided in this Deed of Trust; (iii) Elect to cause the Trust Estate or any part thereof to be sold by the Mortgage Trustee in a non-judicial proceeding as permitted by law exercising the power of sale granted hereunder as further described hereafter, Grantor hereby expressly waives any right which it may have to direct the order in which any of the Trust Estate may be sold. (b) Beneficiary may proceed as if all of the Trust Estate were real property, in accordance with subparagraph (d) below, or Beneficiary may elect to treat any of the Trust Estate which consists of personal property, in accordance with the Section hereof constituting this Deed of Trust and Security Agreement, separate and apart from the sale of real property, the remainder of the Trust Estate being treated as real property. (c) Beneficiary may cause any such sale or other disposition to be conducted immediately following the expiration of any grace period, if any, herein provided or Beneficiary may delay any such sale or other disposition for such period of time as Beneficiary deems to be in its best interest. Should Beneficiary desire that more than one such sale or other disposition be conducted, Beneficiary may, at its option, cause the same to be conducted simultaneously, or successively on the same day, or at such different days or times and in such order as Beneficiary may deem to be in its best interest. (d) Should Beneficiary elect to sell the Trust Estate upon which Beneficiary elects to proceed under the laws governing foreclosure of or sales pursuant to Deeds of Trust, Beneficiary or Mortgage Trustee shall give such notice of default and election to sell as may then be required by law. Thereafter, upon the expiration of such time and the giving of such notice of sale as may then be required by law, Mortgage Trustee, at the time and place specified by the notice of sale, shall sell such Trust Estate, or any portion thereof specified by Beneficiary, at public auction to the highest bidder for cash in lawful money of the United States, subject, however, to the provisions of the Section below authorizing Beneficiary to make payment by giving credit against the Obligations. Mortgage Trustee may, and upon request of Beneficiary shall, from time to time, postpone the sale by public announcement thereof at the time and place noticed therefor. If the Trust Estate consists of several lots or parcels, Beneficiary may elect to sell the Trust Estate either as a whole or in separate lots or parcels. If Beneficiary elects to sell in separate lots or parcels, Beneficiary may designate the order in which such lots or parcels shall be offered for sale or sold. Any person, including Grantor or Beneficiary, may purchase at the sale. Upon any sale, Mortgage Trustee shall execute and deliver to the purchaser or purchasers a deed or deeds conveying the property so sold, but without any covenant or warranty whatsoever, express or implied. G-9 (e) In the event of a sale or other disposition of any such property, or any part thereof, and the execution of a deed or other conveyance pursuant thereto, the recitals therein of facts, such as an Event of Default, the giving of a notice of default, acceleration and notice of sale, demand that such sale should be made, postponement of sale, terms of sale, sale, purchase, payments of purchase money, and any other fact affecting the regularity or validity of such sale or disposition shall be conclusive proof of the truth of such facts, and any such deed or conveyance shall be conclusive against all persons as to such facts recited therein. (f) Beneficiary and/or Mortgage Trustee shall apply the proceeds of any sale or disposition hereunder in the order as provided in the Indenture and Term Loan Agreement, as applicable. 10. Mortgage Trustee. Mortgage Trustee shall be entitled to reasonable compensation for all services rendered or expenses incurred in the administration or execution of the trusts hereby created and Grantor hereby agrees to pay the same. Mortgage Trustee shall be indemnified, held harmless and reimbursed by Grantor for any liability, damage or expense, including reasonable attorneys' fees, which Mortgage Trustee may incur or sustain in connection with this Deed of Trust or in the doing of any act which Mortgage Trustee is required or permitted to do by the terms hereof or by law, except to the extent the same results from Mortgage Trustee's own gross negligence or willful misconduct. The acceptance by Mortgage Trustee of this trust shall be evidenced when this Deed of Trust, duly executed and acknowledged, is made a public record as provided by law and the trust created hereby is irrevocable by Grantor. 11. Successor Grantor. In the event ownership of the Trust Estate or any portion thereof becomes vested in a person other than the Grantor herein named, Beneficiary may, without notice to the Grantor herein named, whether or not Beneficiary has given written consent to such change in ownership, deal with such successor or successors in interest with reference to this Deed of Trust and the Obligations, and in the same manner as with the Grantor herein named, without in any way vitiating or discharging Grantor's liability hereunder or in respect of the Obligations. 12. Right of Beneficiary to Credit Sale. Upon the occurrence of any sale made under this Deed of Trust, whether made under the power of sale or by virtue of judicial proceedings or of a judgment or decree of foreclosure and sale, Beneficiary may bid for and acquire the Trust Estate or any part thereof. In lieu of paying cash therefor, Beneficiary may make settlement for the purchase price by crediting upon the Obligations or other sums secured by this Deed of Trust the net sales price after deducting therefrom the expenses of sale and the cost of the action and any other sums which Beneficiary is authorized to deduct under this Deed of Trust. In such event, this Deed of Trust, and documents evidencing the Obligations and the other expenditures secured hereby may be presented to the person or persons conducting the sale in order that the amount so used or applied may be credited upon the Obligations as having been paid. 13. Appointment of Receiver. If an Event of Default shall have occurred and be continuing, Beneficiary as a matter of right and without notice to Grantor, unless otherwise required by applicable law, and without regard to the adequacy or inadequacy of the Trust Estate or any other collateral as security for the Obligations or the interest of Grantor therein, shall have G-10 the right to apply to any court having jurisdiction to appoint a receiver or receivers or other manager of the Trust Estate, and Grantor hereby irrevocably consents to such appointment and waives notice of any application therefor (except as may be required by law). Any such receiver or receivers shall have all the usual powers and duties of receivers in like or similar cases and all the powers and duties of Beneficiary in case of entry as provided in this Deed of Trust, including, without limitation and to the extent permitted by law, the right to enter into leases of all or any part of the Trust Estate and exercise all such powers until the date of confirmation of sale of the Trust Estate unless such receivership is sooner terminated. 14. Miscellaneous Rights, Waivers. (a) Reference is hereby made to Sections 4.06, 13.01 and 13.05 of the Indenture and Sections 5.06, 12.01 and 12.05 of the Term Loan Agreement pertaining to the acknowledgement, waiver and/or agreement of Grantor with respect to the matters contained therein. Each of such provisions is hereby incorporated herein by the foregoing reference as though such matters were set forth in full herein. Any amendment, supplement or addition to any of such provisions shall likewise be automatically incorporated herein. (b) No recovery of any judgment by Beneficiary and no levy of an execution under any judgment upon the Trust Estate or upon any other property of Grantor shall affect the lien of this Deed of Trust or any liens, rights, powers or remedies of Beneficiary hereunder, and such liens, rights, powers and remedies shall continue unimpaired. (c) If Beneficiary shall have the right to foreclose this Deed of Trust or to direct the Trustee to exercise its power of sale, Grantor authorizes Beneficiary at its option to foreclose the lien of this Deed of Trust (or to direct the trustee to sell the Trust Estate, as the case may be) subject to the rights of any tenants of the Trust Estate. To the extent permitted by applicable law, the failure to make any such tenants parties defendant to any such foreclosure proceeding and to foreclose their rights, or to provide notice to such tenants as required in any statutory procedure governing a sale of the Trust Estate by Trustee, or to terminate such tenant's rights in such sale will not be asserted by Grantor as a defense to any proceeding instituted by Beneficiary to collect the Obligations or to foreclose this Deed of Trust. (d) Unless expressly provided otherwise, in the event that ownership of this Deed of Trust and title to the Trust Estate or any estate therein shall become vested in the same person or entity, this Deed of Trust shall not merge in such title but shall continue as a valid charge on the Trust Estate for the amount secured hereby. 15. Security Agreement under Uniform Commercial Code. It is the intention of the parties hereto that this Deed of Trust shall constitute a Security Agreement within the meaning of the Uniform Commercial Code (the "Code") of the state in which the Real Estate is located. If an Event of Default shall be in effect, then in addition to having any other right or remedy available at law or in equity, Beneficiary shall have the option of either (a) proceeding under the Code and exercising such rights and remedies as may be provided to a secured party by the Code with respect to all or any portion of the Trust Estate which is personal property (including, without limitation, taking possession of and selling such property), if any, or (b) treating such property as real property and proceeding with respect to both the real and personal property G-11 constituting the Trust Estate in accordance with Beneficiary's rights, powers and remedies with respect to the real property (in which event the default provisions of the Code shall not apply). If Beneficiary shall elect to proceed under the Code, then ten (10) days' notice of sale of the personal property shall be deemed reasonable notice, and the reasonable expenses of retaking, holding, preparing for sale, selling and the like incurred by Beneficiary shall include, but not be limited to, reasonable attorneys' fees and legal expenses. At Beneficiary's request, Grantor shall assemble the personal property and make it available to Beneficiary at a place designated by Beneficiary which is reasonably convenient to both parties. 16. Assignment of Rents. Grantor hereby assigns to Mortgage Trustee, for the benefit of Beneficiary, the Rents as further security for the payment and performance of all of the Obligations, and Grantor grants to Mortgage Trustee and Beneficiary the right to enter the Trust Estate for the purpose of collecting the same and to let the Trust Estate or any part thereof, and to apply the Rents on account of the Obligations. The foregoing assignment and grant is present and absolute and shall continue in full force and effect until the Obligations are paid and performed in full. Beneficiary and Mortgage Trustee hereby waive the right to enter the Trust Estate for the purpose of collecting the Rents and Grantor shall be entitled to collect, receive, use and retain the Rents. During the continuance of any Event of Default, such right of Grantor to collect, receive, use and retain the Rents may be suspended by Beneficiary by giving not less than thirty (30) days' written notice of such suspension to Grantor. In the event such notice is given, Grantor shall pay over to Beneficiary, or if so requested by Beneficiary to any receiver appointed to collect the Rents, the Rents. Grantor shall not accept prepayments of installments of Rent to become due for a period of more than one month in advance (except for security deposits and estimated payments of percentage rent, if any). 17. Trust Funds. To the extent required under applicable law, all lease security deposits of the Real Estate shall be treated as trust funds not to be commingled with any other funds of Grantor. Within thirty (30) days after request by Beneficiary, Grantor shall furnish Beneficiary satisfactory evidence of compliance with this section, together with a statement of all lease security deposits by lessees and copies of all Leases not previously delivered to the Beneficiary, which statement shall be certified by Grantor. 18. Additional Rights. The holder of any subordinate lien or subordinate deed of trust on the Trust Estate shall have no right to terminate any Lease whether or not such Lease is subordinate to this Deed of Trust, nor shall Grantor consent to any holder of any subordinate lien or subordinate deed of trust joining any tenant under any Lease in any trustee's sale or action to foreclose such lien or modify, interfere with, disturb or terminate the rights of any tenant under any Lease. By recordation of this Deed of Trust all subordinate lienholders and the trustees and beneficiaries under subordinate deeds of trust are subject to and notified of this provision, and any action taken by any such lienholder or trustee or beneficiary contrary to this provision shall be null and void. Upon the occurrence and during the continuance of any Event of Default, Beneficiary may, in its sole discretion and without regard to the adequacy of its security under this Deed of Trust, apply all or any part of any amounts on deposit with Beneficiary under this Deed of Trust against all or any part of the Obligations then matured. 19. Notices. All notices or other communications hereunder shall be given in the manner and to the addresses listed under the Guarantees. G-12 20. No Oral Modification. This Deed of Trust may not be changed or terminated orally. Any agreement made by Grantor and Beneficiary after the date of this Deed of Trust relating to this Deed of Trust shall be superior to the rights of the holder of any intervening or subordinate lien or encumbrance. Mortgage Trustee's execution of any written agreement between Grantor and Beneficiary shall not be required for the effectiveness thereof as between Grantor and Beneficiary. 21. Partial Invalidity. In the event any one or more of the provisions contained in this Deed of Trust shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, but each shall be construed as if such invalid, illegal or unenforceable provision had never been included. 22. Grantor's Waiver of Rights. To the fullest extent permitted by law, Grantor waives the benefit of all laws now existing or that may subsequently be enacted providing for (a) any appraisement before sale of any portion of the Trust Estate, (b) any extension of the time for the enforcement of the collection of the Obligations or the creation or extension of a period of redemption from any sale made in collecting such debt and (c) exemption of the Trust Estate from attachment, levy or sale under execution or exemption from civil process. To the fullest extent permitted by law, Grantor agrees that Grantor will not at any time insist upon, plead, claim or take the benefit or advantage of any law now or hereafter in force providing for any appraisement, valuation, stay of execution, exemption, extension or redemption, or requiring foreclosure of this Deed of Trust before exercising any other remedy granted hereunder and Grantor, for Grantor and its successors and assigns, and for any and all persons ever claiming any interest in the Trust Estate, to the extent permitted by law, hereby waives and releases all rights of redemption, valuation, appraisement, stay of execution, notice of election to mature or declare due the whole of the secured indebtedness and marshalling in the event of exercise by Mortgage Trustee or Beneficiary of the power of sale or other rights hereby created. 23. Remedies Not Exclusive. Beneficiary and Mortgage Trustee shall be entitled to enforce payment and performance of all of the Obligations and to exercise all rights and powers under this Deed of Trust, the Guarantees, the Indenture, the Term Loan Agreement, the Note Documents or the Term Loan Documents or other agreement or any laws now or hereafter in force, notwithstanding some or all of the Obligations may now or hereafter be otherwise secured, whether by deed of trust, mortgage, security agreement, pledge, lien, assignment or otherwise. Neither the acceptance of this Deed of Trust nor its enforcement, shall prejudice or in any manner affect Beneficiary's or Mortgage Trustee's right to realize upon or enforce any other security now or hereafter held by Beneficiary or Mortgage Trustee, it being agreed that Beneficiary and Mortgage Trustee shall, to the extent permitted by applicable law, be entitled to enforce this Deed of Trust and any other security now or hereafter held by Beneficiary or Mortgage Trustee in such order and manner as Beneficiary may determine in its absolute discretion. No remedy herein conferred upon or reserved to Beneficiary or Mortgage Trustee is intended to be exclusive of any other remedy herein or by law provided or permitted, but each shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. To the extent permitted by applicable law, every power or remedy given by any of the Note Documents or the Term Loan Documents to Beneficiary or Mortgage Trustee or to which either may otherwise be entitled, may be exercised, concurrently or independently, from time to time and as often as may be deemed expedient by G-13 Beneficiary or Mortgage Trustee, as the case may be. In no event shall Beneficiary or Mortgage Trustee, in the exercise of the remedies provided in this Deed of Trust (including, without limitation, in connection with the assignment of Rents to Beneficiary, or the appointment of a receiver and the entry of such receiver on to all or any part of the Trust Estate), be deemed a "mortgagee in possession," and neither Beneficiary nor Mortgage Trustee shall in any way be made liable for any act, either of commission or omission, in connection with the exercise of such remedies. 24. Multiple Security. If (a) the Premises shall consist of one or more parcels, whether or not contiguous and whether or not located in the same county, or (b) in addition to this Deed of Trust, Beneficiary shall now or hereafter hold or be the beneficiary of one or more additional mortgages, liens, deeds of trust or other security (directly or indirectly) for the Obligations upon other property in the state in which the Real Estate is located (whether or not such property is owned by Grantor or by others) or (c) both the circumstances described in clauses (a) and (b) shall be true, then to the fullest extent permitted by law, Beneficiary may, at its election, commence or consolidate in a single trustee's sale or foreclosure action all trustee's sale or foreclosure proceedings against all such collateral (the "Deed of Trust Collateral") securing the Obligations (including the Trust Estate), which action may be brought or consolidated in the courts of, or sale conducted in, any county in which any of such Deed of Trust Collateral is located. Grantor acknowledges that the right to maintain a consolidated trustee's sale or foreclosure action is a specific inducement to Beneficiary and the other parties to, or beneficiaries of, the Indenture or the Term Loan Agreement to enter into the Indenture and the Term Loan Agreement and to extend the indebtedness guaranteed in this Deed of Trust, and Grantor expressly and irrevocably waives any objections to the commencement or consolidation of the foreclosure proceedings in a single action and any objections to the laying of venue or based on the grounds of forum non conveniens which it may now or hereafter have. Grantor further agrees that if Mortgage Trustee or Beneficiary shall be prosecuting one or more foreclosure or other proceedings against a portion of the Trust Estate or against any collateral other than the Trust Estate, which collateral directly or indirectly secures the Obligations, or if Beneficiary shall have obtained a judgment of foreclosure and sale or similar judgment against such collateral (or, in the case of a trustee's sale, shall have met the statutory requirements therefor with respect to such collateral), then, whether or not such proceedings are being maintained or judgments were obtained in or outside the State in which the Real Estate is located, Beneficiary may commence or continue any trustee's sale or foreclosure proceedings and exercise its other remedies granted in this Deed of Trust against all or any part of the Deed of Trust Collateral and Grantor waives any objections to the commencement or continuation of a foreclosure of this Deed of Trust or exercise of any other remedies hereunder based on such other proceedings or judgments, and waives any right to seek to dismiss, stay the execution of, remove, transfer or consolidate either any action under this Deed of Trust or such other proceedings on such basis. The commencement or continuation of proceedings to sell the Deed of Trust Collateral in a trustee's sale, to foreclose this Deed of Trust or the exercise of any other rights hereunder or the recovery of any judgment by Beneficiary or the occurrence of any sale by the Mortgage Trustee in any such proceedings shall not prejudice, limit or preclude Beneficiary's right to commence or continue one or more trustee's sales, foreclosure or other proceedings or obtain a judgment against (or, in the case of a trustee's sale, to meet the statutory requirements for, any such sale of) any other collateral (either in or outside the state in which the Real Estate is located) which directly or indirectly secures the Obligations, and Grantor expressly waives any G-14 objections to the commencement of, continuation of, or entry of a judgment in such other sales or proceedings or exercise of any remedies in such sales or proceedings based upon any action or judgment connected to this Deed of Trust, and Grantor also waives any right to seek to dismiss, stay the execution of, remove, transfer or consolidate either such other sales or proceedings or any sale or action under this Deed of Trust on such basis. It is expressly understood and agreed that the foreclosure and realization statutes of the state in which the Real Estate is located shall apply only to the Deed of Trust Collateral that is located in the state in which the Real Estate is located and shall not be understood to have application to any actions or proceedings in other jurisdictions, nor shall such extraterritorial actions or proceedings limit, bar or prejudice Beneficiary's right to realize upon the Trust Estate in the state in which the Real Estate is located. It is expressly understood and agreed that to the fullest extent permitted by law, Beneficiary may, at its election, cause the sale of all of the Trust Estate which is the subject of a single trustee's sale or foreclosure action at either a single sale or at multiple sales conducted simultaneously and take such other measures as are appropriate in order to effect the agreement of the parties to dispose of and administer all of the Trust Estate securing the Obligations (directly or indirectly) in the most economical and least time-consuming manner. 25. Successors and Assigns. All covenants of Grantor contained in this Deed of Trust are imposed solely and exclusively for the benefit of Beneficiary, Mortgage Trustee and the Collateral Agent and their respective successors and assigns, and no other persons or entities shall have standing to require compliance with such covenants or be deemed, under any circumstances, to be a beneficiary of such covenants. All such covenants of Grantor shall run with the land and bind Grantor, the successors and assigns of Grantor (and each of them) and all subsequent owners, encumbrancers and tenants of the Trust Estate, and shall inure to the benefit of Beneficiary, Mortgage Trustee and the Secured Parties and their respective successors and assigns. The word "Grantor" shall be construed as if it read "Grantors" whenever the sense of this Deed of Trust so requires, and if there shall be more than one Grantor, the obligations of the Grantors shall be joint and several. 26. No Waivers. Any failure by Beneficiary to insist upon the strict performance by Grantor of any of the terms and provisions of this Deed of Trust shall not be deemed to be a waiver of any of the terms and provisions hereof, and Beneficiary or Mortgage Trustee, notwithstanding any such failure, shall have the right thereafter to insist upon the strict performance by Grantor of any and all of the terms and provisions of this Deed of Trust to be performed by Grantor. Beneficiary may release, regardless of consideration and without the necessity for any notice to or consent by the holder of any subordinate lien on the Trust Estate, any part of the security held for the obligations secured by this Deed of Trust without, as to the remainder of the security, in any way impairing or affecting the lien of this Deed of Trust or the priority of such lien over any subordinate lien or deed of trust. 27. Governing Law. This Deed of Trust shall be governed by and construed in accordance with the laws of the State in which the Premises are located, except that Grantor expressly acknowledges that by its terms the Guarantees, Indenture and Term Loan Agreement shall be governed and construed, to the extent provided for therein, in accordance with the laws of the State of New York, without regard to principles of conflicts of laws, and for purposes of consistency, Grantor agrees that in any in personam proceeding related to this Deed of Trust the rights of the parties to this Deed of Trust shall also be governed by and construed in accordance G-15 with the laws of the State of New York governing contracts made and to be performed in that State, without regard to principles of conflicts of laws. 28. Waiver of Trial by Jury. Grantor and Beneficiary each hereby irrevocably and unconditionally waive trial by Jury in any action, claim, suit or proceeding relating to this Deed of Trust and for any counterclaim brought therein Grantor hereby waives all rights to interpose any counterclaim in any suit brought by Beneficiary for foreclosure hereunder and all rights to have any such suit consolidated with any separate suit, action or proceeding. Such waiver shall not be construed so as to prevent Grantor or Company from interposing a counterclaim against Beneficiary concerning the Obligations. 29. Certain Definitions. Unless the context clearly indicates a contrary intent or unless otherwise specifically provided herein, words used in this Deed of Trust shall be used interchangeably in singular or plural form and the word "Grantor" shall mean "each Grantor or any subsequent owner or owners of the Trust Estate or any part thereof or interest therein," the term "Mortgage Trustee" shall mean "Mortgage Trustee and any successor trustee hereunder", the term "Obligations" shall mean "the Obligations and any other obligations secured by this Deed of Trust," the word "person" shall include any individual, corporation, partnership, trust, unincorporated association, government, governmental authority, or other entity, and the words "Trust Estate" shall include any portion of the Trust Estate or interest therein. Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice versa. The captions in this Deed of Trust are for convenience of reference only and in no way limit or amplify the provisions hereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK. SIGNATURE PAGE FOLLOWS.] G-16 IN WITNESS WHEREOF, the undersigned, by its duly elected officers and pursuant to proper authority of its board of directors has duly executed, acknowledged and delivered this instrument on __________, 200_, which instrument is intended to be effective as of _________, 200_. TESORO [ENTITY], a Delaware corporation By:__________________________________ Name: Title: By:_____________________________ Name: Title: G-17 [NOTARY PAGE] NOTARY PAGE EX-4.10 7 h05116exv4w10.txt REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.10 TESORO PETROLEUM CORPORATION 8% SENIOR SECURED NOTES DUE 2008 GUARANTEED AS TO THE PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST BY DIGICOMP INC. FAR EAST MARITIME COMPANY GOLD STAR MARITIME COMPANY KENAI PIPE LINE COMPANY SMILEY'S SUPER SERVICE, INC. TESORO ALASKA COMPANY TESORO ALASKA PIPELINE COMPANY TESORO AVIATION COMPANY TESORO FINANCIAL SERVICES HOLDING COMPANY TESORO GAS RESOURCES COMPANY, INC. TESORO HAWAII CORPORATION TESORO HIGH PLAINS PIPELINE COMPANY TESORO MARINE SERVICES HOLDING COMPANY TESORO MARINE SERVICES, LLC TESORO MARITIME COMPANY TESORO NORTHSTORE COMPANY TESORO PETROLEUM COMPANIES, INC. TESORO REFINING AND MARKETING COMPANY TESORO TECHNOLOGY COMPANY TESORO TRADING COMPANY TESORO VOSTOK COMPANY TESORO WASATCH, LLC VICTORY FINANCE COMPANY 1 EXCHANGE AND REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is made and entered into as of April 17, 2003 by and among Tesoro Petroleum Corporation, a Delaware corporation (the "Company"), Digicomp Inc., Far East Maritime Company, Gold Star Maritime Company, Kenai Pipe Line Company, Smiley's Super Service, Inc., Tesoro Alaska Company, Tesoro Alaska Pipeline Company, Tesoro Aviation Company, Tesoro Financial Services Holding Company, Tesoro Gas Resources Company, Inc., Tesoro Hawaii Corporation, Tesoro High Plains Pipeline Company, Tesoro Marine Services Holding Company, Tesoro Marine Services, LLC, Tesoro Maritime Company, Tesoro Northstore Company, Tesoro Petroleum Companies, Inc., Tesoro Refining and Marketing Company, Tesoro Technology Company, Tesoro Trading Company, Tesoro Vostok Company, Tesoro Wasatch, LLC and Victory Finance Company (each a "Guarantor" and collectively, the "Guarantors"), and Goldman, Sachs & Co., as representative of the several Purchasers named in Schedule I to the Purchase Agreement (the "Purchasers"), who have agreed to purchase $375,000,000 aggregate amount of the Company's 8% Senior Secured Notes due 2008 (the "Initial Notes") pursuant to and subject to the terms and conditions of a certain Purchase Agreement, dated April 7, 2003 (the "Purchase Agreement") among the Company, the Guarantors and the Purchasers. In order to induce the Purchasers to purchase the Initial Notes, the Company has agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligation of the Purchasers to purchase the Initial Notes pursuant to the Purchase Agreement. SECTION 1. DEFINITIONS As used in this Agreement, the following capitalized terms shall have the following meanings: Advice: As defined in Section 6(d) hereof. Affiliate: With respect to any specified person, "Affiliate" shall mean any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person. For the purposes of this definition, "control," when used with respect to any person, means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise and the terms "affiliated," "controlling" and "controlled" have meanings correlative to the foregoing. Broker-Dealer: Any broker or dealer registered under the Exchange Act. Broker Dealer Transfer Restricted Securities: Exchange Notes that are acquired by a Broker-Dealer in the Exchange Offer in exchange for Initial Notes that such Broker-Dealer acquired for its own account as a result of market-making activities or other trading activities (other than Initial Notes acquired directly from the Company or any of its Affiliates). Business Day: Any day except a Saturday, Sunday or other day in the City of New York, or in the city of the corporate trust office of the Trustee, on which banks are authorized to close. Closing Date: The date on which the Initial Notes are initially issued. 2 Commission: The United States Securities and Exchange Commission, or any other federal agency at the time administering the Exchange Act or the Securities Act, whichever is the relevant statute for the particular purpose. Consummate: An Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (i) the filing and effectiveness under the Securities Act of the Exchange Offer Registration Statement relating to the Exchange Notes to be issued in the Exchange Offer, (ii) the maintenance of such Exchange Offer Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the minimum period required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company to the Trustee under the Indenture of Exchange Notes in the same aggregate principal amount as the aggregate principal amount of Initial Notes that were tendered by Holders thereof pursuant to the Exchange Offer. Damages Payment Date: With respect to the Transfer Restricted Securities, each Interest Payment Date. Definitive Notes: As defined in the Indenture. Effectiveness Target Date: As defined in Section 5 hereof. Effective Time: In the case of (i) an Exchange Registration, shall mean the time and date as of which the Commission declares the Exchange Offer Registration Statement effective or as of which the Exchange Offer Registration Statement otherwise becomes effective and (ii) a Shelf Registration, shall mean the time and date as of which the Commission declares the Shelf Registration Statement effective or as of which the Shelf Registration Statement otherwise becomes effective. Exchange Act: The Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. Exchange Notes: The Company's 8% Senior Secured Notes due 2008 to be issued pursuant to the Indenture (i) in the Exchange Offer or (ii) upon the request of any Holder of Notes covered by a Shelf Registration Statement, in exchange for such Notes. Each Note is entitled to the benefit of the guarantee provided for in the Indenture (the "Guarantee") and, unless the context otherwise requires, any reference herein to a "Note," an "Exchange Note" or a "Transfer Restricted Security" shall include a reference to the related Guarantee. Exchange Offer: The registration by the Company under the Securities Act of the Exchange Notes pursuant to an Exchange Offer Registration Statement pursuant to which the Company offers the Holders of all outstanding Transfer Restricted Securities the opportunity to exchange all such outstanding Transfer Restricted Securities held by such Holders for Exchange Notes in an aggregate principal amount equal to the aggregate principal amount of the Transfer Restricted Securities tendered in such exchange offer by such Holders. Exchange Offer Registration Statement: The Registration Statement relating to the Exchange Offer, including the related Prospectus. Global Note: As defined in the Indenture. Holders: As defined in Section 2(b) hereof. 3 indemnified party: As defined in Section 8(c) hereof. indemnifying party: As defined in Section 8(c) hereof. Indenture: The Indenture, dated as of April 17, 2003, among the Company, the Guarantors and The Bank of New York, as trustee (the "Trustee"), pursuant to which the Notes are to be issued, as such Indenture is amended or supplemented from time to time in accordance with the terms thereof. Interest Payment Date: As defined in the Indenture and the Notes. NASD: National Association of Securities Dealers, Inc. Notes: The Initial Notes and the Exchange Notes. Person: An individual, partnership, corporation, limited liability company, joint venture, association, joint- stock company, trust or unincorporated organization, or a government or agency or political subdivision thereof or any other entity. Purchase Agreement: The Purchase Agreement, dated as of April 7, 2003, among the Purchasers, the Guarantors and the Company related to the Notes. Purchasers: The Purchasers named in Schedule I to the Purchase Agreement. Prospectus: The prospectus included in a Registration Statement at the time such Registration Statement is declared effective, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. Record Holder: With respect to any Damages Payment Date relating to Notes, each Person who is a Holder of Notes on the record date with respect to the Interest Payment Date on which such Damages Payment Date shall occur. Registration Default: As defined in Section 5 hereof. Registration Statement: Any registration statement of the Company and the Guarantors relating to (a) an offering of Exchange Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, in each case (i) which is filed pursuant to the provisions of this Agreement, and (ii) including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. Restricted Broker-Dealer: Any Broker-Dealer which holds Broker-Dealer Transfer Restricted Securities. Securities Act: The Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. Shelf Filing Deadline: As defined in Section 4 hereof. Shelf Registration Statement: As defined in Section 4 hereof. 4 Special Interest: As defined in Section 5 hereof. TIA: The Trust Indenture Act of 1939, as amended (15 U.S.C. Section 77aaa-77bbbb), as in effect on the date of the Indenture. Transfer Restricted Securities: Each Initial Note, until the earliest to occur of (a) the date on which such Initial Note is exchanged in the Exchange Offer and entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Securities Act, (b) the date on which such Initial Note has been effectively registered under the Securities Act and disposed of in accordance with a Shelf Registration Statement, (c) the date on which such Initial Note is distributed to the public pursuant to Rule 144 or is saleable pursuant to Rule 144(k) under the Securities Act and (d) the date on which such Initial Note is distributed by a Broker-Dealer pursuant to the "Plan of Distribution" (or similar provision) section contemplated by the Exchange Offer Registration Statement (including delivery of the Prospectus contained therein). Underwritten Registration or Underwritten Offering: A registration in which securities of the Company are sold to an underwriter for reoffering to the public. SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT (a) Transfer Restricted Securities. The securities entitled to the benefits of this Agreement are the Transfer Restricted Securities. (b) Holders of Transfer Restricted Securities. A Person is deemed to be a holder of Transfer Restricted Securities (each, a "Holder") whenever such Person owns Transfer Restricted Securities. SECTION 3. REGISTERED EXCHANGE OFFER (a) Unless the Exchange Offer shall not be permissible under applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with), the Company shall (i) cause to be filed with the Commission as soon as practicable after the Closing Date, but in no event later than 90 days after the Closing Date, the Exchange Offer Registration Statement under the Securities Act relating to the Exchange Notes and the Exchange Offer, (ii) use its reasonable best efforts to have the Exchange Offer Registration Statement declared effective by the Commission at the earliest possible time, but in no event later than 210 days after the Closing Date, (iii) in connection with the foregoing, (A) file all pre-effective amendments to such Exchange Offer Registration Statement as may be necessary in order to cause such Exchange Offer Registration Statement to become effective, (B) if applicable, file a post-effective amendment to such Exchange Offer Registration Statement pursuant to Rule 430A under the Securities Act and (C) cause all necessary filings, if any, in connection with the registration and qualification of the Exchange Notes to be made under the Blue Sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer and (iv) upon the effectiveness of such Exchange Offer Registration Statement, commence the Registered Exchange Offer and use its reasonable best efforts to issue, on or prior to 60 days after the date on which the Exchange Offer Registration Statement was declared effective by the Commission, Exchange Notes in exchange for all Initial Notes tendered prior thereto in the Registered Exchange Offer. The Exchange Offer Registration Statement shall be on the appropriate form permitting registration of the Exchange Notes to be 5 offered in exchange for the Transfer Restricted Securities and to permit sales of Broker-Dealer Transfer Restricted Securities by Broker-Dealers as contemplated by Section 3(c) below. (b) The Company shall use its reasonable best efforts to cause the Exchange Offer Registration Statement to be effective continuously and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than twenty (20) Business Days. The Company shall cause the Exchange Offer to comply with all applicable federal and state securities laws. No securities other than the Notes shall be included in the Exchange Offer Registration Statement. (c) The Company shall include a "Plan of Distribution" (or similar provision) section in the Prospectus contained in the Exchange Offer Registration Statement and indicate that any Restricted Broker-Dealer who holds Initial Notes that are Transfer Restricted Securities and that were acquired for the account of such Restricted Broker-Dealer as a result of market-making activities or other trading activities (other than Transfer Restricted Securities acquired directly from the Company or one of its Affiliates) may exchange such Initial Notes pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Securities Act and must, therefore, deliver a prospectus meeting the requirements of the Securities Act in connection with its initial sale of the Exchange Notes received by such Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may be satisfied by the delivery by such Broker-Dealer of the Prospectus contained in the Exchange Offer Registration Statement. Such "Plan of Distribution" (or similar provision) section shall also contain all other information with respect to such resales of Broker-Dealer Transfer Restricted Securities that the Commission may require in order to permit such sales pursuant thereto but such "Plan of Distribution" (or other similar provision) section shall not name any such Broker-Dealer or disclose the amount of Notes held by any such Broker-Dealer except to the extent required by the Commission as a result of a change in policy after the date of this Agreement. The Company and the Guarantors shall use their respective reasonable best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 6(c) below to the extent necessary to ensure that it is available for resales of Broker-Dealer Transfer Restricted Securities acquired by Restricted Broker-Dealers and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of 180 days from the date on which the Exchange Offer Registration Statement is declared effective or, if shorter, until all Broker-Dealer Transfer Restricted Securities have been sold thereunder. The Company shall provide sufficient copies of the latest version of such Prospectus to such Restricted Broker-Dealers promptly upon request at any time during such 180 day period (or such shorter period, if applicable) in order to facilitate such sales. SECTION 4. SHELF REGISTRATION (a) Shelf Registration. If (i) the Company is not required to file an Exchange Offer Registration Statement or to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with) or (ii) any Holder of Transfer Restricted Securities shall notify the Company within twenty (20) Business Days of the Consummation of the 6 Exchange Offer that (A) such Holder is prohibited by applicable law or Commission policy from participating in the Exchange Offer, (B) such Holder may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and that the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder, or (C) such Holder is a Broker-Dealer and holds Initial Notes acquired directly from the Company or one of its Affiliates, then the Company and the Guarantors shall: (i) use its reasonable best efforts to file a shelf registration statement pursuant to Rule 415 under the Securities Act, which may be an amendment to the Exchange Offer Registration Statement (in either event, the "Shelf Registration Statement"), on or prior to the earlier to occur of (1) the 30th day after the date on which the Company receives notice from the Commission or determines that it is not required to file the Exchange Offer Registration Statement pursuant to clause (i) above, and (2) the 30th day after the date on which the Company receives notice from a Holder of Transfer Restricted Securities as contemplated by clause (ii) above, (such earliest date being the "Shelf Filing Deadline"), which Shelf Registration Statement shall provide for resales of all Transfer Restricted Securities the Holders of which shall have provided the information required pursuant to Section 4(b) hereof; and (ii) use its reasonable best efforts to cause such Shelf Registration Statement to be declared effective by the Commission on or before the 90th day after the Shelf Filing Deadline. The Company and the Guarantors shall use their respective reasonable best efforts to keep such Shelf Registration Statement continuously effective, supplemented and amended as required by and subject to the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is available for sales of Transfer Restricted Securities by the Holders thereof entitled to the benefit of this Section 4(a), and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least two years (as extended pursuant to Section 6(c)(i)) following the date on which such Shelf Registration Statement first becomes effective under the Securities Act or such shorter period ending when all of the Transfer Restricted Securities available for sale thereunder have been sold pursuant thereto. (b) Provision by Holders of Certain Information in Connection with the Shelf Registration Statement. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 20 Business Days after receipt of a request therefor, such information as the Company may reasonably request for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. No Holder of Transfer Restricted Securities shall be entitled to Special Interest (as defined below) pursuant to Section 5 hereof unless and until such Holder shall have provided all such reasonably requested information. Each Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. 7 SECTION 5. SPECIAL INTEREST If (i) any of the Registration Statements required by this Agreement are not filed with the Commission on or prior to the date specified for such filing in this Agreement, (ii) any of such Registration Statements has not been declared effective by the Commission on or prior to the date specified for such effectiveness in this Agreement (the "Effectiveness Target Date"), (iii) the Exchange Offer has not been Consummated within 30 Business Days after the Effectiveness Target Date with respect to the Exchange Offer Registration Statement or (iv) any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded within 30 days by a post-effective amendment to such Registration Statement, the effectiveness of another Registration Statement or the use of the Prospectus (as amended or supplemented) is again permitted that cures such failure (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company hereby agrees to pay, as liquidated damages for such Registration Default, subject to the provisions of Section 12(a), special interest ("Special Interest"). Special interest shall be paid to each Holder of Transfer Restricted Securities with respect to the first 90-day period immediately following the occurrence of such Registration Default, in an amount equal to $0.05 per week per $1,000 principal amount of Transfer Restricted Securities held by such Holder for each week or portion thereof that the Registration Default continues. The amount of the Special Interest shall increase by an additional $0.05 per week per $1,000 in principal amount of Transfer Restricted Securities with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of Special Interest of $0.50 per week per $1,000 principal amount of Transfer Restricted Securities. All accrued Special Interest shall be paid to the holder(s) of Global Note(s) representing Transfer Restricted Securities by the Company by wire transfer of immediately available funds or by federal funds check and to Holders of Certificated Securities by wire transfer to the accounts specified by them or by mailing checks to their registered addresses if no such accounts have been specified on each Damages Payment Date, as provided in the Indenture. Notwithstanding anything to the contrary set forth herein, (1) upon filing of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (i) above, (2) upon the effectiveness of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon the filing of a post-effective amendment to the Registration Statement or an additional Registration Statement that causes the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement) to again be declared effective or the Prospectus to be made usable in the case of (iv) above, the Special Interest payable with respect to the Transfer Restricted Securities as a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease. All obligations of the Company and the Guarantors set forth in the preceding paragraph that are outstanding with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such obligations with respect to such security shall have been satisfied in full. SECTION 6. REGISTRATION PROCEDURES (a) Exchange Offer Registration Statement. In connection with the Exchange Offer, the Company and the Guarantors shall comply with all applicable provisions of Section 6(c) below, shall use their respective reasonable best efforts to effect such exchange to permit the sale of Broker-Dealer Transfer Restricted Securities being sold in accordance with the 8 intended method or methods of distribution thereof (which shall be in a manner consistent with the terms of this Agreement), and shall comply with all of the following provisions: (i) If, following the date hereof and prior to the Consummation of the Exchange Offer, there has been published a change in Commission policy with respect to exchange offers such as the Exchange Offer, such that in the reasonable opinion of counsel to the Company there is a substantial question as to whether the Exchange Offer is permitted by applicable law or Commission policy, the Company and the Guarantors hereby agree to seek a no-action letter or other favorable decision from the Commission allowing the Company and the Guarantors to Consummate an Exchange Offer for such Initial Notes. The Company and the Guarantors hereby agree to pursue the issuance of such a decision to the Commission staff level but shall not be required to take commercially unreasonable action to effect a change of Commission policy. The Company and the Guarantors hereby agree, however, to take all such other actions as are reasonably requested by the Commission staff or otherwise required in connection with the issuance of such decision, including without limitation, to (A) participate in telephonic conferences with the Commission staff, (B) deliver to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursue a resolution (which need not be favorable) by the Commission staff of such submission. (ii) As a condition to its participation in the Exchange Offer pursuant to the terms of this Agreement, each Holder of Transfer Restricted Securities shall furnish, upon the request of the Company, prior to the Consummation thereof, a written representation to the Company (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an Affiliate of the Company, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the Exchange Notes to be issued in the Exchange Offer and (C) it is acquiring the Exchange Notes in its ordinary course of business. In addition, all such Holders of Transfer Restricted Securities shall otherwise reasonably cooperate in the Company's preparations for the Exchange Offer. Each Holder hereby acknowledges and agrees that any Broker-Dealer and any such Holder using the Exchange Offer to participate in a distribution of the securities to be acquired in the Exchange Offer (1) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission enunciated in no-action letters issued to Morgan Stanley and Co. Incorporated (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters (including any no- action letter obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction and that such a secondary resale transaction should be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K if the resales are of the Exchange Notes obtained by such Holder in exchange for Initial Notes acquired by such Holder directly from the Company or an Affiliate thereof. (iii) Prior to effectiveness of the Exchange Offer Registration Statement, the Company and the Guarantors shall provide a supplemental letter to the Commission (A) stating that the Company and the Guarantors are registering the Exchange Offer in 9 reliance on the position of the Commission enunciated in no-action letters issued to Exxon Capital Holdings Corporation (available May 13, 1988), Morgan Stanley and Co. Incorporated (available June 5, 1991) and, if applicable, any no-action letter obtained pursuant to clause (i) above, (B) including a representation that neither the Company nor any Guarantor has entered into any arrangement or understanding with any Person to distribute the Exchange Notes to be received in the Exchange Offer and that, to the best of the Company's information and belief, each Holder participating in the Exchange Offer is acquiring the Exchange Notes in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the Exchange Notes received in the Exchange Offer and (C) any other undertaking or representation required by the Commission as set forth in any no-action letter obtained pursuant to clause (i) above. (b) Shelf Registration Statement. In connection with the Shelf Registration Statement, the Company and the Guarantors shall comply with all the provisions of Section 6(c) below and shall use their reasonable best efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and pursuant thereto the Company and the Guarantors will as expeditiously as possible, and in any event within the time periods and otherwise in accordance with the provisions hereof, prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Securities Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof. (c) General Provisions. In connection with any Registration Statement and any Prospectus required by this Agreement to permit the sale or resale of Transfer Restricted Securities (including, without limitation, any Exchange Offer Registration Statement and the related Prospectus required to permit resales of Transfer Restricted Securities by Restricted Broker-Dealers), the Company and the Guarantors shall: (i) use their respective reasonable best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements for the period specified in Section 3 or 4 of this Agreement, as applicable; upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain a material misstatement or omission or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Company and the Guarantors shall file promptly an appropriate amendment to such Registration Statement, (1) in the case of clause (A), correcting any such misstatement or omission, and (2) in the case of either clause (A) or (B), use their respective reasonable best efforts to cause such amendment to be declared effective and such Registration Statement and the related Prospectus to become usable for their intended purpose(s) as soon as practicable thereafter; (ii) use their respective reasonable best efforts to prepare and file with the Commission such amendments and post-effective amendments to the Registration Statement as may be necessary to keep the Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, as applicable, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been sold; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act, and to comply fully with the applicable provisions of Rules 424, 430A 10 and 462, as applicable, under the Securities Act in a timely manner; and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (iii) advise the underwriter(s), if any, and selling Holders promptly and, if requested by such Persons, to confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment thereto has been filed, and, with respect to any Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Securities Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto, or any document incorporated by reference therein untrue in any material respect, or that requires the making of any additions to or changes in the Registration Statement or the Prospectus in order to make the statements therein, in light of the circumstances under which they were made, not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Company shall use its reasonable best efforts to obtain the withdrawal or lifting of such order at the earliest practicable time; (iv) upon written request, furnish to the Initial Purchasers, and, upon written request, to each of the selling Holders and each of the underwriter(s) in connection with such sale, if any, before filing with the Commission, copies of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus, which documents will be subject to the review of such Holders and underwriter(s) in connection with such sale, if any, for a period of at least five Business Days, and the Company will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus to which a selling Holder of Transfer Restricted Securities covered by such Registration Statement or the underwriter(s) in connection with such sale, if any, shall reasonably object within five Business Days after the receipt thereof. A selling Holder or underwriter in connection with such sale, if any, shall be deemed to have reasonably objected to such filing (A) if such Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains a material misstatement or omission or fails to comply with the applicable requirements of the Securities Act or (B) if any of the information furnished to the Company by such selling Holder or underwriter in connection with such sale, if any, and included in such Registration statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed is incorrect in any respect; 11 (v) upon written request, promptly prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus, provide copies of such document to the selling Holders and to the underwriter(s) in connection with such sale, if any, make the Company's and the Guarantors' representatives available for discussion of such document and other customary due diligence matters, and include such information in such document prior to the filing thereof as such selling Holders or underwriters, if any, reasonably may request; (vi) in the case of a shelf registration, make available at reasonable times for inspection by the selling Holders, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney or accountant retained by such selling Holders or any of the underwriter(s), all relevant financial and other records, pertinent corporate documents and properties of the Company and cause the Company's officers, directors and employees to supply all information, in each case, reasonably requested by any such Holder, underwriter, attorney or accountant in connection with such Registration Statement or any post-effective amendment thereto subsequent to the filing thereof and prior to its effectiveness; (vii) if requested by any selling Holders or the underwriter(s) in connection with such sale, if any, promptly incorporate in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holders and underwriter(s), if any, may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities, information with respect to the principal amount of Transfer Restricted Securities being sold to such underwriter(s), the purchase price being paid therefor and any other terms of the offering of the Transfer Restricted Securities to be sold in such offering; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Company is notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment; (viii) use their respective commercially reasonable efforts to cause the Transfer Restricted Securities covered by the Registration Statement to be rated with the appropriate rating agencies, if so requested by the Holders of a majority in aggregate principal amount of Notes covered thereby or the underwriter(s) in connection with such sale, if any, unless such Transfer Restricted Securities are already so rated; (ix) furnish to each selling Holder and each of the underwriter(s) in connection with such sale, if any, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); (x) deliver to each selling Holder and each of the underwriter(s), if any, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; the Company and the Guarantors hereby consent to the use of the Prospectus and any amendment or supplement thereto by each of the selling Holders and each of the underwriter(s), if any, in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto; 12 (xi) enter into such agreements (including an underwriting agreement), and make such representations and warranties with respect to the business of the Company as are customarily addressed in representations and warranties made by issuers to underwriters in underwritten offerings, and take all such other commercially reasonable actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any Registration Statement contemplated by this Agreement, all to such extent as may be requested by the Initial Purchasers or by any Holder of Transfer Restricted Securities or underwriter in connection with any sale or resale pursuant to any Registration Statement contemplated by this Agreement; and whether or not an underwriting agreement is entered into and whether or not the registration is an Underwritten Registration, the Company and the Guarantors shall: (A) furnish to the Initial Purchasers, each selling Holder and each underwriter, if any, in such substance and scope as they may reasonably request and as are customarily made by issuers to underwriters in primary underwritten offerings, upon the date of the Consummation of the Exchange Offer and, if applicable, the effectiveness of the Shelf Registration Statement: (1) a certificate, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, signed on behalf of the Company and each of the Guarantors by the Chairman of the Board, President or any Vice President and Treasurer or Chief Financial Officer of the Company, confirming, as of the date thereof, the matters set forth in paragraph (o) of Section 7 of the Purchase Agreement and such other matters as such parties may reasonably request; (2) opinions, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, of counsel or counsels for the Company and the Guarantors, covering such matters as are customarily covered in opinions given in connection with underwritten firm commitment offerings. (3) customary comfort letters, dated as of the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, from the Company's independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters by underwriters in connection with Underwritten Offerings, and affirming the matters set forth in the comfort letters delivered pursuant to Section 7 (g) of the Purchase Agreement, without exception; (B) set forth in full or incorporate by reference in the underwriting agreement, if any, the indemnification provisions and procedures of Section 8 hereof with respect to all parties to be indemnified pursuant to said Section; and (C) deliver such other documents and certificates as may be reasonably requested by such parties to evidence compliance with clause (A) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company and the Guarantors pursuant to this clause (xi), if any. 13 The above shall be done at each closing under such underwriting or similar agreement, as and to the extent required thereunder, and, if at any time the representations and warranties of the Company and the Guarantors contemplated in clause (A)(1) above cease to be true and correct in any material respect, the Company and the Guarantors shall so advise the Initial Purchasers and the underwriter(s), if any, each selling Holder and each Restricted Broker-Dealer promptly and, if requested by such Persons, shall confirm such advice in writing; (xii) prior to any public offering of Transfer Restricted Securities, cooperate with the selling Holders, the underwriter(s), if any, and its counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions as the selling Holders or underwriter(s), if any, may request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the applicable Registration Statement; provided, however, that neither the Company nor any Guarantor shall be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not now so subject; (xiii) shall issue, upon the request of any Holder of Initial Notes covered by any Shelf Registration Statement contemplated by this Agreement, Exchange Notes, having an aggregate principal amount equal to the aggregate principal amount of the Initial Notes surrendered to the Company by such Holder in exchange therefor or being sold by such Holder; such Exchange Notes to be registered in the name of such Holder or in the name of the purchaser(s) of such Notes, as the case may be; in return, the Initial Notes held by such Holder shall be surrendered to the Company for cancellation; (xiv) cooperate with the selling Holders and the underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and enable such Transfer Restricted Securities to be in such denominations and registered in such names as the Holders or the underwriter(s), if any, may request at least two Business Days prior to any sale of Transfer Restricted Securities made by such underwriter(s); (xv) use their respective commercially reasonable efforts to cause the disposition of the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriter(s), if any, to consummate the disposition of such Transfer Restricted Securities, subject to the proviso contained in clause (xii) above; (xvi) subject to Section 6(c)(i), if any fact or event contemplated by clause 6(c)(iii)(D) above shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading; 14 (xvii) provide a CUSIP number for all Transfer Restricted Securities not later than the effective date of the Registration Statement covering such Transfer Restricted Securities and provide the Trustee under the indenture with printed certificates for the Transfer Restricted Securities which are in a form eligible for deposit with the Depositary Trust Company; (xviii) cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter (including any "qualified independent underwriter" that is required to be retained in accordance with the rules and regulations of the NASD), and use their respective reasonable best efforts to cause such Registration Statement to become effective and approved by such governmental agencies or authorities as may be necessary to enable the Holders selling Transfer Restricted Securities to consummate the disposition of such Transfer Restricted Securities; (xix) otherwise use their respective commercially reasonable efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) for the twelve-month period (A) commencing at the end of any fiscal quarter in which Transfer Restricted Securities are sold to underwriters in a firm or best efforts Underwritten Offering or (B) if not sold to underwriters in such an offering, beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement; (xx) qualify the Indenture under the TIA (at or before the Effective Time of the Exchange Offer or the Shelf Registration, as the case may be) (xxi) cause all Transfer Restricted Securities covered by the Registration Statement to be listed on each securities exchange on which similar securities issued by the Company are then listed if requested by the Holders of a majority in aggregate principal amount of the Initial Notes or the managing underwriter(s), if any; and (xxii) provide promptly to each Holder upon request each document filed with the Commission pursuant to the requirements of Section 13 and Section 15(d) of the Exchange Act. (d) Restrictions on Holders. (i) Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of any notice from the Company of the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof, or until it is advised in writing (the "Advice") by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus. If so directed by the Company, each Holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of such notice. In the event the Company shall give any such notice, the time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by the number of days during the period from and including the date of the 15 giving of such notice pursuant to Section 6(c)(iii)(D) hereof to and including the date when each selling Holder covered by such Registration Statement shall have received the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof or shall have received the Advice. (i) The Company may require a Holder of Transfer Restricted Securities to be included in a Registration Statement to furnish to the Company such information as required by law to be disclosed by such Holder in such Registration Statement, and the Company may exclude from such Registration Statement the Transfer Restricted Securities of any Holder who unreasonably fails to furnish such information within a reasonable time after receiving such request. SECTION 7. REGISTRATION EXPENSES All expenses incident to the Company's and the Guarantors' performance of or compliance with this Agreement will be borne by the Company, regardless of whether a Registration Statement becomes effective, including, without limitation: (i) all registration and filing fees and expenses (including filings made by the Initial Purchasers or Holder with the NASD (and, if applicable, the fees and expenses of any "qualified independent underwriter") that may be required by the rules and regulations of the NASD); (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the Exchange Notes to be issued in the Exchange Offer and printing of Prospectuses); (iv) all fees and disbursements of counsel for the Company; (v) all messenger and delivery services and telephone expenses of the Company and the Guarantors; (vi) all application and filing fees in connection with listing Notes on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vii) all fees and disbursements of independent certified public accountants of the Company (including the expenses of any special audit and comfort letters required by or incident to such performance). The Company and the Guarantors will, in any event, bear their internal expenses (including, without limitation, all salaries and expenses of any of their officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company or the Guarantors. SECTION 8. INDEMNIFICATION (a) The Company and each Guarantor, jointly and severally, shall indemnify and hold harmless each Holder, its directors, officers and each person, if any, who controls such Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages, liabilities, judgments and actions, joint or several, or any action in respect thereof (including, but not limited to, any loss, claim, damage, liability, judgment or action relating to purchases and sales of Notes), to which that Holder, its directors, officers or controlling persons may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability, judgment or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, Preliminary Prospectus or Prospectus or in any amendment or supplement thereto or (ii) the omission or alleged omission to state in any Registration Statement, Preliminary Prospectus or Prospectus, or in any amendment or supplement thereto, any material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse such Holder and each such director, officer or controlling 16 person promptly upon demand for any legal or other expenses reasonably incurred by such Holder, director, officer or controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability, judgment or action as such expenses are incurred; provided, however, that the Company and the Guarantors shall not be liable in any such case to the extent that any such loss, claim, damage, liability, judgment or action arises out of, or is based upon, any untrue statement or alleged untrue statement or omission or alleged omission made in any Registration Statement, Preliminary Prospectus or Prospectus, or in any such amendment or supplement thereto, in reliance upon and in conformity with written information concerning such Holder furnished to the Company by or on behalf of such Holder specifically for inclusion therein. The foregoing indemnity agreement is in addition to any liability which the Company may otherwise have to any Holder or to any director, officer or controlling person of such Holder. (b) Each Holder, severally and not jointly, shall indemnify and hold harmless the Company, the Guarantors and their respective directors, officers and each person, if any, who controls the Company or any Guarantor within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages, liabilities, judgments or actions, joint or several, or any action in respect thereof, to which the Company, any Guarantor or any such director, officer or controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability, judgment or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, Preliminary Prospectus or Prospectus or in any amendment or supplement thereto or (ii) the omission or alleged omission to state in any Registration Statement, Preliminary Prospectus or Prospectus, or in any amendment or supplement thereto, any material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information concerning such Holder furnished to the Company by or on behalf of such Holder specifically for inclusion therein, and shall reimburse the Company, the Guarantors and any such director, officer or controlling person promptly upon demand for any legal or other expenses reasonably incurred by the Company, any Guarantor or any such director, officer or controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability, judgment or action as such expenses are incurred. The foregoing indemnity agreement is in addition to any liability which any Holder may otherwise have to the Company, any Guarantor or any such director, officer or controlling person. (c) Promptly after receipt by any person in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the "indemnified party") of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against any person against whom indemnity may be sought pursuant to Section 8(a) or 8(b) (the "indemnifying party"), notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 8 except to the extent it has been materially prejudiced by such failure and, provided further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 8. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party and the payment of all fees and expenses of 17 such counsel shall be the responsibility of the indemnifying party. After notice from the indemnifying party to the indemnified party of the indemnifying party's election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 8 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation. In addition, any indemnified party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the indemnified party unless (i) the employment of such counsel shall have been specifically authorized in writing by the indemnifying party, (ii) the indemnifying party shall have failed to assume the defense of such action or employ counsel reasonably satisfactory to the indemnified party or (iii) the named parties to any such action (including any impleaded parties) include both the indemnified party and the indemnifying party, and the indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party). In any such case, the indemnifying party shall not, in connection with any one action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) of all indemnified parties, and all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by Goldman, Sachs & Co. in the case of the parties indemnified pursuant to Section 8(a), and by the Company in the case of parties indemnified pursuant to Section 8(b). No indemnifying party shall (i) without the prior written consent of the indemnified parties (which consent shall not be unreasonably withheld), settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding, or (ii) be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with the consent of the indemnifying party or if there be a final judgment of the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. (d) If the indemnification provided for in this Section 8 shall for any reason be unavailable or insufficient to hold harmless an indemnified party under Section 8(a) or 8(b) in respect of any loss, claim, damage, liability, judgment or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage, liability, judgment or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company and the Guarantors, on the one hand, and the Holders, on the other, from the offering of the Notes or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Guarantors, on the one hand, and the Holders, on the other, with respect to the statements or omissions which resulted in such loss, claim, damage, liability, judgment or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Guarantors, on the one hand, and the Holders, on the other, with respect to such offering shall be deemed to be in the same proportion as the total net proceeds from the offering of the Initial Notes purchased under 18 the Purchase Agreement (before deducting expenses) received by the Company on the one hand, and the total net proceeds received by such Holder upon its resale of Notes less the amount paid by such Holder for such Notes, on the other hand, bear to the total sum of such amounts. The relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company and the Guarantors or such Holder, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. Solely for the purposes of the preceding two sentences, the net proceeds received by the Company shall be deemed also to be indirectly for the benefit of the Guarantors and the information supplied by the Company shall also be deemed to have been supplied by the Guarantors. The Company and the Guarantors and the Holders agree that it would not be just and equitable if contributions pursuant to this Section 8 were to be determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage, liability, judgment or action in respect thereof, referred to above in this Section 8, shall be deemed to include, for purposes of this Section 8(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8(d), no Holder, and none of its directors, officers or controlling persons, shall be required to contribute, in the aggregate, any amount in excess of the amount by which the total net proceeds received by such Holder upon its resale of Notes exceeds the sum of the amount paid by such Holder for such Notes and the amount of any damages which such Holder has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Holders' obligations to contribute as provided in this Section 8(d) are several in proportion to the respective principal amount of Notes held by each of the Holders hereunder and not joint. (e) The remedies provided for in this Section 8 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. SECTION 9. RULE 144A The Company and the Guarantors hereby agree with each Holder, for so long as any Transfer Restricted Securities remain outstanding and during any period in which the Company and the Guarantors are subject to Section 13 or 15(d) of the Exchange Act, to make available to any Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities from such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A. SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATION No Holder may participate in any Underwritten Registration hereunder unless such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all reasonable questionnaires, 19 powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents required under the terms of such underwriting arrangements. SECTION 11. SELECTION OF UNDERWRITERS For any Underwritten Offering, the investment banker or investment bankers and manager or managers that will administer such offering will be selected by the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities included in such offering; provided, that such investment bankers and managers must be reasonably satisfactory to the Company. Such investment bankers and managers are referred to herein as the "underwriters." SECTION 12. MISCELLANEOUS (a) Remedies. Each Holder, in addition to being entitled to exercise all rights provided herein, in the Indenture, the Purchase Agreement or granted by law, including recovery of liquidated or other damages, will be entitled to specific performance of its rights under this Agreement. The Company and the Guarantors agree that monetary damages (including the Special Interest contemplated hereby) would not be adequate compensation for any loss incurred by reason of a breach by them of the provisions of this Agreement and hereby agree to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) No Inconsistent Agreements. Neither the Company nor any Guarantor will on or after the date of this Agreement enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Neither the Company nor any Guarantor is currently bound by any agreement granting registration rights with respect to its securities that conflicts with the registration rights set forth herein. (c) Adjustments Affecting the Initial Notes. Neither the Company nor any Guarantor will take any action, or permit any change to occur, with respect to the Initial Notes that would materially and adversely affect the ability of the Holders to Consummate any Exchange Offer. (d) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless (i) in the case of Section 5 hereof and this Section 12(d), the Company has obtained the written consent of the Holders of all outstanding principal amount of Transfer Restricted Securities and (ii) in the case of all other provisions hereof, the Company has obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose securities are being tendered pursuant to the Exchange Offer and that does not affect directly or indirectly the rights of other Holders whose securities are not being tendered pursuant to such Exchange Offer may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities being tendered or registered. (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), fax, or air courier guaranteeing overnight delivery: 20 (i) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and With a copy to: Goldman, Sachs & Co. 85 Broad Street Attention: Special Execution Dept. New York, New York 10004 Fax: 212-346-3594 (ii) if to the Initial Purchasers, to the address specified in Section 12(a) of the Purchase Agreement. (iii) if to the Company: Tesoro Petroleum Corporation 300 Concord Plaza Drive San Antonio, Texas 78216-6999 Attention: Vice President and Treasurer Fax: (210) 283-2080 With a copy to: Fulbright & Jaworski L.L.P. 1301 McKinney, Suite 5100 Houston, Texas 77010-3095 Attention: Charles L. Strauss, Esq. Fax: (713) 651-5246 All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if faxed; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Transfer Restricted Securities; provided, however, that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Transfer Restricted Securities in violation of the terms hereof or of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Transfer Restricted Securities in any manner, whether by operation of law or otherwise, such Transfer Restricted Securities shall be held subject to all of the terms of this Agreement, and by owning and holding such Transfer Restricted Securities such person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, including the restrictions on resale set forth in this Agreement and, 21 if applicable, the Purchase Agreement, and such Person shall be entitled to receive the benefits hereof. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. This Agreement shall be governed by. and construed in accordance with the laws of the State of New York without regard to conflict of laws principles. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable by a court of competent jurisdiction, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) Entire Agreement. This Agreement and the other writings referred to herein (including the Purchase Agreement, the Indenture and the form of Notes) are intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company with respect to the Transfer Restricted Securities. This Agreement and the other writings referred to herein (including the Purchase Agreement, the Indenture and the form of Notes) supersede all prior agreements and understandings between the parties with respect to such subject matter. 22 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. TESORO PETROLEUM CORPORATION By: /s/ GREGORY A. WRIGHT -------------------------------- Name: Gregory A. Wright Title: Senior Vice President and Chief Financial Officer 23 FAR EAST MARITIME COMPANY GOLD STAR MARITIME COMPANY TESORO FINANCIAL SERVICES HOLDING COMPANY VICTORY FINANCE COMPANY By: /s/ G. SCOTT SPENDLOVE ------------------------------------------- Name: G. Scott Spendlove Title: Attorney in Fact DIGICOMP INC. KENAI PIPE LINE COMPANY SMILEY'S SUPER SERVICE, INC. TESORO ALASKA COMPANY TESORO ALASKA PIPELINE COMPANY TESORO AVIATION COMPANY TESORO GAS RESOURCES COMPANY, INC. TESORO HAWAII CORPORATION TESORO HIGH PLAINS PIPELINE COMPANY TESORO MARINE SERVICES HOLDING COMPANY TESORO MARINE SERVICES, LLC By: Tesoro Marine Services Holding Company, as sole member TESORO MARITIME COMPANY TESORO NORTHSTORE COMPANY TESORO PETROLEUM COMPANIES, INC. TESORO REFINING AND MARKETING COMPANY TESORO TECHNOLOGY COMPANY TESORO TRADING COMPANY TESORO VOSTOK COMPANY TESORO WASATCH, LLC By: Tesoro Petroleum Corporation, as sole member By: /s/ SHARON L. LAYMAN ------------------------------------------- Name: Sharon L. Layman Title: Vice President and Treasurer 24 Accepted as of the date hereof: GOLDMAN, SACHS & CO. By: /s/ GOLDMAN, SACHS & CO. ------------------------------------ (Goldman, Sachs & Co.) On behalf of each of the Purchasers 25 EX-4.11 8 h05116exv4w11.txt CREDIT AND GUARANTY AGREEMENT Exhibit 4.11 ================================================================================ TESORO PETROLEUM CORPORATION SENIOR SECURED TERM LOANS DUE 2008 CREDIT AND GUARANTY AGREEMENT Dated as of April 17, 2003 GOLDMAN SACHS CREDIT PARTNERS L.P. Administrative Agent GOLDMAN SACHS CREDIT PARTNERS L.P. Sole Lead Arranger, Sole Bookrunner and Syndication Agent ================================================================================ TABLE OF CONTENTS
PAGE ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions................................................................... 1 SECTION 1.02. Other Definitions............................................................. 39 SECTION 1.03. Rules of Construction......................................................... 40 ARTICLE II THE TERM LOANS SECTION 2.01. Term Loans.................................................................... 42 SECTION 2.02. Pro Rata Shares; Availability of Funds........................................ 42 SECTION 2.03. Use of Proceeds............................................................... 43 SECTION 2.04. Evidence of Debt; Register; Lenders' Books and Records; Notes................. 43 SECTION 2.05. Interest...................................................................... 44 SECTION 2.06. Conversion/Continuation....................................................... 45 SECTION 2.07. Default Interest.............................................................. 46 SECTION 2.08. Fees.......................................................................... 46 SECTION 2.09. Scheduled Payments/Commitment Reductions...................................... 46 SECTION 2.10. Voluntary Prepayments......................................................... 48 SECTION 2.11. Mandatory Offers.............................................................. 49 SECTION 2.12. Application of Prepayments.................................................... 51 SECTION 2.13. General Provisions Regarding Payments......................................... 51 SECTION 2.14. Ratable Sharing............................................................... 52 SECTION 2.15. Making or Maintaining Eurodollar Rate Loans................................... 53
i SECTION 2.16. Increased Costs; Capital Adequacy............................................. 55 SECTION 2.17. Taxes; Withholding, etc....................................................... 56 SECTION 2.18. Removal or Replacement of a Lender............................................ 58 SECTION 2.19. Additional Term Loans......................................................... 59 ARTICLE III CONDITIONS PRECEDENT SECTION 3.01. Closing Date.................................................................. 62 SECTION 3.02. Conditions to Each Term Loan.................................................. 65 ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. No Material Adverse Change.................................................... 66 SECTION 4.02. Immaterial Subsidiaries....................................................... 66 SECTION 4.03. Property...................................................................... 66 SECTION 4.04. Due Incorporation............................................................. 67 SECTION 4.05. Capital Stock and Ownership................................................... 67 SECTION 4.06. Due Authorization; Binding Obligation......................................... 67 SECTION 4.07. Margin Stock.................................................................. 67 SECTION 4.08. No Conflict................................................................... 68 SECTION 4.09. Governmental Consents......................................................... 68 SECTION 4.10. No Violations................................................................. 69 SECTION 4.11. No Adverse Proceedings........................................................ 69 SECTION 4.12. PUHCA......................................................................... 69 SECTION 4.13. Investment Company Act........................................................ 69 SECTION 4.14. Accounting.................................................................... 69 SECTION 4.15. No Legal Violation............................................................ 69
ii SECTION 4.16. Intellectual Property......................................................... 70 SECTION 4.17. Historical Financial Statements............................................... 70 SECTION 4.18. Projections................................................................... 70 SECTION 4.19. Solvency...................................................................... 70 SECTION 4.20. Employee Matters.............................................................. 71 SECTION 4.21. ERISA......................................................................... 71 SECTION 4.22. Unlawful Contributions........................................................ 71 SECTION 4.23. Pipeline Subsidiaries......................................................... 72 SECTION 4.24. Perfection.................................................................... 72 SECTION 4.25. Priority...................................................................... 72 SECTION 4.26. Senior Debt................................................................... 72 SECTION 4.27. Other Representations......................................................... 73 ARTICLE V COVENANTS SECTION 5.01. Section Intentionally Deleted................................................. 73 SECTION 5.02. Section Intentionally Deleted................................................. 73 SECTION 5.03. Reports....................................................................... 73 SECTION 5.04. Compliance Certificate........................................................ 74 SECTION 5.05. Taxes......................................................................... 75 SECTION 5.06. Waiver of Stay, Extension and Usury Laws...................................... 75 SECTION 5.07. Restricted Payments........................................................... 75 SECTION 5.08. Dividend and Other Payment Restrictions Affecting Subsidiaries................ 79 SECTION 5.09. Incurrence of Indebtedness and Issuance of Preferred Stock.................... 81 SECTION 5.10. Asset Sales................................................................... 82
iii SECTION 5.11. Transactions with Affiliates.................................................. 85 SECTION 5.12. Liens......................................................................... 86 SECTION 5.13. Business Activities........................................................... 86 SECTION 5.14. Corporate Existence........................................................... 86 SECTION 5.15. Offer to Repurchase upon Change of Control.................................... 87 SECTION 5.16. Flood Insurance............................................................... 88 SECTION 5.17. Additional Term Loan Guarantees and Liens..................................... 88 SECTION 5.18. Payments for Consent.......................................................... 89 SECTION 5.19. Suspension of Covenants....................................................... 90 ARTICLE VI SUCCESSORS SECTION 6.01. Merger, Consolidation, or Sale of Assets...................................... 90 SECTION 6.02. Successor Corporation Substituted............................................. 91 ARTICLE VII DEFAULTS AND REMEDIES SECTION 7.01. Events of Default............................................................. 91 SECTION 7.02. Acceleration.................................................................. 93 ARTICLE VIII AGENTS SECTION 8.01. Appointment of Agents......................................................... 94 SECTION 8.02. Powers and Duties............................................................. 94 SECTION 8.03. General Immunity.............................................................. 95 SECTION 8.04. Agents Entitled to Act as Lender.............................................. 96 SECTION 8.05. Lenders' Representations, Warranties and Acknowledgment....................... 96
iv SECTION 8.06. Right to Indemnity............................................................ 96 SECTION 8.07. Successor Administrative Agent................................................ 97 ARTICLE IX COLLATERAL AND SECURITY SECTION 9.01. Security Documents............................................................ 97 SECTION 9.02. Further Assurances............................................................ 98 SECTION 9.03. Collateral Agent.............................................................. 99 SECTION 9.04. Collateral Agent; Realization on Collateral................................... 100 SECTION 9.05. Regulatory and Governmental Approvals......................................... 100 SECTION 9.06. Release of Collateral Agent's Lien............................................ 100 ARTICLE X INTERCREDITOR PROVISIONS RELATING TO QUALIFIED CREDIT FACILITY SECTION 10.01. Agreement between the Collateral Agent and Credit Facility Agent.............. 102 SECTION 10.02. Disclaimer of Consensual Liens................................................ 103 SECTION 10.03. Notice of Intent to Foreclose................................................. 104 SECTION 10.04. Consent to License to Use Intellectual Property; Access to Information; Access to Real Property to Process and Sell Inventory................................. 105 SECTION 10.05. Complete Agreement............................................................ 108 SECTION 10.06. No Subrogation, Marshalling or Duty........................................... 108 SECTION 10.07. Limitation on Certain Relief, Defenses and Damage Claims...................... 108 SECTION 10.08. Amendment; Waiver............................................................. 108 SECTION 10.09. Enforcement................................................................... 109 SECTION 10.10. Relative Rights............................................................... 110
v ARTICLE XI COLLATERAL SHARING SECTION 11.01. Equal and Ratable Lien Sharing by holders of Notes and Holders of Term Loans.. 111 SECTION 11.02. Enforcement................................................................... 111 SECTION 11.03. Amendment..................................................................... 111 ARTICLE XII GUARANTEES SECTION 12.01. Term Loan Guarantees.......................................................... 112 SECTION 12.02. Execution and Delivery of Additional Term Loan Guarantee...................... 115 SECTION 12.03. Guarantors May Consolidate, Etc., on Certain Terms............................ 116 SECTION 12.04. Releases...................................................................... 117 SECTION 12.05. Limitation on Guarantor Liability; Contribution............................... 118 ARTICLE XIII MISCELLANEOUS SECTION 13.01. Notices....................................................................... 118 SECTION 13.02. Expenses...................................................................... 119 SECTION 13.03. Indemnity..................................................................... 120 SECTION 13.04. Set-Off....................................................................... 121 SECTION 13.05. Amendments and Waivers........................................................ 121 SECTION 13.06. Successors and Assigns; Participations........................................ 122 SECTION 13.07. Independence of Covenants..................................................... 126 SECTION 13.08. Survival of Representations, Warranties and Agreements........................ 126 SECTION 13.09. No Waiver; Remedies Cumulative................................................ 126 SECTION 13.10. Marshalling; Payments Set Aside............................................... 127
vi SECTION 13.11. Severability.................................................................. 127 SECTION 13.12. Term Loan Obligations Several; Independent Nature of Lenders' Rights.......... 127 SECTION 13.13. Headings...................................................................... 127 SECTION 13.14. Applicable Law................................................................ 127 SECTION 13.15. Consent to Jurisdiction....................................................... 127 SECTION 13.16. Waiver Of Jury Trial.......................................................... 128 SECTION 13.17. Confidentiality............................................................... 128 SECTION 13.18. Usury Savings Clause.......................................................... 130 SECTION 13.19. Counterparts.................................................................. 130 SECTION 13.20. Effectiveness................................................................. 130
vii APPENDICES: A Initial Term Loan Commitments B Notice Addresses SCHEDULES: 3.01(e) Mortgaged Properties 4.04 Jurisdictions of Organization and Qualification 4.05 Capital Stock and Ownership 4.09 UCC Filings 4.11 Adverse Proceedings 4.15 Environmental Matters 4.20 Employee Matters 5.09 Certain Indebtedness 5.12 Certain Liens EXHIBITS: A-1 Funding Notice A-2 Conversion/Continuation Notice B Term Loan Note C Compliance Certificate D Assignment Agreement E Certificate Re Non-bank Status F Guarantor Joinder Agreement G Lender Joinder Agreement H Lender Addendum I Mortgage viii This CREDIT AND GUARANTY AGREEMENT, dated as of April 17, 2003, is entered into by and among TESORO PETROLEUM CORPORATION, a Delaware corporation (the "Company"), CERTAIN SUBSIDIARIES OF COMPANY, as Guarantors, the Lenders party hereto from time to time, GOLDMAN SACHS CREDIT PARTNERS L.P., as Administrative Agent (together with its successors in such capacity, the "Administrative Agent") and GOLDMAN SACHS CREDIT PARTNERS L.P., as Sole Lead Arranger, Sole Bookrunner and Syndication Agent (the "Sole Lead Arranger"). RECITALS: 1. The Company intends to borrow $200,000,000 in principal amount of Term Loans (the "Initial Term Loans") under this Agreement. 2. The Company intends to issue $375,000,000 in principal amount of 8.00% Senior Secured Notes due April 15, 2008 (the "Initial Notes") pursuant to the Indenture, dated as of April 17, 2003 (the "Indenture"), by and among the Company, the Guarantors and The Bank of New York, as Trustee (together with its successors in such capacity, the "Trustee"). 3. Pursuant to this Agreement, the Guarantors guarantee payment of the Initial Term Loans and all other Term Loan Obligations. Pursuant to the Indenture, the Guarantors have guaranteed payment of the Initial Notes and all other Note Obligations. 4. This Agreement and the Indenture will require the Company and the Guarantors to secure payment of the Initial Term Loans and the Initial Notes and other Secured Obligations, Equally and Ratably, by security interests in the Collateral. Without providing any commitments to the Company as to the funding of any future indebtedness, this Agreement and the Indenture permit the Company from time to time to incur indebtedness which it is otherwise permitted to incur under this Agreement and the Indenture in the form of additional Term Loans borrowed under this Agreement or additional Notes issued under the Indenture (or both) and to secure such additional Term Loans and additional Notes, Equally and Ratably with the Initial Term Loans and the Initial Notes, by such security interests in the Collateral, up to an aggregate principal amount (including the Initial Term Loans and the Initial Notes) not exceeding $725,000,000 at any one time outstanding (the "Secured Principal Cap"). 5. This Agreement and the Indenture further require that such security interests in the Collateral be granted to the Collateral Agent acting for the benefit of the holders of Term Loans, Notes and other Secured Obligations pursuant to the Security Documents. ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01 Definitions. "Acquired Debt" means, with respect to any specified Person, (1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Restricted Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Restricted Subsidiary of such specified Person and (2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person, but excluding, in each case, Indebtedness that is extinguished, retired or repaid in connection with such Person merging with or becoming a Restricted Subsidiary of such specified Person. "Actionable Default" has the meaning given to such term in the Collateral Agency Agreement. "Adjusted Eurodollar Rate" means, with respect to a Eurodollar Rate Loan for the relevant Interest Period, the sum of the quotient of (a) the Eurodollar Base Rate applicable to such Interest Period, divided by (b) one minus the Applicable Reserve Requirement (expressed as a decimal) applicable to such Interest Period. "Adjusted Net Assets" of a Guarantor at any date means the lesser of the amount by which (i) the fair value of the property of such Guarantor exceeds the total amount of liabilities, including contingent liabilities (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date), but excluding liabilities under its Term Loan Guarantee, of such Guarantor at such date and (ii) the present fair salable value of the assets of such Guarantor at such date exceeds the amount that will be required to pay the probable liability of such Guarantor on its debts (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date and after giving effect to any collection from any Subsidiary of such Guarantor in respect of the obligations of such Subsidiary under such Term Loan Guarantee), excluding debt in respect of such Term Loan Guarantee, as they become absolute and matured. "Administrative Agent" is defined in the Recitals hereto. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that, for purposes of Section 5.11 hereof and the use of the term "Affiliates" thereunder, beneficial ownership of 10% or more of the voting securities of a specified Person shall be deemed to be control by the owner thereof. "Agents" means the Administrative Agent and the Sole Lead Arranger. "Agreement" means this Credit and Guaranty Agreement, dated as of April 17, 2003. "Applicable Reserve Requirement" means, at any time, for any Eurodollar Rate Loan, the maximum rate, expressed as a decimal, at which reserves (including, without limitation, any 2 basic marginal, special, supplemental, emergency or other reserves) are required to be maintained with respect thereto against "Eurocurrency liabilities" (as such term is defined in Regulation D) under regulations issued from time to time by the Board of Governors of the Federal Reserve System or other applicable banking regulator. Without limiting the effect of the foregoing, the Applicable Reserve Requirement shall reflect any other reserves required to be maintained by such member banks with respect to (i) any category of liabilities which includes deposits by reference to which the applicable Adjusted Eurodollar Rate or any other interest rate of a Term Loan is to be determined, or (ii) any category of extensions of credit or other assets which include Eurodollar Rate Loans. A Eurodollar Rate Loan shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credit for proration, exceptions or offsets that may be available from time to time to the applicable Lender. The rate of interest on Eurodollar Rate Loans shall be adjusted automatically on and as of the effective date of any change in the Applicable Reserve Requirement. "Asset Sale" means: (i) the sale, lease, conveyance or other disposition of any assets or rights (including, without limitation, by way of a sale and leaseback) other than in the ordinary course of business, or any damage or loss of property resulting in the payment of property insurance or condemnation proceeds to the Company or any Restricted Subsidiary (provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole will be governed by Sections 5.15 and 6.01 hereof and not by the provisions in Section 5.10 hereof); and (ii) the issue or sale by the Company or any of its Restricted Subsidiaries of Equity Interests of any of the Company's Restricted Subsidiaries, in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions, (a) that have a Fair Market Value in excess of $5,000,000 or (b) for Net Proceeds in excess of $5,000,000; provided that the following will not be deemed to be Asset Sales: (1) any transfer, conveyance, sale, lease or other disposition of Credit Facility Collateral; (2) any sale or exchange of production of crude oil, natural gas and natural gas liquids, or refined products or residual hydrocarbons, or any other asset or right constituting inventory, made in the ordinary course of the Permitted Business; (3) (A) any disposition of assets (other than Collateral) in trade or exchange for assets of comparable Fair Market Value used or usable in any Permitted Business (including, without limitation, the trade or exchange for a controlling interest in another business or all or substantially all of the assets of a business, in each case, engaged in a Permitted Business or for other non-current assets to be used in a Permitted Business, including, without limitation, assets or Investments of the nature or type described in clause (m) of the definition of "Permitted Investments") and (B) any disposition of assets constituting Collateral in trade or exchange for 3 assets constituting Refinery Assets of comparable Fair Market Value; provided that, in each such case (x) except for trades or exchanges of oil and gas properties and interests therein for other oil and gas properties and interests therein, if the Fair Market Value of the assets so disposed of, in a single transaction or in a series of related transactions, is in excess of $35,000,000, the Company shall obtain an opinion or report from an Independent Financial Advisor confirming that the assets received by the Company and the Restricted Subsidiaries in such trade or exchange have a fair market value of at least the fair market value of the assets so disposed, (y) any cash or Cash Equivalents received by the Company or a Restricted Subsidiary in connection with such trade or exchange (net of any transaction costs of the type deducted under the definition of "Net Proceeds") shall be treated as Net Proceeds of an Asset Sale and shall be applied in the manner set forth in Section 5.10 hereof and (z) in the case of clause (B) above, the Collateral Agent shall concurrently be granted a perfected first priority security interest (subject to Permitted Prior Liens) in such Refinery Assets (other than assets constituting Credit Facility Collateral) as additional Collateral under the Security Documents to secure the Secured Obligations, all on terms and pursuant to arrangements reasonably satisfactory to the Collateral Agent in its reasonable determination (which may include, at the Collateral Agent's request, customary Officers' Certificates and legal opinions); (4) a transfer of assets by the Company to a Restricted Subsidiary of the Company or by a Restricted Subsidiary of the Company to the Company or to a Restricted Subsidiary of the Company; (5) an issuance or sale of Equity Interests by a Restricted Subsidiary of the Company to the Company or to another Restricted Subsidiary of the Company; (6) (A) a Permitted Investment or (B) a Restricted Payment that is permitted by Section 5.07 hereof; (7) the trade, sale or exchange of Cash Equivalents; (8) the sale, exchange or other disposition of obsolete assets not integral to any Permitted Business; (9) the abandonment or relinquishment of assets or property in the ordinary course of business, including without limitation the abandonment, relinquishment or farm-out of oil and gas leases, concessions or drilling or exploration rights or interests therein; (10) any lease of assets entered into in the ordinary course of business and with respect to which the Company or any Restricted Subsidiary of the Company is the lessor and the lessee has no option to purchase such assets for less than Fair Market Value at any time the right to acquire such asset occurs; (11) the disposition of assets received in settlement of debts accrued in the ordinary course of business; 4 (12) the creation or perfection of a Lien on any properties or assets (or any income or profit therefrom) of the Company or any of its Restricted Subsidiaries that is not prohibited by any provision hereof; (13) the surrender or waiver in the ordinary course of business of contract rights or the settlement, release or surrender of contractual, non-contractual or other claims of any kind; and (14) the grant in the ordinary course of business of any non-exclusive license of patents, trademarks, registrations therefor and other similar intellectual property. "Assignment Agreement" means an Assignment and Assumption Agreement substantially in the form of Exhibit D, with such amendments or modifications as may be approved by the Administrative Agent. "Associated Leased Terminals" shall have the meaning provided in the definition of "Collateral." "Bankruptcy Code" means Title 11, U.S. Code, as amended, or any similar federal or state law for the relief of debtors. "Base Rate" means, for any day, a fluctuating rate of interest per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of (a) the Federal Funds Effective Rate for such day and (b) one-half of one percent (0.5%) per annum. "Base Rate Loan" means a Term Loan bearing interest at a rate determined by reference to the Base Rate. "Board of Directors" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board. "Borrowing Base" means, as of any date, an amount equal to: (1) 85% of the face amount of all accounts receivable owned by the Company and its Domestic Subsidiaries as of the end of the most recent fiscal quarter preceding such date that were not more than 90 days past due; plus (2) 80% of the book value (before any reduction from current cost to LIFO cost) of all inventory owned by the Company and its Domestic Subsidiaries as of the end of the most recent fiscal quarter preceding such date; plus (3) 100% of the cash and Cash Equivalents owned by the Company and its Domestic Subsidiaries as of the end of the most recent fiscal quarter preceding such date. "Business Day" means (i) any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York or is a day on which banking institutions located in such state are authorized or required by law or other governmental action to close and 5 (ii) with respect to all notices, determinations, fundings and payments in connection with the Adjusted Eurodollar Rate or any Eurodollar Rate Loans, the term "Business Day" shall mean any day which is a Business Day described in clause (i) and which is also a day for trading by and between banks in Dollar deposits in the London interbank market. "Calculation Date" shall have the meaning provided in the definition of "Fixed Charge Coverage Ratio." "Capital Lease Obligations" means, at the time any determination thereof is to be made, the amount of the liability in respect of one or more capital leases that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than one year from the date of acquisition, (iii) certificates of deposit and Eurodollar time deposits with maturities of not more than one year from the date of acquisition, bankers' acceptances with maturities of not more than one year from the date of acquisition and overnight bank deposits, in each case, with any domestic commercial bank having capital and surplus in excess of $500,000,000 and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above, (v) commercial paper having the highest rating obtainable from Moody's or S&P with maturities of not more than one year from the date of acquisition. "Certificate re Non-Bank Status" means a certificate substantially in the form of Exhibit E. "Change of Control" means the occurrence of one or more of the following events: (i) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a "Group") together with any Affiliates thereof (whether or not otherwise in compliance with the provisions hereof) unless immediately following such sale, lease, exchange or other transfer in compliance with this Agreement such assets are owned, directly or indirectly, by the Company or a Subsidiary of the Company; 6 (ii) the approval by the holders of Capital Stock of the Company of any plan or proposal for the liquidation or dissolution of the Company; (iii) the acquisition in one or more transactions, of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of Voting Securities of the Company by any Person or Group that either (A) beneficially owns (within the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, at least 50% of the Company's then outstanding voting securities entitled to vote on a regular basis for the board of directors of the Company, or (B) otherwise has the ability to elect, directly or indirectly, a majority of the members of the Company's board of directors, including, without limitation, by the acquisition of revocable proxies for the election of directors; (iv) during any period of two consecutive years, individuals who at the beginning of such period constituted the board of directors of the Company (together with any new directors whose election by such board of directors or whose nomination for election by the shareholders (or members, as applicable) of the Company was approved by a vote of 66-2/3% of the directors of the Company then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the board of directors then in office; or (v) the Company consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges with or into, the Company, in any such event pursuant to a transaction in which any of the outstanding Voting Stock of the Company or such other Person is converted into or exchanged for cash, securities or other property, other than any such transaction where the Voting Stock of the Company outstanding immediately prior to such transaction is converted into or exchanged for Voting Stock (other than Disqualified Stock) of the surviving or transferee Person constituting a majority of the outstanding shares of such Voting Stock of such surviving or transferee Person (immediately after giving effect to such issuance). Notwithstanding the foregoing, a Change of Control shall not be deemed to occur upon the consummation of any actions undertaken by the Company or any of its Restricted Subsidiaries solely for the purpose of changing the legal structure of the Company or such Restricted Subsidiary. "Closing Date" means the date on which the Initial Term Loans are made. "Closing Date Mortgages" the mortgages or deeds of trust to be delivered on the Closing Date as set forth on Schedule 3.01(e). "Code" means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter, and any successor statute. "Collateral" means: 7 (1) the real property, fixtures and equipment comprising or used or useful for or in connection with the six refineries and connected terminal assets owned on the Closing Date by Domestic Subsidiaries and located in or near Martinez, California, Anacortes, Washington, Kenai, Alaska, Kapolei, Hawaii, Mandan, North Dakota, and Salt Lake City, Utah (the "Existing Refineries"); (2) the real property, fixtures and equipment comprising or used or useful for or in connection with the two terminals owned on the Closing Date by a Domestic Subsidiary and located in Burley, Idaho and Boise, Idaho (the "Owned Terminals"); (3) (a) all real property, fixtures or equipment acquired at any time after the Closing Date by the Company or any Guarantor (i) located on, or contiguous to or connected with and in reasonable proximity to, any of the Existing Refineries or Owned Terminals and (ii) necessary, used or useful for or in connection with the ownership, expansion, operation, use or maintenance of any of the Existing Refineries or Owned Terminals and (b) any owned or acquired interest in leases or contracts with governmental authorities, where such leases or contracts are in real estate in navigable waters contiguous to or connected with and in reasonable proximity to any of the Existing Refineries or Owned Terminals; (4) all fixtures and equipment at any time owned or acquired by the Company or any Domestic Subsidiary comprising or acquired for use with (a) the pipelines serving and connected to the Existing Refineries on the Closing Date, which are a 71-mile pipeline from the Kenai refinery to Anchorage, Alaska, a 24-mile pipeline from Swanson River Field to the Kenai refinery, a 23-mile pipeline system connected to the Kapolei refinery and a 700-mile pipeline system in North Dakota and Montana, or (b) any other pipeline acquired at any time after the Closing Date by the Company or any Domestic Subsidiary to serve and that is connected to any of the Existing Refineries (collectively, the "Pipelines"); (5) (i) all outstanding Capital Stock of each of Tesoro Alaska Pipeline Company, Kenai Pipe Line Company, and each additional Pipeline Subsidiary (other than Tesoro High Plains Pipeline Company), (ii) all intercompany Indebtedness owed by any Pipeline Subsidiary (other than Tesoro High Plains Pipeline Company) at any time owned or acquired by the Company or any Domestic Subsidiary, and (iii) 66-2/3% of all outstanding Capital Stock of, and 66-2/3% of all intercompany Indebtedness owed by, Tesoro High Plains Pipeline Company, in each case, at any time owned or acquired by the Company or any Domestic Subsidiary; (6) all fixtures and equipment at any time owned or acquired by the Company or any Guarantor located at any of the terminals or any other facilities at which any inventory is stored or distributed that are leased by the Company or any Guarantor and that are necessary for or used in connection with the operation, use or maintenance of any of the Existing Refineries (the "Associated Leased Terminals") or the transportation of any inventory to or from any Existing Refinery, Owned Terminal or Associated Leased Terminal; (7) all general intangibles (including patents, copyrights, trade secrets and other intellectual property, whether owned or licensed, customer and supplier contracts, drawings, 8 plans, books and records, employment, consulting, operating, maintenance or services agreements and other contractual rights, public and private licenses, permits, franchises, powers, authorities, pollution or environmental credits and allowances, goodwill and other intangible property of every type or description) at any time owned or acquired by the Company or any Guarantor necessary, used or useful for or in connection with, or in any respect related, incidental or ancillary to, the ownership, expansion, operation, use, maintenance or sale or other disposition of any of the Existing Refineries, the Owned Terminals, the Associated Leased Terminals or the Pipelines; (8) all rights to payment at any time owned or acquired by the Company or any Subsidiary of the Company constituting (a) intercompany Indebtedness resulting from the declaration of a dividend or a debt distribution on account of Capital Stock of a Subsidiary of the Company or a redemption, reclassification or recapitalization of the Capital Stock of any such Subsidiary and (b) intercompany Indebtedness resulting from the funding of proceeds of any transaction raising capital (whether by the issuance of debt or equity) for the Company or any Subsidiary of the Company as an intercompany loan to the Company or any such Subsidiary (other than the funding of proceeds of any extension of credit or borrowing under a Credit Facility), in each case, whether such rights to payment constitute accounts or payment intangibles, or arise under or in connection with chattel paper or instruments (collectively, the "Specified Intercompany Debt"); (9) each Asset Sale Proceeds Account and all deposits therein and interest thereon and investments thereof, and all property of every type and description in which any proceeds of any Sale of Collateral or other disposition of Collateral are invested or upon which the Collateral Agent is at any time granted, or required to be granted, a Lien to secure the Secured Obligations as set forth in Section 5.10 or in clause (3) of the proviso in the definition of "Asset Sale"; and (10) all proceeds of any of the foregoing; provided, that the Collateral will not at any time include any property that is, at such time, an Excluded Asset. "Collateral Agency Agreement" means a declaration of trust for a collateral trust, a collateral trust agreement or a collateral agency agreement, dated the Closing Date, executed and delivered by the Company, the Guarantors and the Collateral Agent on customary terms reasonably satisfactory to the Trustee and the Administrative Agent, in each case, as amended, modified, renewed, restated or replaced, in whole or in part, from time to time, in accordance with its terms. "Collateral Agent" means Wilmington Trust Company, in its capacity as collateral agent under the Collateral Agency Agreement, together with its successors in such capacity. "Collateral Agent's Liens" means the Liens granted to the Collateral Agent as security for Secured Obligations. 9 "Commodity Hedging Agreements" means agreements or arrangements designed to protect such Person against fluctuations in the price of (i) crude oil, natural gas, or other hydrocarbons, including refined hydrocarbon products; (ii) electricity and other sources of energy or power used in the Company's refining or processing operations; or (iii) any other commodity; in each case, in connection with the conduct of its business and not for speculative purposes. "Commodity Hedging Obligations" means, with respect to any Person, the net payment Obligations of such Person under Commodity Hedging Agreements. "Company" means the Person named as the "Company" in the introductory paragraph of this Agreement until a successor Person shall have become such pursuant to the applicable provisions of this Agreement, and thereafter, the term "Company" shall mean such successor Person and each successive successor Person. "Consolidated Cash Flow" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period, plus (i) an amount equal to any extraordinary, unusual or non-recurring expenses or losses (including, whether or not otherwise includable as a separate item in the statement of Consolidated Net Income for such period, losses on sales of assets outside of the ordinary course of business) plus any net loss realized in connection with an Asset Sale (to the extent such losses were deducted in computing such Consolidated Net Income), plus (ii) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was included in computing such Consolidated Net Income, plus (iii) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income, plus (iv) depreciation and amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation and amortization were deducted in computing such Consolidated Net Income, minus (v) non-cash items increasing such Consolidated Net Income for such period, in each case, on a consolidated basis and determined in accordance with GAAP. 10 Notwithstanding the foregoing, the provision for taxes on the income or profits of, and the depreciation and amortization and other non-cash charges of, a Restricted Subsidiary of the referent Person shall be added to Consolidated Net Income to compute Consolidated Cash Flow only to the extent (and in same proportion) that the Net Income of such Restricted Subsidiary was included in calculating the Consolidated Net Income of such Person and only if a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Restricted Subsidiary without prior governmental approval (that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Restricted Subsidiary or its stockholders. "Consolidated Net Income" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries (for such period, on a consolidated basis, determined in accordance with GAAP); provided that (i) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Restricted Subsidiary; (ii) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders; (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded; (iv) the cumulative effect of a change in accounting principles shall be excluded; and (v) any ceiling limitation writedowns under SEC guidelines shall be treated as capitalized costs, as if such writedown had not occurred. "Conversion/Continuation Date" means the effective date of a continuation or conversion, as the case may be, as set forth in the applicable Conversion/Continuation Notice. "Conversion/Continuation Notice" means a Conversion/Continuation Notice substantially in the form of Exhibit A-2. "Control Agreement" means a Control Agreement relating to any Asset Sale Proceeds Account, by and among the applicable Obligor, the Collateral Agent and a commercial bank designated by the Company and reasonably satisfactory to the Collateral Agent, as depository agent, substantially in the form of Exhibit B to the Security Agreement and otherwise with such changes as are reasonably satisfactory to the Collateral Agent. "Credit Date" means the date that a Term Loan is made. "Credit Facility" means, with respect to the Company or any Restricted Subsidiary of the Company, one or more debt facilities (including, without limitation, the Senior Credit Facility) or commercial paper facilities with banks or other institutional lenders providing for revolving 11 credit loans, other borrowings (including term loans), receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, extended, refunded, replaced or refinanced (in each case, without limitation as to amount) in whole or in part from time to time. "Credit Facility Agent" means, at any time in respect of any Qualified Credit Facility, the administrative agent, collateral agent or collateral trustee for holders of Obligations under such Qualified Credit Facility that holds the Liens securing such Obligations. "Credit Facility Collateral" means, at any time in respect of any Credit Facility: (1) all now owned and hereafter acquired inventory (as defined in Article 9 of the UCC as in effect in any applicable jurisdiction), all documents (as defined in Article 9 of the UCC as in effect in any applicable jurisdiction) related thereto and all rights under any existing or future policy of property loss or casualty insurance on such inventory; (2) all now owned and hereafter acquired rights to payment from inventory sold or leased and services rendered (whether such rights to payment constitute accounts or payment intangibles, or arise under or in connection with chattel paper or instruments, each as defined in Article 9 of the UCC as in effect in any applicable jurisdiction, and whether or not such rights to payment constitute Indebtedness or conform to the underlying contract), together with (i) all rights in and to any merchandise or goods which such rights to payment may represent, whether as returned or repossessed goods or otherwise; and (ii) all Liens, letters of credit, insurance, guarantees and other obligations securing or supporting such rights to payment; (3) all now owned and hereafter acquired money, deposit accounts (as defined in Article 9 of the UCC as in effect in any applicable jurisdiction) and deposits therein and Cash Equivalents (whether held directly or in securities accounts (as defined in Article 9 of the UCC as in effect in any applicable jurisdiction)), except (i) the Asset Sale Proceeds Account and deposits therein and (ii) money, deposit accounts, deposits and Cash Equivalents (whether held directly or in securities accounts) constituting identifiable proceeds of Collateral; (4) all now owned and hereafter acquired rights to payment constituting intercompany debt obligations (whether such rights to payment constitute accounts or payment intangibles, or arise under or in connection with chattel paper or instruments, and whether or not such rights to payment constitute Indebtedness), together with all Liens, letters of credit, insurance, guarantees and other obligations securing or supporting such rights to payment; provided, however, that such intercompany debt obligations shall not include (x) Specified Intercompany Debt, (y) any Liens, letters of credit, insurance, guarantees and other obligations securing or supporting Specified Intercompany Debt or (z) any cash or non-cash proceeds of Specified Intercompany Debt; (5) all now owned and hereafter acquired rights under contracts and other general intangibles, but only to the extent necessary, used or useful in (i) the collection, sale or other disposition of the rights to payment described in clause (2) above or (ii) the processing, shipment 12 (including any rights of stoppage in transit), offtake, storage, completion, supply, lease, sale or other disposition (collectively, "Inventory Disposition Actions") of inventory which is owned or has been sold as of the date of any such Inventory Disposition Action; and (6) all cash and non-cash proceeds (as defined in Article 9 of the UCC as in effect in any applicable jurisdiction) of the foregoing. "Credit Facility Liens" means Liens securing the Credit Facility Obligations. "Credit Facility Obligations" means Indebtedness under a Credit Facility permitted to be incurred under clauses (i) or (xii) of the definition of "Permitted Debt" and other Obligations (not constituting Indebtedness) under such Credit Facility (which may, but need not, include Hedging Obligations and obligations under deposit account services agreements and cash management contracts with any lender that is or at any time was party to such Credit Facility or any of its Affiliates). "Custodian" means any receiver, trustee, assignee, liquidator, sequester or similar official under the Bankruptcy Code. "Default" means any event that is or with the passage of time or the giving of notice (or both) would be an Event of Default. "Designated Proceeds" means the amount of net cash proceeds received by the Company from each issuance or sale since the Closing Date of mandatorily convertible preferred stock of the Company (other than Disqualified Stock), that at the time of such issuance was designated by the Company as "Designated Proceeds" pursuant to an Officer's Certificate delivered to the Administrative Agent; provided, however, that if the mandatorily convertible preferred stock providing such Designated Proceeds is thereafter converted into common stock of the Company, that portion of the Designated Proceeds that has not been paid as dividends pursuant to clause (x) of the second paragraph of Section 5.07 hereof will no longer be considered to be Designated Proceeds. "Disqualified Stock" means, with respect to any Person, any Capital Stock to the extent that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event, it matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature, except such Capital Stock that is solely redeemable with, or solely exchangeable for, any Capital Stock of such Person that is not Disqualified Stock. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require the Company or any of its Restricted Subsidiaries to repurchase Capital Stock upon the occurrence of a change of control or an asset sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company or such Restricted Subsidiary may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 5.07 hereof. 13 "Dollars" and the sign "$" mean the lawful money of the United States of America. "Domestic Subsidiary" means any Restricted Subsidiary of the Company that was formed under the laws of the United States or any state of the United States or the District of Columbia or that guarantees or otherwise provides direct credit support for any Indebtedness of the Company. "Eligible Assignee" means (i) any Lender, any Affiliate of any Lender and any Related Fund (any two or more Related Funds being treated as a single Eligible Assignee for all purposes hereof), and (ii) any commercial bank, insurance company, investment or mutual fund or other entity that is an "accredited investor" (as defined in Regulation D under the Securities Act) and which extends credit or buys loans as one of its businesses; provided, no Affiliate of the Company shall be an Eligible Assignee. "Environmental Claim" means any investigation, notice, notice of violation, claim, action, suit, proceeding, demand, abatement order or other order or directive (conditional or otherwise), by any Governmental Authority or any other Person, arising (i) pursuant to or in connection with any actual or alleged violation of any Environmental Law; (ii) in connection with any Hazardous Material or any actual or alleged Hazardous Materials Activity; or (iii) in connection with any actual or alleged damage, injury, threat or harm to health, safety, natural resources or the environment. "Environmental Laws" means any and all current or future foreign or domestic, federal or state (or any subdivision of either of them), statutes, ordinances, orders, rules, regulations, judgments, Governmental Authorizations, or any other requirements of Governmental Authorities relating to (i) environmental matters, including those relating to any Hazardous Materials Activity; (ii) the generation, use, storage, transportation or disposal of Hazardous Materials; or (iii) occupational safety and health, industrial hygiene, land use or the protection of human, plant or animal health or welfare, in any manner applicable to the Company or any of its Restricted Subsidiaries or any Facility. "Equally and Ratably" means, in reference to sharing of any Liens or proceeds thereof as between the holders of Note Obligations, on the one hand, and Term Loan Obligations, on the other hand, that such Liens or proceeds: (1) shall be allocated and distributed first to the Trustee for account of the holders of Notes, on the one hand, and to the Administrative Agent for account of the Lenders, on the other hand, ratably in proportion to the principal of and interest and premium (if any) outstanding on the Notes when the allocation or distribution is made, on the one hand, and the principal of and interest (including special interest) and premium (if any) outstanding on the Term Loans when the allocation or distribution is made, on the other hand; and thereafter (2) shall be allocated and distributed (if any remain after payment in full of all of the principal of and interest (including special interest) and premium on the Notes and the Term Loans) to the Trustee for account of the holders of any remaining Note Obligations, on the one hand, and to the Administrative Agent for account of the holders of any remaining Term Loan 14 Obligations, on the other hand, ratably in proportion to the aggregate unpaid amount of such remaining Note Obligations due and demanded (with written notice to the Trustee, the Administrative Agent and the Collateral Agent) prior to the date such distribution is made, on the one hand, and the aggregate unpaid amount of such remaining Term Loan Obligations due and demanded (with written notice to the Trustee, the Administrative Agent and the Collateral Agent) prior to the date such distribution is made, on the other hand. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Equity Offering" means any public or private sale of Capital Stock of the Company (other than sales made to any Restricted Subsidiary of the Company and sales of Disqualified Stock) made for cash after the Closing Date. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor thereto. "Eurodollar Base Rate" means, with respect to a Eurodollar Rate Loan for the relevant Interest Period, the applicable British Bankers' Association LIBOR rate for deposits in Dollars as reported by any generally recognized financial information service as of 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period, and having a maturity equal to such Interest Period, provided that, if no such British Bankers' Association LIBOR rate is available to the Administrative Agent, the applicable Eurodollar Base Rate for the relevant Interest Period shall instead be (a) the rate determined by the Administrative Agent to be the offered rate on such other page or other service which displays an average British Bankers Association Interest Settlement Rate for deposits (for delivery on the first day of such period) with a term equivalent to such period in Dollars, determined as of approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period, or (b) in the event the rates referenced in the preceding clauses (a) is not available, the rate per annum equal to the offered quotation rate to first class banks in the London interbank market by GSCP for deposits (for delivery on the first day of the relevant period) in Dollars of amounts in same day funds comparable to the principal amount of the applicable Term Loan of the Administrative Agent, in its capacity as a Lender, for which the Adjusted Eurodollar Rate is then being determined with maturities comparable to such period as of approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period. "Eurodollar Rate Loan" means a Term Loan bearing interest at a rate determined by reference to the Adjusted Eurodollar Rate. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Excluded Assets" means: (1) Credit Facility Collateral; 15 (2) any lease of premises used only as office space or to warehouse inventory; (3) all easements, rights-of-way, licenses and other real property interests for or pertaining to the construction, operation, use or maintenance of any pipeline over, upon or under land owned by another; (4) the fixtures and equipment of any pipeline and the Capital Stock of Tesoro High Plains Pipeline Company if, to the extent that and for as long as (i) the ownership or operation of such pipeline is regulated by any federal or state regulatory authority and (ii) under the law applicable to such regulatory authority the grant of a security interest in such fixtures and equipment or such Capital Stock, respectively, is prohibited or a security interest in such fixtures and equipment or such Capital Stock, respectively, may be granted only after completion of a filing with, or receipt of consent from, such regulatory authority which has not been effectively completed or received; provided, however, that (a) such fixtures and equipment or such Capital Stock, respectively, will be an Excluded Asset only to the extent and for as long as the conditions set forth in clauses (i) and (ii) in this definition are and remain satisfied and to the extent such assets otherwise constitute Collateral, will cease to be an Excluded Asset, and will become subject to the security interests granted to the Collateral Agent under the Security Documents, immediately and automatically at such time as the such conditions cease to exist, including by reason of the effective completion of any required filing or effective receipt of any required regulatory approval; and (b) unless prohibited by law, the proceeds of any sale, lease or other disposition of any such fixtures, equipment or Capital Stock that are Excluded Assets shall not be an Excluded Asset and shall at all times be and remain subject to the security interests granted to the Collateral Agent under the Security Documents; (5) with respect to personal property, any lease, license, permit, franchise, power, authority or right if, to the extent that and for as long as (i) the grant of a security interest therein constitutes or would result in the abandonment, invalidation or unenforceability of such lease, license, interest, permit, franchise, power, authority or right or the termination of or a default under the instrument or agreement by which such lease, license, interest, permit, franchise, power, authority or right is governed and (ii) such abandonment, invalidation, unenforceability, breach, termination or default is not rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor provision) of any relevant jurisdiction or any other applicable law (including the United States Bankruptcy Code) or principles of equity; provided, however, that (a) such lease, license, interest, permit, franchise, power, authority or right will be an Excluded Asset only to the extent and for as long as the conditions set forth in clauses (i) and (ii) in this definition are and remain satisfied and to the extent such assets otherwise constitute Collateral, will cease to be an Excluded Asset, and will become subject to the security interests granted to the Collateral Agent under the Security Documents, immediately and automatically at such time as such conditions cease to exist, including by reason of any waiver or consent under the applicable instrument or agreement, and (b) the proceeds of any sale, lease or other disposition of any such lease, license, interest, permit, franchise, power, authority or right that is or becomes an Excluded Asset shall not be an Excluded Asset and shall at all times be and remain subject to the security interests granted to the Collateral Agent under the Security Documents; 16 (6) with respect to any real property, any lease, license, permit, franchise, power, authority or right if, to the extent that and for as long as the grant of a security interest therein (i) requires a third party consent or (ii) constitutes or would result in the abandonment, invalidation or unenforceability of such lease, license, interest, permit, franchise, power, authority or right or the termination of or a default under the instrument or agreement by which such lease, license, interest, permit, franchise, power, authority or right is governed; provided, however, that such lease, license, interest, permit, franchise, power, authority or right will be an Excluded Asset only to the extent and for as long as the conditions set forth in this definition are and remain satisfied and to the extent such assets otherwise constitute Collateral, will cease to be an Excluded Asset, and will become subject to the security interests granted to the Collateral Agent under the Security Documents, immediately and automatically at such time as such conditions cease to exist, including by reason of any waiver or consent under the applicable instrument or agreement; (7) all trademarks; (8) the Marine Services Business; (9) the Retail Properties; and (10) (a) other property in which a security interest cannot be perfected by the filing of a financing statement under the UCC and (b) without duplication, motor vehicles, that have, in the aggregate for all such property and motor vehicles, a fair market value (as determined in good faith by the Company) not exceeding $10,000,000. "Existing Indebtedness" means the aggregate Indebtedness of the Company and its Restricted Subsidiaries (other than Indebtedness under the Senior Credit Facility) in existence on the Closing Date as described on Schedule 5.09. "Existing Refineries" shall have the meaning provided in the definition of "Collateral." "Existing Senior Secured Credit Facility" means the Amended and Restated Credit Agreement dated as of May 17, 2002, by and among the Company, the lenders party thereto, Lehman Brothers Inc., as arranger, Lehman Commercial Paper Inc., as syndication agent, ABN AMRO Bank N.V., Bank of America, N.A., Credit Lyonnais New York Branch and The Bank of Nova Scotia, as co-documentation agents, and Bank One, NA, as administrative agent, as amended by that certain First Amendment dated as of September 30, 2002, and that certain Second Amendment dated as of December 13, 2002. "Facility" means any real property (including all buildings, fixtures or other improvements located thereon) now, hereafter or heretofore owned, leased, operated or used by the Company or any of its Restricted Subsidiaries or any of their respective predecessors or Affiliates. "Fair Market Value" means, with respect to consideration received or to be received, or given or to be given, pursuant to any transaction by the Company or any Restricted Subsidiary, 17 the fair market value of such consideration as determined in good faith by the Board of Directors of the Company. "Federal Funds Effective Rate" means for any day, an interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the Federal Funds Rate for such day shall be the average rate charged to the Administrative Agent, in its capacity as a Lender, on such day on such transactions as determined by the Administrative Agent. "Financial Hedging Agreements" means (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates or currency exchange rates in connection with the conduct of its business and not for speculative purposes. "Financial Hedging Obligations" means, with respect to any Person, the net payment Obligations of such Person under Financial Hedging Agreements. "Financing Transaction" means collectively, the repayment of the Existing Senior Secured Credit Facility and purchase by the Company of approximately $25,000,000 of the Company's existing senior subordinated notes with the proceeds from the sale of the Notes, the borrowings under this Agreement and borrowings under the Senior Credit Facility. "Fixed Charge Coverage Ratio" means, with respect to any Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the Company or any of its Restricted Subsidiaries incurs, assumes, guarantees or redeems any Indebtedness (other than revolving credit borrowings under any Credit Facility) or issues or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee or redemption of Indebtedness, or such issuance or redemption of preferred stock, as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of making the computation referred to above: (i) acquisitions that have been made by the Company or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated without giving effect to clause (iii) of the proviso set forth in the definition of "Consolidated Net Income"; (ii) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded; and (iii) the Fixed Charges attributable to 18 discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the referent Person or any of its Restricted Subsidiaries following the Calculation Date. "Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of: (i) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation or duplication, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations); (ii) the consolidated interest of such Person and its Restricted Subsidiaries that was capitalized during such period; (iii) any interest expense on Indebtedness of another Person that is guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries (whether or not such guarantee or Lien is called upon); and (iv) the product of: (a) all dividend payments, whether or not in cash, on any series of preferred stock of such Person or any of its Restricted Subsidiaries, other than dividend payments on Equity Interests payable solely in Equity Interests of the Company (other than Disqualified Stock), times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "Flood Hazard Property" means any interest (fee, leasehold or otherwise) then owned by any Obligor in any real property subject to a mortgage in favor of Collateral Agent, for the benefit of the Secured Parties, and located in an area designated by the Federal Emergency Management Agency as having special flood or mud slide hazards. "Funding Notice" means a notice substantially in the form of Exhibit A-1. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, the statements and pronouncements of the Financial Accounting Standards Board and such other statements by such other entities as have been approved by a significant segment of the accounting profession, which are applicable at the date of determination. "Governmental Authority" means any federal, state, municipal, national or other government, governmental department, commission, board, bureau, court, agency or instrumentality or political subdivision thereof or any entity or officer exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case whether associated with a state of the United States, the United States, or a foreign entity or government. 19 "Governmental Authorization" means any permit, license, authorization, plan, directive, consent order or consent decree of or from any Governmental Authority. "Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America for the payment of which guarantees or obligations the full faith and credit of the United States is pledged. "GSCP" means Goldman Sachs Credit Partners L.P. "Guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof or pledging assets to secure), of all or any part of any Indebtedness. "Guarantor Joinder Agreement" means an agreement substantially in the form of Exhibit F delivered by an Obligor pursuant to Section 5.17. "Guarantors" means: (i) each of Digicomp Inc., Far East Maritime Company, Gold Star Maritime Company, Kenai Pipe Line Company, Smiley's Super Service, Inc., Tesoro Alaska Company, Tesoro Alaska Pipeline Company, Tesoro Aviation Company, Tesoro Financial Services Holding Company, Tesoro Gas Resources Company, Inc., Tesoro Hawaii Corporation, Tesoro High Plains Pipeline Company, Tesoro Marine Services Holding Company, Tesoro Marine Services, LLC, Tesoro Maritime Company, Tesoro Northstore Company, Tesoro Petroleum Companies, Inc., Tesoro Refining and Marketing Company, Tesoro Technology Company, Tesoro Trading Company, Tesoro Vostok Company, Tesoro Wasatch, LLC and Victory Finance Company; (ii) each Restricted Subsidiary that becomes a guarantor of the Term Loans pursuant to Section 5.17 or Section 12.02 hereof; and (iii) each Restricted Subsidiary executing a Guarantor Joinder Agreement in which such Restricted Subsidiary agrees to be bound by the terms of this Agreement; provided that any Person constituting a Guarantor as described above shall cease to constitute a Guarantor when its respective Term Loan Guarantee is released in accordance with the terms hereof. "Hazardous Materials" means any chemical, material or substance, exposure to which is prohibited, limited or regulated by any Governmental Authority or which may or could pose a hazard to the health and safety of the owners, occupants or any Persons in the vicinity of any Facility or to the indoor or outdoor environment. "Hazardous Materials Activity" means any past, current, proposed or threatened activity, event or occurrence involving any Hazardous Materials, including the use, manufacture, 20 possession, storage, holding, presence, existence, location, Release, threatened Release, discharge, placement, generation, transportation, processing, construction, treatment, abatement, removal, remediation, disposal, disposition or handling of any Hazardous Materials, and any corrective action or response action with respect to any of the foregoing. "Hedging Obligations" means, with respect to any Person, collectively, the Commodity Hedging Obligations of such Person and the Financial Hedging Obligations of such Person. "Highest Lawful Rate" means the maximum lawful interest rate, if any, that at any time or from time to time may be contracted for, charged, or received under the laws applicable to any Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws now allow. "Historical Financial Statements" means as of the Closing Date, (i) the audited financial statements of the Company and its Restricted Subsidiaries, on a consolidated basis, for the immediately preceding Fiscal Year, consisting of balance sheets and the related consolidated statements of income, stockholders' equity and cash flows for such Fiscal Years, and (ii) the unaudited financial summaries of Company and its Restricted Subsidiaries for the months of January and February of 2003. "Immaterial Subsidiary" means any Domestic Subsidiary for so long as: (1) such Domestic Subsidiary has total assets with a fair market value (as determined by the Company in good faith) of less than $1,000,000; (2) such Domestic Subsidiary has total revenues for each of its annual fiscal periods ending after the Closing Date of less than $1,000,000; and (3) such Domestic Subsidiary has not guaranteed or otherwise provided direct or indirect credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries. "Indebtedness" means, with respect to any Person, without duplication, (i) the principal of and premium, if any, with respect to indebtedness of such Person for borrowed money or evidenced by bonds, notes, debentures or similar instruments; (ii) reimbursement obligations of such Person for letters of credit or banker's acceptances; (iii) Capital Lease Obligations of such Person; (iv) obligations of such Person for the payment of the balance deferred and unpaid of the purchase price of any property except any such balance that constitutes an accrued expense or trade payable; or (v) Hedging Obligations, in each case of the foregoing clauses (i) through (v) if and to the extent any of the foregoing obligations or indebtedness (other than letters of credit, banker's acceptances and Hedging Obligations), but excluding amounts recorded in accordance with Statement of Financial Accounting Standard No. 133, would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP. In addition, the term "Indebtedness" includes: (A) obligations or indebtedness of others of the type referred to in the foregoing clauses (i) through (v) that are secured by a Lien on any asset of such Person (whether or not such Indebtedness is assumed by such Person), but in an amount not to exceed the lesser 21 of the amount of such other Person's obligation or indebtedness or the Fair Market Value of such asset; and (B) to the extent not otherwise included, the guarantee by such Person of any obligations or indebtedness of others of the type referred to in the foregoing clauses (i) through (v), whether or not such guarantee is contingent, and whether or not such guarantee appears on the balance sheet of such Person. "Indemnified Liabilities" means, collectively, any and all liabilities, obligations, losses, damages (including natural resource damages), penalties, claims (including Environmental Claims), costs (including the costs of any investigation, study, sampling, testing, abatement, cleanup, removal, remediation or other response action necessary to remove, remediate, clean up or abate any Hazardous Materials Activity), expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened by any Person, and any fees or expenses incurred by Indemnitees in enforcing this indemnity), whether direct, indirect or consequential and whether based on any federal, state or foreign laws, statutes, rules or regulations (including securities and commercial laws, statutes, rules or regulations and Environmental Laws), on common law or equitable cause or on contract or otherwise, that may be imposed on, incurred by, or asserted against any such Indemnitee, in any manner relating to or arising out of (i) this Agreement or the other Term Loan Documents or the transactions contemplated hereby or thereby (including Lenders' agreement to make Term Loans or the use or intended use of the proceeds thereof, or any enforcement of any of the Term Loan Documents (including any sale of, collection from, or other realization upon any of the Collateral or the enforcement of the Guaranty)); (ii) the statements contained in the commitment letter delivered by any Lender to Company with respect to the transactions contemplated by this Agreement; or (iii) any Environmental Claim or any Hazardous Materials Activity relating to or arising from, directly or indirectly, any past or present activity, operation, land ownership, or practice of the Company or any of its Restricted Subsidiaries. "Indenture" is defined in the Recitals. "Independent Financial Advisor" means a nationally recognized accounting, appraisal or investment banking firm that is, in the reasonable judgment of the Board of Directors, qualified to perform the task for which such firm has been engaged hereunder and disinterested and independent with respect to the Company and its Affiliates; provided, that providing accounting, appraisal or investment banking services to the Company or any of its Affiliates or having an employee, officer or other representative serving as a member of the Board of Directors of the Company or any of its Affiliates will not disqualify any firm from being an Independent Financial Advisor. "Initial Term Loan" means an Initial Term Loan made by a Lender to the Company pursuant to Section 2.1(a) (Term Loans). "Initial Term Loan Commitment" means the commitment of a Lender to make or otherwise fund an Initial Term Loan and "Initial Term Loan Commitments" means such commitments of all Lenders in the aggregate. The amount of each Lender's Initial Term Loan 22 Commitment, if any, is set forth on Appendix A, on Schedule 1 to the Lender Addendum delivered by such Lender or in the applicable Assignment Agreement, subject to any adjustment or reduction pursuant to the terms and conditions hereof. The aggregate amount of the Initial Term Loan Commitments as of the Closing Date is $200,000,000. "Initial Notes" is defined in the Recitals. "Intercreditor Agreement" means any agreement at any time entered into between the Collateral Agent and a Credit Facility Agent as described under Section 10.01. "Interest Payment Date" means with respect to (i) any Base Rate Loan, each April 15, July 15, October 15 and January 15 of each year, commencing on the first such date to occur after the Closing Date and the final maturity date of such Term Loan; and (ii) any Eurodollar Rate Loan, the last day of each Interest Period applicable to such Term Loan; provided, in the case of each Interest Period of longer than three months "Interest Payment Date" shall also include each date that is three months, or an integral multiple thereof, after the commencement of such Interest Period. "Interest Period" means, in connection with a Eurodollar Rate Loan, an interest period of one, two, three or six months, as selected by the Company in the applicable Funding Notice or Conversion/Continuation Notice, (i) initially, commencing on the Credit Date or Conversion/Continuation Date; and (ii) thereafter, commencing on the day on which the immediately preceding Interest Period expires; provided, (a) if an Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day unless no further Business Day occurs in such month, in which case such Interest Period shall expire on the immediately preceding Business Day; (b) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c), of this definition, end on the last Business Day of a calendar month; and (c) no Interest shall extend beyond the Maturity Date. "Interest Rate Determination Date" means, with respect to any Interest Period, the date that is two Business Days prior to the first day of such Interest Period. "Inventory Disposition Actions" shall have the meaning provided in the definition of "Credit Facility Collateral". "Investment Grade Rating" means a rating equal to or higher than Baa3 (or the equivalent) by Moody's or BBB- (or the equivalent) by S&P. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including guarantees of Indebtedness or other Obligations), advances (other than advances to customers in the ordinary course of business which are recorded as accounts receivable on the balance sheet of the lender and commissions, moving, travel and similar advances to employees and officers made in the ordinary course of business) or capital contributions, purchases or other acquisitions for 23 consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any of its Restricted Subsidiaries sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a direct or indirect Restricted Subsidiary of the Company, the Company, or such Restricted Subsidiary, as the case may be, shall be deemed to have made an Investment on the date of any such sale or disposition equal to the Fair Market Value of the Equity Interests of such Restricted Subsidiary not sold or disposed of in an amount determined as provided in the fourth paragraph of Section 5.07 hereof. "Lender" means each financial institution listed on the signature pages hereto as a Lender, and any other Person that becomes a party hereto pursuant to an Assignment Agreement or a Lender Joinder Agreement. "Lender Addendum" means with respect to any initial Lender, a Lender Addendum, substantially in the form of Exhibit H, to be executed and delivered by such Lender on the Closing Date as provided in Section 13.06(j). "Lender Joinder Agreement" means an agreement substantially in the form of Exhibit G. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in any asset and any filing of or agreement to give any financing statement under the UCC (or equivalent statutes) of any jurisdiction). "Marine Services Business" means (1) all assets involved in the marketing and distribution of petroleum products and provision of logistical support services to the marine and offshore exploration and production industries operating in the Gulf of Mexico, including, without limitation, the 15 terminals located on the Texas and Louisiana coast and all related tugboats, barges and trucks, provided that such assets are owned by either entity referred to in clauses (2) or (3) of this definition and such assets are located on or near either the Texas or Louisiana coast, (2) the Capital Stock of Tesoro Marine Services Holding Company and (3) the membership interests of Tesoro Marine Services, LLC; provided that such assets will not include any assets relating to the sale of petroleum products in bulk and wholesale markets. "Material Adverse Effect" means a material adverse effect on (i) the condition (financial or otherwise), results of operations, business, earnings or prospects of the Company and its Subsidiaries, taken as a whole, (ii) the value of the Collateral or (iii) the validity or enforceability of the Security Documents or any lien purporting to be created thereby or any right or remedy arising thereunder "Maturity Date" means the earlier of (i) April 15, 2008, and (ii) the date that all Term Loans shall become due and payable in full hereunder, whether by acceleration or otherwise. 24 "Moody's" means Moody's Investors Service, Inc., or any successor to the rating agency business thereof. "Mortgages" means a Mortgage substantially in the form of Exhibit I. "NAIC" means The National Association of Insurance Commissioners, and any successor thereto. "Net Income" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however, (i) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions); or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries; and (ii) any extraordinary or nonrecurring gain (but not loss), together with any related provision for taxes on such extraordinary or nonrecurring gain (but not loss). "Net Proceeds" means the aggregate cash proceeds or Cash Equivalents received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of (i) the direct costs relating to such Asset Sale (including, without limitation, legal, accounting, investment banking and brokers fees, sales and underwriting commissions and other reasonable costs incurred in preparing such asset for sale) and any relocation expenses incurred as a result thereof, and any related severance and associated costs, expenses and charges of personnel related to the sold assets and related operations, (ii) taxes paid or reserved as payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), (iii) distributions and payments required to be made to minority interest holders in Restricted Subsidiaries as a result of such Asset Sale, (iv) amounts paid in order to satisfy any Lien attaching to an asset in connection with such Asset Sale and (v) any reserve for adjustment (whether or not placed in escrow) in respect of the sale price of such asset or assets established in accordance with GAAP. "Net Sale Consideration" means the aggregate cash proceeds, Cash Equivalents and other consideration received by the Company or any of its Restricted Subsidiaries in respect of any Sale of Collateral, net of (i) the direct costs relating to such Sale of Collateral (including, without limitation, legal, accounting, investment banking and brokers fees, sales and underwriting commissions and other reasonable costs incurred in preparing such asset for sale), any relocation expenses incurred as a result thereof and any related severance and associated costs, expenses and charges of personnel related to the sold assets and related operations, (ii) taxes paid or reserved as payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), (iii) amounts paid in order to satisfy any Lien attaching to an asset in connection with such Sale of Collateral and (iv) distributions and payments required to be made to minority interest holders in Restricted Subsidiaries as a result of such Sale of Collateral. 25 "Non-Recourse Indebtedness" means Indebtedness: (i) as to which neither the Company nor any of its Restricted Subsidiaries, (a) provides any guarantee or credit support of any kind (including any undertaking, guarantee, indemnity, agreement or instrument that would constitute Indebtedness); or (b) is directly or indirectly liable (as a guarantor or otherwise); (ii) the incurrence of which will not result in any recourse against any of the assets of the Company or its Restricted Subsidiaries; and (iii) no default with respect to which would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Company or any of its Restricted Subsidiaries to declare pursuant to the express terms governing such Indebtedness a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its Stated Maturity. "Note Documents" means the Indenture, the Notes, the exchange notes, the Subsidiary Guarantees and the Security Documents. "Note Obligations" means the Notes (including all additional Notes and all exchange notes therefor), the Subsidiary Guarantees and all other Obligations of any Obligor under the Note Documents. "Notes" means the Initial Notes, the exchange notes and any additional notes issued pursuant to the Indenture. "Notice" means a Funding Notice or a Conversion/Continuation Notice. "Obligations" means any principal, premium (if any), interest (including special interest, if any, and interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company or its Restricted Subsidiaries whether or not a claim for post-filing interest is allowed in such proceeding), penalties, fees, charges, expenses, indemnifications, reimbursement obligations, damages (including special interest), guarantees (including the Subsidiary Guarantees and the Term Loan Guarantees, as applicable) and other liabilities or amounts payable under the documentation governing any Indebtedness or in respect thereof. "Obligor" means the Company, the Guarantors and each other Subsidiary of the Company that has granted the Collateral Agent a Lien upon any of the Collateral as security for any Secured Obligation. "Offering Circular" means the offering circular, dated April 7, 2003 prepared by the Company in connection with the offering of the Notes. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. 26 "Officers' Certificate" means a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company. "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Administrative Agent or the Collateral Agent, as applicable. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company, the Administrative Agent or the Collateral Agent. "Owned Terminals" shall have the meaning provided in the definition of "Collateral." "Permitted Business" means, with respect to the Company and its Restricted Subsidiaries, the businesses of (i) the acquisition, development, operation and disposition of interests in oil, gas and other hydrocarbon properties, (ii) the acquisition, gathering, treating, processing, storage, transportation of production from such interests or properties, (iii) the acquisition, processing, marketing, refining, distilling, storage and/or transportation of hydrocarbons and/or royalty or other interests in crude oil or refined or associated products related thereto, (iv) the acquisition, operation, improvement, leasing and other use of convenience stores, retail service stations, truck stops and other public accommodations in connection therewith, (v) the marketing and distribution of petroleum and marine products and the provision of logistical services to marine and offshore exploration and production industries, (vi) any business currently engaged in by the Company or its Restricted Subsidiaries and (vii) any activity or business that is a reasonable extension, development or expansion of, or reasonably related to, any of the foregoing. "Permitted Debt" means: (i) the incurrence by the Company or any Guarantor of additional Indebtedness and letter of credit reimbursement obligations under one or more Credit Facilities (with letter of credit reimbursement obligations being deemed to have a principal amount equal to the maximum potential liability of the Company or its Restricted Subsidiaries for reimbursement obligations thereunder) in an aggregate principal amount at any one time outstanding under this clause (i) not to exceed the greater of: (A) $700,000,000; or (B) the amount of the Borrowing Base as of the date of such incurrence; (ii) the incurrence by the Company and the Guarantors of Indebtedness represented by the Notes and the Subsidiary Guarantees, in each case, together with the related Note Obligations; (iii) the incurrence by the Company and the Guarantors of Indebtedness under this Agreement or represented by the Term Loans and the Term Loan Guarantees and the other Term Loan Obligations on the Closing Date in an aggregate principal amount not to exceed $200,000,000; (iv) the incurrence by the Company or any of its Restricted Subsidiaries of Existing Indebtedness; 27 (v) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness, the net proceeds of which are applied to refinance any Indebtedness other than Indebtedness incurred pursuant to clause (i) above; (vi) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries; provided, however, that (A) if the Company or any Guarantor is the obligor and a Restricted Subsidiary of the Company that is not a Guarantor is the obligee on such Indebtedness, such Indebtedness will be subordinated to the payment in full of all Obligations with respect to the Notes, (B) if such intercompany Indebtedness constitutes Specified Intercompany Debt, a perfected first priority security interest (subject to Permitted Prior Liens) is granted to the Collateral Agent in such intercompany Indebtedness and (C) (1) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary of the Company and (2) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary of the Company shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that is not then permitted by this clause (vi); (vii) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations (including any Acquired Debt), in each case, incurred in connection with the purchase of, or for the purpose of financing the purchase price of, the cost of construction, improvement or development of, property, plant or equipment used in the Permitted Business (including, without limitation, oil and gas properties) of the Company or a Restricted Subsidiary of the Company or incurred to extend, refinance, renew, replace, defease or refund any such purchase price or cost of construction, improvement or development, in an aggregate principal amount not to exceed $100,000,000 at any time outstanding; (viii) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness consisting of Hedging Obligations entered into in the ordinary course of business and not for speculative purposes; (ix) Indebtedness arising from agreements of the Company or any of its Restricted Subsidiaries providing for indemnification, adjustment of purchase price or similar obligations, in each case, incurred in connection with the disposition or acquisition of any business, assets or a Restricted Subsidiary of the Company or any business or assets of its Restricted Subsidiaries, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or a Restricted Subsidiary of the Company or any of its Restricted Subsidiaries for the purposes of financing such acquisition; provided, however, that (A) such Indebtedness is not reflected on the balance sheet of the Company or any of its Restricted Subsidiaries (contingent obligations referred to in a footnote to financial statements and not otherwise reflected on the balance sheet will not be deemed to be reflected on such balance sheet for purposes of this clause (A)) and (B) the maximum liability in respect of all such Indebtedness incurred in connection with a disposition shall at no time exceed the gross 28 proceeds including noncash proceeds (the Fair Market Value of such noncash proceeds being measured at the time received and without giving effect to any subsequent changes in value) actually received by the Company and its Restricted Subsidiaries in connection with such disposition; (x) the guarantee by the Company or any of the Guarantors of, or the grant by the Company or any of the Guarantors of Security Interests with respect to, Indebtedness of the Company or a Restricted Subsidiary of the Company that was permitted to be incurred by Section 5.09 hereof (other than pursuant to this clause (x); provided, that the guarantee of, or the grant of Security Interests with respect to, any Indebtedness of a Restricted Subsidiary of the Company that ceases to be such a Restricted Subsidiary shall be deemed a Restricted Investment at the time such Restricted Subsidiary's status terminates in an amount equal to the maximum principal amount so guaranteed or liened against, for so long as, and to the extent that, such guarantee or security interest remains outstanding; (xi) the issuance by a Restricted Subsidiary of the Company of preferred stock to the Company or to any of its Restricted Subsidiaries; provided, however, that any subsequent event or issuance or transfer of any Equity Interests that results in the owner of such preferred stock ceasing to be the Company or any of its Restricted Subsidiaries or any subsequent transfer of such preferred stock to a Person, other than the Company or one of its Restricted Subsidiaries, shall be deemed to be an issuance of preferred stock by such Subsidiary that was not permitted by this clause (xi); and (xii) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness (in addition to Indebtedness permitted by any other clause of this paragraph) in an aggregate principal amount (or accreted value, as applicable) at any time outstanding not to exceed $75,000,000. "Permitted Investments" means: (a) any Investment in the Company or in a Restricted Subsidiary of the Company that is a Guarantor; (b) any Investment in Cash Equivalents or deposit accounts maintained in the ordinary course of business consistent with past practices; (c) any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment (i) such Person becomes a Restricted Subsidiary of the Company and a Guarantor; or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys all or substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company that is a Guarantor; (d) any security or other Investment received or Investment made as a result of the receipt of non-cash consideration from (i) an Asset Sale that was made pursuant to and in compliance with Section 5.10 hereof; or (ii) a disposition of assets that do not constitute an Asset Sale; 29 (e) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; (f) any Investment received in settlement of debts, claims or disputes owed to the Company or any Restricted Subsidiary of the Company that arose out of transactions in the ordinary course of business; (g) any Investment received in connection with or as a result of a bankruptcy, workout or reorganization of any Person; (h) advances and extensions of credit in the nature of accounts receivable arising from the sale or lease of goods or services or the licensing of property in the ordinary course of business; (i) relocation allowances for, and advances and loans to, employees, officers and directors (including, without limitation, loans and advances the net cash proceeds of which are used solely to purchase Equity Interests of the Company in connection with restricted stock or employee stock purchase plans, or to exercise stock received pursuant thereto or other incentive plans in a principal amount not to exceed the aggregate exercise or purchase price), or loans to refinance principal and accrued interest on any such loans, provided that the aggregate principal amount of such loans, advances and allowances shall not exceed at any time $20,000,000; (j) other Investments by the Company or any Restricted Subsidiary of the Company in any Person having an aggregate Fair Market Value (measured as of the date each such Investment is made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (j) (net of returns of capital, dividends and interest paid on Investments and sales, liquidations and redemptions of Investments), not in excess of $50,000,000; (k) Investments in the form of intercompany Indebtedness or Guarantees of Indebtedness of a Restricted Subsidiary of the Company permitted under clauses (vi) and (xi) of the definition of "Permitted Debt"; (l) Investments arising in connection with Hedging Obligations that are incurred in the ordinary course of business for the purpose of fixing or hedging currency, commodity or interest rate risk in connection with the conduct of the business of the Company and its Subsidiaries and not for speculative purposes; (m) Investments in the form of, or pursuant to, operating agreements, joint ventures, partnership agreements, working interests, royalty interests, mineral leases, processing agreements, farm-out agreements, contracts for the sale, transportation or exchange of oil and natural gas, unitization agreements, pooling agreements, area of mutual interests agreements, production sharing agreements or other similar or customary agreements, transactions, properties, interests or arrangements, and Investments and expenditures in connection therewith or pursuant thereto, in each case, made or entered into the ordinary course of the business 30 described in clauses (i) and (ii) of the definition of "Permitted Business" excluding, however, investments in corporations; (n) any Investments in prepaid expenses, negotiable instruments held for collection and lease, utility, worker's compensation, performance and other similar deposits and prepaid expenses made in the ordinary course of business; and (o) Investments pursuant to agreements and obligations of the Company and any Restricted Subsidiary in effect on the Closing Date. "Permitted Liens" means: (1) Liens on Credit Facility Collateral of the Company and any Guarantor (other than a Pipeline Subsidiary) securing the Credit Facility Obligations; (2) Liens created pursuant to the Security Documents securing, Equally and Ratably, the Notes and the Term Loans, having an aggregate principal amount at any one time outstanding not to exceed $725,000,000, together with all other Secured Obligations; (3) Liens (not securing Obligations under a Credit Facility) in favor of the Company or the Guarantors; (4) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (vii) of the definition of "Permitted Debt" covering only the assets acquired with such Indebtedness; (5) Liens existing on the Closing Date as set forth on Schedule 5.12; (6) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings diligently pursued, provided that any reserve or other appropriate provision as is required in conformity with GAAP has been made therefore; (7) Liens on the Marine Services Business; (8) Liens on the Retail Properties; (9) carriers', warehousemen's, mechanics', materialmen's, repairman's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 30 days or that are being contested in good faith by appropriate proceedings; (10) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation; 31 (11) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (12) easements, rights of way, restrictions and other similar encumbrances incurred in the ordinary course of business that, in the aggregate, do not materially interfere with the ordinary conduct of the business of the Company or any of its Subsidiaries; (13) any interest or title of a lessor under any lease entered into by the Company or any of its Subsidiaries in the ordinary course of its business and covering only the assets so leased; (14) any Lien securing Indebtedness, neither assumed nor guaranteed by the Company or any of its Subsidiaries nor on which it customarily pays interest, existing upon real estate or rights in or relating to real estate acquired by the Company for substation, metering station, pump station, storage, gathering line, transmission line, transportation line, distribution line or for right-of-way purposes, any Liens reserved in leases for rent and for compliance with the terms of the leases in the case of leasehold estates, to the extent that any such Lien referred to in this clause (14) does not materially impair the use of the property covered by such Lien for the purposes of which such property is held by the Company or any of its Subsidiaries; (15) inchoate Liens arising under ERISA; (16) any obligations or duties affecting any of the property of the Company or its Subsidiaries to any municipality or public authority with respect to any franchise, grant, license or permit which do not materially impair the use of such property for the purposes for which it is held; (17) defects, irregularities and deficiencies in title of any rights of way or other property of the Company or any of its Subsidiaries which, in the aggregate, do not materially impair the use of such rights of way or other property for the purposes for which such rights of way and other property are held by the Company or any of its Subsidiaries and defects, irregularities and deficiencies in title to any property of the Company or any of its Subsidiaries, which defects, irregularities or deficiencies have been cured by possession under applicable statutes of limitation; (18) Liens in favor of collecting or payor banks having a right of setoff, revocation, refund or chargeback with respect to money or instruments of the Company or any of its Subsidiaries on deposit with or in possession of such bank; (19) Liens on cash or cash equivalents to secure obligations of the Company and its Subsidiaries in respect of Commodity Hedging Agreements and Financial Hedging Agreements, in each case entered into in the ordinary course of business and not for speculative purposes, and Liens with respect to hedging accounts maintained with dealers of NYMEX or similar contracts which require the maintenance of cash margin account balances; and 32 (20) Liens incurred in the ordinary course of business of the Company or any Subsidiary of the Company with respect to obligations that do not exceed $5,000,000 at any one time outstanding. "Permitted Prior Liens" means (a) Liens described in clauses (4), (5), (12), (13), (17) or (18) of the definition of "Permitted Liens" and (b) Liens that arise by operation of law and are not voluntarily granted, to the extent entitled by law to priority over the security interests created by the Security Documents. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries, or portion of such Indebtedness, issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness), including Indebtedness that extends, refinances, renews, replaces, defeases or refunds Permitted Refinancing Indebtedness, provided that: (i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus accrued and unpaid interest on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus fees and expenses incurred in connection therewith, including any premium or defeasance cost); (ii) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Term Loans, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Term Loans on terms at least as favorable to the Lenders as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iv) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is secured, the Liens securing such Permitted Refinancing Indebtedness (a) are not materially less favorable to the Lenders and are not materially more favorable to the lienholders with respect to such Liens than the Liens in respect of the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded and (b) do not extend to or cover any property or assets of the Company or any of its Subsidiaries not securing the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded; and (v) such Indebtedness is incurred either by the Company or a Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Person" means any individual, corporation, partnership, joint venture, association, joint stock company, trust, limited liability company, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Pipeline Subsidiary" means (i) each of Kenai Pipe Line Company, Tesoro Alaska Pipeline Company and Tesoro High Plains Pipeline Company, and (ii) each other Restricted Subsidiary of the Company which acquires any of the Pipelines after the Closing Date. 33 "Pipelines" shall have the meaning provided in the definition of "Collateral." "preferred stock" means any Capital Stock of a Person, however designated, which entitles the holder thereof to a preference with respect to dividends, distributions or liquidation proceeds of such Person over the holders of the other Capital Stock issued by such Person. "Prime Rate" means the rate of interest per annum that Goldman Sachs Credit Partners L.P. announces from time to time as its prime lending rate, as in effect from time to time. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. Goldman Sachs Credit Partners L.P. or any other Lender may make commercial loans or other loans at rates of interest at, above or below the Prime Rate. "Principal Office" means, for the Administrative Agent, its "Principal Office" as set forth on Appendix B, or such other office as the Administrative Agent may from time to time designate in writing to the Company, the Administrative Agent and each Lender. "Pro Rata Share" means with respect to all payments, computations and other matters relating to the Term Loans of any Lender, the percentage obtained by dividing (A) an amount equal to the aggregate outstanding Term Loans of that Lender, by (B) an amount equal to the sum of the aggregate amount of outstanding Term Loans of all Lenders. "Qualified Credit Facility" means the Senior Credit Facility or any other Credit Facility: (1) which is governed by an agreement that provides for the benefit of the holders of the Notes, the Trustee, the Collateral Agent, the holders of the Term Loans and the Administrative Agent, as third party beneficiaries thereof, unless and until the Notes and Term Loans are paid in full and the Collateral Agent's Liens are released, that: (a) the Credit Facility Agent shall be bound by and shall perform each of the obligations of the Credit Facility Agent as set forth in Article X of this Agreement and (b) neither the Credit Facility Agent nor any lender or other holder of Credit Facility Obligations will ever accept, enforce or claim or retain any benefit of (i) any guarantee of any Credit Facility Obligation from any subsidiary that was a Pipeline Subsidiary on the date of such agreement, (ii) any Lien upon any assets of any such Pipeline Subsidiary as security for any Credit Facility Obligations or (iii) any consensual security interest in any Capital Stock of any Subsidiary of the Company; and (2) in respect of which such Credit Facility Agent has delivered to the Trustee, the Administrative Agent and the Collateral Agent: (a) written notice (that has not been withdrawn by such agent or representative) certifying that such Credit Facility is a Qualified Credit Facility and that such Credit Facility Agent is bound by and will perform the obligations of the Credit Facility Agent set forth in Article X of this Agreement; and 34 (b) if any other Credit Facility Agent previously delivered such notice and certification in respect of any predecessor Credit Facility, an instrument reasonably satisfactory to the Collateral Agent signed by such previous Credit Facility Agent withdrawing the previous notice and certification and forever renouncing and discharging all rights and benefits under this Agreement that otherwise would have been enforceable by such previous Credit Facility Agent or the holders of Obligations under such previous Credit Facility, in each case, as amended, modified, renewed, restated, refunded, replaced or refinanced (in each case, without limitation as to amount), in whole or in part, from time to time. "Refinery Assets" means property, plant and equipment used or to be used in the business of gathering, wholesale marketing, refining, distilling, wholesale distributing, terminalling, treating, processing, storing or transporting oil, gas or other hydrocarbons or related products, and other assets that are reasonably related thereto. "Regulation A" means Regulation A of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Regulation T" means Regulation T of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Regulation X" means Regulation X of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Related Fund" means, with respect to any Lender that is an investment fund, any other investment fund that invests in commercial loans and that is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor. "Release" means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching or migration of any Hazardous Material into the indoor or outdoor environment (including the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Material), including the movement of any Hazardous Material through the air, soil, surface water or groundwater. "Representative" means the administrative agent under the Senior Credit Facility or its successor thereunder. "Requisite Lenders" means one or more Lenders holding more than 50% of the sum of the aggregate outstanding Term Loans (or, at any time prior to the funding of the Initial Term 35 Loans, the Initial Term Loan Commitments). For this purpose only, Term Loans registered in the name of, or beneficially owned by, the Company or any Affiliate of the Company shall be deemed not to be outstanding. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Subsidiary" means any Subsidiary of the Company that is not an Unrestricted Subsidiary or a direct or indirect Subsidiary of an Unrestricted Subsidiary; provided that, on the Closing Date, all Subsidiaries of the Company shall be Restricted Subsidiaries. "Retail Properties" means all assets directly related to the retail sale of gasoline and diesel fuel in retail markets in the mid-continental and western United States (including Alaska and Hawaii), including, without limitation, all related gas stations, convenience stores, merchandise items, tow trucks, auto maintenance facilities, oil change facilities, and car washes; provided that such assets will not include any assets relating to the sale of petroleum products in bulk and wholesale markets. "S&P" means Standard & Poor's Ratings Group, Inc., or any successor to the rating agency business thereof. "Sale of Collateral" means any Asset Sale to the extent involving assets, rights or other property that constitutes Collateral under the Security Documents. "SEC" means the Securities and Exchange Commission. "Secured Obligations" means, collectively, the Note Obligations and the Term Loan Obligations. "Secured Parties" means the holders of the Secured Obligations. "Security Agreement" means the Pledge and Security Agreement dated the Closing Date among the Company, the Guarantors and the Collateral Agent. "Security Documents" means the Collateral Agency Agreement, the Security Agreement, the Control Agreement, the Mortgages, and all other grants or transfers for security, instruments, documents and agreements delivered by any Obligor pursuant to this Agreement, the other Term Loan Documents, the Indenture or the other Note Documents in order to grant to the Collateral Agent, Equally and Ratably, for the benefit of the Secured Parties, a Lien on any Collateral as security for the Secured Obligations. "Securities Act" means the Securities Act of 1933, as amended. "Senior Credit Facility" means those certain senior secured credit facilities of the Company available pursuant to the Credit Agreement, by and among the Company, Bank One, NA, as Administrative Agent, Banc One Capital Markets, Inc., as Sole Lead Arranger and Sole Bookrunner, Goldman Credit Partners L.P., as Syndication Agent, and certain other financial 36 institutions from time to time parties thereto, as lenders, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith and, in each case, as amended, modified, renewed, restated, refunded, replaced or refinanced (in each case, without limitation as to amount), in whole or in part, from time to time and any agreements (and related documents) governing Indebtedness incurred to refund or refinance credit extensions and commitments then outstanding or permitted to be outstanding under such Senior Credit Facility, whether by the same or any other lender or group of lenders. The Company shall promptly notify the Administrative Agent of any such refunding or refinancing of the existing Senior Credit Facility. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the Closing Date. "Sole Lead Arranger" is defined in the Preamble. "Specified Intercompany Debt" shall have the meaning provided in the definition of "Collateral." "Stated Maturity" means, with respect to any installment of interest or principal, or sinking fund or mandatory redemption of principal, on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid or made, as applicable, in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "Subsidiary" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or an entity described in clause (i) and related to such Person or (b) the only general partners of which are such Person or of one or more entities described in clause (i) and related to such Person (or any combination thereof). "Subsidiary Guarantee" means the guarantee of the Notes by each of the Guarantors pursuant to the Indenture and, if applicable, in the related form of guarantee notation endorsed on the form of Note and any additional guarantee of the Notes to be executed by any Restricted Subsidiary of the Company pursuant to the Indenture. "Tax" means any present or future tax, levy, impost, duty, assessment, charge, fee, deduction or withholding of any nature and whatever called, by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or assessed; provided, "Tax on the overall net income" of a Person shall be construed as a reference to a tax imposed by the jurisdiction in which that Person is organized or in which that Person's applicable principal office (and/or, in the case of a 37 Lender, its lending office) is located or in which that Person (and/or, in the case of a Lender, its lending office) is deemed to be doing business on all or part of the net income, profits or gains (whether worldwide, or only insofar as such income, profits or gains are considered to arise in or to relate to a particular jurisdiction, or otherwise) of that Person (and/or, in the case of a Lender, its applicable lending office). "Term Loan" means an Initial Term Loan or an Additional Term Loan. "Term Loan Commitment" means any Initial Term Loan Commitment or Additional Term Loan Commitment. "Term Loan Document" means any of this Agreement, the Term Loan Notes, if any, the Security Documents and all other documents, instruments or agreements executed and delivered by a Obligor for the benefit of any Agent or any Lender in connection herewith. "Term Loan Guarantee" means the guarantee of the Term Loans by each Guarantor pursuant to Article XII hereof and any additional guarantee of Term Loans to be executed by any Restricted Subsidiary pursuant to this Agreement. "Term Loan Note" means a promissory note in the form of Exhibit B, as it may be amended, supplemented or otherwise modified from time to time. "Term Loan Obligations" means the Term Loans (including Additional Term Loans), the Term Loan Guarantees and all other Obligations of any Obligor under the Term Loan Documents. "Trustee" is defined in the Recitals. "Type of Loan" means with respect to any Term Loan, a Base Rate Loan or a Eurodollar Rate Loan. "UCC" means the Uniform Commercial Code (or any similar or equivalent legislation) as in effect in any applicable jurisdiction. "Unrestricted Subsidiary" means (i) any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary of the Company) that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a resolution of the Board of Directors as certified in an Officers' Certificate delivered to the Administrative Agent and (ii) each Subsidiary of an Unrestricted Subsidiary, whenever it shall become such a Subsidiary. The Board of Directors may designate any Subsidiary of the Company to become an Unrestricted Subsidiary if it (a) has no Indebtedness other than Non-Recourse Indebtedness; (b) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained, in light of all the circumstances, at the time from Persons who are not Affiliates of the Company; (c) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (x) to subscribe for additional 38 Equity Interests or (y) to maintain or preserve such Person's financial condition or to cause such Persons to achieve any specified levels of operating results; (d) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries; and (e) does not own any Capital Stock of or own or hold any Lien on any property of, the Company or any Restricted Subsidiary of the Company; and (f) would constitute an Investment which the Company could make in compliance with Section 5.07. Notwithstanding the foregoing, if, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Agreement and any Indebtedness of such Subsidiary shall be deemed to be incurred as of such date. "U.S." means the United States of America. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. SECTION 1.02. Other Definitions.
DEFINED IN TERM SECTION - ---------------------------------------------------------------------------------------------- "Additional Term Loan Borrowing Date".......................................... 2.19 "Additional Term Loan Commitments"............................................. 2.19 "Additional Term Loans"........................................................ 2.19 "Affected Lender".............................................................. 2.15 "Affected Loans"............................................................... 2.15 "Affiliate Transaction"........................................................ 5.11 "Aggregate Amounts Due"........................................................ 2.14 "Asset Sale Offer"............................................................. 2.11 "Asset Sale Proceeds Account".................................................. 5.10 "Change of Control Offer"...................................................... 5.15 "Change of Control Payment".................................................... 5.15 "Change of Control Payment Date"............................................... 5.15 "Collateral Proceeds Offer".................................................... 5.10 "Consolidated Company"......................................................... 4.19 "Event of Default"............................................................. 7.01 "Excess Asset Sale Proceeds"................................................... 5.10 "Excess Proceeds from the Sale of Collateral".................................. 5.10
39
DEFINED IN TERM SECTION - ---------------------------------------------------------------------------------------------- "Filing Agent"................................................................. 3.01 "Financing Statements"......................................................... 3.01 "Funding Guarantor"............................................................ 12.05 "Increased Cost Lenders"....................................................... 2.18 "incur"........................................................................ 5.09 "Indemnitee"................................................................... 13.03 "Installment".................................................................. 2.09 "Installment Date"............................................................. 2.09 "Non-Consenting Lender"........................................................ 2.18 "Non-US Lender"................................................................ 2.17 "Offer Amount"................................................................. 2.11 "Offer Period"................................................................. 2.11 "Payout Amount"................................................................ 3.01 "Payment Default".............................................................. 7.01 "Processing and Sale Period"................................................... 10.04 "Projections".................................................................. 4.18 "Register"..................................................................... 2.04 "Repayment Date"............................................................... 2.11 "Replacement Lender"........................................................... 2.18 "Restricted Payments".......................................................... 5.07 "Suspended Covenants".......................................................... 5.19 "Terminated Lender"............................................................ 2.18
SECTION 1.03. Rules of Construction. Unless the context otherwise requires: (a) A term has the meaning assigned to it; (b) An accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (c) Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference. (d) Provisions apply to successive events and transactions (e) Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. (f) Any reference to any agreement or instrument shall be deemed to include a reference to such agreement or instrument as assigned, amended, amended and restated, 40 supplemented, otherwise modified from time to time or replaced in accordance with the terms of this Agreement. (g) The use in this Agreement or any of the Term Loan Documents of the word "include" or "including," when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as "without limitation" or "but not limited to" or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter. The word "will" shall be construed to have the same meaning and effect as the word "shall." (h) References to sections of or rules under the Securities Act shall be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time. (i) References to "Sections" and "clauses" shall be to Sections and clauses, respectively, of this Agreement unless otherwise specifically provided. (j) References to "Articles" shall be to Articles of this Agreement unless otherwise specifically provided. (k) References to "Exhibits" and "Schedules" shall be to Exhibits and Schedules, respectively, of this Agreement unless otherwise specifically provided. (l) The use in this Agreement of the words "herein," "hereof," and "hereunder," and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof. (m) This Agreement, the other Term Loan Documents and any documents or instruments delivered pursuant hereto shall be construed without regard to the identity of the party who drafted the various provisions of the same. Each and every provision of this Agreement, the other Term Loan Documents and instruments and documents entered into and delivered in connection therewith shall be construed as though the parties participated equally in the drafting of the same. Consequently, each of the parties acknowledges and agrees that any rule of construction that a document is to be construed against the drafting party shall not be applicable either to this Agreement or the other Term Loan Documents and instruments and documents entered into and delivered in connection therewith. 41 ARTICLE II THE TERM LOANS SECTION 2.01. Term Loans. (a) Term Loan Commitments. Subject to the terms and conditions hereof, each Lender severally agrees to make, on the Closing Date, an Initial Term Loan to the Company in an amount equal to such Lender's Initial Term Loan Commitment. The Company may make only one borrowing under the Initial Term Loan Commitment which shall be on the Closing Date. Any amount borrowed under this Section and subsequently repaid or prepaid may not be reborrowed. All amounts owed hereunder with respect to the Initial Term Loans shall be paid in full no later than the Maturity Date. Each Lender's Initial Term Loan Commitment shall terminate immediately and without further action on the Closing Date after giving effect to the funding of such Lender's Initial Term Loan Commitment on such date. (b) Borrowing Mechanics for Term Loans. (i) The Company shall deliver to the Administrative Agent a fully executed Funding Notice no later than one Business Day prior to the Closing Date. Promptly upon receipt by the Administrative Agent of such Funding Notice, the Administrative Agent shall notify each Lender of the proposed borrowing. (ii) Each Lender shall make its Term Loan available to the Administrative Agent not later than 1:00 p.m. (New York City time) on the Closing Date, by wire transfer of same day funds in Dollars, at the Administrative Agent's Principal Office. Upon satisfaction or waiver of the conditions precedent specified herein, the Administrative Agent shall make the proceeds of the Initial Term Loans available to the Company on the Closing Date by causing an amount of same day funds in Dollars equal to the proceeds of all such Initial Term Loans received by the Administrative Agent from Lenders to be credited to the account of the Company at the Administrative Agent's Principal Office or to such other account as may be designated in writing to the Administrative Agent by the Company. (iii) The Term Loans shall be funded on the Closing Date as Base Rate Loans unless the Company has requested funding as Eurodollar Rate Loans upon at least three Business Days' prior notice and agreed to indemnify the Lenders for the costs as set forth in Section 2.15(c) in form and substance reasonably satisfactory to the Administrative Agent. SECTION 2.02. Pro Rata Shares; Availability of Funds. (a) Pro Rata Shares. All Term Loans shall be made by the Lenders simultaneously and proportionately to their respective Pro Rata Shares, it being understood that no Lender shall be responsible for any default by any other Lender in such other Lender's 42 obligation to make a Term Loan requested hereunder nor shall any Term Loan Commitment of any Lender be increased or decreased as a result of a default by any other Lender in such other Lender's obligation to make a Term Loan requested hereunder. (b) Availability of Funds. Unless the Administrative Agent shall have been notified by any Lender prior to the applicable Credit Date that such Lender does not intend to make available to the Administrative Agent the amount of such Lender's Term Loan requested on such Credit Date, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on such Credit Date and the Administrative Agent may, in its sole discretion, but shall not be obligated to, make available to the Company a corresponding amount on such Credit Date. If such corresponding amount is not in fact made available to the Administrative Agent by such Lender, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from such Credit Date until the date such amount is paid to the Administrative Agent, at the customary rate set by the Administrative Agent for the correction of errors among banks for three Business Days and thereafter at the Base Rate. If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent shall promptly notify the Company and the Company shall immediately pay such corresponding amount to the Administrative Agent together with interest thereon, for each day from such Credit Date until the date such amount is paid to the Administrative Agent, at the rate payable hereunder for Base Rate Loans. Nothing in this Section 2.02(b) shall be deemed to relieve any Lender from its obligation to fulfill its Term Loan Commitments hereunder or to prejudice any rights that the Company may have against any Lender as a result of any default by such Lender hereunder. SECTION 2.03. Use of Proceeds. The proceeds of the Initial Term Loans made on the Closing Date shall be applied by the Company to provide a portion of the funding required to retire the Existing Senior Secured Credit Facility and purchase up to $25,000,000 of the Company's existing senior subordinated notes. No portion of the proceeds of any Term Loans shall be used in any manner that causes or might cause the funding of the Term Loans or the application of such proceeds to violate Regulation T, Regulation U or Regulation X of the Board of Governors of the Federal Reserve System or any other regulation thereof or to violate the Exchange Act. SECTION 2.04. Evidence of Debt; Register; Lenders' Books and Records; Notes. (a) Lenders' Evidence of Debt. Each Lender shall maintain on its internal records an account or accounts evidencing the Indebtedness of the Company to such Lender, including the amounts of the Term Loans made by it and each repayment and prepayment in respect thereof. Any such recordation shall be conclusive and binding on the Company, absent manifest error; provided, that the failure to make any such recordation, or any error in such recordation, shall not affect the Company's Obligations in respect of any Term Loan; and provided further, in the event of any inconsistency between the Register and any Lender's records, the recordations in the Register shall govern. 43 (b) Register. The Administrative Agent shall maintain at its Principal Office a register for the recordation of the names and addresses of the Lenders and the Term Loans of each Lender from time to time (the "Register"). The Register shall be available for inspection by the Company or any Lender at any reasonable time and from time to time upon reasonable prior notice. The Administrative Agent shall record in the Register the Term Loans, and each repayment or prepayment in respect of the principal amount of the Term Loans, and any such recordation shall be conclusive and binding on the Company and each Lender, absent manifest error; provided, that the failure to make any such recordation, or any error in such recordation, shall not affect the Company's Obligations in respect of any Term Loan. The Company hereby designates GSCP to serve as the Company's agent solely for purposes of maintaining the Register as provided in this Section 2.04, and the Company hereby agrees that, to the extent GSCP serves in such capacity, GSCP and its officers, directors, employees, agents and affiliates shall constitute "Indemnitees." (c) Term Loan Notes. If so requested by any Lender by written notice to the Company (with a copy to the Administrative Agent) at least two Business Days prior to the Closing Date, or at any time thereafter, the Company shall execute and deliver to such Lender (and/or, if applicable and if so specified in such notice, to any Person who is an assignee of such Lender pursuant to Section 13.06 on the Closing Date (or, if such notice is delivered after the Closing Date, promptly after the Company's receipt of such notice)), a Term Loan Note or Term Loan Notes to evidence such Lender's Initial Term Loan. SECTION 2.05. Interest. (a) Except as otherwise set forth herein (and, in the case only of Additional Term Loans, except as may be otherwise agreed pursuant to any written agreement between the Company and the Lenders funding Additional Term Loans), Term Loans shall bear interest on the unpaid principal amount thereof from the date made through repayment (whether by acceleration or otherwise) thereof as follows: (i) if a Base Rate Loan, at the Base Rate plus 4.50% per annum; or (ii) if a Eurodollar Rate Loan, at the Adjusted Eurodollar Rate plus 5.50% per annum. (b) The basis for determining the rate of interest with respect to any Term Loan, and the Interest Period with respect to any Eurodollar Rate Loan, shall be selected by the Company and notified to the Administrative Agent and the Lenders pursuant to the applicable Funding Notice or Conversion/Continuation Notice, as the case may be. If on any day a Term Loan is outstanding with respect to which a Funding Notice or Conversion/Continuation Notice has not been delivered to the Administrative Agent in accordance with the terms hereof specifying the applicable basis for determining the rate of interest, then for that day such Term Loan shall be a Base Rate Loan. (c) In connection with Eurodollar Rate Loans there shall be no more than five (5) Interest Periods outstanding at any time. In the event that the Company fails to specify 44 between a Base Rate Loan or a Eurodollar Rate Loan in the applicable Funding Notice or Conversion/Continuation Notice, such Term Loan (if outstanding as a Eurodollar Rate Loan) will be automatically converted into a Base Rate Loan on the last day of the then-current Interest Period for such Term Loan (or if outstanding as a Base Rate Loan will remain as, or (if not then outstanding) will be made as, a Base Rate Loan). In the event that the Company fails to specify an Interest Period for any Eurodollar Rate Loan in the applicable Funding Notice or Conversion/Continuation Notice, Company shall be deemed to have selected an Interest Period of one month. As soon as practicable after 10:00 a.m. (New York City time) on each Interest Rate Determination Date, the Administrative Agent shall determine (which determination shall, absent manifest error, be final, conclusive and binding upon all parties) the interest rate that shall apply to the Eurodollar Rate Loans for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to the Company and each Lender. (d) Interest payable pursuant to Section 2.05(a) shall be computed (i) in the case of Base Rate Loans on the basis of a 365-day or 366-day year, as the case may be, and (ii) in the case of Eurodollar Rate Loans, on the basis of a 360-day year, in each case for the actual number of days elapsed in the period during which it accrues. In computing interest on any Term Loan, the date of the making of such Term Loan or the first day of an Interest Period applicable to such Term Loan or, with respect to a Base Rate Loan being converted from a Eurodollar Rate Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate Loan, as the case may be, shall be included, and the date of payment of such Term Loan or the expiration date of an Interest Period applicable to such Term Loan or, with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as the case may be, shall be excluded; provided, if a Term Loan is repaid on the same day on which it is made, one day's interest shall be paid on that Term Loan. (e) Except as otherwise set forth herein, interest on each Term Loan shall be payable in arrears on and to (i) each Interest Payment Date applicable to that Term Loan; (ii) upon any prepayment of that Term Loan, whether voluntary or mandatory, to the extent accrued on the amount being prepaid; and (iii) at maturity, including final maturity; provided, however, with respect to any voluntary prepayment of a Base Rate Loan, accrued interest shall instead be payable on the applicable Interest Payment Date. SECTION 2.06. Conversion/Continuation. (a) Subject to Section 2.15 and so long as no Default or Event of Default shall have occurred and then be continuing, the Company shall have the option: (i) to convert at any time all or any part of any Term Loan equal to $5,000,000 and integral multiples of $1,000,000 in excess of that amount from one Type of Term Loan to another Type of Loan; provided, a Eurodollar Rate Loan may only be converted on the expiration of the Interest Period applicable to such Eurodollar Rate Loan unless the Company shall pay all amounts due under Section 2.15 in connection with any such conversion; or 45 (ii) upon the expiration of any Interest Period applicable to any Eurodollar Rate Loan, to continue all or any portion of such Term Loan equal to $5,000,000 and integral multiples of $1,000,000 in excess of that amount as a Eurodollar Rate Loan. (b) The Company shall deliver a Conversion/Continuation Notice to the Administrative Agent no later than 10:00 a.m. (New York City time) at least one Business Day in advance of the proposed conversion date (in the case of a conversion to a Base Rate Loan) and at least three Business Days in advance of the proposed conversion/continuation date (in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan). Except as otherwise provided herein, a Conversion/Continuation Notice for conversion to, or continuation of, any Eurodollar Rate Loans (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and the Company shall be bound to effect a conversion or continuation in accordance therewith. SECTION 2.07. Default Interest. If all or a portion of the principal amount of the Term Loans shall not be paid when due, such overdue principal amount of Term Loans shall thereafter bear interest (including post-petition interest in any proceeding under the Bankruptcy Code or other applicable bankruptcy laws) payable on demand at a rate that is 2.00% per annum in excess of the interest rate otherwise payable hereunder with respect to the applicable Term Loans; provided, in the case of Eurodollar Rate Loans, upon the expiration of the Interest Period in effect at the time any such increase in interest rate is effective such Eurodollar Rate Loans shall thereupon become Base Rate Loans and shall thereafter bear interest payable upon demand at a rate which is 2.00% per annum in excess of the interest rate otherwise payable hereunder for Base Rate Loans. Payment or acceptance of the increased rates of interest provided for in this Section 2.07 is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of the Administrative Agent or any Lender. SECTION 2.08. Fees. The Company agrees to pay to the Agents such fees in the amounts and at the times separately agreed upon. SECTION 2.09. Scheduled Payments/Commitment Reductions. (a) Scheduled Installments. The principal amounts of the Initial Term Loans shall be repaid in consecutive quarterly installments (each, an "Installment") in an amount equal to the aggregate principal amount of Initial Term Loans made on the Closing Date multiplied by the percentage set forth below opposite the fiscal quarter on the last day of such fiscal quarter (each, an "Installment Date"):
Fiscal Quarter Percentage - ------------------------------------------------------ July 15, 2003 0.25%
46 - ------------------------------------------------------ October 15, 2003 0.25% - ------------------------------------------------------ January 15, 2004 0.25% - ------------------------------------------------------ April 15, 2004 0.25% - ------------------------------------------------------ July 15, 2004 0.25% - ------------------------------------------------------ October 15, 2004 0.25% - ------------------------------------------------------ January 15, 2005 0.25% - ------------------------------------------------------ April 15, 2005 0.25% - ------------------------------------------------------ July 15, 2005 0.25% - ------------------------------------------------------ October 15, 2005 0.25% - ------------------------------------------------------ January 15, 2006 0.25% - ------------------------------------------------------ April 15, 2006 0.25% - ------------------------------------------------------ July 15, 2006 0.25% - ------------------------------------------------------ October 15, 2006 0.25% - ------------------------------------------------------ January 15, 2007 0.25% - ------------------------------------------------------ April 15, 2007 0.25% - ------------------------------------------------------ July 15, 2007 24% - ------------------------------------------------------ October 15, 2007 24% - ------------------------------------------------------ January 15, 2008 24% - ------------------------------------------------------ April 15, 2008 24%
If any Additional Term Loans are made, such Additional Term Loans shall be repaid on each Installment Date occurring on or after the applicable date on which such Additional Term Loans are funded in an amount equal to (i) the aggregate principal amount of Additional Term Loans, multiplied by (ii) the ratio (expressed as a percentage) of (y) the amount of all other Initial Term Loans being repaid on such Installment Date and (z) the total aggregate principal amount of all other Initial Term Loans outstanding on such funding date. 47 Notwithstanding the foregoing, (x) such Installments shall be reduced in connection with any voluntary or mandatory prepayments of the Initial Term Loans, in accordance with Sections 2.10, 5.10 and 5.15, as applicable; and (y) the Term Loans, together with all other amounts owed hereunder with respect thereto, shall, in any event, be paid in full no later than the Maturity Date. SECTION 2.10. Voluntary Prepayments. (a) Voluntary Prepayments. (i) The Company may not voluntarily prepay Term Loans except as provided in clause (b) below. In the event of any voluntary prepayment in accordance with clause (b), the Company may prepay any such Term Loans on any Business Day in whole or in part, in an aggregate minimum amount of $1,000,000 and integral multiples of $500,000 in excess of that amount. (ii) All such prepayments shall be made: (A) upon not less than one Business Day's prior written or telephonic notice in the case of Base Rate Loans; (B) upon not less than three Business Days' prior written or telephonic notice in the case of Eurodollar Rate Loans; and in each case given to the Administrative Agent by 1:00 p.m. (New York City time) on the date required and, if given by telephone, promptly confirmed in writing to the Administrative Agent (and the Administrative Agent will promptly transmit such telephonic or original notice for Term Loans, by telefacsimile or telephone to each Lender). Upon the giving of any such notice, the principal amount of the Term Loans specified in such notice shall become due and payable on the prepayment date specified therein. Any prepayment of any Term Loan pursuant to this Section shall be applied on a pro rata basis among the Lenders and applied to reduce the scheduled remaining Installments of principal on such Term Loan in inverse order of maturity. (b) Term Loan Call Protection. (i) The Company may not voluntarily prepay the Term Loans prior to April 15, 2004, except that the Company may make such prepayment with Equity Proceeds as set forth in this clause (i). In the event that for any reason the Term Loans are voluntarily prepaid prior to April 15, 2004, the Company shall pay the Lenders a prepayment premium equal to a percentage of the principal amount of the Term Loans being prepaid, such percentage equal to the lesser of (1) the applicable per annum interest rate pursuant to Section 2.05(a)(i) for the day on which such prepayment shall occur and (2) the applicable per annum interest rate pursuant to Section 2.05(a)(ii) for a one month Interest Period beginning on the day on which such prepayment shall occur; provided that: 48 (A) prior to April 15, 2004, the Company shall not be permitted to prepay the Term Loans having a principal amount greater than 35% of the aggregate principal amount of Term Loans extended under this Agreement since the Closing Date; (B) the Company may elect to make such prepayment only with the net cash proceeds of one or more Equity Offerings; and (C) each such prepayment must occur within 90 days of the closing of such Equity Offering. (ii) In the event that for any reason the Term Loans are voluntarily prepaid on or after April 15, 2004, the Company shall pay to Lenders a prepayment premium equal to the percentage set forth below opposite the period in which such prepayment shall occur multiplied by the principal amount of the Term Loans being prepaid. Term Loans may be prepaid without prepayment premium after April 15, 2006.
Year Ending on Percentage - ------------------------------------------------------ April 15, 2005 3.00% - ------------------------------------------------------ April 15, 2006 1.00%
SECTION 2.11. Mandatory Offers. (a) If the Company is required to prepay any Term Loans by reason of any Lender's acceptance of an Asset Sale Offer or a Collateral Proceeds Offer, the amount payable to such Lender shall be paid to the Administrative Agent for account of such Lender and credited to the remaining installments to become due on the Term Loans outstanding to such Lender. Any prepayment of any Term Loan pursuant hereto shall be applied to reduce the scheduled remaining Installments of principal on such Term Loan of such Lender in inverse order of maturity. (b) In the event that, pursuant to Section 5.10 hereof, the Company shall be required to commence an offer to all Lenders to repay Term Loans (an "Asset Sale Offer"), it shall follow the procedures specified below. (i) The Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "Offer Period"). No later than five Business Days after the termination of the Offer Period (the "Repayment Date"), the Company shall repay the principal amount of Term Loans required to be purchased pursuant to Section 5.10 hereof (the "Offer Amount") or, if less than the Offer Amount has been 49 tendered, all Term Loans for which repayment was requested in response to the Asset Sale Offer. Payment for any Term Loans shall be made in the same manner as interest payments are made. (ii) Upon the commencement of an Asset Sale Offer, the Company shall send a notice to the Administrative Agent (for delivery to each Lender). The notice shall contain all instructions and materials necessary to enable such Lenders to request repayment for the Term Loans pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all Lenders. The notice, which shall govern the terms of the Asset Sale Offer, shall state: (A) that the Asset Sale Offer is being made pursuant to this Section 2.11 and Section 5.10 hereof and the length of time the Asset Sale Offer shall remain open; (B) the Offer Amount, the purchase price and the Repayment Date; (C) that any Term Loan for which repayment is not requested or accepted for repayment shall continue to accrete or accrue interest; (D) that, unless the Company defaults in making such payment, any Term Loan accepted for payment pursuant to the Asset Sale Offer shall cease to accrete or accrue interest after the Repayment Date; (E) that Lenders electing to have Term Loans repaid pursuant to an Asset Sale Offer may only elect to have all of Term Loans repaid and may not elect to have only a portion of its Term Loans; (F) that Lenders shall be entitled to withdraw their request if the Company, or the Administrative Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Lender, the principal amount of the Term Loans for which the Lender requested repayment and a statement that such Lender is withdrawing his request to have Term Loans repaid; and (G) that, if the aggregate principal amount of Term Loans for which repayment is requested by Lenders exceeds the Offer Amount, the Administrative shall select the Term Loans to be purchased on a pro rata basis. (iii) On or before the Repayment Date, the Company shall, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Term Loans or portions thereof for which repayment is requested pursuant to the Asset Sale Offer, or if repayment for Term Loans in an aggregate amount less than the Offer Amount have been requested, all Term Loans for which repayment is requested, and shall deliver to the Administrative Agent (for delivery to the Lenders) an Officers' Certificate 50 stating that such Term Loans or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 2.11. The Company shall promptly (but in any case not later than five days after the Repayment Date) deliver to the Administrative Agent for the account of each Lender for which repayment is requested an amount equal to all outstanding amounts under the Term Loans for which repayment is requested by all Lenders that were accepted by the Company for repayment. The Administrative Agent shall promptly forward the appropriate amount to each Lender being repaid. SECTION 2.12. Application of Prepayments. Any prepayment of Term Loans shall be applied first to Base Rate Loans to the full extent thereof before application to Eurodollar Rate Loans, in each case in a manner which minimizes the amount of any payments required to be made by the Company pursuant to Section 2.15(c). SECTION 2.13. General Provisions Regarding Payments. (a) All payments by the Company of principal, interest, fees and other Term Loan Obligations shall be made in Dollars in same day funds, without defense, setoff or counterclaim, free of any restriction or condition, and delivered to the Administrative Agent not later than 1:00 p.m. (New York City time) on the date due at the Administrative Agent's Principal Office for the account of Lenders. Funds received by the Administrative Agent after that time on such due date shall be deemed to have been paid by the Company on the next succeeding Business Day. (b) All payments in respect of the principal amount of any Term Loan shall include payment of accrued interest on the principal amount being repaid or prepaid, and all such payments (and, in any event, any payments in respect of any Term Loan on a date when interest is due and payable with respect to such Term Loan) shall be applied to the payment of interest before application to principal. (c) The Administrative Agent shall promptly distribute to each Lender at such address as such Lender shall indicate in writing, such Lender's applicable Pro Rata Share of all payments and prepayments of principal and interest due hereunder, except that prepayment offers accepted by Lenders pursuant to Section 5.10 or 5.15 shall be allocated to the accepting Lenders ratably in proportion to the principal amount of Term Loans outstanding to each accepting Lender (and not to all Lenders based on Pro Rata Shares), together with all other amounts due thereto, including, without limitation, all fees payable with respect thereto, to the extent received by the Administrative Agent. (d) Notwithstanding the foregoing provisions hereof, if any Conversion/Continuation Notice is withdrawn as to any Affected Lender or if any Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any Eurodollar Rate Loans, the Administrative Agent shall give effect thereto in apportioning payments received thereafter. (e) Subject to the provisos set forth in the definition of "Interest Period", whenever any payment to be made hereunder shall be stated to be due on a day that is not a 51 Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest hereunder. (f) The Company hereby authorizes the Administrative Agent to charge the Company's accounts with the Administrative Agent in order to cause timely payment to be made to the Administrative Agent of all principal, interest, fees and expenses due hereunder (subject to sufficient funds being available in its accounts for that purpose) upon the occurrence of any Event of Default in respect of its payment obligations hereunder. (g) The Administrative Agent shall deem any payment by or on behalf of the Company hereunder that is not made in same day funds prior to 1:00 p.m. (New York City time) to be a non-conforming payment. Any such payment shall not be deemed to have been received by the Administrative Agent until the later of (i) the time such funds become available funds, and (ii) the applicable next Business Day. The Administrative Agent shall give prompt telephonic notice to the Company and each applicable Lender (confirmed in writing) if any payment is non-conforming. Any non-conforming payment may constitute or become a Default or Event of Default in accordance with the terms of Section 7.01(a) or (b). Interest shall continue to accrue on any principal as to which a non-conforming payment is made until such funds become available funds (but in no event less than the period from the date of such payment to the next succeeding applicable Business Day) at the rate determined pursuant to Section 2.07 from the date such amount was due and payable until the date such amount is paid in full. (h) If an Actionable Default shall have occurred and be continuing and has not otherwise been waived, all payments or proceeds received for application to the Term Loan Obligations shall be applied in the order set forth in Section 2.6 of the Collateral Agency Agreement. SECTION 2.14. Ratable Sharing. The Lenders hereby agree among themselves that, except in the case of prepayments offered to and accepted by any Lender pursuant to Sections 5.10 or 5.15 and subject to the provision of Section 2.6 of the Collateral Agency Agreement, if any of them shall, whether by voluntary payment (other than a voluntary prepayment of Term Loans made and applied in accordance with the terms hereof), through the exercise of any right of set-off or banker's lien, by counterclaim or cross action or by the enforcement of any right under the Term Loan Documents or otherwise, or as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code, receive payment or reduction of a proportion of the aggregate amount of principal, interest, fees and other amounts then due and owing to such Lender hereunder or under the other Term Loan Documents (collectively, the "Aggregate Amounts Due" to such Lender) which is greater than the proportion received by any other Lender in respect of the Aggregate Amounts Due to such other Lender, then the Lender receiving such proportionately greater payment shall (a) notify the Administrative Agent and each other Lender of the receipt of such payment and (b) apply a portion of such payment to purchase participations (which it shall be deemed to have purchased from each seller of a participation simultaneously upon the receipt by such seller of its portion of such payment) in the Aggregate Amounts Due to the other Lenders so that all such recoveries of Aggregate Amounts Due shall be shared by all Lenders in proportion to the Aggregate Amounts Due to them; provided, if all or part of such 52 proportionately greater payment received by such purchasing Lender is thereafter recovered from such Lender upon the bankruptcy or reorganization of the Company or otherwise, those purchases shall be rescinded and the purchase prices paid for such participations shall be returned to such purchasing Lender ratably to the extent of such recovery, but without interest. The Company expressly consents to the foregoing arrangement and agrees that any holder of a participation so purchased may exercise any and all rights of banker's lien, set-off or counterclaim with respect to any and all monies owing by the Company to that holder with respect thereto as fully as if that holder were owed the amount of the participation held by that holder. SECTION 2.15. Making or Maintaining Eurodollar Rate Loans. (a) Inability to Determine Applicable Interest Rate. In the event that the Administrative Agent shall have determined (which determination shall be final and conclusive and binding upon all parties hereto), on any Interest Rate Determination Date with respect to any Eurodollar Rate Loans, that by reason of circumstances affecting the London interbank market adequate and fair means do not exist for ascertaining the interest rate applicable to such Term Loans on the basis provided for in the definition of Adjusted Eurodollar Rate, the Administrative Agent shall on such date give notice (by telefacsimile or by telephone confirmed in writing) to the Company and each Lender of such determination, whereupon (i) no Term Loans may be made as, or converted to, Eurodollar Rate Loans until such time as the Administrative Agent notifies the Company and Lenders that the circumstances giving rise to such notice no longer exist, and (ii) any Funding Notice or Conversion/Continuation Notice given by the Company with respect to the Term Loans in respect of which such determination was made shall be deemed to be rescinded by the Company. (b) Illegality or Impracticability of Eurodollar Rate Loans. In the event that on any date any Lender shall have determined (which determination shall be final and conclusive and binding upon all parties hereto but shall be made only after consultation with the Company and the Administrative Agent) that the making, maintaining or continuation of its Eurodollar Rate Loans (i) has become unlawful as a result of compliance by such Lender in good faith with any law, treaty, governmental rule, regulation, guideline or order (or would conflict with any such treaty, governmental rule, regulation, guideline or order not having the force of law even though the failure to comply therewith would not be unlawful), or (ii) has become impracticable, as a result of contingencies occurring after the date hereof which materially and adversely affect the London interbank market or the position of such Lender in that market, then, and in any such event, such Lender shall be an "Affected Lender" and it shall on that day give notice (by telefacsimile or by telephone confirmed in writing) to the Company and the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each other Lender). Thereafter (1) the obligation of the Affected Lender to make Term Loans as, or to convert Term Loans to, Eurodollar Rate Loans shall be suspended until such notice shall be withdrawn by the Affected Lender, (2) to the extent such determination by the Affected Lender relates to a Eurodollar Rate Loan then being requested by the Company pursuant to a Funding Notice or a Conversion/Continuation Notice, the Affected Lender shall make such Term Loan as (or continue such Term Loan as or convert such Term Loan to, as the case may be) a Base Rate 53 Loan, (3) the Affected Lender's obligation to maintain its outstanding Eurodollar Rate Loans (the "Affected Loans") shall be terminated at the earlier to occur of the expiration of the Interest Period then in effect with respect to the Affected Loans or when required by law, and (4) the Affected Loans shall automatically convert into Base Rate Loans on the date of such termination. Notwithstanding the foregoing, to the extent a determination by an Affected Lender as described above relates to a Eurodollar Rate Loan then being requested by the Company pursuant to a Funding Notice or a Conversion/Continuation Notice, the Company shall have the option, subject to the provisions of Section 2.15(c), to rescind such Funding Notice or Conversion/Continuation Notice as to all Lenders by giving notice (by telefacsimile or by telephone confirmed in writing) to the Administrative Agent of such rescission on the date on which the Affected Lender gives notice of its determination as described above (which notice of rescission the Administrative Agent shall promptly transmit to each other Lender). Except as provided in the immediately preceding sentence, nothing in this Section 2.15(b) shall affect the obligation of any Lender other than an Affected Lender to make or maintain Term Loans as, or to convert Term Loans to, Eurodollar Rate Loans in accordance with the terms hereof. (c) Compensation for Breakage or Non-Commencement of Interest Periods. The Company shall compensate each Lender, upon written request by such Lender (which request shall set forth the basis for requesting such amounts), for all reasonable losses, expenses and liabilities (including any interest paid by such Lender to lenders of funds borrowed by it to make or carry its Eurodollar Rate Loans and any loss, expense or liability sustained by such Lender in connection with the liquidation or re-employment of such funds but excluding loss of anticipated profits) which such Lender may sustain: (i) if for any reason (other than a default by such Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date specified therefor in a Funding Notice or a telephonic request for borrowing, or a conversion to or continuation of any Eurodollar Rate Loan does not occur on a date specified therefor in a Conversion/Continuation Notice or a telephonic request for conversion or continuation; (ii) if any prepayment or other principal payment or any conversion of any of its Eurodollar Rate Loans occurs on a date prior to the last day of an Interest Period applicable to that Term Loan (including, without limitation, pursuant to Section 2.10, 2.11, 5.10 and 5.15 hereof); or (iii) if any prepayment of any of its Eurodollar Rate Loans is not made on any date specified in a notice of prepayment given by the Company. (d) Booking of Eurodollar Rate Loans. Any Lender may make, carry or transfer Eurodollar Rate Loans at, to, or for the account of any of its branch offices or the office of an Affiliate of such Lender. (e) Assumptions Concerning Funding of Eurodollar Rate Loans. Calculation of all amounts payable to a Lender under this Section 2.15 and under Section 2.16 shall be made as though such Lender had actually funded each of its relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit bearing interest at the rate obtained pursuant to clause (i) of the definition of Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar Rate Loan and having a maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar deposit from an offshore office of such Lender to a domestic office of such Lender in the United States of America; provided, however, each Lender may fund each of 54 its Eurodollar Rate Loans in any manner it sees fit and the foregoing assumptions shall be utilized only for the purposes of calculating amounts payable under this Section 2.15 and under Section 2.16. SECTION 2.16. Increased Costs; Capital Adequacy. (a) Compensation For Increased Costs and Taxes. Subject to the provisions of Section 2.17 (which shall be controlling with respect to the matters covered thereby), in the event that any Lender shall determine (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or governmental authority, in each case that becomes effective after the date hereof, or compliance by such Lender with any guideline, request or directive issued or made after the date hereof by any central bank or other governmental or quasi-governmental authority (whether or not having the force of law): (i) subjects such Lender (or its applicable lending office) to any additional Tax (other than any Tax on the overall net income of such Lender) with respect to this Agreement or any of the other Term Loan Documents or any of its obligations hereunder or thereunder or any payments to such Lender (or its applicable lending office) of principal, interest, fees or any other amount payable hereunder; (ii) imposes, modifies or holds applicable any reserve (including any marginal, emergency, supplemental, special or other reserve), special deposit, compulsory loan, FDIC insurance or similar requirement against assets held by, or deposits or other liabilities in or for the account of, or advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Lender (other than any such reserve or other requirements with respect to Eurodollar Rate Loans that are reflected in the definition of Adjusted Eurodollar Rate); or (iii) imposes any other condition (other than with respect to a Tax matter) on or affecting such Lender (or its applicable lending office) or its obligations hereunder or the London interbank market; and the result of any of the foregoing is to increase the cost to such Lender of agreeing to make, making or maintaining Term Loans hereunder or to reduce any amount received or receivable by such Lender (or its applicable lending office) with respect thereto; then, in any such case, the Company shall promptly pay to such Lender, upon receipt of the statement referred to in the next sentence, such additional amount or amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its sole discretion shall determine) as may be necessary to compensate such Lender for any such increased cost or reduction in amounts received or receivable hereunder. Such Lender shall deliver to the Company (with a copy to the Administrative Agent) a written statement, setting forth in reasonable detail the basis 55 for calculating the additional amounts owed to such Lender under this Section 2.16(a), which statement shall be conclusive and binding upon all parties hereto absent manifest error. (b) Capital Adequacy Adjustment. In the event that any Lender shall have determined that the adoption, effectiveness, phase-in or applicability after the Closing Date of any law, rule or regulation (or any provision thereof) regarding capital adequacy, or any change therein or in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its applicable lending office) with any guideline, request or directive regarding capital adequacy (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of, or with reference to, such Lender's Term Loans, or participations therein or other obligations hereunder with respect to the Term Loans to a level below that which such Lender or such controlling corporation could have achieved but for such adoption, effectiveness, phase-in, applicability, change or compliance (taking into consideration the policies of such Lender or such controlling corporation with regard to capital adequacy), then from time to time, within five Business Days after receipt by the Company from such Lender of the statement referred to in the next sentence, the Company shall pay to such Lender such additional amount or amounts as will compensate such Lender or such controlling corporation on an after-tax basis for such reduction. Such Lender shall deliver to the Company (with a copy to the Administrative Agent) a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to Lender under this Section 2.16(b), which statement shall be conclusive and binding upon all parties hereto absent manifest error. SECTION 2.17. Taxes; Withholding, etc. (a) Payments to Be Free and Clear. All sums payable by any Obligor hereunder and under the other Term Loan Documents shall (except to the extent required by law) be paid free and clear of, and without any deduction or withholding on account of, any Tax (other than a Tax on the overall net income of any Lender) imposed, levied, collected, withheld or assessed by or within the United States of America or any political subdivision in or of the United States of America or any other jurisdiction from or to which a payment is made by or on behalf of any Obligor or by any federation or organization of which the United States of America or any such jurisdiction is a member at the time of payment. (b) Withholding of Taxes. If any Obligor or any other Person is required by law to make any deduction or withholding on account of any such Tax from any sum paid or payable by any Obligor to the Administrative Agent or any Lender under any of the Term Loan Documents: (i) the Company shall notify the Administrative Agent of any such requirement or any change in any such requirement as soon as the Company becomes aware of it; 56 (ii) the Company shall pay any such Tax before the date on which penalties attach thereto, such payment to be made (if the liability to pay is imposed on any Obligor) for its own account or (if that liability is imposed on the Administrative Agent or such Lender, as the case may be) on behalf of and in the name of the Administrative Agent or such Lender; (iii) the sum payable by such Obligor in respect of which the relevant deduction, withholding or payment is required shall be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment, the Administrative Agent or such Lender, as the case may be, receives on the due date a net sum equal to what it would have received had no such deduction, withholding or payment been required or made; and (iv) within thirty (30) days after paying any sum from which it is required by law to make any deduction or withholding, and within thirty (30) days after the due date of payment of any tax which it is required by clause (ii) above to pay, the Company shall deliver to the Administrative Agent evidence satisfactory to the other affected parties of such deduction, withholding or payment and of the remittance thereof to the relevant taxing or other authority; provided, no such additional amount shall be required to be paid to any Lender under clause (iii) above except to the extent that any change after the date hereof (in the case of each Lender listed on the signature pages hereof on the Closing Date) or after the effective date of the Assignment Agreement pursuant to which such Lender became a Lender (in the case of each other Lender) in any such requirement for a deduction, withholding or payment as is mentioned therein shall result in an increase in the rate of such deduction, withholding or payment from that in effect at the date hereof or at the date of such Assignment Agreement, as the case may be, in respect of payments to such Lender. (c) Evidence of Exemption From U.S. Withholding Tax. Each Lender that is not a United States Person (as such term is defined in Section 7701(a)(30) of the Code) for U.S. federal income tax purposes (a "Non-US Lender") shall deliver to the Administrative Agent for transmission to the Company, on or prior to the Closing Date (in the case of each Lender listed on the signature pages hereof on the Closing Date) or on or prior to the date of the Assignment Agreement pursuant to which it becomes a Lender (in the case of each other Lender), and at such other times as may be necessary in the determination of the Company or the Administrative Agent (each in the reasonable exercise of its discretion): (i) two original copies of Internal Revenue Service Form W-8BEN or W-8ECI (or any successor forms), properly completed and duly executed by such Lender, and such other documentation required under the Code and reasonably requested by the Company to establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to any payments to such Lender of principal, interest, fees or other amounts payable under any of the Term Loan Documents; or 57 (ii) if such Lender is not a "bank" or other Person described in Section 881(c)(3) of the Code and cannot deliver either Internal Revenue Service Form W-8BEN or W-8ECI pursuant to clause (i) above, a Certificate re Non-Bank Status together with two original copies of Internal Revenue Service Form W-8 (or any successor form), properly completed and duly executed by such Lender, and such other documentation required under the Code and reasonably requested by the Company to establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to any payments to such Lender of interest payable under any of the Term Loan Documents. Each Lender required to deliver any forms, certificates or other evidence with respect to United States federal income tax withholding matters pursuant to this Section 2.17(c) hereby agrees, from time to time after the initial delivery by such Lender of such forms, certificates or other evidence, whenever a lapse in time or change in circumstances renders such forms, certificates or other evidence obsolete or inaccurate in any material respect, that such Lender shall promptly deliver to the Administrative Agent for transmission to the Company two new original copies of Internal Revenue Service Form W-8BEN or W-8ECI , or a Certificate re Non-Bank Status and two original copies of Internal Revenue Service Form W-8, as the case may be, properly completed and duly executed by such Lender, and such other documentation required under the Code and reasonably requested by the Company to confirm or establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to payments to such Lender under the Term Loan Documents, or notify the Administrative Agent and the Company of its inability to deliver any such forms, certificates or other evidence. The Company shall not be required to pay any additional amount to any Non-US Lender under Section 2.17(b)(iii) if such Lender shall have failed (1) to deliver the forms, certificates or other evidence referred to in the second sentence of this Section 2.17(c), or (2) to notify the Administrative Agent and the Company of its inability to deliver any such forms, certificates or other evidence, as the case may be; provided, if such Lender shall have satisfied the requirements of the first sentence of this Section 2.17(c) on the Closing Date or on the date of the Assignment Agreement pursuant to which it became a Lender, as applicable, nothing in this last sentence of Section 2.17(c) shall relieve the Company of its obligation to pay any additional amounts pursuant to Section 2.16(a) in the event that, as a result of any change in any applicable law, treaty or governmental rule, regulation or order, or any change in the interpretation, administration or application thereof, such Lender is no longer properly entitled to deliver forms, certificates or other evidence at a subsequent date establishing the fact that such Lender is not subject to withholding as described herein. SECTION 2.18. Removal or Replacement of a Lender. Anything contained herein to the contrary notwithstanding, in the event that: (a) (i) any Lender (an "Increased-Cost Lender") shall give notice to the Company that such Lender is an Affected Lender or that such Lender is entitled to receive payments under Section 2.15, 2.16 or 2.17, (ii) the circumstances which have caused such Lender to be an Affected Lender or which entitle such Lender to receive such payments shall 58 remain in effect, and (iii) such Lender shall fail to withdraw such notice within five Business Days after the Company's request for such withdrawal; or (b) in connection with any proposed amendment, modification, termination, waiver or consent with respect to any of the provisions hereof as contemplated by Section 13.05(b), the consent of Requisite Lenders shall have been obtained but the consent of one or more of such other Lenders (each a "Non-Consenting Lender") whose consent is required shall not have been obtained; then, with respect to each such Increased-Cost Lender or Non-Consenting Lender (the "Terminated Lender"), the Company may, by giving written notice to the Administrative Agent and any Terminated Lender of its election to do so, elect to cause such Terminated Lender (and such Terminated Lender hereby irrevocably agrees) to assign its outstanding Term Loans in full to one or more Eligible Assignees (each a "Replacement Lender") in accordance with the provisions of Section 13.06 and Terminated Lender shall pay any fees payable thereunder in connection with such assignment; provided, (i) on the date of such assignment, the Replacement Lender shall pay to Terminated Lender an amount equal to the sum of (A) an amount equal to the principal of, and all accrued interest on, all outstanding Term Loans of the Terminated Lender, and (B) an amount equal to all accrued, but theretofore unpaid fees owing to such Terminated Lender pursuant to Section 2.11; (ii) on the date of such assignment, the Company shall pay any amounts payable to such Terminated Lender pursuant to Section 2.15(c), 2.16 or 2.17 or otherwise as if it were a prepayment; and (iii) in the event such Terminated Lender is a Non-Consenting Lender, each Replacement Lender shall consent, at the time of such assignment, to each matter in respect of which such Terminated Lender was a Non-Consenting Lender. Upon the prepayment of all amounts owing to any Terminated Lender, such Terminated Lender shall no longer constitute a "Lender" for purposes hereof; provided, any rights of such Terminated Lender to indemnification hereunder shall survive as to such Terminated Lender. SECTION 2.19. Additional Term Loans. With the consent of the Administrative Agent, the Company from time to time after the Closing Date may solicit commitments ("Additional Term Loan Commitments") for additional Term Loans ("Additional Term Loans") which may become committed and shall be funded on the following terms: (a) Additional Term Loans shall be committed and funded on the terms and conditions set forth in this Agreement applicable to Term Loans (other than those expressly applicable only to Initial Term Loans), except that the margins at which interest accrues pursuant to Section 2.05(a) in excess of the Base Rate on Base Rate Loans and in excess of the Adjusted Eurodollar Rate on Eurodollar Rate Loans may be changed with the consent of the Company as set forth in the Additional Term Loan Commitments. Without limiting the generality of the 59 foregoing, Additional Term Loans shall be payable in full on the Maturity Date, shall be guaranteed by the Guarantors on the terms set forth in Article XII (whether or not any Guarantor delivers an additional instrument creating or confirming such guarantee), and shall be secured Equally and Ratably with the Initial Term Loans and all other Secured Obligations by all security interests granted to the Collateral Agent pursuant to the Security Documents. (b) On each occasion on which Additional Term Loan Commitments are solicited, Additional Term Loan Commitments shall be solicited and delivered for simultaneous funding in a single drawdown on a single Business Day (an "Additional Term Loan Borrowing Date") in a minimum amount of $25,000,000. Additional Term Loans that are repaid may not be reborrowed. (c) With the consent of the Company and the Administrative Agent, Additional Term Loans may be funded at a discount or premium to the stated principal amount thereof, and the compensation paid or promised by the Company or any Subsidiary or Affiliate of the Company for the arrangement, solicitation, delivery or funding of Additional Term Loans shall not be restricted. (d) Additional Term Loan Commitments shall not be solicited, delivered or funded: (i) in an amount which the Company is not then permitted to incur under Section 5.09; (ii) in a stated principal amount which would, after giving effect to any simultaneous issuance of additional Notes under the Indenture and any simultaneous use of the proceeds of any such funding or issuance, cause the aggregate outstanding principal amount of all outstanding Notes (including all original Notes and additional Notes) and Term Loans (including the Initial Term Loans and all Additional Term Loans) to exceed $725,000,000; or (iii) unless the Company and Guarantors deliver to the Administrative Agent, for the benefit of the Collateral Agent, the Administrative Agent and the Lenders: (A) an Officers' Certificate to the effect that, on the Additional Term Loan Borrowing Date for such Additional Term Loans, (1) no Default or Event of Default has occurred and is continuing or resulted from the funding of such Additional Term Loans; (2) no "Default" or "Event of Default", as defined in the Indenture, has occurred and is continuing and (3) the requirements set forth in Section 2.19(d)(i) and (ii) are satisfied (and each Lender funding an Additional Term Loan shall be entitled to rely conclusively upon such Officer's Certificate as to all of the matters therein set forth for all purposes, including the right of such Additional Term Loan to share Equally and Ratably in the Collateral and all benefits thereof); and 60 (B) such representations and warranties, Opinions of Counsel, confirmations and certificates as may reasonably be requested by the Administrative Agent. (e) Neither of the Administrative Agent nor any Lender shall have any obligation whatsoever to arrange, commit to make, or fund any Additional Term Loan Commitment. (f) If and whenever it wishes to solicit Additional Term Loan Commitments, the Company shall, in consultation with the Administrative Agent, offer the opportunity to deliver such Additional Term Loan Commitments first to the then existing Lenders, which shall have five Business Days to accept such offer, with any such acceptances allocated ratably to accepting Lenders. To the extent such Additional Term Loan Commitments are not fully subscribed by accepting Lenders within the five Business Day period, the Company may solicit and accept such Additional Term Loan Commitments, in compliance with all applicable laws and legal requirements, from any Eligible Assignee reasonably satisfactory to the Administrative Agent. (g) All Additional Term Loan Commitments shall be delivered to the Administrative Agent prior to the relevant Additional Term Loan Borrowing Date. Each Eligible Assignee that delivers an Additional Term Loan Commitment shall also deliver to the Administrative Agent, prior to the relevant Additional Term Loan Borrowing Date, the duly executed Lender Joinder Agreement of such Eligible Assignee to be bound by and to perform, in respect of the Additional Term Loans funded by it, all of the obligations of a Lender under this Agreement; and thereupon, but only if and when such Additional Term Loans are funded by such Eligible Assignee, such Eligible Assignee shall become entitled to enjoy the rights of a Lender under this Agreement and such Additional Term Loans shall constitute Term Loans for all purposes of this Agreement. (h) Additional Term Loans shall be Base Rate Loans until the last day of the first Interest Period for any Eurodollar Rate Loans expiring after the relevant Additional Term Loan Borrowing Date, at which time the outstanding Base Rate Loans and Eurodollar Rate Loans shall be adjusted so that all Base Rate Loans and all Eurodollar Rate Loans are allocated to the Lenders ratably to their Pro Rata Shares. If so requested by the Company, the Administrative Agent may make such adjustment on any earlier Business Day, by resetting any Interest Period that has not then expired, and the Company shall pay compensation pursuant to Section 2.15(c) as if such reset constituted a prepayment of the affected Eurodollar Rate Loans. (i) Subject to the foregoing provisions of this Section 2.19, Additional Term Loans may be solicited, committed to and funded without need for any amendment or supplement to this Agreement and without need for consent from any other Lenders. 61 ARTICLE III CONDITIONS PRECEDENT SECTION 3.01. Closing Date. The obligation of any Lender to make a Term Loan on the Closing Date is subject to the satisfaction, or waiver in accordance with Section 13.05, of the following conditions on or before the Closing Date: (a) Opinions of Counsel to Obligors. Lenders and their respective counsel shall have received originally executed copies of the favorable written opinions of Fulbright & Jaworski L.L.P., New York and California counsel for Obligors, James C. Reed, Jr., General Counsel of the Company, Goldstein & Associates, P.C. and local counsel in each of the states of Alaska, Hawaii, Idaho, Montana, North Dakota, Utah and Washington, as to such matters as the Administrative Agent may reasonably request, dated as of the Closing Date and in form and substance reasonably satisfactory to the Administrative Agent (and each Obligor hereby instructs such counsel to deliver such opinions to the Agents and Lenders). (b) Solvency Opinion. Valuation Research Corporation shall have furnished to the Administrative Agent its written opinion, dated the Closing Date, in form and substance reasonably satisfactory to the Administrative Agent. (c) Solvency Certificate. The Chief Financial Officer of the Company shall have furnished a certificate to the Administrative Agent, dated the Closing Date, in form and substance reasonably satisfactory to the Administrative Agent. (d) Releases. The Collateral Agent shall have received at the Closing Date: (i) certified copies of UCC Requests for Information or Copies (Form UCC-11), or a similar search report certified by a party acceptable to the Administrative Agent, dated a date reasonably near to the Closing Date, listing all effective Financing Statements which name the Company or any Guarantor (under its present name and any previous names) as the debtor, together with copies of such Financing Statements (none of which shall cover any collateral described in the Security Documents, other than such Financing Statements that evidence Permitted Prior Liens); (ii) appropriately completed copies, which have been duly authorized for filing by the appropriate Person, of UCC Financing Statements naming the Company and each Guarantor as a debtor and the Collateral Agent as the secured party, or other similar instruments or documents to be filed under the UCC of all jurisdictions as may be necessary or, in the reasonable opinion of the Administrative Agent and its counsel, desirable to perfect the security interests of the Collateral Agent pursuant to the Security Documents; (iii) such releases, reconveyances, satisfactions or other instruments as it may request to confirm the release, satisfaction and discharge in full of all mortgages 62 and deeds of trust at any time delivered by the Company or any Guarantor to secure any Obligations in respect of the Existing Senior Secured Credit Facility, duly executed, delivered and acknowledged in recordable form by the grantee named therein or its of record successors or assigns; and (iv) a letter (in form and substance reasonably satisfactory to the Administrative Agent) addressed to the Collateral Agent, the Trustee and the Administrative Agent, executed and delivered by Bank One, N.A. as administrative agent under the Existing Senior Secured Credit Facility, stating the amount (the "Payout Amount") required to pay in full in cash at the Closing Date all outstanding Obligations under or in respect of the Existing Senior Secured Credit Facility and confirming and agreeing that upon payment of such amount all Liens securing such Obligations will be forever released and discharged. (e) Security. The Collateral Agent shall have received at the Closing Date: (i) appropriately completed copies, which have been duly authorized for filing by the appropriate Person, of UCC Form UCC-3 termination statements, if any, necessary to release all Liens (other than Permitted Prior Liens) of any Person in any collateral described in the Security Documents previously granted by any Person, except to the extent that the administrative agent under the Existing Senior Secured Credit Facility has not delivered such termination statements as of the Closing Date but has agreed to pursuant to a release, reconveyance, satisfaction or other instrument described in clause (iv) below; (ii) confirmation reasonably satisfactory to the Administrative Agent that First American Title Insurance Company has accepted the Closing Date Mortgages for recording and will cause the Closing Date Mortgages to be duly filed and recorded within ten days following the Closing Date and has agreed to issue to the Collateral Agent for the benefit of the Secured Parties, a policy of title insurance in form and substance reasonably satisfactory to the Administrative Agent, insuring each Closing Date Mortgage to be a valid, enforceable and perfected Lien upon all real property described therein, free from all prior Liens except Permitted Prior Liens, for the full amount of the Secured Obligations; and (iii) all UCC Financing Statements or other similar Financing Statements and UCC Form UCC-3 termination statements required pursuant to clauses (i) and (ii) above (collectively, the "Financing Statements") shall have been delivered to CT Corporation System or another similar filing service company acceptable to the Administrative Agent (the "Filing Agent"). The Filing Agent shall have acknowledged in a writing reasonably satisfactory to the Administrative Agent and its counsel (i) the Filing Agent's receipt of all Financing Statements, (ii) that the Financing Statements have either been submitted for filing in the appropriate filing offices or will be submitted for filing in the appropriate offices within ten days following the Closing Date and (iii) that the Filing 63 Agent will notify the Administrative Agent and its counsel of the results of such submissions within 30 days following the Closing Date. (f) Insurance. The Collateral Agent shall have received at the Closing Date a certificate of insurance reasonably satisfactory to the Administrative Agent confirming that all insurance requirements of the Security Documents are satisfied. (g) Intercreditor Agreement. The Collateral Agent shall have received at the Closing Date an agreement (in form and substance reasonably satisfactory to the Administrative Agent) executed and delivered by the Collateral Agent and the Credit Facility Agent under the Senior Credit Facility, by which such Credit Facility Agent certifies to the Collateral Agent that the Senior Credit Facility is governed by an agreement that includes the provisions described in clause (1) of the definition of Qualified Credit Facility and that such Credit Facility Agent agrees to be bound by and will perform the obligations of the Credit Facility Agent set forth in the intercreditor provisions of this Agreement and the Collateral Agent agrees to be bound by and will perform the obligations of the Collateral Agent set forth in the intercreditor provisions of this Agreement. (h) Other Deliverables. The Administrative Agent shall have received at the Closing Date such other approvals, opinions, or documents as the Administrative Agent or the Collateral Agent may reasonably request in form and substance reasonably satisfactory to each of them. (i) Closing Date Certificates. The Company shall have furnished or caused to be furnished to the Administrative Agent on the Closing Date certificates of officers of the Company reasonably satisfactory to the Administrative Agent as to the accuracy of the representations and warranties of the Company herein at and as of such Closing Date, as to the matters set forth in clause (e)(iii) of this Section and as to such other matters as the Administrative Agent may reasonably request. (j) The Notes. The Company shall have consummated the transactions contemplated by the Indenture, and the Notes shall have been issued prior to, or shall be funded simultaneously with, the Closing Date on terms reasonably satisfactory to the Administrative Agent, and the Administrative Agent shall have received counterparts, conformed as executed, of the Indenture and such other documentation as they deem necessary to evidence the consummation thereof. (k) The Senior Credit Facility. The Company shall have consummated the Senior Credit Facility, and such Senior Credit Facility shall have been funded prior to, or shall be funded simultaneously with, the Closing Date on terms reasonably satisfactory to the Administrative Agent, and the Administrative Agent shall have received counterparts, conformed as executed, of the Senior Credit Facility and such other documentation as they deem necessary to evidence the consummation of the Senior Credit Facility. (l) Payoff of Existing Senior Credit Facility. Prior to or simultaneously with the Closing Date, the Company shall have received cash proceeds from the issuance of the Notes 64 and borrowings under the Senior Credit Facility in an amount sufficient, when added to the cash proceeds from the sale of the proceeds of the Term Loans (net of any fees paid in connection therewith), to pay in full in cash the Payout Amount and all other fees, costs and expenses payable by the Company in connection with the transactions contemplated hereby and shall have authorized disbursement of such cash proceeds directly to pay the Payout Amount and such fees, costs and expenses pursuant to a disbursement authorization letter (in form and substance reasonably satisfactory to the Administrative Agent) executed and delivered by the Company and the Guarantors, and the Administrative Agent shall have received such other confirmation as it may reasonably request as to the termination and discharge of the Existing Senior Secured Credit Facility and the release and discharge of all Liens securing Obligations thereunder. (m) Term Loan Documents. The Company and each of the Guarantors shall have delivered executed copies of the Term Loan Documents to the Administrative Agent, in each case in form and substance reasonably satisfactory to the Administrative Agent. (n) Environmental Reports. The Administrative Agent shall have received reports and other information, in form, scope and substance satisfactory to the Administrative Agent and Lenders, regarding environmental matters relating to the Facilities. (o) Financial Statements; Projections. The Company shall have delivered to the Administrative Agent (i) the Historical Financial Statements, (ii) pro forma consolidated balance sheets of the Company and its Restricted Subsidiaries as of December 31, 2002, and reflecting the consummation of the transactions contemplated by this Agreement, the Indenture and the Senior Credit Facility to occur on or prior to the Closing Date, which pro forma financial statements shall be in form and substance satisfactory to the Administrative Agent, and (iii) the Projections (which shall be presented on a quarterly basis through Fiscal Year 2003 and on an annual basis thereafter). Each Lender, by delivering its signature page to this Agreement and funding a Term Loan on the Closing Date, shall be deemed to have acknowledged receipt of, and consented to and approved, each Term Loan Document and each other document required to be approved by the Administrative Agent, Requisite Lenders or Lenders, as applicable on the Closing Date. SECTION 3.02. Conditions to Each Term Loan. (a) Conditions Precedent. The obligation of each Lender to make any Term Loan on any Credit Date, including the Closing Date, are subject to the satisfaction, or waiver in accordance with Section 13.05, of the following conditions precedent: (i) the Administrative Agent shall have received a fully executed and delivered Funding Notice; and (ii) as of such Credit Date, no event shall have occurred and be continuing or would result from the consummation of the applicable Term Loan that would constitute an Event of Default or a Default. 65 The Administrative Agent be entitled, but not obligated to, request and receive, prior to the making of any Term Loan, additional information reasonably satisfactory to the requesting party confirming the satisfaction of any of the foregoing if, in the good faith judgment of the Administrative Agent such request is warranted under the circumstances. (b) Notices. Any Notice shall be executed by an Officer in a writing delivered to the Administrative Agent. In lieu of delivering a Notice, the Company may give the Administrative Agent telephonic notice by the required time of any proposed borrowing or conversion/continuation; provided each such notice shall be promptly confirmed in writing by delivery of the applicable Notice to the Administrative Agent on or before the applicable date of borrowing or continuation/conversion. Neither the Administrative Agent nor any Lender shall incur any liability to the Company in acting upon any telephonic notice referred to above that the Administrative Agent believes in good faith to have been given by a duly authorized officer or other Person authorized on behalf of the Company or for otherwise acting in good faith. ARTICLE IV REPRESENTATIONS AND WARRANTIES In order to induce Lenders to enter into this Agreement and to make the Initial Term Loan to be made thereby, each Obligor represents and warrants to each Lender on the Closing Date that the following statements are true and correct on the Closing Date: SECTION 4.01. No Material Adverse Change. Neither the Company nor any of its Subsidiaries has sustained since December 31, 2002 any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Offering Circular; and, since the respective dates as of which information is given in the Offering Circular, there has not been any change in the capital stock or long-term debt of the Company or any of its subsidiaries or any material adverse change, or any development involving a prospective material adverse change, in or affecting the general affairs, management, consolidated financial position, stockholders' equity or results of operations of the Company and its subsidiaries, otherwise than as set forth or contemplated in the Offering Circular. SECTION 4.02. Immaterial Subsidiaries. As of the Closing Date, each of the Company's Subsidiaries that are not named as Guarantors under this Agreement either (i) is not a Domestic Subsidiary or (ii) qualifies as an Immaterial Subsidiary. SECTION 4.03. Property. The Company and its Subsidiaries have good and indefeasible title in fee simple to all real property and good and defensible title to all personal property owned by them, in each case free and clear of all liens, encumbrances and defects except for Permitted Liens or such as do not materially adversely affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its Subsidiaries; and all real property, buildings and vessels held under lease by the Company and its 66 Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property, buildings and vessels by the Company and its Subsidiaries subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights or providing for the relief of debtors and to general equity principles. SECTION 4.04. Due Incorporation. Each of the Company and the Guarantors have been duly incorporated or formed, as the case may be, and are validly existing as a corporation or limited liability company, as the case may be, in good standing under the laws of their respective jurisdictions of incorporation or organization as set forth on Schedule 4.04 with corporate or limited liability company power and authority to own or lease their properties and conduct their business as contemplated under this Agreement and, and have been duly qualified as a foreign corporation or limited liability company, as the case may be, for the transaction of business and are in good standing under the laws of each other jurisdiction in which the character of business conducted by it or the location of properties owned or leased make such qualification or registration necessary (except where the failure to so qualify would not have a Material Adverse Effect). SECTION 4.05. Capital Stock and Ownership. The Company has an authorized capitalization as set forth in Schedule 4.05. All of the issued shares of Capital Stock of the Company have been duly and validly authorized and issued and are fully paid and non-assessable; all of the issued shares of Capital Stock of each of the Guarantors that is a corporation have been duly and validly authorized and issued and are fully paid and non-assessable (except as described on Schedule 4.05 and except for one share of Tesoro Petroleum (Singapore) Pte Ltd.), are owned directly or indirectly by the Company, free and clear of all Liens; and all of the outstanding limited liability company interests of each Guarantor that is a limited liability company are owned, directly or indirectly, by the Company free and clear of all Liens except as set forth on Schedule 4.05. SECTION 4.06. Due Authorization; Binding Obligation (a) The execution, delivery and performance of the Term Loan Documents have been duly authorized by all necessary action on the part of each Obligor that is a party thereto. (b) Each Term Loan Document has been duly executed and delivered by each Obligor that is a party thereto and is the legally valid and binding obligation of such Obligor, enforceable against such Obligor in accordance with its respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. SECTION 4.07. Margin Stock. None of the transactions contemplated by this Agreement (including, without limitation, the use of the proceeds from the sale of the Securities) will violate or result in a violation of Section 7 of the Exchange Act, or any regulation promulgated 67 thereunder, including, without limitation, Regulations T, U and X of the Board of Governors of the Federal Reserve System. SECTION 4.08. No Conflict. The execution, delivery and performance by Obligors of the Term Loan Documents to which they are parties and the consummation of the transactions contemplated by the Term Loan Documents do not and will not: (a) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound or to which any of the property or assets of the Company or any of its Subsidiaries is subject; (b) result in any violation of the provisions of the Certificate of Incorporation or Certificate of Formation or By-laws or other organizational documents, as applicable, of the Company or any of its Subsidiaries; (c) result in any violation of the applicable provisions of any law or statute or any order, rule or regulation, judgment or decree of any court or governmental agency or body having jurisdiction over, and applicable to, the Company or any of its Subsidiaries or any of their respective properties or assets; or (d) result in the imposition or creation of (or the obligation to create or impose) a Lien under any agreement or instrument to which the Company or any subsidiary is a party or by which the Company or any of their respective properties or assets is bound (other than any Liens created under any of the Term Loan Documents in favor of Collateral Agent, on behalf of the Secured Parties and as provided in favor of the lenders under the Senior Credit Facility); except in the case of clauses (a), (b) and (d) for such conflicts, breaches, violations, defaults or Liens which, individually or in the aggregate, would not result in a Material Adverse Effect. SECTION 4.09. Governmental Consents. The execution, delivery and performance by the Obligors of the Term Loan Documents to which they are parties and the consummation by the Obligors of the transactions contemplated by the Term Loan Documents do not and will not require any consent, approval, authorization, order, registration or qualification of or with any court or governmental agency or body except for (1) the filings required to perfect the Collateral Agent's security interests granted pursuant to the Security Documents as set forth on Schedule 4.09(a), (2) the filings required to release existing Liens as set forth on Schedule 4.09(b), (3) those regulatory approvals from the North Dakota Public Service Commission required for the grant of security interest in the Company's 700-mile pipeline system in North Dakota and Montana, and the Capital Stock of Tesoro High Plains Pipeline Company, and (4) such consents required in connection with the assignment and transfer of leases related to the waterfront rights at the Hawaii, Alaska, California and Washington refineries. 68 SECTION 4.10. No Violations. Neither the Company nor any of it Subsidiaries is in violation of its Certificate of Incorporation or By-laws or in default in the performance or observance of any obligation, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party or by which it or any of its properties may be bound, except where such violation or default would not have a Material Adverse Effect. SECTION 4.11. No Adverse Proceedings. Other than as set forth on Schedule 4.11, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or to which any property or assets of the Company or any of its subsidiaries is the subject which (i) could reasonably be expected to have a Material Adverse Effect or (ii) could materially and adversely affect the consummation by the Company and each of the Guarantors of their obligations pursuant to this Agreement or the other Term Loan Documents; and, to the Company's and each of the Guarantors' knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. SECTION 4.12. PUHCA. Neither the Company nor any of its Subsidiaries is, or after giving effect to the offering and sale of the Securities, will be, subject to the Public Utility Holding Company Act of 1935, as amended, and the rules and regulations thereunder. SECTION 4.13. Investment Company Act. Neither the Company, nor any of its Subsidiaries, is, or, after giving effect to the transactions contemplated hereby, will be, an "investment company" or an entity "controlled by an investment company," as such terms are defined in the United States Investment Company Act of 1940, as amended, and the rules and regulations thereunder (the "Investment Company Act"). SECTION 4.14. Accounting. The Company and the Guarantors (i) make and keep accurate books and records and (ii) maintain internal accounting controls which provide reasonable assurance that (A) transactions are executed in accordance with management's authorization, (B) transactions are recorded as necessary to permit preparation of its financial statements and to maintain accountability for its assets and (C) the reported accounting for its assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any difference. SECTION 4.15. No Legal Violation. Except as described on Schedule 4.15 and except for such matters as would not, singly or in the aggregate, result in a Material Adverse Effect, (i) neither the Company nor any of its subsidiaries is in violation of any Environmental Laws, (ii) the Company and each of its subsidiaries have all permits, authorizations and approvals required under any applicable Environmental Laws and are each in compliance with their requirements, (iii) to the knowledge of the Company, there are no pending or overtly threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Law against the Company or any of its subsidiaries and (iv) to the knowledge of the Company, there are no events or circumstances that might reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or 69 governmental body or agency, against or affecting the Company or any of the subsidiaries relating to Hazardous Materials or Environmental Laws. SECTION 4.16. Intellectual Property. The Company and each of its Restricted Subsidiaries own or possess adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights and licenses necessary for the conduct of their respective businesses, except where the failure to have such rights would not have a Material Adverse Effect, and have no reason to believe that the conduct of their respective businesses will conflict with, and have not received any notice of any claim of conflict with, any such rights of others which, in the aggregate, could reasonably be expected to have a Material Adverse Effect. SECTION 4.17. Historical Financial Statements. The Historical Financial Statements were (a) prepared in conformity with GAAP (other than the unaudited financial summaries of the Company and its Restricted Subsidiaries for the months of January and February of 2003) and (b) fairly present, in all material respects, the financial position, on a consolidated basis, of the Persons described in such financial statements as at the respective dates thereof and the results of operations and cash flows, on a consolidated basis, of the entities described therein for each of the periods then ended, subject, in the case of any such unaudited financial statements, to changes resulting from audit and normal year-end adjustments. As of the Closing Date, neither the Company nor any of its Restricted Subsidiaries has any contingent liability or liability for taxes, long-term lease or unusual forward or long-term commitment that is not reflected in the Historical Financial Statements or the notes thereto and which in any such case is material in relation to the business, operations, properties, assets, condition (financial or otherwise) or prospects of the Company and any of its Restricted Subsidiaries taken as a whole. SECTION 4.18. Projections. On and as of the Closing Date, the business plan and financial projections of the Company and its Restricted Subsidiaries for the period Fiscal Year 2003 through and including Fiscal Year 2008 (the "Projections") are based on good faith estimates and assumptions made by the management of the Company; provided the Projections are not to be viewed as facts and that actual results during the period or periods covered by the Projections may differ from such Projections and that the differences may be material; provided, further, as of the Closing Date, management of the Company believed that the Projections were reasonable. SECTION 4.19. Solvency. (a) The Company and its Subsidiaries, collectively (the "Consolidated Company"), and each of the Guarantors has not, and, as a result of consummation of the transactions herein contemplated and the consummation of the Financing Transaction, will not have, incurred debts beyond its ability to pay as they mature; (b) The present fair saleable value of the assets of the Consolidated Company and each of the Guarantors, exceeds the amount required to pay the probable liability on its and their existing debts, respectively (whether matured or unmatured, liquidated or unliquidated, 70 absolute, fixed or contingent), as they become absolute and matured, and as a result of consummation of the transactions herein contemplated and after giving effect to the Financing Transaction, will exceed such amount; (c) The Consolidated Company and each of the Guarantors, does not, and, as a result of consummation of the transactions herein contemplated and the consummation of the Financing Transaction, will not, have unreasonably small capital for it to carry on its business as proposed to be conducted; and (d) Neither the Consolidated Company nor any of the Guarantors are incurring obligations or making transfers under any evidence of indebtedness with the intent to hinder, delay or defraud any entity to which it is or will become indebted. SECTION 4.20. Employee Matters. Except for such matters which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, (i) no labor disturbance by the employees of the Company or any of its Restricted Subsidiaries exists or, to the best of the Company's knowledge, is imminent, (ii) except as described on Schedule 4.20, neither the Company nor any Restricted Subsidiaries is party to a collective bargaining agreement, and (iii) except as described on Schedule 4.17, there are no unfair labor practice complaints pending against the Company or any Restricted Subsidiaries or, to the Company's knowledge, threatened against any of them. SECTION 4.21. ERISA. No "prohibited transaction" (as defined in Section 406 of ERISA), or Section 4975 of the Code, or "accumulated funding deficiency" (as defined in Section 302 of ERISA) or any of the events set forth in Section 4043(b) of ERISA (other than events with respect to which the 30-day notice requirement under Section 4043 of ERISA has been waived) has occurred with respect to any "employee benefit plan", (as defined in Section 3(3) of ERISA), or any "employee benefit plan" of any entity which is considered one employer with the Company under Section 4001 of ERISA or Section 414 of the Code (an "ERISA Affiliate"); each such "employee benefit plan" is in compliance in all material respects with its terms and applicable law, including ERISA and the Code; and the Company or any ERISA Affiliate has not participated in any multiemployer plan (as defined in Section 3(37) of ERISA); the Company or any ERISA Affiliate has not incurred and does not expect to incur liability under Title IV of ERISA with respect to the termination of, or withdrawal from any "pension plan" (as defined in Section 3(2) of ERISA) and each "pension plan" for which the Company would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which could cause the loss of such qualification. SECTION 4.22. Unlawful Contributions. Neither the Company nor any of its Subsidiaries nor, to the Company's knowledge, any of its employees or agents has at any time during the last five years (i) made any unlawful contribution to any candidate for foreign office, or failed to disclose fully any contribution in violation of law or (ii) made any payment to any federal or state governmental officer or official, or other Person charged with similar public or quasi-public 71 duties, other than payments required or permitted by the laws of the United States or any jurisdiction thereof. SECTION 4.23. Pipeline Subsidiaries. As of the Closing Date, no Pipeline Subsidiary will have guaranteed or granted or agreed to grant any security interest in any of its present or future property to secure any of the Obligations under the Senior Credit Facility and the Senior Credit Facility will be governed by an agreement that includes the provisions described in clause (1) of the definition of Qualified Credit Facility. SECTION 4.24. Perfection. As of the Closing Date, the Company and the Guarantors will own the Collateral free and clear of all Liens (other than Permitted Liens), and no Financing Statements (as defined below) in respect of any property or assets of the Company or any Guarantor will be effective in favor of any person other than those in respect of Permitted Prior Liens and those to be terminated with respect to existing Indebtedness. SECTION 4.25. Priority. (a) When executed and delivered to the Collateral Agent on the Closing Date, the Security Documents grant and create, in favor of the Collateral Agent for the benefit of the Secured Parties as security for all of the Secured Obligations, a valid and enforceable security interest in the Collateral, and when the filings referred to in Section 3.01(d) and (e) hereof have been made, such security interests will be perfected first priority security interests (subject to Permitted Prior Liens). (b) When delivered on the Closing Date, each Mortgage will be delivered, duly acknowledged and, if required for recordation, attested and otherwise will be in recordable form, and when such Mortgage is filed for record and recorded in the filing office identified therein, the security interest of the Collateral Agent in the real property described therein will be duly perfected. Each of the Company and Guarantors is a "registered organization" (as defined in Article 9 of the California UCC) under the law of the state in which it is identified in the Indenture, as being organized, and on the Closing Date all security interests granted under the Security Documents in Collateral consisting of personal property or fixtures will be duly perfected to the extent such security interests may be perfected by filing upon the filing of the financing statements referred to in Section 3.01(e)(iii) hereof. (c) On the Closing Date, (i) all Collateral consisting of Capital Stock of Pipeline Subsidiaries will be represented by certificated securities and (ii) all such certificated securities and all promissory notes and other instruments then evidencing or representing any Collateral (other than those of Tesoro High Plains Pipeline Company) will be delivered to the Collateral Agent in pledge for the benefit of the Secured Parties as security for all of the Secured Obligations, duly endorsed by an effective endorsement (unless such certificated securities, promissory notes and instruments are Excluded Assets). SECTION 4.26. Senior Debt. All Obligations under or in respect of the Securities and the Term Loans constitute "Senior Debt" as such term is defined in, and for the purposes of, the indentures governing the Company's outstanding 9-5/8% senior subordinated notes due 2012, 9- 72 5/8% senior subordinated notes due 2008 and 9% senior subordinated notes due 2008 and the promissory notes constituting the Company's junior subordinated notes due 2012. SECTION 4.27. Other Representations. On the Closing Date, the representations and warranties contained in the Security Documents will be true and correct in all respects. ARTICLE V COVENANTS SECTION 5.01. Section Intentionally Deleted. SECTION 5.02. Section Intentionally Deleted. SECTION 5.03. Reports. (a) Whether or not required by the SEC's rules and regulations, so long as any Term Loan Obligations are outstanding, the Company shall furnish to the Administrative Agent (for delivery to each Lender), within the time periods specified in the SEC's rules and regulations, beginning with quarterly financial information for the period ended March 31, 2003, (i) all quarterly and annual reports that would be required to be filed with the SEC on Forms 10-Q and 10-K if the Company were required to file such reports, and (ii) all current reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports. (b) All such reports will be prepared in all material respects in accordance with all of the rules and regulations applicable to such reports. Each annual report on Form 10-K will include a report on the Company's consolidated financial statements by the Company's certified independent accountants. In addition, the Company will file a copy of each of the reports referred to in clauses (a)(i) and (a)(ii) above with the SEC for public availability within the time periods specified in the rules and regulations applicable to such reports (unless the SEC will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. (c) If at any time, the Company is no longer subject to the periodic reporting requirements of the Exchange Act for any reason, the Company will nevertheless continue filing the reports specified in the preceding paragraph with the SEC within the time periods specified above unless the SEC will not accept such a filing. The Company agrees that it will not take any action for the purpose of causing the SEC not to accept any such filings. If, notwithstanding the foregoing, the SEC will not accept the Company's filings for any reason, the Company will post the reports referred to in the preceding paragraph on its website within the time periods that would apply if the Company were required to file those reports with the SEC. 73 \ (d) The Company and the Guarantors agree that, for so long as any Term Loan Obligations remain outstanding, at any time they are not required to file the reports required by the preceding paragraphs with the SEC, they will furnish to the Administrative Agent and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d) (4) under the Securities Act. (e) Delivery of such reports, information and documents to the Administrative Agent is for informational purposes only, and the Administrative Agent's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Administrative Agent is entitled to rely exclusively on Officers' Certificates). SECTION 5.04. Compliance Certificate. (a) The Company shall deliver to the Administrative Agent (for delivery to each Lender), within 90 days after the end of each fiscal year, an Officers' Certificate substantially in the form of Exhibit C stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Agreement, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Agreement and is not in default in the performance or observance of any of the terms, provisions and conditions of this Agreement (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest on the Term Loans is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 5.03(a) above shall be accompanied by a written statement of the Company's independent public accountants that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article V or Article VI hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any future knowledge of any such violation. (c) The Company shall, so long as any of the Term Loan Obligations are outstanding, deliver to the Administrative Agent, forthwith upon any executive Officer having knowledge that an event or circumstance constitutes a Default or an Event of Default and that 74 such event or circumstance has occurred and is existing, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. SECTION 5.05. Taxes. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, charges, assessments, and governmental levies except such as are contested in good faith and, if required, by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Lenders. SECTION 5.06. Waiver of Stay, Extension and Usury Laws. Each of the Company and the Guarantors covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Agreement; and each of the Company and the Guarantors (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Administrative Agent, but shall suffer and permit the execution of every such power as though no such law had been enacted. SECTION 5.07. Restricted Payments. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such, in each case other than dividends or distributions declared or paid in Equity Interests (other than Disqualified Stock) of the Company or declared or paid to the Company or any of its Restricted Subsidiaries; (ii) purchase, redeem or otherwise acquire or retire for value (including without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company (other than any such Equity Interests owned by a Restricted Subsidiary of the Company); (iii) make any payment to purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes, except a payment of interest or principal at its Stated Maturity; or (iv) make any Investment other than a Permitted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (a) no Default or Event of Default shall have occurred and be continuing; and 75 (b) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 5.09; and (c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company or any of its Restricted Subsidiaries after the Closing Date (excluding Restricted Payments permitted by clauses (ii), (iii), (iv), (v), (vi), (viii), (x), (xi) or (xii) of the next succeeding paragraph), is less than the sum of: (1) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing immediately prior to the Closing Date to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a loss, less 100% of such loss), plus (2) 100% of the aggregate net cash proceeds (other than Designated Proceeds), or the Fair Market Value of assets or property other than cash, received by the Company from the issue or sale, in either case, since the Closing Date of (A) Equity Interests of the Company (other than Disqualified Stock), or (B) Disqualified Stock or debt securities of the Company that have been converted into, or exchanged for, such Equity Interests, together with the aggregate cash received at the time of such conversion or exchange, or received by the Company from any such conversion or exchange of such debt securities sold or issued prior to the Closing Date other than Equity Interests (or Disqualified Stock or convertible or exchangeable debt securities) sold to a Restricted Subsidiary of the Company and other than Disqualified Stock or debt securities that have been converted or exchanged into Disqualified Stock, plus (3) in case any Unrestricted Subsidiary has been redesignated a Restricted Subsidiary pursuant to the terms hereof or has been merged, consolidated or amalgamated with or into, or transfers or conveys assets to or is liquidated into, the Company or a Restricted Subsidiary and provided that no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof, the lesser of (A) the book value (determined in accordance with GAAP) at the date of such redesignation, combination or transfer of the aggregate Investments made by the Company and its Restricted Subsidiaries in such Unrestricted Subsidiary (or of the assets transferred or conveyed, as applicable) and (B) the fair market value of such Investment in such Unrestricted Subsidiary at the time of such redesignation, combination or transfer (or of the assets transferred or conveyed, as applicable), in each case, as determined in good faith by the Board of Directors of the Company, whose determination shall be conclusive and evidenced by a resolution of such Board and, in each case, after deducting any Indebtedness of the Unrestricted Subsidiary so designated or combined or with the assets so transferred or conveyed, plus (4) to the extent not already included in Consolidated Net Income for such period, (A) if any Restricted Investment that was made by the Company or any Restricted Subsidiary after the Closing Date is sold for cash or otherwise liquidated or repaid for cash, the cash return of capital with respect to such Restricted Investment resulting from such sale or disposition (less the cost of disposition, if any) and (B) with respect to any Restricted Investment that was made by the Company or any Restricted Subsidiary after the Closing Date, the net reduction in such Restricted Investment resulting from payments of 76 interest, dividends, principal repayments and other transfers and distributions of cash, assets or property, in an amount not to exceed the aggregate amount of such Restricted Investment. The foregoing provisions shall not prohibit: (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions hereof; (ii) the redemption, repurchase, retirement, defeasance or other acquisition, prior to its Stated Maturity, of any (y) Indebtedness (or portion thereof) which is subordinated to the Notes, or the making of any principal payment thereon, or (z) Equity Interests of the Company or any Restricted Subsidiary, in each case, in exchange for, or out of the net cash proceeds (other than Designated Proceeds) of the substantially concurrent sale or issuance (a sale or issuance will be deemed substantially concurrent if such redemption, repurchase, retirement or acquisition occurs not more than 30 days after such sale or issuance) (other than to a Restricted Subsidiary of the Company) of, Equity Interests of the Company (other than any Disqualified Stock), provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition, or payments, shall be excluded from clause (c)(2) of the preceding paragraph; (iii) the making of any principal payment on, or the defeasance, redemption, repurchase or other acquisition of, prior to its Stated Maturity, Indebtedness which is subordinated to the Notes with the net cash proceeds from an incurrence of, or in exchange for the issuance of, Permitted Refinancing Indebtedness; (iv) the payment of any dividend or distribution by a Restricted Subsidiary of the Company to the holders of its Equity Interests (other than Disqualified Stock) on a pro rata basis; (v) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Restricted Subsidiary of the Company held by any current or former officer, employee or director of the Company (or any of its Subsidiaries) pursuant to the terms of agreements (including employment agreements) and plans approved by the Company's Board of Directors, including any management equity plan or stock option plan or any other management or employee benefit plan, agreement or trust, provided, however, that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests pursuant to this clause (v) shall not exceed the sum of (y) $4,000,000 in any twelve-month period and (z) the aggregate net proceeds received by the Company during such 12-month period from issuance of such Equity Interests pursuant to such agreements or plans; (vi) repurchases of Equity Interests deemed to occur upon the cashless exercise of stock options; (vii) the purchase, redemption, defeasance or retirement, in each case, prior to its Stated Maturity, of any Indebtedness that is subordinated to the Notes in right of payment by payments out of Excess Asset Sale Proceeds remaining after completion of an Asset Sale Offer and/or Excess Proceeds from the Sale of Collateral remaining after completion of a Collateral Proceeds Offer, provided that (x) in the case of payments made out of Excess Asset Sale Proceeds, any payments made or value given for such purchase, redemption, defeasance or retirement shall be made out of, or shall not be in excess of, any Excess Asset Sale Proceeds remaining after completion of an Asset Sale Offer (but for the provision of the last sentence of the third paragraph under Section 5.10 hereof), (y) in the case of payments made out of Excess Proceeds from the Sale of Collateral, any payments made or value given for such purchase, redemption, defeasance or retirement shall be made out of, or shall not be in excess of, any Excess Proceeds from the Sale of Collateral remaining after completion of a Collateral Proceeds Offer (but for the provision of the last sentence under Section 5.10 hereof) and (z) the Company would, at the time of such payment and after giving 77 pro forma effect thereto as if such payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 5.09 hereof; (viii) the payment of reasonable and customary directors' fees to the members of the Company's Board of Directors, provided that such fees are consistent with past practice or current requirements; (ix) the purchase by the Company of fractional shares arising out of stock dividends, splits or combinations or business combinations; (x) the declaration and payment of dividends on mandatorily convertible preferred stock of the Company (other than Disqualified Stock) issued after the Closing Date in an aggregate amount not to exceed the amount of Designated Proceeds; (xi) the repurchase by the Company on the Closing Date of a portion of the Company's outstanding 9% Senior Subordinated Notes due 2008, 9-5/8% Senior Subordinated Notes due 2008 or 9-5/8% Senior Subordinated Notes due 2012, in an aggregate principal amount not to exceed $25,000,000; and (xii) other Restricted Payments in an aggregate principal amount since the Closing Date not to exceed $50,000,000; provided, further, that, with respect to clauses (ii), (iii), (v), (vi), (vii), (viii), (x), (xi) and (xii) above, no Default or Event of Default shall have occurred and be continuing. In determining whether any Restricted Payment is permitted by this Section 5.07, the Company may allocate or reallocate all or any portion of such Restricted Payment among the clauses (i) through (xii) of the preceding paragraph or among such clauses and the first paragraph of this Section 5.07 including clauses (a), (b) and (c), provided that at the time of such allocation or reallocation, all such Restricted Payments, or allocated portions thereof, would be permitted under this Section 5.07. The amount of all Restricted Payments (other than cash) shall be the Fair Market Value (as determined by the Board of Directors of the Company and as evidenced by a resolution of the Board of Directors of the Company set forth in an Officers' Certificate delivered to the Administrative Agent) on the date of the transfer, incurrence or issuance of such non-cash Restricted Payment. Not later than (i) the end of any calendar quarter in which any Restricted Payment is made or (ii) the making of a Restricted Payment which, when added to the sum of all previous Restricted Payments made in a calendar quarter, would cause the aggregate of all Restricted Payments made in such quarter to exceed $20,000,000, the Company shall deliver to the Administrative Agent an Officers' Certificate stating that such Restricted Payments were permitted and setting forth the basis upon which the calculations required by this Section 5.07 were computed, which calculations may be based upon the Company's latest available financial statements. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if: (i) immediately after giving effect to such designation, the Company could incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test under the first paragraph of Section 5.09 hereof; (ii) immediately before and immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing; and (iii) the Company certifies that such designation complies with this covenant. Any such designation by the Board of Directors shall be evidenced by the Company promptly filing with the Administrative Agent a copy of the resolution giving effect to such designation 78 and an Officers' Certificate certifying that such designation complied with the foregoing provisions. The Board of Directors may designate any Subsidiary of the Company to be an Unrestricted Subsidiary under the circumstances and pursuant to the requirements described in the definition of "Unrestricted Subsidiary," which requirements include that such designation will be made in compliance with this covenant. For purposes of making the determination as to whether such designation would be made in compliance with this covenant, all outstanding Investments by the Company and its Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary so designated will be deemed to be Restricted Payments at the time of such designation and will reduce the amount available for Restricted Payments under the first paragraph of this Section 5.07. All such outstanding Investments will be deemed to constitute Investments in an amount equal to the greatest of (i) the net book value (determined in accordance with GAAP) of such Investments at the time of such designation, (ii) the Fair Market Value of such Investments at the time of such designation and (iii) the original Fair Market Value of such Investments at the time they were made. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes hereof, and any Indebtedness of such Subsidiary shall be deemed to be incurred as of such date. SECTION 5.08. Dividend and Other Payment Restrictions Affecting Subsidiaries. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary of the Company or the Company to: (i)(x) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (y) pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries; (ii) make loans or advances to the Company or any of its Restricted Subsidiaries; or (iii) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries. However the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of: (a) agreements in effect on the Closing Date and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings (collectively, for the purposes of this Section 5.08, "amendments") of any such agreements or any Existing Indebtedness to which such agreements relate, provided that such amendments are no more restrictive with respect to such dividend, distribution or other payment restrictions and loan or investment restrictions than those contained in such agreement, as in effect on the Closing Date; (b) any Credit Facility in effect after the Closing Date to the extent its provisions are no more restrictive with respect to such dividend, distribution or other payment 79 restrictions and loan or investment restrictions than those contained in the Indenture or the Senior Credit Facility as in effect on the Closing Date; (c) this Agreement, the Term Loans and the Term Loan Guarantees, or any other indenture governing debt securities issued by the Company or any Guarantor that are no more restrictive with respect to such dividend, distribution or other payment restrictions and loan or investment restrictions than those contained herein; (d) any future Liens that may be permitted to be granted under, or incurred not in violation of, any other provisions hereof; (e) applicable law; (f) any instrument governing Indebtedness or Capital Stock, or any other agreement relating to any property or assets, of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except with respect to Indebtedness incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person or such Person's subsidiaries, so acquired, provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms hereof to be incurred; (g) restrictions of the nature described in clause (iii) above by reason of customary non-assignment provisions in contracts, agreements, licenses and leases entered into in the ordinary course of business; (h) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (iii) above on the property so acquired; (i) any restriction with respect to a Restricted Subsidiary of the Company imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition; (j) agreements relating to secured Indebtedness otherwise permitted to be incurred pursuant to Section 5.09 hereof, and not in violation of Section 5.12 hereof, that limit the right of the debtor to dispose of assets securing such Indebtedness; (k) Permitted Refinancing Indebtedness in respect of Indebtedness referred to in clauses (a), (b), (c), (f), (h) and (j) of this paragraph, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive with respect to such dividend, distribution or other payment restrictions and loan or investment restrictions than those contained in the agreements governing the Indebtedness being refinanced; and 80 (l) provisions with respect to the disposition or distribution of assets in joint venture agreements and other similar agreements entered into in the ordinary course of business. SECTION 5.09. Incurrence of Indebtedness and Issuance of Preferred Stock. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt), other than Permitted Debt, and the Company shall not issue, and shall not permit any of its Restricted Subsidiaries to issue, any Disqualified Stock; provided, however, that the Company or any Guarantor may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock if the Company's Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.00 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if such additional Indebtedness had been incurred, or such Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period. The provisions of the first paragraph of this Section 5.09 shall not apply to the incurrence of any Permitted Debt. Accrual of interest, the accretion of accreted value and the payment of interest in the form of additional Indebtedness will not be deemed to be an incurrence of Indebtedness for purposes of this Section 5.09. In the case an Unrestricted Subsidiary incurs Non-Recourse Indebtedness and any such Non-Recourse Indebtedness ceases to be Non-Recourse Indebtedness of such Unrestricted Subsidiary, then such event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary that is subject to this Section 5.09. The Company will not incur any Indebtedness (including Permitted Debt) that is contractually subordinated in right of payment to any other Indebtedness of the Company unless such Indebtedness is also contractually subordinated in right of payment to the Notes on substantially identical terms; provided, however, that no Indebtedness of the Company will be deemed to be contractually subordinated in right of payment to any other Indebtedness of the Company solely by virtue of being unsecured. For purposes of determining compliance with this Section 5.09, in the event that an item of Indebtedness (including Acquired Debt) meets the criteria of more than one of the categories of Permitted Debt described above or is entitled to be incurred pursuant to the first paragraph of this Section 5.09, the Company will, in its sole discretion, classify (or later reclassify) in whole or in part such item of Indebtedness in any manner that complies with this Section 5.09 and such item of Indebtedness or a portion thereof may be classified (or later reclassified) in whole or in part as having been incurred under more than one of the applicable clauses or pursuant to the first paragraph of this Section 5.09. 81 Notwithstanding the foregoing, no Pipeline Subsidiary shall incur or maintain any Indebtedness or grant or become or remain subject to any Lien upon any of its property securing Indebtedness, except (i) liabilities outstanding on the Closing Date in respect of the Company's outstanding 9% Senior Subordinated Notes due 2008, 9-5/8% Senior Subordinated Notes due 2008 and 9-5/8% Senior Subordinated Notes due 2012, (ii) guarantees of the Notes (including any additional Notes) and Term Loans (including any additional Term Loans) and Liens securing Secured Obligations and (iii) Permitted Liens. SECTION 5.10. Asset Sales. The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale (including a Sale of Collateral) unless: (i) the Company or the Restricted Subsidiary, as the case may be, receives consideration at the time of the Asset Sale at least equal to the fair market value (which, in the case of an Asset Sale for consideration exceeding $30,000,000, shall be determined in good faith by the Company's Board of Directors) of the assets or Equity Interests issued or sold or otherwise disposed of; (ii) at least 75% of the consideration therefor received by the Company or the Restricted Subsidiary is in the form of, or any combination of, (a) cash or Cash Equivalents, (b) the assumption of any liabilities (as shown on the Company's or the Restricted Subsidiary's most recent balance sheet) of the Company or any Restricted Subsidiary of the Company (other than liabilities that are by their terms subordinated to the Term Loans or any Term Loan Guarantee) by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or the Restricted Subsidiary from further liability, (c) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are converted by the Company or the Restricted Subsidiary into cash or Cash Equivalents within 60 days following their receipt (to the extent of cash or Cash Equivalents received) and (d) other assets or rights used or useful in a Permitted Business, including, without limitation, assets or Investments of the nature or type described in clause (m) of the definition of "Permitted Investments" except that, in the case of a Sale of Collateral, such assets or rights shall consist solely of Refinery Assets; and (iii) in the case of a Sale of Collateral, the Collateral Agent is immediately granted a perfected first priority security interest (subject to Permitted Prior Liens) in the Net Sale Consideration therefor received by the Company or the Restricted Subsidiary as additional Collateral under the Security Documents to secure the Secured Obligations, and, in the case of cash or Cash Equivalents constituting Net Sale Consideration, such cash or Cash Equivalents must be deposited into a segregated account under the sole control of the Collateral Agent that includes only proceeds from the Sale of Collateral and interest earned thereon (an "Asset Sale Proceeds Account") and is free from all other Liens, all on terms and pursuant to arrangements reasonably satisfactory to the Collateral Agent in its reasonable determination (which may include, at the Collateral Agent's reasonable request, customary Officers' Certificates and legal opinions and shall include release provisions requiring the Collateral Agent to release deposits in 82 the Asset Sale Proceeds Account as necessary to permit the Company or its Restricted Subsidiaries to apply such Net Sale Consideration in the manner described below, unless the Collateral Agent has received written notice that a Default or Event of Default has occurred and is continuing); provided, that any Asset Sale pursuant to a condemnation, appropriation or other similar taking, including by deed in lieu of condemnation, or pursuant to the foreclosure or other enforcement of a Lien incurred not in violation of Section 5.12 hereof or exercise by the related lienholder of rights with respect thereto, including by deed or assignment in lieu of foreclosure shall not be required to satisfy the conditions set forth in clauses (i) and (ii) of this paragraph. Within 365 days after the receipt of any Net Proceeds from an Asset Sale, other than a Sale of Collateral, the Company or the Restricted Subsidiary, as the case may be, may apply such Net Proceeds, at its option: (a) to repay, repurchase or redeem any secured Indebtedness or other secured Obligations, (b) to acquire a controlling interest in another business or all or substantially all of the assets of another business, in each case engaged in a Permitted Business, (c) to make capital expenditures, or (d) to acquire other non-current assets to be used in a Permitted Business, including, without limitation, assets or Investments of the nature or type described in clause (m) of the definition of "Permitted Investments;" provided, that the Company or the applicable Restricted Subsidiary will be deemed to have complied with clause (b) or (c) if, within 365 days of such Asset Sale, the Company or such Restricted Subsidiary shall have commenced and not completed or abandoned an expenditure or Investment, or a binding agreement with respect to an expenditure or Investment, in compliance with clause (b) or (c), and that expenditure or Investment is substantially completed within a date one year and six months after the date of such Asset Sale. Pending the final application of any such Net Proceeds, the Company may temporarily reduce Indebtedness under any Credit Facility or otherwise expend or invest such Net Proceeds in any manner that is not prohibited by this Agreement. Any Net Proceeds from Asset Sales described in this paragraph that are not applied or invested as provided in the first sentence of this paragraph shall be deemed to constitute "Excess Asset Sale Proceeds." When the aggregate amount of Excess Asset Sale Proceeds exceeds $15,000,000, the Company will be required to make an offer to all Lenders and holders of each other series of Indebtedness that ranks by its terms pari passu in right of payment with the Term Loans and the terms of which contain substantially similar requirements with respect to the application of net proceeds from asset sales as are contained herein, including the Term Loans (an "Asset Sale Offer"), to purchase on a pro rata basis (with the Excess Asset Sale Proceeds prorated between the Lenders and such holders of pari passu Indebtedness based upon outstanding aggregate 83 principal amounts) the maximum principal amount of the Term Loans and such other Indebtedness that may be purchased or prepaid, as applicable, out of the prorated Excess Asset Sale Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest, if any, thereon, to the date of purchase, in accordance with the procedures set forth in Section 2.11 hereof. To the extent that the aggregate amount of Term Loans and other Indebtedness tendered (and electing to be redeemed or repaid, as applicable) pursuant to an Asset Sale Offer is less than the Excess Asset Sale Proceeds, the Company and its Restricted Subsidiaries may use any remaining Excess Asset Sale Proceeds for general corporate purposes and any other purpose not prohibited by this Agreement. If the aggregate principal amount of Term Loans and such other Indebtedness surrendered by holders thereof exceeds the amount of the prorated Excess Asset Sale Proceeds, the Company shall select the Term Loans and such other Indebtedness to be purchased or prepaid on a pro rata basis. Upon completion of the offer to purchase, the amount of Excess Asset Sale Proceeds shall be reset at zero. Within 365 days after the receipt of any Net Sale Consideration from an Asset Sale that constitutes a Sale of Collateral, the Company or the Restricted Subsidiary, as the case may be, may apply such Net Sale Consideration, at its option: (a) to acquire a controlling interest in another business or all or substantially all of the assets of another business, in each case engaged in a Permitted Business and principally owning Refinery Assets that have (in the good faith judgment of the Company) a value, net of the value of any Credit Facility Collateral included therein, at least equal to the amount of such Net Sale Consideration; or (b) to make capital expenditures on or acquire Refinery Assets; provided, that in each such case, the Collateral Agent shall immediately be granted a perfected first priority security interest (subject to Permitted Prior Liens) on all of the assets (other than any Credit Facility Collateral included therein) acquired with such Net Sale Consideration as Collateral under the Security Documents to secure the Secured Obligations, all on terms and pursuant to arrangements reasonably satisfactory to the Collateral Agent in its reasonable determination (which may include, at the Collateral Agent's reasonable request, customary Officers' Certificates and legal opinions). The Company or the applicable Restricted Subsidiary will be deemed to have complied with clause (a) or (b) of this paragraph if, within 365 days of such Sale of Collateral, the Company or such Restricted Subsidiary shall have commenced and not completed or abandoned an acquisition, Investment or expenditure, or a binding agreement with respect to an acquisition, Investment or expenditure, in compliance with clause (a) or (b) of this paragraph, and that acquisition, Investment or expenditure is substantially completed within a date one year and six months after the date of such Asset Sale. Any Net Sale Consideration from the Sale of Collateral that is not applied or invested as provided this paragraph shall be deemed to constitute "Excess Proceeds from the Sale of Collateral." When the aggregate amount of Excess Proceeds from the Sale of Collateral exceeds $15,000,000, the Company will be required to make an offer to all holders of Notes and Lenders 84 (a "Collateral Proceeds Offer") to purchase (or redeem or repay, as applicable) on a pro rata basis (with the Excess Proceeds from the Sale of Collateral prorated between the holders of Notes and such Lenders based upon outstanding aggregate principal amounts) the maximum principal amount of the Notes that may be purchased, and the Term Loans that may be prepaid, in each case, out of the prorated Excess Proceeds from the Sale of Collateral, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest, if any, thereon, to the date of purchase, in accordance with the procedures set forth in Section 2.11 hereof. To the extent that the aggregate amount of Notes and Term Loans tendered (and electing to be redeemed or repaid, as applicable) pursuant to such Collateral Proceeds Offer is less than the Excess Proceeds from the Sale of Collateral, the Company and its Restricted Subsidiaries may use any remaining Excess Proceeds from the Sale of Collateral, free and clear of any Liens created by any Security Documents or otherwise for the benefit of any holder of Secured Obligations, for general corporate purposes and any other purpose not prohibited by this Agreement. If the aggregate principal amount of Notes and Term Loans surrendered by holders thereof exceeds the amount of the prorated Excess Proceeds from the Sale of Collateral, the Trustee shall select the Notes to be purchased on a pro rata basis and the Administrative Agent shall select the Term Loans to be repaid on a pro rata basis. Upon completion of the offer to purchase, the amount of Excess Proceeds from the Sale of Collateral shall be reset at zero. SECTION 5.11. Transactions with Affiliates. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, make any payment to, or sell, lease, transfer or otherwise dispose of any properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of any such Person (each of the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that could have been obtained in a transaction by the Company or such Restricted Subsidiary with an unrelated Person; and (ii) the Company delivers to the Administrative Agent: (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of at least $5,000,000, an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above; (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $20,000,000, a resolution of its Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of its Board of Directors; and (c) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $30,000,000 and for which there are no disinterested members of its Board of Directors, an opinion as to the fairness to the Company of such Affiliate Transaction from a financial point of view issued by an Independent Financial Advisor; provided that none of the following shall be deemed to be Affiliate Transactions and therefore shall not be subject to the provisions of this Section 5.11: (1) Affiliate Transactions involving the purchase or sale of crude oil, natural gas and other hydrocarbons, and refined products therefrom, in the ordinary course of any Permitted 85 Business, so long as such transactions are priced in line with industry accepted benchmark prices and the pricing of such transactions are equivalent to the pricing of comparable transactions with unrelated third parties; (2) any employment, equity award, equity option or equity appreciation agreement or plan, agreement or other similar compensation plan or arrangement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of its business; (3) transactions between or among (A) the Company and its Restricted Subsidiaries and (B) the Restricted Subsidiaries; (4) the performance of any agreement in effect on the Closing Date; (5) loans or advances to officers, directors and employees for moving, entertainment and travel expenses, drawing accounts and similar expenditures and other purposes, in each case in the ordinary course of business; (6) maintenance in the ordinary course of business of customary benefit programs or arrangements for employees, officers or directors, including vacation plans, health and life insurance plans, deferred compensation plans and retirement or savings plans and similar plans; (7) fees and compensation paid to, and indemnity provided on behalf of, officers, directors, employees or consultants of the Company or any of its Restricted Subsidiaries in their capacity as such, to the extent such fees and compensation are reasonable and customary; (8) sales of Equity Interests of the Company (other than Disqualified Stock) to Affiliates of the Company or any of its Restricted Subsidiaries; and (9) Restricted Payments that are permitted by Section 5.07 hereof. SECTION 5.12. Liens. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien other than Permitted Liens. SECTION 5.13. Business Activities. The Company will not, and will not permit any of its Restricted Subsidiaries to, engage in any business other than a Permitted Business, except to such extent as would not be material to the Company and its Restricted Subsidiaries taken as a whole. SECTION 5.14. Corporate Existence. Subject to Article VI hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, and the corporate, partnership or other existence of each of its Restricted Subsidiaries, in accordance with the 86 respective organizational documents (as the same may be amended from time to time) of the Company or any such Restricted Subsidiary; provided, however, that the Company shall not be required to preserve the existence of any of its Restricted Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Restricted Subsidiaries, taken as a whole. SECTION 5.15. Offer to Repurchase upon Change of Control. (a) Upon the occurrence of a Change of Control, each Lender will have the right to require the Company to repay all or any part of such Lender's Term Loans pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest thereon, to the date of purchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company will send a notice to the Administrative Agent (for delivery to each Lender) stating: (i) the description of the transaction or transactions that constitute the Change of Control, that the Change of Control Offer is being made pursuant to this Section 5.15, and that all Term Loans for which payment is requested and not rescinded will be accepted for payment; (ii) the purchase price and the purchase date, which shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"); (iii) that any Term Loans for which payment is not requested will continue to accrue interest; (iv) that, unless the Company defaults in the payment of the Change of Control Payment, all Term Loans for which payment is requested pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; (v) that Lenders requesting that their Term Loans be repaid pursuant to a Change of Control Offer will be required to surrender the any Term Loan Notes with other customary documents as the Company may reasonably request, to the Administrative Agent prior to the close of business on the third Business Day preceding the Change of Control Payment Date; and (vi) that Lenders will be entitled to withdraw their request if the Administrative Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Lender, the principal amount of Term Loans for which repayment is requested, and a statement that such Lender is withdrawing his request to have the Term Loans repaid. 87 (b) On the Change of Control Payment Date, the Company will, to the extent lawful, (i) transfer to the Administrative Agent in immediately available funds an amount equal to the Change of Control Payment in respect of all Term Loans or portions thereof for which repayment has been requested and (ii) deliver or cause to be delivered to the Administrative an Officers' Certificate stating the aggregate principal amount of Term Loans or portions thereof being repaid by the Company. The Administrative Agent will promptly mail to each Lender so requesting the Change of Control Payment for such Term Loans. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. (c) The Change of Control provisions described above will be applicable whether or not any other provisions of this Agreement are applicable, except as set forth in Article VIII hereof. (d) The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth herein applicable to a Change of Control Offer made by the Company and purchases or repays all Term Loans for which payment is requested and not rescinded under such Change of Control Offer. SECTION 5.16. Flood Insurance. At the request of any Lender, the Company shall provide to such requesting Lender evidence of flood insurance with respect to each Flood Hazard Property that is located in a community that participates in the National Flood Insurance Program, in each case, if and to the extent required to comply with any applicable regulations of the Board of Governors of the Federal Reserve System. SECTION 5.17. Additional Term Loan Guarantees and Liens. (a) If the Company or any of its Restricted Subsidiaries acquires or creates another Domestic Subsidiary (other than any Immaterial Subsidiary) after the Closing Date, then that newly acquired or created Subsidiary will become a Guarantor and (i) execute a Guarantor Joinder Agreement, a "Joinder Agreement" (as such term is defined in the Security Agreement) and a "Joinder Agreement" (as such term is defined in the Collateral Agency Agreement) providing that such Subsidiary shall become a Guarantor under this Agreement and a party to the Security Documents and (ii) deliver an Opinion of Counsel to the effect that each such joinder agreement has been duly authorized and executed by such Subsidiary and that this Agreement, the Term Loan Guarantees and the Security Documents are binding and enforceable obligations of such Subsidiary, in each case, within 30 days following the date on which it was acquired or created. (b) If the Company or any of the Guarantors at any time owns or acquires Collateral that is not subject to a valid, enforceable perfected first priority Lien (subject to Permitted Prior Liens) in favor of the Collateral Agent as security for the Secured Obligations, then the Company will, or will cause such Guarantor to, concurrently: 88 (i) execute and deliver to the Collateral Agent a Security Document upon substantially the same terms as the Security Documents delivered on the Closing Date, granting a Lien upon such Collateral in favor of the Collateral Agent for the benefit of the Secured Parties; (ii) cause the Lien granted in such Security Document to be duly perfected in any manner permitted by law and cause each other Lien upon such Collateral to be (a) released, unless it is a Permitted Lien or (b) subordinated to the Collateral Agent's Liens if it is a Permitted Lien but not a Permitted Prior Lien; and (iii) deliver to the Collateral Agent and the Administrative Agent an Opinion of Counsel reasonably satisfactory to the Collateral Agent and the Administrative Agent, confirming as to such Security Document and Lien the matters set forth as to the Security Documents and Liens in the Opinions of Counsel delivered on behalf of the Company to the Secured Parties on the Closing Date in connection with the original issuance of the Notes and the initial incurrence of the Term Loans and, if the property subject to such Security Document is an interest in real estate, such local counsel opinions, title and flood insurance policies, surveys and other supporting documents as may have been delivered to the Secured Parties on the Closing Date in connection with the original issuance of the Notes and the initial incurrence of the Term Loans, all as the Collateral Agent may reasonably request and in form and substance reasonably satisfactory to the Collateral Agent. (c) If any Restricted Subsidiary of the Company ceases to be an Immaterial Subsidiary at any time, or if any Subsidiary of the Company ceases to be an Unrestricted Subsidiary at any time, such Subsidiary will promptly become a Guarantor and will (i) execute a Guarantor Joinder Agreement, a "Joinder Agreement" (as such term is defined in the Security Agreement) and a "Joinder Agreement" (as such term is defined in the Collateral Agency Agreement) providing that such Subsidiary shall become a Guarantor under this Agreement and a party to the Security Documents and (ii) deliver an Opinion of Counsel to the effect that each such joinder agreement has been duly authorized and executed by such Subsidiary and that this Agreement, the Term Loan Guarantees and the Security Documents are binding and enforceable obligations of such Subsidiary, in each case, only if it would otherwise be required to be a Guarantor at that date. SECTION 5.18. Payments for Consent. The Company will not, and will not permit any of its Restricted Subsidiaries, directly or indirectly to, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Lender or holder of any Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Agreement, the Term Loans, the Indenture, the Notes, or any Security Document unless such consideration is offered to be paid or is paid to all holders of the Notes and/or holders of Term Loans that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. 89 SECTION 5.19. Suspension of Covenants. (a) In the event that at any time (i) the rating assigned to the Notes and the Term Loans by each of S&P and Moody's is an Investment Grade Rating and (ii) no Default or Event of Default has occurred and is continuing under this Agreement or the Indenture, then, beginning on that day and subject to the provisions of paragraph (b) below, the Company and its Restricted Subsidiaries will no longer be subject to Sections 5.07, 5.08, 5.09, 5.10 (provided that those provisions of Section 5.10 relating to Sales of Collateral and the application of the proceeds therefrom will remain in full force and effect and will not be suspended), 5.11, 5.13, 6.01(iv) and 12.03(b)(iii) hereof (the "Suspended Covenants"); provided, however, that all other provisions of this Agreement shall continue to be in full force and effect. (b) Notwithstanding the foregoing, if the rating assigned by either Moody's or S&P should subsequently decline to below an Investment Grade Rating, respectively, the foregoing covenants shall be reinstituted as of and from the date of such rating decline. Section 5.07 hereof will be interpreted as if it had been in effect since the Closing Date except that no Default will be deemed to have occurred solely by reason of a Restricted Payment made while that covenant was suspended. ARTICLE VI SUCCESSORS SECTION 6.01. Merger, Consolidation, or Sale of Assets. The Company will not consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another Person, unless: (i) the Company is the resulting, transferee or surviving Person or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (ii) the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to whom such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations and covenants of the Company under this Agreement and all other Term Loan Documents pursuant to appropriate documentation in form and substance reasonably satisfactory to the Collateral Agent and the Administrative Agent; (iii) immediately before and after such transaction no Default or Event of Default shall have occurred and be continuing; and (iv) except in the case of a merger of the Company with or into a Restricted Subsidiary, the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to whom such sale, assignment, transfer, lease, conveyance or other disposition shall have been made will, at the time of such transaction and after giving pro forma effect thereto as if such transaction had 90 occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 5.09 hereof; provided, however, that this clause (iv) shall be suspended for so long as the Company and its Restricted Subsidiaries are not subject to the Suspended Covenants subject to Section 5.19 hereof. In addition, the Company will not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person. This Section 6.01 will not apply to a sale, assignment, transfer, conveyance or other disposition of assets between or among the Company and any of the Guarantors. SECTION 6.02. Successor Corporation Substituted. Upon any consolidation or merger, or any sale, assignment, transfer, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 6.01 hereof, the successor Person formed by such consolidation or into or with which the Company is merged or to whom such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, conveyance or other disposition, the provisions of this Agreement referring to the "Company" shall refer instead to such successor Person and not to the Person previously defined as Company), and may exercise every right and power of, the Company under this Agreement, the other Term Loan Documents and the Term Loans with the same effect as if such successor Person originally had been named as the Company herein; and when such successor corporation duly assumes all of the obligations and covenants of the Company pursuant to the Term Loan Documents, the predecessor Person shall be relieved of all such obligations. ARTICLE VII DEFAULTS AND REMEDIES SECTION 7.01. Events of Default. An "Event of Default" occurs if: (a) the Company defaults in the payment when due of interest on the Term Loans and such default continues for a period of 30 days; (b) the Company defaults in the payment when due of principal of or premium, if any, on the Term Loans; (c) the Company or any of its Restricted Subsidiaries fails to comply with any of the provisions of Sections 5.15 and 6.01 hereof; 91 (d) the Company or any of its Restricted Subsidiaries fails to observe or perform any covenant or other agreement in this Agreement or the other Term Loan Documents (other than the provisions expressly set forth in clauses (a), (b) or (c) above) for 60 days after written notice of such failure to the Company by the Administrative Agent or the holders of at least 25% in aggregate principal amount of the Term Loans then outstanding; (e) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or is created after the Closing Date, which default: (i) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness (a "Payment Default") or (ii) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates without duplication $20,000,000 or more, and such default shall not have been cured or waived or any such acceleration rescinded, or such Indebtedness is repaid, within ten Business Days after the running of such grace period or the occurrence of such acceleration; (f) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of its Restricted Subsidiaries, and such judgment or judgments remain unpaid, unstayed or undischarged for a period (during which execution shall not be effectively stayed) of 60 days, provided that the aggregate of all such unpaid or undischarged judgments exceeds $20,000,000 (excluding amounts covered by insurance); (g) any Security Document or any Lien purported to be granted thereby on any one or more items of Collateral having an aggregate Fair Market Value in excess of $20,000,000 is held in any judicial proceeding to be unenforceable or invalid, in whole or in part, or ceases for any reason (other than pursuant to a release that is delivered or becomes effective as set forth in this Agreement) to be fully enforceable and perfected; (h) the Company or any Guarantor, or any Person acting on behalf of any of them, denies or disaffirms, in writing, any obligation of the Company or any Guarantor set forth in or arising under any Security Document; (i) the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, when taken together, would constitute a Significant Subsidiary pursuant to or within the meaning of the Bankruptcy Code: (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case, 92 (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or (v) generally is not paying its debts as they become due; (j) a court of competent jurisdiction enters an order or decree under the Bankruptcy Code that: (i) is for relief against the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, when taken together, would constitute a Significant Subsidiary, in an involuntary case; (ii) appoints a Custodian of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, when taken together, would constitute a Significant Subsidiary, or for all or substantially all of the property of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, when taken together, would constitute a Significant Subsidiary; or (iii) orders the liquidation of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, when taken together, would constitute a Significant Subsidiary; and the order or decree remains unstayed and in effect for 60 consecutive days; or (k) except as permitted herein, any Term Loan Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Term Loan Guarantee (other than by reason of the termination of this Agreement or the release of any such Term Loan Guarantee in accordance with this Agreement). SECTION 7.02. Acceleration. Upon the occurrence of any Event of Default described in Section 7.01(i) or (j), automatically, and upon the occurrence and during the continuance of any other Event of Default, at the request of (or with the consent of) Requisite Lenders, upon notice to the Company by the Administrative Agent: (a) the unpaid principal amount of and accrued interest on the Term Loans and all other Term Loan Obligations shall immediately become due and payable, in each case without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by each Obligor; and (b) the Collateral Agent shall immediately become unconditionally entitled to foreclose upon any or all of the Collateral, exercise and enforce its other rights and remedies in 93 respect of the Collateral, subject to the provisions of this Agreement and the Security Documents, as applicable. The Requisite Lenders by written notice to the Administrative Agent may on behalf of all of the Lenders rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal or interest that has become due solely because of the acceleration) have been cured or waived. SECTION 7.03. Waiver of Past Defaults. The Requisite Lenders by notice to the Administrative Agent may on behalf of all Lenders waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of interest, if any, on, or the principal of, the Term Loans; provided, however, that the Requisite Lenders may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration, to the extent permitted by applicable law. Upon any such waiver, such Default or Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Agreement; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. ARTICLE VIII AGENTS SECTION 8.01. Appointment of Agents. The Company and the Lenders acknowledge and agree that GSCP has acted and shall be credited as sole lead arranger, sole bookrunner and syndication agent of the Initial Term Loans and that GSCP is hereby appointed Administrative Agent hereunder and under the other Term Loan Documents. Each Lender hereby authorizes the Sole Lead Arranger and the Administrative Agent to act as its agent in accordance with the terms hereof and the other Term Loan Documents. The Administrative Agent hereby agrees to act upon the express conditions contained herein and the other Term Loan Documents, as applicable. The provisions of this Article VIII are solely for the benefit of Agents and Lenders and no Obligor shall have any rights as a third party beneficiary of any of the provisions thereof. In performing its functions and duties hereunder, the Administrative Agent shall act solely as an agent of Lenders and no Agent does or shall assume or be deemed to have assumed any obligation towards or relationship of agency or trust with or for the Company or any of its Restricted Subsidiaries. The Sole Lead Arranger, without consent of or notice to any party hereto, may assign any and all of its rights or obligations hereunder to any of its Affiliates. GSCP in its capacity as the Sole Lead Arranger shall not have any duties, liabilities or obligations under the Term Loan Documents but shall be entitled to all benefits of this Article VIII. SECTION 8.02. Powers and Duties. Each Lender irrevocably authorizes each Agent to take such action on such Lender's behalf and to exercise such powers, rights and remedies 94 hereunder and under the other Term Loan Documents as are specifically delegated or granted to such Agent by the terms hereof and thereof, together with such powers, rights and remedies as are reasonably incidental thereto. Each Agent shall have only those duties and responsibilities that are expressly specified herein and the other Term Loan Documents. Each Agent may exercise such powers, rights and remedies and perform such duties by or through its agents or employees. No Agent shall have, by reason hereof or any of the other Term Loan Documents, a fiduciary relationship in respect of any Lender; and nothing herein or any of the other Term Loan Documents, expressed or implied, is intended to or shall be so construed as to impose upon any Agent any obligations in respect hereof or any of the other Term Loan Documents except as expressly set forth herein or therein. SECTION 8.03. General Immunity. (a) No Responsibility for Certain Matters. No Agent shall be responsible to any Lender for the execution, effectiveness, genuineness, validity, enforceability, collectability or sufficiency hereof or any other Term Loan Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statements or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by any Agent to Lenders or by or on behalf of any Obligor to any Agent or any Lender in connection with the Term Loan Documents and the transactions contemplated thereby or for the financial condition or business affairs of any Obligor or any other Person liable for the payment of any Term Loan Obligations, nor shall any Agent be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Term Loan Documents or as to the use of the proceeds of the Term Loans or as to the existence or possible existence of any Event of Default or Default or to make any disclosures with respect to the foregoing. Anything contained herein to the contrary notwithstanding, the Administrative Agent shall not have any liability arising from confirmations of the amount of outstanding Term Loans or the component amounts thereof. (b) Exculpatory Provisions. No Agent nor any of its officers, partners, directors, employees or agents shall be liable to Lenders for any action taken or omitted by any Agent under or in connection with any of the Term Loan Documents except to the extent caused by such Agent's gross negligence or willful misconduct. Each Agent shall be entitled to refrain from any act or the taking of any action (including the failure to take an action) in connection herewith or any of the other Term Loan Documents or from the exercise of any power, discretion or authority vested in it hereunder or thereunder unless and until such Agent shall have received instructions in respect thereof from Requisite Lenders (or such other Lenders as may be required to give such instructions under Section 13.05) and, upon receipt of such instructions from Requisite Lenders (or such other Lenders, as the case may be), such Agent shall be entitled to act or (where so instructed) refrain from acting, or to exercise such power, discretion or authority, in accordance with such instructions. Without prejudice to the generality of the foregoing, (i) each Agent shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper Person or Persons, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys (who may be attorneys for the Company and its Restricted 95 Subsidiaries), accountants, experts and other professional advisors selected by it; and (ii) no Lender shall have any right of action whatsoever against any Agent as a result of such Agent acting or (where so instructed) refraining from acting hereunder or any of the other Term Loan Documents in accordance with the instructions of Requisite Lenders (or such other Lenders as may be required to give such instructions under Section 13.05). SECTION 8.04. Agents Entitled to Act as Lender. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, any Agent in its individual capacity as a Lender hereunder. With respect to its participation in the Term Loans, each Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as if it were not performing the duties and functions delegated to it hereunder, and the term "Lender" shall, unless the context clearly otherwise indicates, include each Agent in its individual capacity. Any Agent and its Affiliates may accept deposits from, lend money to, own securities of, and generally engage in any kind of banking, trust, financial advisory or other business with the Company or any of its Affiliates as if it were not performing the duties specified herein, and may accept fees and other consideration from the Company for services in connection herewith and otherwise without having to account for the same to Lenders. SECTION 8.05. Lenders' Representations, Warranties and Acknowledgment. (a) Each Lender represents and warrants that it has made its own independent investigation of the financial condition and affairs of the Company and its Restricted Subsidiaries in connection with its Term Loans hereunder and that it has made and shall continue to make its own appraisal of the creditworthiness of the Company and its Restricted Subsidiaries. No Agent shall have any duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of Lenders or to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the making of the Term Loans or at any time or times thereafter, and no Agent shall have any responsibility with respect to the accuracy of or the completeness of any information provided to Lenders. (b) Each Lender, by delivering its signature page to this Agreement and funding its Initial Term Loan on the Closing Date, shall be deemed to have acknowledged receipt of, and consented to and approved, each Term Loan Document and each other document required to be approved by any Agent, Requisite Lenders or Lenders, as applicable on the Closing Date. SECTION 8.06. Right to Indemnity. Each Lender, in proportion to its Pro Rata Share, severally agrees to indemnify each Agent, to the extent that such Agent shall not have been reimbursed by any Obligor, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including counsel fees and disbursements) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against such Agent in exercising its powers, rights and remedies or performing its duties hereunder or under the other Term Loan Documents or otherwise in its capacity as such Agent in 96 any way relating to or arising out of this Agreement or the other Term Loan Documents; provided, no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent's gross negligence or willful misconduct. If any indemnity furnished to any Agent for any purpose shall, in the opinion of such Agent, be insufficient or become impaired, such Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished; provided, in no event shall this sentence require any Lender to indemnify any Agent against any liability, obligation, loss, damage, penalty, action, judgment, suit, cost, expense or disbursement in excess of such Lender's Pro Rata Share thereof; and provided further, this sentence shall not be deemed to require any Lender to indemnify any Agent against any liability, obligation, loss, damage, penalty, action, judgment, suit, cost, expense or disbursement described in the proviso in the immediately preceding sentence. SECTION 8.07. Successor Administrative Agent. The Administrative Agent may resign at any time by giving thirty (30) days' prior written notice thereof to Lenders and the Company, and the Administrative Agent may be removed at any time with or without cause by an instrument or concurrent instruments in writing delivered to the Company and the Administrative Agent and signed by the Requisite Lenders. Upon any such notice of resignation or any such removal, Requisite Lenders shall have the right, upon five Business Days' notice to the Company, to appoint a successor Administrative Agent. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, that successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Administrative Agent and the retiring or removed Administrative Agent shall promptly transfer to such successor Administrative Agent all sums, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Administrative Agent under the Term Loan Documents, whereupon such retiring or removed Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring or removed Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article VIII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent hereunder. ARTICLE IX COLLATERAL AND SECURITY SECTION 9.01. Security Documents. The payment of principal of, and premium and interest (including special interest), if any, on the Notes, the Term Loans, and all other Secured Obligations, when due, whether on an interest payment date, at maturity, by acceleration, repurchase, redemption or otherwise and 97 whether by the Company pursuant to the Notes or the Term Loans or by any Guarantor pursuant to the Subsidiary Guarantees or the Term Loan Guarantees, and the performance of all other obligations of the Company and its Restricted Subsidiaries under the Note Documents and the Term Loan Documents are secured as provided in the Security Documents which the Company and the Guarantors have entered into simultaneously with the execution of this Agreement and will be secured by all Security Documents hereafter delivered as required or permitted by this Agreement and the Indenture. SECTION 9.02. Further Assurances. (a) The Company will, and will cause each of its Subsidiaries to, do or cause to be done all acts and things which may be required, or which the Collateral Agent from time to time may reasonably request, to assure and confirm that the Collateral Agent holds, for the benefit of the Secured Parties, duly created, enforceable and perfected first priority Liens (subject to Permitted Prior Liens) upon the Collateral as contemplated by the Note Documents and the Term Loan Documents. (b) If the Company or any Domestic Subsidiary shall at any time acquire any real property or leasehold or other interest in real property described in the definition of Collateral that is not covered by the mortgages running to the benefit of the Collateral Agent that are executed on or before the Closing Date, then within 45 days of such acquisition the Company or such Domestic Subsidiary shall execute, deliver and record a Mortgage or a supplement to a Closing Date Mortgage, in each case, reasonably satisfactory in form and substance to the Collateral Agent, subjecting such real property or leasehold or other interests in real property to the Lien created by such Mortgage. If requested by the Collateral Agent, the Company or such Subsidiary shall obtain an appropriate title policy or endorsement or supplement to the title policy insuring the Collateral Agent's Liens in such additional interests in real property, subject only to Permitted Prior Liens and other exceptions to title approved by the Collateral Agent, provided that the Collateral Agent shall not request any such additional title policy or endorsement or supplement to the title policy in respect of such additional real property described in the definition of "Collateral" having a Fair Market Value less than $1,000,000. (c) Upon request of the Collateral Agent at any time and from time to time, the Company will, and will cause each of its Subsidiaries to, promptly execute, acknowledge and deliver such Security Documents, instruments, certificates, notices and other documents and take such other actions as shall be required or which the Collateral Agent may reasonably request to create, perfect, protect, assure or enforce the Liens and benefits intended to be conferred as contemplated by this Agreement and the Indenture for the benefit of the holders of the Secured Obligations. If the Company or such Subsidiary fails to do so, the Collateral Agent is hereby irrevocably authorized and empowered, with full power of substitution, to execute, acknowledge and deliver such Security Documents, instruments, certificates, notices and other documents and, subject to the provisions of the Note Documents and the Term Loan Documents, take such other actions in the name, place and stead of the Company or such Subsidiary, but the Collateral Agent will have no obligation to do so and no liability for any action taken or omitted by it in good faith in connection therewith. 98 SECTION 9.03. Collateral Agent. (a) The Company has appointed Wilmington Trust Company to serve as the Collateral Agent for the benefit of the holders of the Notes and the Term Loans and other Secured Obligations from time to time. The Collateral Agent may not be the same institution serving as the Administrative Agent or as the Trustee. (b) The Collateral Agent is authorized and empowered to appoint one or more co-Collateral Agents or sub-agents or bailees to hold Collateral or to take such other action as it deems necessary or appropriate. (c) Neither the Administrative Agent nor the Collateral Agent nor any of their respective officers, directors, employees, attorneys or agents will be responsible or liable for the existence, genuineness, value or protection of any Collateral, for the legality, enforceability, effectiveness or sufficiency of the Security Documents, for the creation, perfection, priority, sufficiency or protection of any Collateral Agent's Lien, or for any defect or deficiency as to any such matters, or for any failure to demand, collect, foreclose or realize upon or otherwise enforce any of the Collateral Agent's Liens or Security Documents or any delay in doing so. (d) The Collateral Agent will be subject to such directions as may be given it by the Trustee and by the Administrative Agent from time to time as required or permitted by this Agreement and the Indenture. The relative rights with respect to control of the Collateral Agent will be specified in the Collateral Agency Agreement by and among the Company, the Guarantors, the Trustee, the Administrative Agent and the Collateral Agent. Except as directed by the holders of a majority in principal amount of the Notes and the Term Loans then outstanding, voting together as a single class, the Collateral Agent will not be obligated: (i) to act upon directions purported to be delivered to it by any other Person; (ii) to foreclose upon or otherwise enforce any Lien; or (iii) to take any other action whatsoever with regard to any or all of the Security Documents, the Liens created thereby or Collateral. (e) The Collateral Agent will be accountable only for amounts that it actually receives as a result of the enforcement of the Collateral Agent's Liens or Security Documents. (f) In acting as Collateral Agent or co-Collateral Agent, the Collateral Agent and each co-Collateral Agent may rely upon and enforce each and all of the rights, powers, immunities, indemnities and benefits of the Administrative Agent under Article VIII. (g) The Company will deliver to the Administrative Agent copies of all Security Documents delivered to the Collateral Agent and copies of all documents delivered to the Collateral Agent pursuant to the Security Documents. 99 SECTION 9.04. Collateral Agent; Realization on Collateral. (a) Each Lender hereby authorizes the Administrative Agent and the Collateral Agent, as applicable, on behalf of and for the benefit of the Lenders, to be the agent for and representative of the Lenders with respect to the Term Loan Guarantees, the Collateral and the Security Documents. (b) Anything contained in any of the Term Loan Documents to the contrary notwithstanding, each Lender hereby agrees that no Lender shall have any right individually to realize upon any of the Collateral, it being understood and agreed that all powers, rights and remedies of the Administrative Agent hereunder may be exercised solely by the Administrative Agent in accordance with the terms hereof and all powers, rights and remedies in respect of the Collateral under the Security Documents may be exercised solely by the Collateral Agent. SECTION 9.05. Regulatory and Governmental Approvals. (a) The Company and Tesoro High Plains Pipeline Company agree promptly to apply for and seek all necessary regulatory approvals from the North Dakota Public Service Commission to grant security interests to the Collateral Agent in the fixtures and equipment comprising the North Dakota-Montana pipeline system and the Capital Stock of Tesoro High Plains Pipeline Company and agree to use all commercially reasonable efforts to obtain all such approvals as soon as practicable, but if the Company concludes in good faith that such efforts will not be successful, the Company and Tesoro High Plains Pipeline Company will not be required to grant such security interests. (b) The Company and its Domestic Subsidiaries will agree promptly to seek all necessary consents under leases and contracts with governmental authorities to grant security interests in the applicable Restricted Subsidiary's property interests associated with (i) the wharfs and related facilities that are connected to the Martinez, California refinery and Diablo Coke Plant, California, (ii) the transportation causeway, wharf and related facilities that are connected to the Anacortes, Washington refinery and terminal, (iii) the mooring and related facilities that are connected to the Kapolei, Hawaii refinery, (iv) the wharf and related facilities that are connected to the Kenai, Alaska refinery, and (v) the real estate contiguous to or connected with and in reasonable proximity to the Existing Refineries or Owned Terminals, and agree to use all commercially reasonable efforts to obtain all such consents as soon as practicable, but if the Company concludes in good faith that such efforts will not be successful, the Company and its Domestic Subsidiaries will not be required to grant such security interests. SECTION 9.06. Release of Collateral Agent's Lien. The Collateral will be released from the Collateral Agent's Lien: (a) in whole, upon payment in full of the Notes, the Term Loans and all other Secured Obligations that are outstanding, due and payable at the time the Notes and the Term Loans are paid in full; 100 (b) with respect to the Note Obligations only, upon satisfaction and discharge of this Indenture as set forth in Section 8.01 of the Indenture; (c) with respect to the Note Obligations only, upon a Legal Defeasance or Covenant Defeasance as set forth in Article VIII of the Indenture; (d) with respect to the Note Obligations only, upon payment in full of the Notes and all other Note Obligations that are outstanding, due and payable at the time the Notes are paid in full; (e) with respect to the Term Loan Obligations only, upon payment in full of the Term Loans and all other Term Loan Obligations that are outstanding, due and payable at the time the Term Loan Obligations are paid in full; (f) as to any Collateral that constitutes all or substantially all of the Collateral, with the consent of the holders of 100% in principal amount of the Notes and Term Loans then outstanding, voting together as a single class (including, without limitation, consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes); (g) as to any Collateral that constitutes less than all or substantially all of the Collateral, with the consent of the holders of a majority in principal amount of the Notes and Term Loans then outstanding, voting together as a single class (including, without limitation, consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes); (h) as to any Collateral (A) that is sold or otherwise disposed of by the Company or any of its Restricted Subsidiaries in a transaction permitted by this Agreement and the Indenture, at the time of such sale or disposition, to the extent of the interest sold or disposed of in accordance with the terms of Section 5.10 hereof, (B) that is exchanged or traded as provided in clause (3) of the proviso in the definition of "Asset Sale," (C) that constitutes Excess Proceeds from the Sale of Collateral which have been offered to, but not accepted by, the holders of Notes and Term Loans and are released as set forth in the last paragraph of Section 5.10 hereof, (D) that is owned or at any time acquired by a Subsidiary of the Company that has been released from its Subsidiary Guarantee and its Term Loans Guarantee, concurrently with the release thereof, or (E) in accordance with Article X hereof; or (i) as to the Capital Stock of any Pipeline Subsidiary, if securing the Notes with the Capital Stock of such Pipeline Subsidiary as provided by the Security Documents would give rise to an obligation of the Company to prepare audited financial statements of such Pipeline Subsidiary in order to comply with Regulation S-X of the rules and regulations of the SEC, but only if such obligation did not arise as a result of the transfer of assets to such Pipeline Subsidiary, the transfer of pipeline assets to another Subsidiary of the Company or any recapitalization of any Subsidiary of the Company by the Company or any of its Subsidiaries. If the Collateral Agent at any time receives an Officers' Certificate stating that the Company or any Guarantor intends to incur Indebtedness that will be secured by a purchase money security 101 interest permitted under clause (4) in the definition of "Permitted Liens" upon property identified therein with reasonable specificity to be acquired with such Indebtedness, accompanied by (a) a proposed lien subordination agreement subordinating the Liens under the Security Documents to such purchase money security interest, to the extent it attaches to such property and secures Indebtedness incurred to acquire such property, and (b) an Opinion of Counsel for the Company to the effect that the subordination of such Liens to such purchase money security interest, and to such extent, is permitted by the Term Loan Documents and that such proposed lien subordination agreement is effective solely to subordinate such Lien as to such property to such extent, without requiring the Collateral Agent to make any representation or warranty in respect thereof, without releasing or satisfying any such Lien or any obligation secured thereby, and without imposing any obligation or liability upon the Collateral Agent or any other Person, then, subject to the terms of the Collateral Agency Agreement, the Collateral Agent will, within ten Business Days thereafter, execute such lien subordination agreement and deliver to the Company or such Guarantor, subject to and effective upon the incurrence of such Indebtedness and the use of the proceeds thereof to acquire such property. ARTICLE X INTERCREDITOR PROVISIONS RELATING TO QUALIFIED CREDIT FACILITY SECTION 10.01. Agreement between the Collateral Agent and Credit Facility Agent. (a) If and whenever any Credit Facility becomes a Qualified Credit Facility, the Collateral Agent and the Credit Facility Agent under such Qualified Credit Facility shall become obligated to perform, each for the benefit of the other, the obligations described in this Article X. (b) No agent or representative under any Credit Facility that is not a Qualified Credit Facility shall have the right to rely on or enforce any obligation of the Collateral Agent set forth in this Article X. (c) The obligations of the Collateral Agent set forth in this Article X shall be enforceable by a Credit Facility Agent under each Qualified Credit Facility, and holders of Credit Facility Obligations under a Qualified Credit Facility, as third party beneficiaries hereof, without need for any additional agreement or undertaking between the Collateral Agent and such Credit Facility Agent. (d) The Collateral Agent may require the Credit Facility Agent to execute and deliver an instrument reasonably satisfactory to the Collateral Agent, by which the Credit Facility Agent confirms to the Collateral Agent its agreement to be bound by and perform the obligations of the Credit Facility Agent set forth in this Article X. (e) A Credit Facility Agent under a Qualified Credit Facility may require the Collateral Agent to execute and deliver an instrument reasonably satisfactory to such Credit 102 Facility Agent, by which the Collateral Agent confirms to such Credit Faculty Agent its agreement to be bound by and perform the obligations of the Collateral Agent set forth in this Article X. (f) At the request of the Company from time to time, the Collateral Agent will enter into an agreement with the Credit Facility Agent by which each of them confirms to the other its agreement to be bound by and perform its obligations set forth in this Article X, and the Collateral Agent is authorized, at the request of the Company, to enter into such additional agreements with the Credit Facility Agent as may be necessary or appropriate, in the opinion of the Collateral Agent, to confirm, elaborate upon, perform, implement or give further assurance for any obligations of the Collateral Agent or such Credit Facility Agent in any respect that is not materially inconsistent with the provisions, intents and purposes of this Article X and does not impose any additional obligation or liability on the Collateral Agent or any holder of Secured Obligations. SECTION 10.02. Disclaimer of Consensual Liens. (a) The Collateral Agent will not claim or enforce any consensual Lien upon any Credit Facility Collateral. (b) The Credit Facility Agent will not claim or enforce any consensual Lien upon any property other than Credit Facility Collateral. (c) The Secured Parties shall be entitled to receive and retain, free from any Lien securing Credit Facility Obligations, all payments made in cash by the Company or any other Obligor and all amounts received with respect to Secured Obligations through the exercise of a set-off or other similar right, even if such cash constitutes proceeds of property subject to a Lien securing Credit Facility Obligations. (d) The holders of Credit Facility Obligations shall be entitled to receive and retain, free from any Collateral Agent's Liens thereon, all payments made in cash by the Company or any other Obligor and all amounts received with respect to Credit Facility Obligations through the exercise of a set-off or other similar right, even if such cash constitutes proceeds of property subject to a Collateral Agent's Lien. (e) If any cash proceeds of Credit Facility Collateral are converted into or invested in property subject to Collateral Agent's Liens (other than cash, Cash Equivalents or deposit accounts) at any time when the Collateral Agent has not received written notice from the Credit Facility Agent or any holder of Indebtedness outstanding under a Qualified Credit Facility stating that such Indebtedness has become due and payable in full (whether at maturity, upon acceleration or otherwise), then all Liens upon such proceeds securing Credit Facility Obligations shall be released and discharged concurrently with such conversion or investment. (f) If any cash proceeds of Collateral are converted into or invested in property subject to the Lien of the Credit Facility Agent (other than cash, Cash Equivalents or deposit accounts) at any time when the Credit Facility Agent has not received written notice 103 from the Collateral Agent stating that the Notes and the Term Loans have become due and payable in full (whether at maturity, upon acceleration or otherwise), then all Liens upon such proceeds securing the Secured Obligations shall be released and discharged concurrently with such conversion or investment. (g) The provisions of this Section 10.02 will not apply to, restrict or affect any judicial lien, including any attachment or judgment lien. SECTION 10.03. Notice of Intent to Foreclose. (a) The Credit Facility Agent will give the Collateral Agent notice of its intent to enforce any consensual Lien upon any Credit Facility Collateral. (b) The Collateral Agent will give the Credit Facility Agent notice of its intent to enforce any consensual Lien upon any Collateral. (c) The notice required by Sections 10.03(a) and 10.03(b): (i) shall be required to be given by a party only if it intends to: (A) deliver to the Company or a Subsidiary written notice of its intent to foreclose a consensual Lien or a written proposal to retain property subject to a consensual Lien in full or partial satisfaction of any obligation secured thereby; (B) commence legal action against the Company or a Subsidiary for foreclosure or replevin or other enforcement of a consensual Lien; or (C) take possession of goods or real property of the Company or a Subsidiary upon which it holds a consensual Lien; (ii) shall not be required in any other instance or as to any other action or event (including, for purposes of illustration and not by way of limitation, any incurrence, payment or acceleration of any Indebtedness or Obligation or any amendment or waiver of the terms thereof, any exercise of a right of setoff, any notification to account debtors to make payment directly to the secured party or any other exercise of collection rights or the institution of any other legal proceedings, including suit to collect any debt or claim or the commencement of any bankruptcy case, receivership or insolvency proceeding); (iii) need only state that it is given pursuant to the provisions of Section 10.03 of this Agreement and that lien enforcement action may be taken by the party giving the notice, and need not disclose or describe the action to be taken; 104 (iv) need only be given once by or to the Collateral Agent or the Credit Facility Agent; (v) may be given by electronic mail, telefax, postal mail or courier or personal delivery or in any other manner permitted by law for service of legal process; (vi) shall be given to a party at the address (including an e-mail address, telecopy address or office address within the State of New York) specified by such party by notice to the other party and shall not be required if no address is so specified; and (vii) shall be given at least five Business Days prior to the date on which any enforcement action described in Section 10.03(c)(i) is taken, except that a party may give such notice promptly after taking such enforcement action if it in good faith believes that immediate enforcement action is or may be required to protect its interest in the property subject to its Liens. (d) The party giving any notice required by this Section 10.03 shall endeavor, promptly after delivery such notice, to deliver a copy thereof to the Company, but neither the Company nor any Subsidiary shall be entitled to demand or receive any such notice or copy thereof. (e) No liability or defense shall ever arise, no Lien shall ever be lost, invalidated or impaired, and no action taken in enforcement of a Lien shall ever be annulled, set aside, affected or impaired, if any notice required by this Section 10.03 is not given or is defectively given. (f) The provisions of this Section 10.03 do not apply to, restrict or affect any judicial lien, including any attachment or judgment lien. SECTION 10.04. Consent to License to Use Intellectual Property; Access to Information; Access to Real Property to Process and Sell Inventory. (a) If so requested at any time by the Credit Facility Agent, the Collateral Agent shall deliver its written consent (given without any representation, warranty or obligation whatsoever) to any grant by any Obligor to the Credit Facility Agent of a non-exclusive royalty-free license to use any patent, trademark or proprietary information of such Obligor that is subject to a consensual Lien held by the Collateral Agent, in connection with the enforcement of any consensual Lien held by the Credit Facility Agent upon any inventory of the Company or any Subsidiary of the Company and to the extent the use of such patent, trademark or proprietary information is necessary or appropriate, in the good faith opinion of the Credit Facility Agent, to process, ship, produce, store, complete, supply, lease, sell or otherwise dispose of any such inventory in any lawful manner. Any consent so delivered by the Collateral Agent shall be binding on its successors and assigns, including a purchaser of the patent, trademark or proprietary information subject to such license at a foreclosure sale conducted in foreclosure of any Collateral Agent's Liens thereon. 105 (b) If the Collateral Agent or a purchaser at a foreclosure sale conducted in foreclosure of any Collateral Agent's Liens takes actual possession of any documentation of the Company or a Subsidiary of the Company (whether such documentation is in the form of a writing or is stored in any data equipment or data record in the physical possession of the Collateral Agent or the foreclosure purchaser), then upon request of the Credit Facility Agent and reasonable advance notice, the Collateral Agent or such foreclosure purchaser will permit the Credit Facility Agent or its representative to inspect and copy such documentation if and to the extent the Credit Facility Agent certifies to the Collateral Agent that: (i) such documentation contains or may contain information necessary or appropriate, in the good faith opinion of the Credit Facility Agent, to the enforcement of the Credit Facility Agent's Liens upon any Credit Facility Collateral; and (ii) the Credit Facility Agent and the lenders under the Qualified Credit Facility are entitled to receive and use such information as against the Company and its Subsidiaries and their suppliers, customers and contractors and under applicable law and, in doing so, will comply with all obligations imposed by law or contract in respect of the disclosure or use of such information. (c) If, upon enforcement of any Collateral Agent's Liens held by the Collateral Agent, the Collateral Agent or a purchaser at a foreclosure sale conducted in foreclosure of any Collateral Agent's Liens takes actual possession of refinery, terminal or pipeline property of any Obligor, then, if so requested by the Credit Facility Agent and upon reasonable advance notice, the Collateral Agent or such foreclosure purchaser will allow the Credit Facility Agent and its officers, employees and agents (but not any of its transferees) reasonable and non-exclusive access to and use of such property for a period not exceeding 120 consecutive calendar days (the "Processing and Sale Period"), as necessary or reasonably appropriate to process, ship, produce, store, complete, supply, lease, sell or otherwise dispose of, in any lawful manner, any inventory upon which the Credit Facility Agent holds a Lien, subject to the following conditions and limitations: (i) The Processing and Sale Period shall commence on the date the Collateral Agent or, if the Collateral Agent has not taken possession, the foreclosure purchaser takes possession of such real property and shall terminate on the earlier of (i) the day that is 120 days thereafter and (ii) the day on which all inventory (other than inventory abandoned by the Credit Facility Agent) has been removed from such property; and (ii) Each of the Collateral Agent and foreclosure purchaser shall be entitled, as a condition of permitting such access and use, to demand and receive assurances reasonably satisfactory to it that the access or use requested and all activities incidental thereto: (A) will be permitted, lawful and enforceable as against the Company and its Subsidiaries and their suppliers, customers and contractors and 106 under applicable law and will be conducted in accordance with prudent manufacturing practices; and (B) will be adequately insured for damage to property and liability to persons, including property and liability insurance for the benefit of the Collateral Agent and the holders of the Secured Obligations, at no cost to the Collateral Agent or such holders. The Collateral Agent and/or any such purchaser (i) shall provide reasonable cooperation to the Credit Facility Agent in connection with the manufacture, production, completion, removal and sale of any Credit Facility Collateral by the Credit Facility Agent as provided above and (ii) shall be entitled to receive, from the Credit Facility Agent, fair compensation and reimbursement for their reasonable costs and expenses incurred in connection with such cooperation, support and assistance to the Credit Facility Agent. The Collateral Agent and/or any such purchaser (or its transferee or successor) shall not otherwise be required to manufacture, produce, complete, remove, insure, protect, store, safeguard, sell or deliver any inventory subject to any Lien held by the Credit Facility Agent or to provide any support, assistance or cooperation to the Credit Facility Agent in respect thereof. (d) Each of the Collateral Agent and foreclosure purchaser may condition its performance of any obligation set forth in this Section 10.04 upon its prior receipt (without cost to it) of: (i) such assurances as it may reasonably request to confirm that the performance of such obligation and all activities of the Credit Facility Agent or its officers, employees and agents in connection therewith or incidental thereto: (A) will be permitted, lawful and enforceable as against the Company and its Subsidiaries and their suppliers, customers and contractors and under applicable law; and (B) will not impose upon the Collateral Agent (or any holder of Secured Obligations) or any foreclosure purchaser any legal duty, legal liability or risk of uninsured loss; and (ii) such indemnity or insurance as the Collateral Agent or foreclosure purchaser may reasonably request in connection therewith. (e) The Company and the other Obligors consent to the performance by the Collateral Agent and foreclosure purchaser of the obligations set forth in this Section 10.04 and acknowledge and agree that neither the Collateral Agent (nor any holder of Secured Obligations) nor any foreclosure purchaser shall ever be accountable or liable for any action taken or omitted by the Credit Facility Agent or its officers, employees and agents in connection therewith or incidental thereto or in consequence thereof, including any improper use or disclosure of any proprietary information or other intellectual property by the Credit Facility Agent or its officers, employees, agents, successors or assigns or any other damage to or misuse or loss of any 107 property of the Company and its Subsidiaries as a result of any action taken or omitted by the Credit Facility Agent or its officers, employees, agents, successors or assigns. SECTION 10.05. Complete Agreement. (a) This Article X sets forth exhaustively the complete agreement and sole contractual obligations and rights arising under this Agreement as between the Collateral Agent and the Credit Facility Agent. (b) Neither the Collateral Agent and nor the Credit Facility Agent will be restricted in any respect not expressly set forth herein as to any matter relating to the creation, perfection, protection or enforcement of their respective Liens and their rights and obligations in respect of such matters shall be based solely on the legal rights and duties, if any, that they would have if they had not entered into any agreement whatsoever with each other relating to their Liens. SECTION 10.06. No Subrogation, Marshalling or Duty. Neither the assumption nor the performance of any obligation set forth in or arising under this Article X shall ever create or give rise to any right of subrogation, right of marshalling, duty of care, duty of loyalty, duty of disclosure or other fiduciary duty whatsoever enforceable by the Collateral Agent, the Credit Facility Agent or any holder of Secured Obligations or Credit Facility Obligations. SECTION 10.07. Limitation on Certain Relief, Defenses and Damage Claims. (a) No action taken or omitted in violation of any obligation set forth in or arising under this Article X will constitute a breach of such obligation or expose the party taking or omitting such action to any liability whatsoever if, when such action was taken or omitted, such party received and in good faith relied on an Officers' Certificate or Opinion of Counsel to the effect that such action was permitted under this Article X. (b) None of the Secured Obligations, Collateral Agent's Liens, Credit Facility Obligations and Credit Facility Liens will ever be forfeited, invalidated, discharged, reduced, subordinated or restricted or otherwise affected or impaired by any breach of any obligation set forth in or arising under this Article X. No claim shall ever be made against the Collateral Agent or the Credit Facility Agent for any special, indirect or consequential damages or (to the fullest extent a claim for punitive damages may lawfully be waived) for any punitive damages based on any claim arising, on any theory of liability, from or in connection with to any act, omission, breach, wrongful conduct, event or circumstance occurring relating in any respect to the performance or breach of any obligation set forth in or arising under this Article X. SECTION 10.08. Amendment; Waiver. 108 (a) No amendment or supplement to, or waiver of, the provisions this Article X will: (i) be effective unless set forth in a writing signed by the Collateral Agent with the consent of the holders of at least a majority in principal amount of the Notes and the Term Loans then outstanding voting as a single class, except that any such amendment, supplement or waiver that increases the obligations or adversely affects the rights of the holders of the Secured Obligations will be effective only with the consent of the holders of at least 66-2/3% in principal amount of the Notes and the Term Loans then outstanding, voting as a single class; and (ii) become effective at any time when any Credit Facility Obligations are outstanding or committed under any Qualified Credit Facility unless such amendment, supplement or waiver is consented to in a writing signed by the Credit Facility Agent acting upon the direction or with the consent of such number of the lenders thereunder as may, by the terms of such Qualified Credit Facility, have the power to bind all of such lenders thereto. Any such amendment or supplement that: (A) imposes any obligation upon the Company or any Subsidiary of the Company, or adversely affects the rights of the Company or any Subsidiary of the Company or affects the benefits, if any, specifically afforded the Company or any Subsidiary of the Company under this Article X will become effective only with the consent of the Company and such Subsidiary; (B) imposes any obligation upon the Collateral Agent, or adversely affects the rights of the Collateral Agent in its individual capacity, will become effective only with the consent of the Collateral Agent; or (C) imposes any obligation upon the Credit Facility Agent, or adversely affects the rights of the Credit Facility Agent in its individual capacity, will become effective only with the consent of the Credit Facility Agent. (b) No exercise, delay in exercising or failure to exercise any right arising under this Article X, no act or omission of any Obligor or holder of Secured Obligations or Credit Facility Obligations, no change, impairment, or suspension of any right or remedy, and no other lawful act, failure to act, circumstance, occurrence or event which, but for this provision, would or could act as a release or exoneration of any obligation arising under this Article X will in any way affect, decrease, diminish or impair any such obligation. SECTION 10.09. Enforcement. The rights and obligations set forth in or arising under this Article X are enforceable only by the Collateral Agent and Credit Facility Agent under a Qualified Credit Facility against each other (and their respective successors, including, but only to the extent expressly provided 109 herein, a purchaser at a foreclosure sale conducted in foreclosure of Collateral Agent's Liens) and against the Obligors. No other Person (including holders of Secured Obligations or Credit Facility Obligations) shall be entitled to enforce any such right or shall be obligated to perform any such obligation; however, such provisions will be binding on the holders of Secured Obligations and Credit Facility Obligations. SECTION 10.10. Relative Rights. This Article X sets forth certain relative rights, as lienholders, of the Collateral Agent and the Credit Facility Agent. Nothing in this Agreement will: (a) impair, as between the Company, any other Obligor and holders of Notes, the obligation of the Company, which is absolute and unconditional, to pay principal of, premium and interest and special interest, if any, on the Notes in accordance with their terms or to perform any other obligation of the Company or any other Obligor under the Note Documents; (b) impair, as between the Company, any other Obligor and holders of Term Loans, the Obligation of the Company, which is absolute and unconditional, to pay principal of, premium and interest, on the Term Loans in accordance with their terms or to perform any other Obligation of the Company or any other Obligor under the Term Loan Documents; (c) impair, as between the Company, any other obligor under a Qualified Credit Facility and holders of the loans under a Qualified Credit Facility, the Obligation of the Company, which is absolute and unconditional, to pay principal of, premium and interest, on such loans in accordance with their terms or to perform any other obligation of the Company or any other obligor under a Qualified Credit Facility; (d) affect the relative rights of holders of Note Obligations, Term Loan Obligations or Credit Facility Obligations and other creditors of the Company or any of its Subsidiaries; (e) restrict the right of any holder of Secured Obligations or Credit Facility Obligations to sue for payments that are then due and owing; (f) prevent the Trustee, the Administrative Agent, the Collateral Agent or the Credit Facility Agent or any holder of Secured Obligations or Credit Facility Obligations from exercising against the Company or any other Obligor any of its other available remedies upon a Default or Event of Default; or (g) restrict the right of the Trustee, the Administrative Agent, the Collateral Agent or the Credit Facility Agent or any holder of Secured Obligations or Credit Facility Obligations to file and prosecute a petition seeking an order for relief in an involuntary bankruptcy case as to any Obligor or otherwise to commence, or seek relief commencing, any insolvency or liquidation proceeding involuntarily against any Obligor or to assert or enforce any claim, Lien, right or remedy in any voluntary or involuntary bankruptcy case or insolvency or liquidation proceeding. 110 ARTICLE XI COLLATERAL SHARING SECTION 11.01. Equal and Ratable Lien Sharing by holders of Notes and Holders of Term Loans. Notwithstanding (i) anything to the contrary contained in the Note Documents or the Term Loan Documents, (ii) the time, order or method of attachment of the Collateral Agent's Liens, (iii) the time or order of filing or recording of financing statements or other documents filed or recorded to perfect any Lien upon any Collateral, (iv) the time of taking possession or control over any Collateral or (v) the rules for determining priority under the UCC or any other law governing relative priorities of secured creditors: (a) all Liens at any time granted to secure any Secured Obligations will secure Equally and Ratably all of the Notes (including additional Notes permitted by clause (2) of the definition of "Permitted Liens"), all other present and future Note Obligations, all of the Term Loans (including additional Term Loans permitted by clause (2) of the definition of "Permitted Liens") and all other present and future Term Loan Obligations, and (b) all proceeds of Collateral encumbered by such Liens shall be allocated and distributed Equally and Ratably on account of the Note Obligations and Term Loan Obligations. SECTION 11.02. Enforcement. The provisions of Section 11.01 are binding upon and intended for the benefit of the Collateral Agent and each present and future holder of Secured Obligations, each of whom shall be entitled to enforce such provisions as a third party beneficiary thereof. SECTION 11.03. Amendment. (a) No amendment or supplement to the provisions of this Article XI that adversely affects the right of any holder of Secured Obligations to share in the Collateral Equally and Ratably will become effective without the consent of each such holder. (b) Any such amendment or supplement that imposes any obligation upon the Collateral Agent or adversely affects the rights of the Collateral Agent in its individual capacity will become effective only with the consent of the Collateral Agent. (c) No waiver of the provisions of this Article XI will in any event be effective unless set forth in a writing signed and consented to, as required for an amendment under this Section 11.03, by the party to be bound thereby. 111 ARTICLE XII GUARANTEES SECTION 12.01. Term Loan Guarantees. Subject to Section 12.05 hereof, each of the Guarantors hereby, jointly and severally, unconditionally guarantees, and each Person who in the future becomes a Guarantor by executing a Guarantor Joinder Agreement shall jointly and severally, unconditionally guarantee, on a senior basis to each Lender and to the Administrative Agent and its successors and assigns, the Term Loans and the Obligations of the Company hereunder and thereunder, that: (a) the principal of, and premium, if any, and interest on the Term Loans will be promptly paid in full when due, subject to any applicable grace period, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of, and premium, if any, and (to the extent permitted by law) interest on, the Term Loans, and all other payment Obligations of the Company to the Lenders or the Administrative Agent hereunder or thereunder will be promptly paid in full and performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Term Loans or any of such other Obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable grace period, whether at stated maturity, by acceleration, redemption or otherwise. Failing payment when so due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors will be jointly and severally obligated to pay the same immediately. An Event of Default under this Agreement shall constitute an event of default under the Term Loan Guarantees, and shall entitle the Lenders to accelerate the Obligations of the Guarantors hereunder in the same manner and to the same extent as the Obligations of the Company hereunder. This is a guarantee of payment and not of collection, and, to the maximum extent permitted by applicable law, each Guarantor hereby waives and agrees not to assert or take advantage of, and each Guarantor's liability under its Term Loan Guarantee shall be absolute and unconditional irrespective of: (i) any right to require the Administrative Agent to proceed against the Company or any other Person or to resort to, proceed against or exhaust any security held by it at any time or to pursue any other remedy in its power before proceeding against such Guarantor; (ii) the defense of the statute of limitations in any action hereunder or for the collection or performance of any of the obligations guaranteed hereunder; (iii) any defense that may arise by reason of the incapacity, lack of authority, death or disability of, or revocation hereof by such Guarantor or the revocation 112 or repudiation of any of the Term Loan Documents by the Company, any other Guarantor or any other Person or the failure of any Guarantor to file or enforce a claim against the estate (either in administration, bankruptcy, or any other proceeding) of the Company or any other Person; (iv) the unenforceability in whole or in part of any of the Term Loan Documents or any other instrument, document or agreement; (v) any election, in any proceeding by or against the Company or any other Person under the Bankruptcy Code, of the application of Section 1111(b)(2) of such Code; (vi) any borrowing or grant of a security interest under Section 364 of the Bankruptcy Code; (vii) demand, presentment, protest and notice of any kind, and notice of the existence, creation or incurring of any new or additional indebtedness or obligation or of any action or non-action on the part of the Company, a Guarantor or any other Person under this or any other instrument, in connection with any of the obligations guaranteed hereunder or any collateral now or hereafter given for any of such obligations; (viii) any defense based upon an election of remedies by the Administrative Agent, including, without limitation, an election to proceed by non-judicial rather than judicial foreclosure, which destroys or otherwise impairs the subrogation rights of such Guarantor or any other Guarantor, or the right of such Guarantor, any other Guarantor or any other Person to proceed against the Company for reimbursement, or both; (ix) any suretyship defense or right of any nature otherwise available to such Guarantor under the laws of any state, including, without limitations, provisions to the effect that: (A) the obligation of a surety must not be either larger in amount or in other respects more burdensome than that of the principal; (B) a surety is not liable if for any reason other than the mere personal disability of the principal, there is no liability upon the part of the principal at the time of execution of the contract, or the liability of the principal thereafter ceases; (C) a surety is exonerated if the creditor alters the original obligation of the principal without the consent of the surety; (D) a surety is exonerated to the extent that the creditor fails to proceed against the principal, or to pursue any other remedy in the creditor's 113 power which the surety cannot pursue and which would lighten the surety's burden; (E) a surety may compel its principal to perform the obligation when due; (F) if a surety satisfies the principal obligation, or any part thereof, the principal is obligated to reimburse the surety for the amounts paid by the surety; (G) a surety, upon satisfaction of the obligation of the principal, is entitled to enforce remedies which the creditor then has against the principal; (H) a surety is entitled to the benefit of security held by the creditor for the performance of the principal obligation held by the creditor; (I) whenever the property of a surety is hypothecated with property of the principal, the surety is entitled to have the property of the principal first applied to the discharge of the obligation; and (J) the principal may designate the portion of any obligation to be satisfied by the surety in the event that the principal provides partial satisfaction of such obligation; and (x) any rights to direct the manner in which, or the order in which, the Administrative Agent must proceed to recover against any collateral given by such Guarantor, any other Guarantor or any other Person to secure the obligations secured hereunder, including, without limitation, any prohibition against obtaining a deficiency judgment and any requirement that any deficiency judgment be obtained only through judicial proceedings, including, without limitation: (A) any rights under Section 580b or 580d of the California Code of Civil Procedure or under Section 726 of the California Code of Civil Procedure; (B) any rights under Section 32-19-06.1 of the North Dakota Century Code; (C) any rights under Sections 45-1503, 45-1505(4), 45-1512 and 6-108 of the Idaho Code; (D) any rights under Section 78-37-1 of the Utah Code; and (E) any rights under RCW 61.12.120, RCW 61.24.030(4) and RCW 61.24.100. 114 The Company (and Obligors) and all other Persons bound by the Term Loan Obligations are personally obligated and fully liable for all amounts due under the Term Loan Obligations. The Collateral Agent (and Administrative Agent) has the right to sue on the Term Loan Obligations and obtain a personal judgment against the undersigned Obligors or any other Person bound by this Agreement for satisfaction of all amounts due under the Term Loan Obligations either before, after or without a judicial foreclosure of the mortgage or deed of trust under Alaska Statute Section 09.45.170 - Section 09.45.220. Each Guarantor hereby acknowledges that none of the Administrative Agent, any Lender and any other Person have a duty to disclose to such Guarantor any facts such Person may now or hereafter know about the Company, regardless of whether such Person has reason to believe that any such facts materially increase the risk beyond that which such Guarantor intends to assume or has reason to believe that such facts are unknown to such Guarantor or has a reasonable opportunity to communicate such facts to such Guarantor, it being understood and agreed that each Guarantor is fully responsible for being and keeping informed of the financial condition of the Company and of all circumstances bearing on the risk of nonpayment or nonperformance of any obligations hereby guaranteed. Each Guarantor further acknowledges that the suretyship defenses and rights waived hereunder may provide partial or complete defenses to the recovery by the Administrative Agent from such Guarantor and/or grant such Guarantor certain rights, the enforcement or realization of which could reduce or eliminate such Guarantor's liability hereunder to the Company. If any Lender or the Administrative Agent is required by any court or otherwise to return to the Company, the Guarantors, or any trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by the Company or any Guarantor to the Administrative Agent or such Lender, this Term Loan Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor agrees that it shall not be entitled to, and hereby waives, any right to exercise any right of subrogation in relation to the Lender in respect of any Obligations guaranteed hereby, except as provided under Section 12.05 hereof. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Lenders and the Administrative Agent, on the other hand, (x) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article VII hereof for the purposes of its Term Loan Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed thereby, and (y) in the event of any declaration of acceleration of such Obligations as provided in Article VII hereof, such Obligations (whether or not due and payable) shall forthwith become due and payable by each Guarantor for the purpose of its Term Loan Guarantee. The Guarantors shall have the right to seek contribution from any non-paying Guarantor pursuant to Section 12.05 hereof after the Term Loans and the Obligations hereunder shall have been paid in full to the Lenders under the Term Loan Guarantees. SECTION 12.02. Execution and Delivery of Additional Term Loan Guarantee. To effect any additional Term Loan Guarantee set forth in Section 12.01 hereof, any future Guarantor shall execute and deliver a Guarantor Joinder Agreement, which agreement shall be entered into in accordance with Section 5.17 hereof and shall be executed on behalf of such Guarantor, by manual or facsimile signature, by an Officer of such Guarantor. 115 To evidence its Term Loan Guarantee set forth in Section 12.01 hereof, each Guarantor of the Term Loans hereby agrees that a Guarantor Joinder Agreement shall be executed on behalf of such Guarantor, by manual or facsimile signature, by an Officer of such Guarantor. For so long as a Term Loan Guarantee of such Guarantor remains in full force and effect, each Guarantor hereby irrevocably appoints the Company as its attorney-in-fact for the purpose of executing in the name and on behalf of such Guarantor any Guarantor Joinder Agreement. SECTION 12.03. Guarantors May Consolidate, Etc., on Certain Terms. (a) Except as set forth in Articles V and VI hereof and this Section 12.03, nothing contained in this Agreement shall prohibit a merger between a Guarantor and another Guarantor or a merger between a Guarantor and the Company. (b) No Guarantor shall consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person, whether or not affiliated with such Guarantor, unless (i) the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) assumes all the Obligations of such Guarantor hereunder, pursuant to a Guarantor Joinder Agreement and other documentation in form and substance reasonably satisfactory to the Administrative Agent under the Term Loan Documents delivered by that Guarantor, and, in the case of a Pipeline Subsidiary, if and to the extent that a pledge in respect thereof is required to then be in effect, the Capital Stock of the successor resultant transferee Person continues to be pledged to the Collateral Agent for the benefit on the holders of the Secured Obligations; (ii) immediately after giving effect to such transaction, no Default or Event of Default exists; and (iii) the Company would be permitted by virtue of the Company's pro forma Fixed Charge Coverage Ratio, immediately after giving effect to such transaction, to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 5.09 hereof; provided, however, that this clause (iii) shall be suspended for so long as the Company and its Restricted Subsidiaries are not subject to the Suspended Covenants subject to Section 5.19 hereof. Notwithstanding the foregoing paragraph (and in the case of clause (iii) of this paragraph, notwithstanding Section 12.03(c) hereof), (i) any Guarantor other than a Pipeline Subsidiary may consolidate with, merge into or transfer all or a part of its properties and assets to the Company or any other Guarantor, (ii) any Guarantor may consolidate with merge into or transfer all or a part of its properties and assets to a Restricted Subsidiary of the Company that has no significant assets or liabilities and was incorporated, organized or formed solely for the purpose of reincorporating or otherwise reorganizing such Guarantor in another State of the United States; provided that, in each case, such successor, resultant or transferee Person continues to be a Guarantor and to have the same obligations under this Agreement and all of the other Term Loan Documents and, in the case of a Pipeline Subsidiary, if and to the extent that a pledge in respect thereof is required to then be in effect, the Capital Stock of the successor resultant transferee Person continues to be pledged to the Collateral Agent for the benefit of the holders of the Secured Obligations, and (iii) subject to the provisions of Section 12.04, upon the disposition (including by way of merger, consolidation or otherwise) of all or substantially all of the assets 116 or all of the Capital Stock of any Guarantor, that Guarantor shall be released from its obligations under its Term Loan Guarantee and all of the other obligations of that Guarantor under this Agreement and all of the other Term Loan Documents, all security interests granted by that Guarantor to the Collateral Agent shall be released and any related resultant, surviving or transferee Person shall not be required to assume any of such obligations. (c) In the case of any such consolidation, merger, sale or conveyance and (i) upon the assumption by the successor Person pursuant to a Guarantor Joinder Agreement and other documentation in form and substance reasonably satisfactory to the Administrative Agent, of the Obligations under this Agreement and all other Term Loan Documents delivered by that Guarantor, and, (ii) in the case of a Pipeline Subsidiary, if and to the extent that a pledge in respect thereof is required to then be in effect, the Capital Stock of the successor resultant transferee Person continues to be pledged to the Collateral Agent for the benefit on the holders of the Secured Obligations, executed and delivered to the Administrative Agent or the Collateral Agent, as appropriate, and (iii) such successor Person continues the due and punctual performance of all of the covenants and conditions of this Agreement to be performed by the Guarantor, then such successor Person shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. All Term Loan Guarantees shall in all respects have the same legal rank and benefit under this Agreement as the Term Loan Guarantees theretofore and thereafter issued in accordance with the terms of this Agreement as though all of such Term Loan Guarantees had been issued at the date of the execution hereof. SECTION 12.04. Releases. (a) In the event of any sale or other disposition, whether in one or a series of related transactions, of all or substantially all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition, whether in one or a series of related transactions, of all of the Capital Stock of any Guarantor in compliance with this Agreement to any entity that is not the Company or a Subsidiary of the Company, then such Guarantor and such acquiring, resulting, surviving or transferee Person will be released and relieved of any obligations under any Term Loan Guarantee; provided, however, that the Net Proceeds of such sale or other disposition will be applied in accordance with Section 5.10 hereof. Upon delivery by the Company to the Administrative Agent of an Officers' Certificate to the effect of the foregoing, the Administrative Agent shall execute any documents reasonably required in order to evidence the release of such Guarantor from its Obligation under its Term Loan Guarantee and this Agreement. Any Guarantor not released from its Obligations under its Term Loan Guarantee shall remain liable for the full amount of principal of, and premium, if any, interest on the Term Loans and for the other Obligations of such Guarantor under this Agreement as provided in this Article XII. (b) Upon the designation of a Guarantor as an Unrestricted Subsidiary in accordance with the Terms of this Agreement, such Guarantor shall be released and relieved of its obligations under this Agreement. Upon delivery by the Company to the Administrative Agent of an Officers' Certificate and an Opinion of Counsel to the effect that the designation of such Guarantor as an Unrestricted Subsidiary was made by the Company in accordance with the 117 provisions of this Agreement, including, without limitation, Section 5.07 hereof, the Administrative Agent shall execute any documents reasonably required in order to evidence the release of such Guarantor from its Obligation under its Term Loan Guarantee and this Agreement. Any Guarantor not released from its Obligations under its Term Loan Guarantee shall remain liable for the full amount of principal of, and premium, if any, interest on the Term Loans and for the other Obligations of such Guarantor under this Agreement as provided in this Article XII. SECTION 12.05. Limitation on Guarantor Liability; Contribution. For purposes hereof, each Guarantor's liability under its Term Loan Guarantee shall be limited to the lesser of (i) the aggregate amount of the Obligations of the Company under the Term Loan Documents and (ii) the amount, if any, which would not have (A) rendered such Guarantor "insolvent" (as such term is defined in the Bankruptcy Code and in the Debtor and Creditor Law of the State of New York) or (B) left such Guarantor with unreasonably small capital at the time its Term Loan Guarantee of the Term Loans was entered into; provided that, it will be a presumption in any lawsuit or other proceeding in which a Guarantor is a party that the amount guaranteed pursuant to its Term Loan Guarantee is the amount set forth in clause (i) above unless any creditor, representative of creditors of such Guarantor, or debtor in possession or trustee in bankruptcy of such Guarantor, otherwise proves in such a lawsuit that the aggregate liability of such Guarantor is the amount set forth in clause (ii) above. In making any determination as to solvency or sufficiency of capital of a Guarantor in accordance with the previous sentence, the right of such Guarantor to contribution from other Guarantors as set forth below, and any other rights such Guarantor may have, contractual or otherwise, shall be taken into account. In order to provide for just and equitable contribution among the Guarantors, the Guarantors shall agree, inter se, that in the event any payment or distribution is made by any Guarantor (a "Funding Guarantor") under its Term Loan Guarantee, such Funding Guarantor shall be entitled to a contribution from all other Guarantors in a pro rata amount based on the Adjusted Net Assets of each Guarantor (including the Funding Guarantor) for all payments, damages and expenses incurred by that Funding Guarantor in discharging the Company's Obligations with respect to the Term Loans or any other Guarantor's Obligations with respect to its Term Loan Guarantee. ARTICLE XIII MISCELLANEOUS SECTION 13.01. Notices. Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given to any Obligor, the Sole Lead Arranger, the Collateral Agent or the Administrative Agent shall be sent to such Person's address as set forth on Appendix B or in the other relevant Term Loan Document, and in the case of any 118 Lender, the address as indicated on Appendix B or otherwise indicated to the Administrative Agent in writing. Each notice hereunder shall be in writing and may be personally served, telexed or sent by telefacsimile or United States mail or courier service and shall be deemed to have been given when delivered in person or by courier service and signed for against receipt thereof, upon receipt of telefacsimile or telex, or three Business Days after depositing it in the United States mail with postage prepaid and properly addressed; provided, no notice to any Agent shall be effective until received by such Agent. Documents, notices or reports required to be delivered to the Lenders pursuant to Sections 2.11, 5.03(a), 5.04 and 5.15 may be delivered electronically and posted electronically on IntraLinks/IntraAgency or other relevant website to which the Lenders have access (whether a commercial, third-party website or whether sponsored by Administrative Agent), if any; provided that (i) the Administrative Agent shall deliver paper copies of such reports to any Lender upon written request therefor; and (ii) the Administrative Agent shall notify (which may be by facsimile or electronic mail) each Lender of the posting of any such reports and provide to each Lender by email electronic versions (i.e. soft copies) of such reports. SECTION 13.02. Expenses. Whether or not the transactions contemplated hereby shall be consummated, the Company agrees to pay promptly: (a) all expenses associated with the creation and perfection of security interests and associated documents, including, without limitation, the Security Documents and all Financing Statements, including filing fees and the reasonable fees and disbursements of Latham & Watkins LLP, counsel to the Sole Lead Arranger, incurred in connection therewith and the fees and disbursements of local counsel incurred in connection therewith, in each case, prior to the Closing Date; (b) all the actual and reasonable costs and expenses incurred after the Closing Date of preparation of the Term Loan Documents and any consents, amendments, waivers or other modifications thereto; (c) all the costs incurred after the Closing Date of furnishing all opinions by counsel for the Company and the other Obligors; (d) after the Closing Date, the reasonable fees, expenses and disbursements of counsel to Agents in connection with the negotiation, preparation, execution and administration of the Term Loan Documents and any consents, amendments, waivers or other modifications thereto and any other documents or matters requested by the Company; (e) all the actual costs and reasonable expenses of creating and perfecting Liens in favor of Collateral Agent, for the benefit of Lenders pursuant hereto, including filing and recording fees, expenses and taxes, stamp or documentary taxes, search fees, title insurance premiums and reasonable fees, expenses and disbursements of counsel to each Agent and of counsel providing any opinions that any Agent or Requisite Lenders may request in respect of the Collateral or the Liens created pursuant to the Security Documents; 119 (f) all the actual costs and reasonable fees, expenses and disbursements of any auditors, accountants, consultants or appraisers; (g) all the actual costs and reasonable expenses (including the reasonable fees, expenses and disbursements of any appraisers, consultants, advisors and agents employed or retained by Collateral Agent and its counsel) in connection with the custody or preservation of any of the Collateral; (h) all other actual and reasonable costs and expenses incurred by each Agent in connection with the syndication of the Term Loans and Term Loan Commitments and the negotiation, preparation and execution of the Term Loan Documents and any consents, amendments, waivers or other modifications thereto and the transactions contemplated thereby; and (i) after the occurrence of a Default or an Event of Default, all costs and expenses, including reasonable attorneys' fees and costs of settlement, incurred by any Agent and Lenders in enforcing any Term Loan Obligations of or in collecting any payments due from any Obligor hereunder or under the other Term Loan Documents by reason of such Default or Event of Default (including in connection with the sale of, collection from, or other realization upon any of the Collateral or the enforcement of the Term Loan Guarantee) or in connection with any refinancing or restructuring of the credit arrangements provided hereunder in the nature of a "work-out" or pursuant to any insolvency or bankruptcy cases or proceedings. SECTION 13.03. Indemnity. (a) In addition to the payment of costs and expenses pursuant to Section 13.02, whether or not the transactions contemplated hereby shall be consummated, each of the Company and the Guarantors jointly and severally agrees to defend (subject to Indemnitees' selection of counsel), indemnify, pay and hold harmless the Administrative Agent and Lender and each of their respective Affiliates and each and all of the directors, officers, partners, trustees, employees, attorneys and agents, and (in each case) their respective heirs, representatives, successors and assigns (each of the foregoing, an "Indemnitee") from and against any and all Indemnified Liabilities; provided, no Indemnitee shall be entitled to indemnification hereunder with respect to any Indemnified Liability to the extent such Indemnified Liability is found by a final and nonappealable decision of a court of competent jurisdiction to have resulted directly and primarily from the gross negligence or willful misconduct of such Indemnitee. (b) All amounts due under Section 13.03(a) shall be payable not later than 10 days after written demand therefor. (c) To the extent that the undertakings to defend, indemnify, pay and hold harmless set forth in Section 13.03(a) may be unenforceable in whole or in part because they are violative of any law or public policy, each of the Company and Guarantors shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of them. 120 (d) Neither the Company nor any Guarantor shall ever assert any claim against any Indemnitee, on any theory of liability, for any lost profits or special, indirect or consequential damages or (to the fullest extent lawful) any punitive damages arising out of, in connection with, or as a result of, this Agreement or any other Term Loan Document or any agreement or instrument or transaction contemplated hereby or relating in any respect to any Indemnified Liability, and each of the Company and Guarantors hereby forever waives, releases and agrees not to sue upon any claim for any such lost profits or special, indirect, consequential or (to the fullest extent lawful) punitive damages, whether or not accrued and whether or not known or suspected to exist in its favor. (e) The agreements in this Section 13.03 shall survive repayment of the Term Loans and all other amounts payable hereunder. SECTION 13.04. Set-Off. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence of any Event of Default each Lender is hereby authorized by each Obligor at any time or from time to time subject to the consent of the Administrative Agent, without prior written notice to any Obligor or to any other Person (other than the Administrative Agent), any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, including Indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts) and any other Indebtedness at any time held or owing by such Lender to or for the credit or the account of any Obligor against and on account of the obligations and liabilities of any Obligor to such Lender hereunder, and under the other Term Loan Documents, including all claims of any nature or description arising out of or connected hereto, or with any other Term Loan Document, irrespective of whether or not (a) such Lender shall have made any demand hereunder or (b) the principal of or the interest on the Term Loans or any other amounts due hereunder shall have become due and payable pursuant to Article II and although such obligations and liabilities, or any of them, may be contingent or unmatured. Each Obligor hereby further grants to the Administrative Agent and each Lender a security interest in all deposit accounts maintained with the Administrative Agent or such Lender as security for the Term Loan Obligations. SECTION 13.05. Amendments and Waivers. (a) Requisite Lenders' Consent. No amendment, modification, termination or waiver of any provision of the Term Loan Documents, or consent to any departure by any Obligor therefrom, shall in any event be effective without the written concurrence of the Requisite Lenders and any additional consents required by Sections 13.05(b) and (c). (b) Affected Lenders' Consent. No amendment, modification, termination, or consent shall be effective if the effect thereof would: (i) extend the scheduled final maturity of any Term Loan or Term Loan Note outstanding to any Lender without the prior written consent of that Lender; 121 (ii) waive, reduce or postpone any scheduled repayment (but not prepayment) due to any Lender without the prior written consent of that Lender; (iii) reduce the rate of interest on any Term Loan (other than any waiver of any increase in the interest rate applicable to any Term Loan pursuant to Section 2.07) payable to any Lender or reduce or extend any fee payable hereunder to any Lender without the prior written consent of that Lender; (iv) reduce the principal amount of any Term Loan outstanding to any Lender without the prior written consent of that Lender; (v) amend, modify, terminate or waive any provision of this Section 13.05(b), as it applies to any Lender without the prior written consent of that Lender; (vi) amend the definition of "Requisite Lenders" or "Pro Rata Share"; provided, without the consent of the Requisite Lenders as set forth in Section 2.19 hereof and otherwise with the consent of the Requisite Lenders additional extensions of credit pursuant hereto may be included in the determination of "Requisite Lenders" or "Pro Rata Share" on substantially the same basis as the Initial Term Loan Commitments and the Initial Term Loans are included on the Closing Date; (vii) release all or substantially all of the Collateral or all or substantially all of the Guarantors from the Guaranty except as expressly provided in the Term Loan Documents without the prior written consent of all Lenders; or (viii) consent to the assignment or transfer by any Obligor of any of its rights and obligations under any Term Loan Document without the prior written consent of all Lenders. (c) Other Consents. No amendment, modification, termination or waiver of any provision of the Term Loan Documents, or consent to any departure by any Obligor therefrom, shall amend, modify, terminate or waive any provision of Article VIII as the same applies to the Administrative Agent, or any other provision hereof as the same applies to the rights or obligations of any Agent, in each case without the consent of the Administrative Agent. (d) Execution of Amendments, etc. The Administrative Agent may, but shall have no obligation to, with the concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of such Lender. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on any Obligor in any case shall entitle any Obligor to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this Section 13.05 shall be binding upon each Lender at the time outstanding, each future Lender and, if signed by a Obligor, on such Obligor. SECTION 13.06. Successors and Assigns; Participations. 122 (a) Generally. This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of Lenders and the other parties hereto. No Obligor's rights or obligations hereunder nor any interest therein may be assigned or delegated by any Obligor without the prior written consent of all Lenders. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, Affiliates of each of the Agents and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Register. The Company, the Administrative Agent and Lenders shall deem and treat the Persons listed as Lenders in the Register as the holders and owners of the corresponding Term Loan Commitments and Term Loans listed therein for all purposes hereof, and no assignment or transfer of any such Term Loan Commitment or Term Loan shall be effective, in each case, unless and until an Assignment Agreement effecting the assignment or transfer thereof shall have been delivered to and accepted by the Administrative Agent and recorded in the Register as provided in Section 12.06(e). Prior to such recordation, all amounts owed with respect to the applicable Term Loan Commitment or Term Loan shall be owed to the Lender listed in the Register as the owner thereof, and any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is listed in the Register as a Lender shall be conclusive and binding on any subsequent holder, assignee or transferee of the corresponding Term Loan Commitments or Term Loans. (c) Right to Assign. Each Lender shall have the right at any time to sell, assign or transfer all or a portion of its rights and obligations under this Agreement, including, without limitation, all or a portion of its Term Loan Commitment or Term Loans owing to it or other Term Loan Obligation (provided, however, that each such assignment shall be of a uniform, and not varying, percentage of all rights and obligations under and in respect of any Term Loan and any related Term Loan Commitments): (i) to any Person meeting the criteria of clause (i) of the definition of the term of "Eligible Assignee" upon the giving of notice to the Company and the Administrative Agent; and (ii) to any Person meeting the criteria of clause (ii) of the definition of the term of "Eligible Assignee"; provided, further each such assignment pursuant to this Section 13.06(c) shall be in an aggregate amount of not less than $1,000,000 (or such lesser amount as may be agreed to by the Company and the Administrative Agent or as shall constitute the aggregate amount of the Term Loan Commitments and Term Loans outstanding to the assigning Lender). (d) Mechanics. The assigning Lender and the assignee thereof shall execute and deliver to the Administrative Agent an Assignment Agreement, together with such forms, certificates or other evidence, if any, with respect to United States federal income tax 123 withholding matters as the assignee under such Assignment Agreement may be required to deliver to the Administrative Agent pursuant to Section 2.17(c). (e) Notice of Assignment. Upon its receipt of a duly executed and completed Assignment Agreement, together with the processing and recordation fee referred to in Section 13.06(d) (and any forms, certificates or other evidence required by this Agreement in connection therewith), the Administrative Agent shall record the information contained in such Assignment Agreement in the Register, shall give prompt notice thereof to the Company and shall maintain a copy of such Assignment Agreement. (f) Representations and Warranties of Assignee. Each Lender, upon execution and delivery hereof or upon executing and delivering an Assignment Agreement, as the case may be, represents and warrants as of the Closing Date or as of the applicable Effective Date (as defined in the applicable Assignment Agreement) that (i) it is an Eligible Assignee; (ii) it has experience and expertise in the making of or investing in commitments or loans such as the applicable Term Loan Commitments or Term Loans, as the case may be; and (iii) it will make or invest in, as the case may be, its Term Loan Commitments or Term Loans for its own account in the ordinary course of its business and without a view to distribution of such Term Loan Commitments or Term Loans within the meaning of the Securities Act or the Exchange Act or other federal securities laws (it being understood that, subject to the provisions of this Section 13.06, the disposition of such Term Loan Commitments or Term Loans or any interests therein shall at all times remain within its exclusive control). (g) Effect of Assignment. Subject to the terms and conditions of this Section 13.06, as of the "Effective Date" specified in the applicable Assignment Agreement: (i) the assignee thereunder shall have the rights and obligations of a "Lender" hereunder to the extent such rights and obligations hereunder have been assigned to it pursuant to such Assignment Agreement and shall thereafter be a party hereto and a "Lender" for all purposes hereof; (ii) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned thereby pursuant to such Assignment Agreement, relinquish its rights (other than any rights which survive the termination hereof under Section 13.08 and be released from its obligations hereunder (and, in the case of an Assignment Agreement covering all or the remaining portion of an assigning Lender's rights and obligations hereunder, such Lender shall cease to be a party hereto; provided, anything contained in any of the Term Loan Documents to the contrary notwithstanding, such assigning Lender shall continue to be entitled to the benefit of all indemnities hereunder as specified herein with respect to matters arising out of the prior involvement of such assigning Lender as a Lender hereunder); (iii) the Term Loan Commitments shall be modified to reflect the Term Loan Commitment of such assignee; and 124 (iv) if any such assignment occurs after the issuance of any Term Loan Note hereunder, the assigning Lender shall, upon the effectiveness of such assignment or as promptly thereafter as practicable, surrender its applicable Term Loan Notes to the Administrative Agent for cancellation, and thereupon the Company shall issue and deliver new Term Loan Notes, if so requested by the assignee and/or assigning Lender, to such assignee and/or to such assigning Lender, with appropriate insertions, to reflect the new outstanding Term Loans of the assignee and/or the assigning Lender. (h) Participations. Each Lender shall have the right at any time to sell one or more participations to any Person (other than the Company, any of its Restricted Subsidiaries or any of its Affiliates) in all or any part of its Term Loan Commitments, Term Loans or in any other Term Loan Obligation. The holder of any such participation, other than an Affiliate of the Lender granting such participation, shall not be entitled to require such Lender to take or omit to take any action hereunder except with respect to any amendment, modification or waiver that would: (i) extend the final scheduled maturity of any Term Loan or Term Loan Note in which such participant is participating, or reduce the rate or extend the time of payment of interest or fees thereon (except in connection with a waiver of applicability of any post-default increase in interest rates) or reduce the principal amount thereof, or increase the amount of the participant's participation over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of a mandatory reduction in the Term Loan Commitment shall not constitute a change in the terms of such participation, and that an increase in any Term Loan Commitment or Term Loan shall be permitted without the consent of any participant if the participant's participation is not increased as a result thereof); (ii) consent to the assignment or transfer by any Obligor of any of its rights and obligations under this Agreement; or (iii) release all or substantially all of the Collateral under the Security Documents (except as expressly provided in the Term Loan Documents) supporting the Term Loans hereunder in which such participant is participating. The Company agrees that each participant shall be entitled to the benefits of Sections 2.15(c), 2.16 and 2.17 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (c) of this Section; provided, (i) a participant shall not be entitled to receive any greater payment under Section 2.16 or 2.17 than the applicable Lender would have been entitled to receive with respect to the participation sold to such participant, unless the sale of the participation to such participant is made with the Company's prior written consent and (ii) a participant that would be a Non-US Lender if it were a Lender shall not be entitled to the benefits of Section 2.17 unless the Company is notified of the participation sold to such participant and such participant agrees, for the benefit of the Company, to comply with Section 2.17 as though it were a Lender. To the extent permitted by law, each participant also 125 shall be entitled to the benefits of Section 13.04 as though it were a Lender, provided such Participant agrees to be subject to Section 2.14 as though it were a Lender. (i) Certain Other Assignments. In addition to any other assignment permitted pursuant to this Section 13.06, any Lender may assign and/or pledge all or any portion of its Term Loans, the other Term Loan Obligations owed by or to such Lender, and its Term Loan Notes, if any, to secure obligations of such Lender including, without limitation, (i) to any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any operating circular issued by such Federal Reserve Bank and (ii) with respect to any Lender that is a fund that invests in bank loans, to any trustee or holder of obligations owed, or securities issued by, such fund as security for such obligations or securities or to any other representative of such holders; provided, no Lender, as between the Company and such Lender, shall be relieved of any of its obligations hereunder as a result of any such assignment and pledge, and provided further, in no event shall the applicable Federal Reserve Bank, trustee or such holder of obligations be considered to be a "Lender" or be entitled to require the assigning Lender to take or omit to take any action hereunder. (j) Delivery of Lender Addenda. Each initial Lender shall become a party to this Agreement by delivering to the Administrative Agent a Lender Addendum duly executed by such Lender, the Borrower and the Administrative Agent. SECTION 13.07. Independence of Covenants. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of a Default or an Event of Default if such action is taken or condition exists. SECTION 13.08. Survival of Representations, Warranties and Agreements. All representations, warranties and agreements made herein shall survive the execution and delivery hereof and the making of any Term Loan. Notwithstanding anything herein or implied by law to the contrary, the agreements of each Obligor set forth in Sections 2.15(c), 2.16, 2.17, 13.02, 13.03 and 13.04 and the agreements of Lenders set forth in Sections 2.14, 8.03(b) and 8.06 shall survive the payment of the Term Loans and the termination hereof. SECTION 13.09. No Waiver; Remedies Cumulative. No failure or delay on the part of any Agent or any Lender in the exercise of any power, right or privilege hereunder or under any other Term Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege. The rights, powers and remedies given to each Agent and each Lender hereby are cumulative and shall be in addition to and independent of all rights, powers and remedies existing by virtue of any statute or rule of law or in any of the other Term Loan Documents. Any forbearance or failure to exercise, and any delay in exercising, any right, power or remedy hereunder shall not impair any such right, power or remedy or be construed to be a waiver thereof, nor shall it preclude the further exercise of any such right, power or remedy. 126 SECTION 13.10. Marshalling; Payments Set Aside. Neither any Agent nor any Lender shall be under any obligation to marshal any assets in favor of any Obligor or any other Person or against or in payment of any or all of the Term Loan Obligations. To the extent that any Obligor makes a payment or payments to the Administrative Agent or Lenders (or to the Administrative Agent, on behalf of Lenders), or the Administrative Agent or Lenders enforce any security interests or exercise their rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, any other state or federal law, common law or any equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor or related thereto, shall be revived and continued in full force and effect as if such payment or payments had not been made or such enforcement or setoff had not occurred. SECTION 13.11. Severability. In case any provision in or obligation under any Term Loan Document shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. SECTION 13.12. Term Loan Obligations Several; Independent Nature of Lenders' Rights. The obligations of Lenders hereunder are several and no Lender shall be responsible for the obligations or Term Loan Commitment of any other Lender hereunder. Nothing contained herein or in any other Term Loan Document, and no action taken by Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising out hereof and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. SECTION 13.13. Headings. Section headings herein are included herein for convenience of reference only and shall not constitute a part hereof for any other purpose or be given any substantive effect. SECTION 13.14. Applicable Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF. SECTION 13.15. Consent to Jurisdiction. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PARTY HERETO ARISING OUT OF OR RELATING HERETO OR ANY OTHER TERM LOAN DOCUMENT, OR ANY OF THE TERM LOAN OBLIGATIONS, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH PARTY HERETO, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (a) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (b) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (c) AGREES THAT SERVICE OF ALL 127 PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE APPLICABLE OBLIGOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 10.01; (d) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (c) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE APPLICABLE OBLIGOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND (e) AGREES AGENTS AND LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY OBLIGOR IN THE COURTS OF ANY OTHER JURISDICTION. SECTION 13.16. Waiver Of Jury Trial. EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING HEREUNDER OR UNDER ANY OF THE OTHER TERM LOAN DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE LENDER/COMPANY RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 13.16 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS HERETO OR ANY OF THE OTHER TERM LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. SECTION 13.17. Confidentiality. Each Lender shall hold all non-public information regarding the Company and its business identified as such by the Company and obtained by such Lender pursuant to the requirements hereof in accordance with such Lender's customary procedures for handling confidential information of such nature, it being understood and agreed by the Company that, in any event, a Lender may make: 128 (i) disclosures of such information to Affiliates of such Lender and to their agents and advisors (and to other Persons authorized by a Lender or Agent to organize, present or disseminate such information in connection with disclosures otherwise made in accordance with this Section 13.17); (ii) disclosures of such information reasonably required by any bona fide or potential assignee, transferee or participant in connection with the contemplated assignment, transfer or participation by such Lender of any Term Loans or any participations therein or by any direct or indirect contractual counterparties (or the professional advisors thereto) in Commodity Hedge Agreements and Financial Hedge Agreements (provided, such assignee, transferee, participant, counterparties and advisors are advised of and agree to be bound by the provisions of this Section 13.17); (iii) disclosure to any rating agency when required by it, provided that, prior to any disclosure, such rating agency shall undertake in writing to preserve the confidentiality of any confidential information relating to the Obligors received by it from any of the Agents or any Lender, and (iv) disclosures required or requested by any governmental agency or representative thereof or by the NAIC or pursuant to legal or judicial process; provided, unless specifically prohibited by applicable law or court order, each Lender shall make reasonable efforts to notify the Company of any request by any governmental agency or representative thereof (other than any such request in connection with any examination of the financial condition or other routine examination of such Lender by such governmental agency) for disclosure of any such non-public information prior to disclosure of such information. Notwithstanding anything to the contrary set forth herein or in any other written or oral understanding or agreement to which the parties hereto are parties or by which they are bound, the parties acknowledge and agree that (i) any obligations of confidentiality contained herein and therein do not apply and have not applied from the commencement of discussions between the parties to the tax treatment and tax structure of this Agreement, the Indenture, the Senior Credit Facility and the transactions contemplated hereby (and any related transactions or arrangements), and (ii) each party (and each of its employees, representatives, or other agents) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of this Agreement, the Indenture, the Senior Credit Facility and the transactions contemplated hereby and all materials of any kind (including opinions or other tax analyses) that are provided to such party relating to such tax treatment and tax structure, all within the meaning of Treasury Regulations Section 1.6011-4; provided, however, that each party recognizes that the privilege each has to maintain, in its sole discretion, the confidentiality of a communication relating to this Agreement, the Indenture, the Senior Credit Facility and the transactions contemplated hereby, including a confidential communication with its attorney or a confidential communication with a federally authorized tax practitioner under Section 7525 of the Code, is not intended to be affected by the foregoing. 129 SECTION 13.18. Usury Savings Clause. Notwithstanding any other provision herein, the aggregate interest rate charged with respect to any of the Term Loan Obligations, including all charges or fees in connection therewith deemed in the nature of interest under applicable law shall not exceed the Highest Lawful Rate. If the rate of interest (determined without regard to the preceding sentence) under this Agreement at any time exceeds the Highest Lawful Rate, the outstanding amount of the Term Loans made hereunder shall bear interest at the Highest Lawful Rate until the total amount of interest due hereunder equals the amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect. In addition, if when the Term Loans made hereunder are repaid in full the total interest due hereunder (taking into account the increase provided for above) is less than the total amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect, then to the extent permitted by law, the Company shall pay to the Administrative Agent an amount equal to the difference between the amount of interest paid and the amount of interest which would have been paid if the Highest Lawful Rate had at all times been in effect. Notwithstanding the foregoing, it is the intention of Lenders and the Company to conform strictly to any applicable usury laws. Accordingly, if any Lender contracts for, charges, or receives any consideration which constitutes interest in excess of the Highest Lawful Rate, then any such excess shall be cancelled automatically and, if previously paid, shall at such Lender's option be applied to the outstanding amount of the Term Loans made hereunder or be refunded to the Company. SECTION 13.19. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. The delivery of an executed signature page of this Agreement, or any Joinder Agreement in connection herewith, by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. SECTION 13.20. Effectiveness. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto and receipt by the Company and the Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 130 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. TESORO PETROLEUM CORPORATION By: /s/ GREGORY A. WRIGHT -------------------------------------- Name: Gregory A. Wright Title: Senior Vice President and Chief Financial Officer DIGICOMP INC., FAR EAST MARITIME COMPANY, GOLD STAR MARITIME COMPANY, KENAI PIPE LINE COMPANY, SMILEY'S SUPER SERVICE, INC., TESORO ALASKA COMPANY, TESORO ALASKA PIPELINE COMPANY, TESORO AVIATION COMPANY, TESORO FINANCIAL SERVICES HOLDING COMPANY, TESORO GAS RESOURCES COMPANY, INC., S-1 TESORO HAWAII CORPORATION, TESORO HIGH PLAINS PIPELINE COMPANY, TESORO MARINE SERVICES HOLDING COMPANY, TESORO MARINE SERVICES, LLC, TESORO MARITIME COMPANY, TESORO NORTHSTORE COMPANY, TESORO PETROLEUM COMPANIES, INC., TESORO REFINING AND MARKETING COMPANY, TESORO TECHNOLOGY COMPANY, TESORO TRADING COMPANY, TESORO VOSTOK COMPANY, TESORO WASATCH, LLC VICTORY FINANCE COMPANY S-2 By: /s/ Sharon L. Layman --------------------------------------- Name: Sharon L. Layman S-3 GOLDMAN SACHS CREDIT PARTNERS L.P., as Administrative Agent, Sole Lead Arranger and a Lender By: /s/ Robert Wagner --------------------------------------- Authorized Signatory S-4 EX-4.12 9 h05116exv4w12.txt PLEDGE AND SECURITY AGREEMENT Exhibit 4.12 ================================================================================ TESORO PETROLEUM CORPORATION SENIOR SECURED TERM LOANS DUE 2008 8% SENIOR SECURED NOTES DUE 2008 PLEDGE AND SECURITY AGREEMENT Dated as of April 17, 2003 ================================================================================ TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS; PRINCIPLES OF CONSTRUCTION SECTION 1.01. Defined Terms.......................................................................... 2 ARTICLE II SECURITY INTEREST SECTION 2.01. Grant of Security Interest............................................................. 6 SECTION 2.02. Retention of Certain Rights............................................................ 8 SECTION 2.03. Obligations Secured.................................................................... 8 ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.01. Jurisdiction of Organization........................................................... 1 SECTION 3.02. Patents................................................................................ 1 ARTICLE IV. COVENANTS OF GRANTORS SECTION 4.01. Delivery of Instruments................................................................ 1 SECTION 4.02. UCC Article 8.......................................................................... 1 SECTION 4.03. Preservation of Value; Limitation of Liens............................................. 1 SECTION 4.04. Defense of Collateral.................................................................. 1 SECTION 4.05. Maintenance of Insurance............................................................... 1 SECTION 4.06. Maintenance of Perfected Security Interest; Further Documentation...................... 2 SECTION 4.07. Change of Name; Change of Jurisdiction of Organization................................. 2 SECTION 4.08. Post Closing Collateral................................................................ 3
ARTICLE V RIGHTS AND REMEDIES SECTION 5.01. Event of Default Defined............................................................... 3 SECTION 5.02. Remedies Upon Event of Default......................................................... 3 SECTION 5.03. Compliance With Limitations and Restrictions; No Discount.............................. 5 SECTION 5.04. Registration of Securities............................................................. 6 SECTION 5.05. Right to Cure.......................................................................... 6 SECTION 5.06. No Impairment of Remedies.............................................................. 6 SECTION 5.07. Application of Proceeds................................................................ 7 SECTION 5.08. Foreclosure Waiver..................................................................... 7 SECTION 5.09. Attorney-in-Fact....................................................................... 7 ARTICLE VI MISCELLANEOUS PROVISIONS SECTION 6.01. Notices................................................................................ 7 SECTION 6.02. Benefit of Agreement................................................................... 8 SECTION 6.03. No Waiver; Remedies Cumulative......................................................... 8 SECTION 6.04. Severability........................................................................... 8 SECTION 6.05. Amendments............................................................................. 9 SECTION 6.06. Headings............................................................................... 9 SECTION 6.07. Governing Law.......................................................................... 9 SECTION 6.08. CONSENT TO JURISDICTION................................................................ 9 SECTION 6.09. WAIVER OF JURY TRIAL................................................................... 9 SECTION 6.10. Successors and Assigns................................................................. 10 SECTION 6.11. Entire Agreement....................................................................... 10 SECTION 6.12. Survival of Agreements................................................................. 10
ii SECTION 6.13. Counterparts........................................................................... 10 SECTION 6.14. Integration of Terms................................................................... 10 SECTION 6.15. Effectiveness.......................................................................... 10 SECTION 6.16. Collateral Agent's Obligations......................................................... 10 SECTION 6.17. Additional Obligors.................................................................... 10
iii EXHIBITS: A Joinder Agreement B Control Agreement SCHEDULES: I Intellectual Property i This SECURITY AND PLEDGE AGREEMENT, dated as of April 17, 2003, (this "Agreement") is entered into by and among TESORO PETROLEUM CORPORATION, a Delaware corporation (the "Company"), CERTAIN SUBSIDIARIES OF THE COMPANY (each a "Grantor" and together with the Company, the "Grantors") and WILMINGTON TRUST COMPANY, as Collateral Agent (together with its successors in such capacity, the "Collateral Agent"). RECITALS 1. The Company intends to borrow $200,000,000 in principal amount of Term Loans (the "Initial Term Loans") under the Term Loan Agreement dated as of April 17, 2003 (the "Term Loan Agreement") by and among the Company, the other Grantors, the lenders from time to time party thereto, the Administrative Agent (together with its successors in such capacity, the "Administrative Agent") and Goldman Sachs Credit Partners L.P., as sole lead arranger, sole bookrunner and syndication agent. 2. The Company intends to issue $375,000,000 in principal amount of 8.00% Senior Secured Notes due April 15, 2008 (the "Initial Notes") pursuant to the Indenture dated as of April 17, 2003 (the "Indenture") by and among the Company, the other Grantors and The Bank of New York, as Trustee (together with its successors in such capacity, the "Trustee"). 3. Pursuant to the Term Loan Agreement, each Grantor (other than the Company) guarantees payment of the Initial Term Loans and all other Term Loan Obligations (the "Term Loan Guarantees"). Pursuant to the Indenture, each Grantor (other than the Company) guarantees payment of the Initial Notes and all other Note Obligations (the "Note Guarantees"). 4. The Term Loan Agreement and Indenture require the Company and the other Grantors to secure payment of the Initial Term Loans and the Initial Notes and other Secured Obligations, Equally and Ratably, by security interests in the Collateral. Without providing any commitments to the Company as to the funding of any future indebtedness, the Term Loan Agreement and Indenture permit the Company from time to time to incur Indebtedness which it is otherwise permitted to incur under the Term Loan Agreement and Indenture in the form of additional Term Loans borrowed under the Term Loan Agreement or additional Notes issued under the Indenture (or both) and to secure such additional Term Loans and additional Notes, Equally and Ratably with the Initial Term Loans and the Initial Notes, by such security interests in the Collateral, up to an aggregate principal amount (including the Initial Term Loans and the Initial Notes) not exceeding $725,000,000 at any one time outstanding. 5. The Term Loan Agreement and Indenture further require that such security interests in the Collateral be granted pursuant to the Security Documents to a collateral agent acting for the benefit of the holders of Term Loans, Notes and other Secured Obligations. This Agreement sets forth the terms on which the Collateral Agent has undertaken to accept, hold and enforce such security interests and all related rights, interests and powers as agent for, and for the benefit exclusively of, the present and future holders of the Term Loans, Notes and other Secured Obligations. NOW THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS; PRINCIPLES OF CONSTRUCTION SECTION 1.01. Defined Terms. (a) Capitalized terms used in this Agreement that are defined in the Term Loan Agreement and Indenture and not otherwise defined herein shall have the meanings set forth in the Term Loan Agreement and Indenture. (b) All capitalized terms used in this Agreement that are defined in Article 9 of the UCC, as in effect on the date of this Agreement in the State of California, and not otherwise defined herein shall have the meanings therein set forth. (c) The following terms shall have the following meanings: "Associated Leased Terminals" means any terminals or any other facilities at which any inventory is stored or distributed that are leased by any Grantor and that are necessary for or used in connection with the operation, use or maintenance of any of the Existing Refineries. "Collateral" has the meaning given in Section 2.01 of this Agreement. "Credit Facility Collateral" means, at any time in respect of any Credit Facility: (1) all now owned and hereafter acquired inventory (as defined in Article 9 of the UCC as in effect in any applicable jurisdiction), all documents (as defined in Article 9 of the UCC as in effect in any applicable jurisdiction) related thereto and all rights under any existing or future policy of property loss or casualty insurance on such inventory; (2) all now owned and hereafter acquired rights to payment from inventory sold or leased and services rendered (whether such rights to payment constitute accounts or payment intangibles, or arise under or in connection with chattel paper or instruments, each as defined in Article 9 of the UCC in effect in any applicable jurisdiction, and whether or not such rights to payment constitute Indebtedness or conform to the underlying contract), together with (i) all rights in and to any merchandise or goods which such rights to payment may represent, whether as returned or repossessed goods or otherwise; and (ii) all Liens, letters of credit, insurance, guarantees and other obligations securing or supporting such rights to payment; (3) all now owned and hereafter acquired money, deposit accounts (as defined in Article 9 of the UCC as in effect in any applicable jurisdiction) and deposits therein and Cash Equivalents (whether held directly or in securities accounts (as defined in Article 9 of the UCC as in effect in any applicable jurisdiction)), except (i) the Asset Sale Proceeds Account and 2 deposits therein and (ii) money, deposit accounts, deposits and Cash Equivalents (whether held directly or in securities accounts) constituting identifiable proceeds of Collateral; (4) all now owned and hereafter acquired rights to payment constituting intercompany debt obligations (whether such rights to payment constitute accounts or payment intangibles, or arise under or in connection with chattel paper or instruments, and whether or not such rights to payment constitute Indebtedness), together with all Liens, letters of credit, insurance, guarantees and other obligations securing or supporting such rights to payment; provided, however, that such intercompany debt obligations shall not include (x) Specified Intercompany Debt, (y) any Liens, letters of credit, insurance, guarantees and other obligations securing or supporting Specified Intercompany Debt or (z) any cash or non-cash proceeds of Specified Intercompany Debt; (5) all now owned and hereafter acquired rights under contracts and other general intangibles, but only to the extent necessary, used or useful in (i) the collection, sale or other disposition of the rights to payment described in clause (2) above or (ii) the processing, shipment (including any rights of stoppage in transit), offtake, storage, completion, supply, lease, sale or other disposition (collectively, "Inventory Disposition Actions") of inventory which is owned or has been sold as of the date of any such Inventory Disposition Action; and (6) all cash and non-cash proceeds (as defined in Article 9 of the UCC as in effect in any applicable jurisdiction) of the foregoing. "Excluded Assets" means: (1) Credit Facility Collateral; (2) any lease of premises used only as office space or to warehouse inventory; (3) all easements, rights-of-way, licenses and other real property interests for or pertaining to the construction, operation, use or maintenance of any pipeline over, upon or under land owned by another; (4) the fixtures and equipment of any pipeline and the Capital Stock of Tesoro High Plains Pipeline Company if, to the extent that and for as long as (i) the ownership or operation of such pipeline is regulated by any federal or state regulatory authority and (ii) under the law applicable to such regulatory authority the grant of a security interest in such fixtures and equipment or such Capital Stock, respectively, is prohibited or a security interest in such fixtures and equipment or such Capital Stock, respectively, may be granted only after completion of a filing with, or receipt of consent from, such regulatory authority which has not been effectively completed or received; provided, however, that (a) such fixtures and equipment or such Capital Stock, respectively, will be an Excluded Asset only to the extent and for as long as the conditions set forth in clauses (i) and (ii) in this definition are and remain satisfied and to the extent such assets otherwise constitute Collateral, will cease to be an Excluded Asset, and will become subject to the security interests granted to the Collateral Agent under the Security Documents, immediately and automatically at such time as the such conditions cease to exist, including by reason of the effective completion of any required filing or effective receipt of any required 3 regulatory approval; and (b) unless prohibited by law, the proceeds of any sale, lease or other disposition of any such fixtures, equipment or Capital Stock that are Excluded Assets shall not be an Excluded Asset and shall at all times be and remain subject to the security interests granted to the Collateral Agent under the Security Documents; (5) with respect to personal property, any lease, license, permit, franchise, power, authority or right if, to the extent that and for as long as (i) the grant of a security interest therein constitutes or would result in the abandonment, invalidation or unenforceability of such lease, license, interest, permit, franchise, power, authority or right or the termination of or a default under the instrument or agreement by which such lease, license, interest, permit, franchise, power, authority or right is governed and (ii) such abandonment, invalidation, unenforceability, breach, termination or default is not rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor provision) of any relevant jurisdiction or any other applicable law (including the United States Bankruptcy Code) or principles of equity; provided, however, that (a) such lease, license, interest, permit, franchise, power, authority or right will be an Excluded Asset only to the extent and for as long as the conditions set forth in clauses (i) and (ii) in this definition are and remain satisfied and to the extent such assets otherwise constitute Collateral, will cease to be an Excluded Asset, and will become subject to the security interests granted to the Collateral Agent under the Security Documents, immediately and automatically at such time as such conditions cease to exist, including by reason of any waiver or consent under the applicable instrument or agreement, and (b) the proceeds of any sale, lease or other disposition of any such lease, license, interest, permit, franchise, power, authority or right that is or becomes an Excluded Asset shall not be an Excluded Asset and shall at all times be and remain subject to the security interests granted to the Collateral Agent under the Security Documents; (6) with respect to any real property, any lease, license, permit, franchise, power, authority or right if, to the extent that and for as long as the grant of a security interest therein (i) requires a third party consent or (ii) constitutes or would result in the abandonment, invalidation or unenforceability of such lease, license, interest, permit, franchise, power, authority or right or the termination of or a default under the instrument or agreement by which such lease, license, interest, permit, franchise, power, authority or right is governed; provided, however, that such lease, license, interest, permit, franchise, power, authority or right will be an Excluded Asset only to the extent and for as long as the conditions set forth in this definition are and remain satisfied and to the extent such assets otherwise constitute Collateral, will cease to be an Excluded Asset, and will become subject to the security interests granted to the Collateral Agent under the Security Documents, immediately and automatically at such time as such conditions cease to exist, including by reason of any waiver or consent under the applicable instrument or agreement; (7) all trademarks; (8) the Marine Services Business; (9) the Retail Properties; and 4 (10) (a) other property in which a security interest cannot be perfected by the filing of a financing statement under the UCC and (b) without duplication, motor vehicles, that have, in the aggregate for all such property and motor vehicles, a fair market value (as determined in good faith by the Company) not exceeding $10,000,000. "Existing Refinery" means any of the six refineries and connected terminal assets owned on the date hereof by any Grantor and located in or near Martinez, California, Anacortes, Washington, Kenai, Alaska, Kapolei, Hawaii, Mandan, North Dakota, and Salt Lake City, Utah. "Joinder Agreement" means an agreement substantially in form of Exhibit A hereto. "Marine Services Business" means (1) all assets involved in the marketing and distribution of petroleum products and provision of logistical support services to the marine and offshore exploration and production industries operating in the Gulf of Mexico, including, without limitation, the 15 terminals located on the Texas and Louisiana coast and all related tugboats, barges and trucks, provided that such assets are owned by either entity referred to in clauses (2) or (3) of this definition and such assets are located on or near either the Texas or Louisiana coast, (2) the Capital Stock of Tesoro Marine Services Holding Company and (3) the membership interests of Tesoro Marine Services, LLC; provided that such assets will not include any assets relating to the sale of petroleum products in bulk and wholesale markets. "Owned Terminals" means the two terminals owned on the date hereof by any Grantor and located in Burley, Idaho and Boise, Idaho. "Pledged Securities" means the Capital Stock designated as follows: (i) a certificate issued by Tesoro Alaska Pipeline Company to the Company representing all shares of common stock of such issuer; (ii) a certificate issued by Kenai Pipe Line Company to Tesoro Alaska Company representing all shares of common stock of such issuer; and (iii) a certificate issued by Tesoro High Plains Pipeline Company to the Company representing two thirds of all shares of common stock of such issuer. "Pipelines" means collectively (1) the pipelines serving and connected to the Existing Refineries on the date hereof, which are a 71-mile pipeline from the Kenai refinery to Anchorage, Alaska, a 24-mile pipeline from Swanson River Field to the Kenai refinery, a 23-mile pipeline system connected to the Kapolei refinery and a 700-mile pipeline system in North Dakota and Montana, or (2) any other pipeline acquired at any time after the date hereof by any Grantor to serve and that is connected to any of the Existing Refineries. "Retail Properties" means all assets directly related to the retail sale of gasoline and diesel fuel in retail markets in the mid-continental and western United States (including Alaska and Hawaii), including, without limitation, all related gas stations, convenience stores, merchandise items, tow trucks, auto maintenance facilities, oil change facilities, and car washes; provided that such assets will not include any assets relating to the sale of petroleum products in bulk and wholesale markets. "Securities Laws" has the meaning given in Section 5.02(c) of this Agreement. 5 "Specified Intercompany Debt" means (1) intercompany Indebtedness resulting from the declaration of a dividend or a debt distribution on account of Capital Stock of a Subsidiary of the Company or a redemption, reclassification or recapitalization of the Capital Stock of any such Subsidiary and (2) intercompany Indebtedness resulting from the funding of proceeds of any transaction raising capital (whether by the issuance of debt or equity) for the Company or any Subsidiary of the Company as an intercompany loan to the Company or any such Subsidiary (other than the funding of proceeds of any extension of credit or borrowing under a Credit Facility), in each case, whether such rights to payment constitute accounts or payment intangibles, or arise under or in connection with chattel paper or instruments. ARTICLE II SECURITY INTEREST SECTION 2.01. Grant of Security Interest. To secure the timely payment and performance in full of its Secured Obligations, whether now outstanding or hereafter acquired, each Grantor does hereby assign, grant and pledge to the Collateral Agent, for the benefit of the Secured Parties, as of the date hereof (or in the case of the property consisting of the Capital Stock of Tesoro High Plains Pipeline Company, or any property referred to below that is owned by Tesoro High Plains Pipeline Company, promptly upon the receipt of any necessary approval required of the North Dakota Public Service Commission) all the estate, right, title and interest of such Grantor in, to and under the following property (all of the collateral described in clauses (a) through (i) being herein collectively referred to as the "Collateral"), including (1) all rights of each Grantor to receive moneys due and to become due under or pursuant to the Collateral, (2) all rights of each Grantor to receive return of any premiums for or proceeds of any insurance, indemnity, warranty or guaranty with respect to the Collateral or to receive condemnation proceeds, (3) all claims of each Grantor for damages arising out of or for breach of or default under the agreements assigned, granted or pledged to the Collateral Agent or any other Collateral, (4) all rights of each Grantor to terminate, amend, supplement, modify or waive performance under any agreements assigned, granted or pledged to the Collateral Agent to perform thereunder and to compel performance and otherwise exercise all remedies thereunder and (5) to the extent not included in the foregoing, all proceeds receivable or received when any and all of the foregoing Collateral is sold, collected, exchanged or otherwise disposed, whether voluntarily or involuntarily: (a) the fixtures and equipment comprising or used or useful for or in connection with the Existing Refineries; (b) the fixtures and equipment comprising or used or useful for or in connection with the Owned Terminals; (c) all fixtures or equipment acquired at any time after the date hereof by the Company or any Grantor (i) located on, or contiguous to or connected with and in reasonable proximity to, any of the Existing Refineries or Owned Terminals and (ii) necessary, used or useful for or in connection with the ownership, expansion, operation, use or maintenance of any of the Existing Refineries or Owned Terminals and (b) any owned or acquired interest in leases 6 or contracts with governmental authorities, where such leases or contracts are in real estate in navigable waters contiguous to or connected with and in reasonable proximity to any of the Existing Refineries or Owned Terminals; (d) all fixtures and equipment at any time owned or acquired by any Grantor comprising or acquired for use with the Pipelines; (e) (A)(1)all of the indebtedness or other obligations of Tesoro Alaska Pipeline Company, Kenai Pipe Line Company and each additional Pipeline Subsidiary (other than Tesoro High Plains Pipeline Company at any time owed to each Grantor and (2) 66 2/3% of the indebtedness or other obligations of Tesoro High Plains Pipeline Company owed to each Grantor and (2) the interests at any time owned or acquired of each Grantor in respect of all of the Capital Stock of each of Tesoro Alaska Pipeline Company, Kenai Pipe Line Company and each additional Pipeline Subsidiary (other than Tesoro High Plains Pipeline Company) and 66 2/3% of the Capital Stock of Tesoro High Plains Pipeline Company, including the following rights and interests in respect thereof: (i) the rights to receive income, gain, profit, dividends and other distributions allocated or distributed to any Grantor in respect of or in exchange for all or any portion of such Capital Stock; (ii) each Grantor's capital or ownership interest, including capital accounts in respect thereof; (iii) each Grantor's voting rights in or rights to control or direct the affairs in respect thereof; (iv) all other rights, title and interest therein or thereto or derived therefrom; (v) all rights of any Grantor to terminate, amend, supplement, modify, or cancel, take actions under, to compel performance under and otherwise exercise all remedies under the certificate of incorporation, by-laws or other organizational documents in respect thereof; and (vi) all securities, notes, certificates and other instruments representing or evidencing any of the foregoing rights and interests or the ownership thereof, including the Pledged Securities, and any interest of each Grantor reflected in the books of any financial intermediary pertaining to such rights and interests and all non-cash dividends, cash, options, warrants, stock splits, reclassifications, rights, instruments or other investment property and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such rights and interests; (f) all fixtures and equipment at any time owned or acquired by any Grantor located at any of the Associated Leased Terminals; 7 (g) all general intangibles (including patents, copyrights, trade secrets and other intellectual property, whether owned or licensed, customer and supplier contracts, drawings, plans, books and records, employment, consulting, operating, maintenance or services agreements and other contractual rights, public and private licenses, permits, franchises, powers, authorities, pollution or environmental credits and allowances, goodwill and other intangible property of every type or description) at any time owned or acquired by any Grantor necessary, used or useful for or in connection with, or in any respect related, incidental or ancillary to, the ownership, expansion, operation, use, maintenance or sale or other disposition of any of the Existing Refineries, the Owned Terminals, the Associated Leased Terminals or the Pipelines; (h) all rights to payment at any time owned or acquired by any Grantor constituting Specified Intercompany Debt; and (i) each Asset Sale Proceeds Account and all deposits therein and interest thereon and investments thereof, and all property of every type and description in which any proceeds of any Sale of Collateral or other disposition of Collateral are invested or upon which the Collateral Agent is at any time granted, or required to be granted, a Lien to secure the Secured Obligations as set forth in Section 5.10 of the Term Loan Agreement, Section 4.10 of the Indenture or in clause (3) of the proviso in the definition of "Asset Sale"; and (j) all proceeds of any of the foregoing; provided, that the Collateral will not at any time include any property that is, at such time, an Excluded Asset. SECTION 2.02. Retention of Certain Rights. So long as the Collateral Agent has not exercised remedies with respect to the Collateral under this Agreement or any other Security Document upon the occurrence and during the continuance of an Event of Default, each Grantor reserves the right to exercise all voting and other rights with respect to the Collateral (except as limited by the Security Documents) and to receive all income, dividends and other distributions from the Collateral (except as limited by the Security Documents); provided that no vote shall be cast, right exercised or other action taken which could materially impair the Collateral. SECTION 2.03. Obligations Secured. Each Grantor hereby agrees that the Collateral shall secure, Equally and Ratably, all of the Term Loan Obligations and the Note Obligations of such Grantor (including, in the case of the Company, all of its present and future liability under or for the Terms Loans (including Additional Term Loans) or Notes (including Additional Notes) or any other Secured Obligation, and, in the case of each other Grantor, all of its present and future liability under the Term Loan Guarantees or the Note Guarantees or for any other Secured Obligation) and further agrees that the security interest granted hereby grants the Collateral Agent, for the benefit of Secured Parties, a first priority security interest (subject to Permitted Prior Liens) on the Collateral. 8 ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.01. Jurisdiction of Organization. On the date hereof, such Grantor's jurisdiction of organization and identification number from the jurisdiction of organization (if any) are specified on Schedule I. Such Grantor has furnished to the Collateral Agent a certified charter, certificate of incorporation or other organization document and long-form good standing certificate as of a date which is recent to the date hereof. SECTION 3.02. Patents. Schedule II lists all rights, priorities and privileges relating to patents and patent applications that constitute Collateral (other than such interests in respect of which Grantor is a licensee) owned by such Grantor in its own name on the date hereof. ARTICLE IV. COVENANTS OF GRANTORS SECTION 4.01. Delivery of Instruments. All Collateral consisting of Capital Stock of Pipeline Subsidiaries will be represented by certificated securities and each Grantor shall deliver all promissory notes and other instruments evidencing or representing any Collateral to the Collateral Agent for the benefit of the Secured Parties as security for all of the Secured Obligations, accompanied by duly executed instruments of transfer or assignment in blank. SECTION 4.02. UCC Article 8. To the extent that any Capital Stock of any Pipeline Subsidiary constitutes membership or partnership interests, the Grantor owing such interests shall elect for such securities to be governed by Article 8 of the UCC and any limited liability company agreement or partnership agreement of such Pipeline Subsidiary, as the case may be, shall explicitly state that such interests in such Pipeline Subsidiary are securities governed by Article 8 of the UCC. Each Grantor shall cause the Capital Stock of each Pipeline Subsidiary owned by it to be evidenced by and remain "certificated securities" as defined in Article 8 of the UCC. SECTION 4.03. Preservation of Value; Limitation of Liens. No Grantor shall take any action in connection with the Collateral which would impair in any material respect the interests or rights of the Collateral Agent therein or with respect thereto. SECTION 4.04. Defense of Collateral. Each Grantor shall defend its title to the Collateral against the claims and demands of all Persons whomsoever. SECTION 4.05. Maintenance of Insurance (a) Except to the extent that the requirements in respect of insurance are inconsistent with those set forth in this Section, Each Grantor shall maintain, with financially sound and reputable companies, insurance on all its property in such amounts, subject to deductibles and self-insurance retentions, and covering such risks as is consistent with sound business practice, and the Company will furnish to the Collateral Agent (for distribution to any Secured Party) upon request full information as to the insurance carried. In the event any Grantor at any time or times hereafter shall fail to obtain or maintain any of the policies of insurance required herein or to pay any premium in whole or in part relating thereto, then the Collateral Agent, without waiving or releasing any obligation or resulting Default, may at any time or times thereafter (but shall be under no obligation to do so) obtain and maintain such policies of insurance and pay such premiums and take any other action with respect thereto which the Collateral Agent deems advisable. All sums so disbursed by the Collateral Agent shall constitute part of the Secured Obligations payable as provided in the Term Loan Agreement or the Indenture, as applicable. (b) All such insurance shall (i) provide that no cancellation thereof shall be effective until at least 30 days after receipt by the Collateral Agent of written notice thereof, (ii) name the Collateral Agent as insured party or loss payee, (iii) if reasonably requested by the Collateral Agent, include a breach of warranty clause and (iv) be reasonably satisfactory in all other respects to the Collateral Agent, provided insurance provided by or through Oil Insurance Limited shall not be subject to the requirements of clause (i) above. SECTION 4.06. Maintenance of Perfected Security Interest; Further Documentation. Each Grantor shall maintain the security interest created by this Agreement as a perfected security interest having a first priority security interest (subject to Permitted Prior Liens) and shall defend such security interest against the claims and demands of all Persons whomsoever. (a) Each Grantor will furnish to the Collateral Agent and the Secured Parties from time to time statements and schedules further identifying and describing the assets and property of such Grantor and such other reports in connection with the Collateral as the Collateral Agent may reasonably request, all in reasonable detail. (b) Each Grantor shall at the expense of such Grantor execute and deliver such instruments and documents as may be required by the Collateral Agent or applicable legal requirements to maintain a first priority perfected security interest (subject to Permitted Prior Liens) in the Collateral. (c) At any time and from time to time, upon the written request of the Collateral Agent, and at the sole expense of such Grantor, such Grantor will promptly and duly execute and deliver, and have recorded, such further instruments and documents and take such further actions as the Collateral Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, (i) the filing of any financing or continuation statements under the UCC (or other similar laws) in effect in any jurisdiction with respect to the security interests created hereby and (ii) in the case of any other relevant Collateral, taking any actions necessary to enable the Collateral Agent to obtain "control" (within the meaning of the UCC as in effect in any applicable jurisdiction) with respect thereto. SECTION 4.07. Change of Name; Change of Jurisdiction of Organization. 2 (a) Each Grantor shall give the Collateral Agent at least 30 days prior written notice before such Grantor changes its name, jurisdiction of organization or entity type. SECTION 4.08. Post Closing Collateral. The Company shall at the Company's expense within 30 days after the Closing Date duly execute and deliver to the Collateral Agent, a Control Agreement in respect of an Asset Sale Proceeds Account and shall take such other actions which are necessary or advisable in the reasonable opinion of the Collateral Agent to vest in the Collateral Agent acting on behalf of the Secured Parties a valid and perfected first priority security interest in such Asset Sale Proceeds Account. Concurrently with the execution and delivery of such Control Agreement, the Company shall provide the Collateral Agent with an Opinion of Counsel in form and substance satisfactory to the Collateral Agent. ARTICLE V RIGHTS AND REMEDIES SECTION 5.01. Event of Default Defined. The occurrence of an Event of Default under the Term Loan Agreement or the Indenture, whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any Collateral or governmental body, shall constitute an Event of Default hereunder. SECTION 5.02. Remedies Upon Event of Default. (a) During any period during which an Event of Default shall have occurred and be continuing, the Collateral Agent shall have the right to (but shall be under no obligation to), directly or by using an agent or broker do any of the following: (i) proceed to protect and enforce the rights vested in it by this Agreement and under the UCC; (ii) cause all revenues hereby pledged as security and all other moneys and other property pledged hereunder to be paid and/or delivered directly to it, and demand, sue for, collect and receive any part or all of such moneys and property; (iii) cause any action at law or suit in equity or other proceeding to be instituted and prosecuted to collect or enforce any Secured Obligations of any Grantor, or rights included in the Collateral, or for specific enforcement of any covenant or agreement contained herein, in the Term Loan Agreement or in the Indenture or under the agreements assigned, granted or pledged to the Collateral Agent, or in aid of the exercise of any power therein or herein granted, or for any foreclosure hereunder and sale under a judgment or decree in any judicial proceeding, or to enforce any other legal or equitable right vested in it by this Agreement or by law; 3 (iv) foreclose or enforce any other agreement or other instrument by or under or pursuant to which the Secured Obligations of any Grantor are issued or secured; (v) in connection with any acceleration and foreclosure, vote or exercise any and all of Grantors' rights or powers incident to its ownership of the Capital Stock and interests referred to in clause (d) of the definition of Collateral herein; (vi) subject to clause (b) of this Section 5.02, sell, lease or otherwise dispose of any or all of the Collateral, in one or more transactions, at such prices as the Collateral Agent may deem best, and for cash or on credit or for future delivery, without assumption of any credit risk, at any broker's board or at public or private sale, without demand of performance or notice of intention to sell, lease or otherwise dispose of, or of time or place of disposition (except such notice as is required by applicable statute and cannot be waived), it being agreed that the Collateral Agent may be a purchaser or lessee on behalf of the Secured Parties or on its own behalf at any such sale and that the Collateral Agent or anyone else who may be the purchaser, lessee or recipient for value of any or all of the Collateral so disposed of shall, upon such disposition, acquire all of any Grantor's rights therein. The Collateral Agent may adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the same, and such sale may, without further notice or publication, be made at any time or place to which the same may be so adjourned; (vii) incur expenses, including reasonable attorneys' fees, consultants' fees, and other costs appropriate to the exercise of any right or power under this Agreement; (viii) perform any obligation of any Grantor hereunder or under any other Security Document, and make payments, purchase, contest or compromise any encumbrance, charge, or lien, and pay taxes and expenses; (ix) take possession of the Collateral and render it usable, and repair and renovate the same, without, however, any obligation so to do, and enter upon any site where the same may be located for that purpose, control, manage, operate, rent and lease the Collateral, either separately from or in conjunction with the other Collateral necessary or useful to such renovated Collateral, collect all rents and income from the Collateral and apply the same to the payment or performance of the Secured Obligations of any Grantor; (x) make any reasonable compromise or settlement deemed desirable with respect to any of the Collateral and may extend the time of payment, arrange for payment installments, or otherwise modify the terms of, any Collateral; and (xi) secure the appointment of a receiver of the Collateral or any part thereof, without notice to any Grantor. (b) If, pursuant to applicable law, prior notice of any action described in Section 5.02(a) is required to be given to a Grantor, such Grantor hereby acknowledges that the 4 minimum time required by such applicable law, or if no minimum is specified, ten Business Days, shall be deemed a reasonable notice period. (c) The Grantor recognizes that, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws (collectively, the "Securities Laws"), the Collateral Agent may be compelled, with respect to any sale of all or any part of the Collateral constituting "securities," however defined in the Securities Laws, to limit purchasers to those who will agree, among other things, to acquire such Collateral for their own account, for investment and not with a view to the distribution or resale thereof. Each Grantor acknowledges that any such private sales may be at prices and on terms less favorable to the Collateral Agent than those obtainable through a public sale without the restrictions applicable to a private sale and waives any claims against the Collateral Agent and the Secured Parties arising by reason of the fact that the price at which the Collateral may have been sold at such a private sale was less than the price that might have been obtained at a public sale, provided that such private sale is conducted in a commercially reasonable manner. (d) Any action or proceeding to enforce this Agreement or any agreement under the agreements assigned, granted or pledged to the Collateral Agent may be taken by the Collateral Agent either in a Grantor's name or in the Collateral Agent's name, as the Collateral Agent may deem necessary. (e) All rights of marshaling of assets of any Grantor, including any such right with respect to the Collateral, are hereby waived by each Grantor. (f) The Collateral Agent shall incur no liability as a result of the sale of the Collateral, or any part thereof, at any private sale pursuant to Section 5.02(a) conducted in a commercially reasonable manner. Each Grantor hereby waives any claims against the Collateral Agent and the Secured Parties arising by reason of the fact that the price at which the Collateral may have been sold at such a private sale was less than the price that might have obtained at a public sale or was less than the aggregate amount of the Secured Obligations of the Grantor, even if the Collateral Agent accepts the first offer received and does not offer the Collateral to more than one offeree, provided, that such private sale is conducted in a commercially reasonable manner. SECTION 5.03. Compliance With Limitations and Restrictions; No Discount. Each Grantor hereby agrees that in respect of any sale of any of the Collateral pursuant to the terms hereof, the Collateral Agent is hereby authorized to comply with any limitation or restriction in connection with such sale as it may be advised by counsel is necessary in order to avoid any violation of applicable legal requirements, or in order to obtain any required approval of the sale or of the purchaser by any Governmental Authority or official, and each Grantor further agrees that such compliance shall not result in such sale being considered or deemed not to have been made in a commercially reasonable manner, nor shall the Collateral Agent be liable or accountable to such Grantor for any discount allowed by reason of the fact that such Collateral is sold in compliance with any such limitation or restriction. 5 SECTION 5.04. Registration of Securities. If the Collateral Agent shall decide to exercise its right to sell any or all of the Collateral, and if, in the reasonable opinion of counsel to the Collateral Agent, it is necessary to have such Collateral, or that portion thereof to be sold, registered under the provisions of the Securities Laws, each Grantor will execute and deliver, all at such Grantor's expense, all such instruments and documents which, in the opinion of the Collateral Agent, are necessary to register or qualify such Collateral, or that portion thereof to be sold, under the provisions of the Securities Laws. Each Grantor will execute and will use commercially reasonable efforts to cause any registration statement relating thereto to become effective and to remain effective for a period of not less than six months from the date of the first public offering of such Collateral, or that portion thereof to be sold, and to make all amendments thereto and/or to any related prospectus or similar document which, in the reasonable opinion of the Collateral Agent, are necessary, all in conformity with the Securities Laws applicable thereto. Without limiting the generality of the foregoing, each Grantor agrees to comply with the applicable provisions of the securities or "Blue Sky" laws of any jurisdiction(s) which the Collateral Agent shall reasonably designate and to make available to its security holders, as soon as practicable, an earnings statement which will satisfy the provisions of Section 11(a) of the Securities Act. SECTION 5.05. Right to Cure. In addition to the foregoing remedies, the Collateral Agent may, but shall not be obligated to, cure any Event of Default and incur reasonable fees, costs and expenses in doing so, in which event the Company shall immediately reimburse the Collateral Agent within 10 days after demand for all such fees, costs and expenses, together with interest thereon at the Default Rate from the date payable until the date repaid in full. SECTION 5.06. No Impairment of Remedies. If the Collateral Agent may, under applicable legal requirements, proceed to realize its benefits under this Agreement, either by judicial foreclosure or by non-judicial sale or enforcement, the Collateral Agent may, at its sole option, determine which of its remedies or rights it may pursue without affecting any of the rights and remedies of the Collateral Agent under this Agreement. If, in the exercise of any of such rights and remedies, the Collateral Agent shall forfeit any of its rights or remedies, including any right to enter a deficiency judgment against such Grantor or any other Person, whether because of any applicable legal requirements pertaining to "election of remedies" or the like, such Grantor hereby consents to such action by the Collateral Agent and, to the extent permitted by applicable legal requirements, waives any claim based upon such action, even if such action by the Collateral Agent shall result in a full or partial loss of any rights of subrogation, indemnification or reimbursement which such Grantor might otherwise have had but for such action by the Collateral Agent or the terms herein. Any election of remedies which results in the denial or impairment of the right of the Collateral Agent to seek a deficiency judgment against any of the parties to any of the Security Documents shall not, to the extent permitted by applicable legal requirements, impair such Grantor's obligation hereunder. In the event the Collateral Agent shall bid at any foreclosure or trustee's sale or at any private sale permitted by legal requirements or this Agreement, the Collateral Agent may bid all or less than the amount of the Secured Obligations. To the extent permitted by applicable legal requirements, the amount of the successful bid at any such sale, whether the Collateral Agent or any other party is the successful bidder, shall be conclusively deemed to be the fair market value 6 of the Collateral and the difference between such bid amount and the remaining balance of the Secured Obligations shall be conclusively deemed to be the amount of the Secured Obligations. SECTION 5.07. Application of Proceeds. Upon the occurrence and during the continuation of an Actionable Default, the proceeds of any sale of or other realization upon, all or any part of the Collateral shall be applied in accordance with Section 2.6 of the Collateral Agency Agreement. Each Grantor shall remain liable for any deficiency. SECTION 5.08. Foreclosure Waiver. To the extent permitted by legal requirements, each Grantor waives the posting of any bond otherwise required of the Collateral Agent in connection with any judicial process or proceeding to obtain possession of, replevy, attach, or levy upon the Collateral, to enforce any judgment or other security for its Secured Obligations, to enforce any judgment or other court order entered in favor of the Collateral Agent, or to enforce by specific performance, temporary restraining order, preliminary or permanent injunction, this Agreement or any other agreement or document between any Grantor, the Collateral Agent and the Secured Parties. Each Grantor further agrees that upon the occurrence and during the continuation of an Event of Default, the Collateral Agent may elect to nonjudicially or judicially foreclose against any real or personal property security it holds for the Secured Obligations or any part thereof, or to exercise any other remedy against any Grantor or any other Person, any security or any guarantor, even if the effect of that action is to deprive such Grantor of the right to collect reimbursement from any Person for any sums paid by such Grantor to the Collateral Agent or any Secured Party. SECTION 5.09. Attorney-in-Fact. Each Grantor hereby irrevocably appoints the Collateral Agent attorney-in-fact, with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise from time to time in the Collateral Agent's discretion, if an Event of Default shall have occurred and be continuing, to take any action and to execute any instrument to enforce all rights of such Grantor with respect to the Collateral, including the right to give appropriate receipts, releases and satisfactions for and on behalf of and in the name of the Grantor or, at the option of the Collateral Agent, in the name of the Collateral Agent, with the same force and effect as the Grantor could do if this Agreement had not been made. Each Grantor hereby acknowledges, consents and agrees that the power of attorney granted pursuant to this Section 5.08 is irrevocable and coupled with an interest. ARTICLE VI MISCELLANEOUS PROVISIONS SECTION 6.01. Notices. Any communications, including notices and instructions, between the parties hereto or notices provided herein to be given may be given to the following addresses: If to the Collateral Agent: Wilmington Trust Company Attention: Mary St. Amand Assistant Vice President Corporate Trust Administration 7 1100 North Market Street Wilmington, Delaware 19890 Phone: 302-636-6436 Fax: 302-636-4145 If to the Company or any Grantor: Tesoro Petroleum Corporation 300 Concord Plaza Drive San Antonio, Texas 78216-6999 Attention: Finance Department Phone: 210-828-8484 Fax: 210-283-2080 Each notice hereunder shall be in writing and may be personally served, telexed or sent by telefacsimile or United States mail or courier service and shall be deemed to have been given when delivered in person or by courier service and signed for against receipt thereof, upon receipt of telefacsimile or telex, or three Business Days after depositing it in the United States mail with postage prepaid and properly addressed; provided, no notice to the Collateral Agent shall be effective until received by such Person. Any party shall have the right to change its address for notice hereunder to any other location within the continental United States by giving of 30 days' notice to the other parties in the manner set forth hereinabove. SECTION 6.02. Benefit of Agreement. Nothing in this Agreement, expressed or implied, shall give or be construed to give to any Person other than the parties hereto, the Secured Parties, any legal or equitable right, remedy or claim under this Agreement, or under any covenants and provisions of this Agreement, each such covenant and provision being for the sole benefit of the parties hereto and the Secured Parties. SECTION 6.03. No Waiver; Remedies Cumulative. No failure or delay on the part of the Collateral Agent in the exercise of any power, right or privilege hereunder or under any other Term Loan Document or Note Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege. The rights, powers and remedies given to the Collateral Agent hereby are cumulative and shall be in addition to and independent of all rights, powers and remedies existing by virtue of any statute or rule of law or in any of the other Term Loan Documents or Note Documents. Any forbearance or failure to exercise, and any delay in exercising, any right, power or remedy hereunder shall not impair any such right, power or remedy or be construed to be a waiver thereof, nor shall it preclude the further exercise of any such right, power or remedy. SECTION 6.04. Severability. In case any provision in or obligation hereunder shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. 8 SECTION 6.05. Amendments. This Agreement may not be amended, modified or supplemented, except in a writing signed by each of the parties hereto and in accordance with the Collateral Agency Agreement. SECTION 6.06. Headings. Section headings herein are included herein for convenience of reference only and shall not constitute a part hereof for any other purpose or be given any substantive effect. SECTION 6.07. Governing Law. THIS AGREEMENT, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE AND MATTERS RELATING TO THE CREATION, VALIDITY, PERFECTION, EFFECT OF PERFECTION OR NON-PERFECTION, PRIORITY OR ENFORCEMENT OF THE LIEN OF, AND SECURITY INTERESTS CREATED BY, THIS AGREEMENT UPON THE COLLATERAL SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REFERENCE TO THE RULES OF CONFLICT OF LAW (OTHER THAN SECTION 410.40 OF THE CALIFORNIA CODE OF CIVIL PROCEDURE), EXCEPT TO THE EXTENT THAT PURSUANT TO THE PROVISIONS OF THE MORTGAGES OR MANDATORY CHOICE OF LAW PROVISIONS THE PERFECTION, EFFECT OF PERFECTION OR NON-PERFECTION OR PRIORITY OF THE LIEN AND SECURITY INTERESTS HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN CALIFORNIA. SECTION 6.08. CONSENT TO JURISDICTION. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PARTY HERETO ARISING OUT OF OR RELATING HERETO OR ANY OTHER TERM LOAN DOCUMENT, OR ANY OF THE OBLIGATIONS, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF LOS ANGELES. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH PARTY HERETO, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (a) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (b) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (c) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE APPLICABLE OBLIGOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 6.01; (d) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (c) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE APPLICABLE OBLIGOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND (e) AGREES THAT EACH PARTY THERETO (INCLUDING EACH BENEFICIARY HEREOF) RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY OBLIGOR IN THE COURTS OF ANY OTHER JURISDICTION. SECTION 6.09. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING HEREUNDER OR UNDER ANY OF THE OTHER TERM LOAN DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE LENDER/COMPANY RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS AND 9 REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 6.09 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS HERETO OR ANY OF THE OTHER TERM LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. SECTION 6.10. Successors and Assigns. The provisions of this Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns, provided that no Grantor may assign or otherwise transfer any of its rights or obligations under this Agreement without the consent of the Collateral Agent (which consent may be withheld in its sole discretion). SECTION 6.11. Entire Agreement. This Agreement and any agreement, document or instrument attached hereto or referred to herein among the parties hereto integrate all the terms and conditions mentioned herein or incidental hereto and supersede all oral negotiations and prior writings in respect of the subject matter hereof. In the event of any conflict between the terms, conditions and provisions of this Agreement and any such agreement, document or instrument, the terms, conditions and provisions of this Agreement shall prevail. SECTION 6.12. Survival of Agreements. All agreements, covenants, representations and warranties made herein shall survive the execution and delivery of this Agreement. SECTION 6.13. Counterparts. This Agreement may be executed in any number of counterparts (including by telecopy), each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. SECTION 6.14. Integration of Terms. This Agreement contains the entire agreement among the parties hereto relating to the subject matter hereof and supersedes all oral statements and prior writings with respect hereto. SECTION 6.15. Effectiveness. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto and receipt by each Grantor and the Collateral Agent of written or telephonic notification of such execution and authorization of delivery thereof. SECTION 6.16. Collateral Agent's Obligations. The performance by the Collateral Agent of its obligations under this Agreement and the exercise of its rights hereunder is subject in all respects to the provisions of the Collateral Agency Agreement. SECTION 6.17. Additional Obligors. The Company will cause each Subsidiary of the Company that becomes a Grantor or is required to become a party to this Agreement under Section 5.17 of the Term Loan Agreement and Section 4.17 of the Indenture to become party to this Agreement, for all purposes of this Agreement on the terms set forth herein applicable to a 10 Grantor, by causing such Subsidiary to execute and deliver to the parties hereto a Joinder Agreement, whereupon such Subsidiary shall be bound by the terms hereof to the same extent as if it had executed and delivered this Agreement as a Grantor as of the date hereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 11 IN WITNESS WHEREOF, the Grantor and the Collateral Agent have caused this Agreement to be duly executed by their member or officer thereunto duly authorized, as of the day and year first written above. TESORO PETROLEUM CORPORATION By: /s/ GREGORY A. WRIGHT -------------------------------------- Name: Gregory A. Wright Title: Senior Vice President and Chief Financial Officer (signatures continue on next page) [Security Agreement] THE GUARANTORS: DIGICOMP INC. KENAI PIPE LINE COMPANY SMILEY'S SUPER SERVICE, INC. TESORO ALASKA COMPANY TESORO ALASKA PIPELINE COMPANY TESORO AVIATION COMPANY TESORO GAS RESOURCES COMPANY, INC. TESORO HAWAII CORPORATION TESORO HIGH PLAINS PIPELINE COMPANY TESORO MARINE SERVICES HOLDING COMPANY TESORO MARINE SERVICES, LLC By: Tesoro Marine Services Holding Company, as sole member TESORO MARITIME COMPANY TESORO NORTHSTORE COMPANY TESORO PETROLEUM COMPANIES, INC. TESORO REFINING AND MARKETING COMPANY TESORO TECHNOLOGY COMPANY TESORO TRADING COMPANY TESORO VOSTOK COMPANY TESORO WASATCH, LLC By: Tesoro Petroleum Corporation, as sole member Executing this Agreement as Senior Vice President and Chief Financial Officer and on behalf of and so as to bind, each of the Persons named above under the caption "The Guarantors" By: /s/ SHARON L. LAYMAN -------------------------------------- Name: Sharon L. Layman, Vice President and Treasurer (signatures continue on next page) [Security Agreement] THE GUARANTORS: FAR EAST MARITIME COMPANY GOLD STAR MARITIME COMPANY TESORO FINANCIAL SERVICES HOLDING COMPANY VICTORY FINANCE COMPANY Executing this Agreement as Vice President and Treasurer and on behalf of and so as to bind, each of the Persons named above under the caption "The Guarantors" By: /s/ G. SCOTT SPENDLOVE -------------------------------------- Name: G. Scott Spendlove Attorney in Fact [Pledge and Security Agreement - Signature Page] WILMINGTON TRUST COMPANY, as Collateral Agent By: /s/ MICHAEL W. DIAZ -------------------------------------- Name: Michael W. Diaz Title: Authorized Signer (signatures continue on next page) [Collateral Agency Agreement] Schedule I Assignment of Patents
- ------------------------------------------------------------------------------------------------------------------- Filing Date/Serial Registration Date/ Owner Type Number Registration Number - ------------------------------------------------------------------------------------------------------------------- Tesoro Alaska Company "Analog Hall-Effect 5/16/94 6/10/97 Liquid Level Detector and Method" 245,142 5,636,548 - -------------------------------------------------------------------------------------------------------------------
[Pledge and Security Agreement - Signature Page] EXHIBIT A to the Security Agreement Wilmington Trust Company, as Collateral Agent 1100 North Market Street Wilmington, Delaware 19890 Attention: Mary St. Amand, Corporate Trust Administration JOINDER AGREEMENT The undersigned, [INSERT OBLIGOR'S NAME], a [INSERT DESCRIPTION OF OBLIGOR], hereby agrees to become party to the Pledge and Security Agreement dated as of April 17, 2003 (the "Security Agreement"), by and among Tesoro Petroleum Corporation, a Delaware corporation (the "Company"), the subsidiaries of the Company party thereto, and Wilmington Trust Company, as Collateral Agent, for all purposes thereof on the terms set forth therein applicable to a "Grantor", as defined therein, and to be bound by the terms of the Security Agreement as fully as if the undersigned had executed and delivered the Security Agreement as a Grantor thereunder as of the date thereof. The undersigned hereby assigns, grants and pledges to the Collateral Agent all of the estate, right, title and interest of such Grantor the Collateral to secure the timely payment and performance in full of its Secured Obligations, whether now outstanding or hereafter acquired. The provisions of Article VI of the Security Agreement shall apply with like effect to this Joinder. IN WITNESS WHEREOF, the undersigned has executed and delivered this Joinder as of ___________________, 20____. [______________________________________] By: ______________________________________ Name: Title: EX-4.13 10 h05116exv4w13.txt COLLATERAL AGENCY AGREEMENT EXHIBIT 4.13 ================================================================================ TESORO PETROLEUM CORPORATION SENIOR SECURED TERM LOANS DUE 2008 8% SENIOR SECURED NOTES DUE 2008 COLLATERAL AGENCY AGREEMENT Dated as of April 17, 2003 ================================================================================ TABLE OF CONTENTS PAGE ARTICLE 1. DEFINITIONS; PRINCIPLES OF CONSTRUCTION SECTION 1.1. Defined Terms.................................................2 SECTION 1.2. Rules of Interpretation.......................................3 ARTICLE 2. OBLIGATIONS AND POWERS OF COLLATERAL AGENT SECTION 2.1. Undertaking of the Collateral Agent...........................3 SECTION 2.2. Documents and Communications..................................4 SECTION 2.3. Release or Subordination of Liens.............................5 SECTION 2.4. Actionable Default............................................5 SECTION 2.5. Equal and Ratable Sharing.....................................5 SECTION 2.6. Application of Proceeds.......................................5 SECTION 2.7. Credit Bid Rights.............................................6 SECTION 2.8. Powers of the Collateral Agent................................7 SECTION 2.9. For Sole Benefit of Holders of Secured Obligations, Equally and Ratably...........................................8 ARTICLE 3. OBLIGATIONS ENFORCEABLE BY THE COMPANY AND GUARANTORS SECTION 3.1. Release of Liens..............................................8 SECTION 3.2. Subordination of Liens........................................8 SECTION 3.3. Delivery of Copies to the Administrative Agent and Trustee.......................................................9 SECTION 3.4. Collateral Agent not Required to Serve, File or Record........9 i ARTICLE 4. IMMUNITIES OF THE COLLATERAL AGENT. SECTION 4.1. No Implied Duty...............................................9 SECTION 4.2. Appointment of Co-Agents and Sub-Agents.......................9 SECTION 4.3. Other Agreements..............................................9 SECTION 4.4. Solicitation of Instructions.................................10 SECTION 4.5. Limitation of Liability......................................10 SECTION 4.6. Documents in Satisfactory Form...............................10 SECTION 4.7. Entitled to Rely.............................................10 SECTION 4.8. Defaults and Events of Default...............................10 SECTION 4.9. Actions by Collateral Agent..................................10 SECTION 4.10. Security or Indemnity in favor of the Collateral Agent.......11 ARTICLE 5. RESIGNATION AND REMOVAL OF THE COLLATERAL AGENT. SECTION 5.1. Resignation or Removal of Collateral Agent...................11 SECTION 5.2. Appointment of Successor Collateral Agent....................11 SECTION 5.3. Succession...................................................11 SECTION 5.4. Limitation...................................................12 ARTICLE 6. MISCELLANEOUS PROVISIONS. SECTION 6.1. Amendment....................................................12 SECTION 6.2. Further Assurances...........................................12 SECTION 6.3. Successors and Assigns.......................................13 SECTION 6.4. Delay and Waiver.............................................14 SECTION 6.5. Notices......................................................14 ii SECTION 6.6. Entire Agreement.............................................15 SECTION 6.7. Compensation; Expenses.......................................15 SECTION 6.8. Indemnity....................................................16 SECTION 6.9. Severability.................................................16 SECTION 6.10. Headings.....................................................17 SECTION 6.11. Obligations Secured..........................................17 SECTION 6.12. Applicable Law...............................................17 SECTION 6.13. Consent to Jurisdiction......................................17 SECTION 6.14. Waiver of Jury Trial.........................................17 SECTION 6.15. Counterparts.................................................18 SECTION 6.16. Effectiveness................................................18 SECTION 6.17. Additional Obligors..........................................18 iii EXHIBITS: A Joinder Agreement This COLLATERAL AGENCY AGREEMENT, dated as of April 17, 2003 (this "Agreement"), is entered into by and among TESORO PETROLEUM CORPORATION, a Delaware corporation (the "Company"), THE SUBSIDIARIES OF THE COMPANY PARTY HERETO (the "Guarantors"), GOLDMAN SACHS CREDIT PARTNERS L.P., as Administrative Agent under the Term Loan Agreement (each, as defined below), THE BANK OF NEW YORK, as Trustee under the Indenture (each, as defined below), and WILMINGTON TRUST COMPANY, as Collateral Agent (together with its successors in such capacity, the "Collateral Agent"). RECITALS 1. The Company intends to borrow $200,000,000 in principal amount of Term Loans (the "Initial Term Loans") under the Term Loan Agreement dated as of April 17, 2003 (the "Term Loan Agreement") by and among the Company, the Guarantors, the lenders from time to time party thereto, the Administrative Agent (together with its successors in such capacity, the "Administrative Agent") and Goldman Sachs Credit Partners L.P., as sole lead arranger, sole bookrunner and syndication agent. 2. The Company intends to issue $375,000,000 in principal amount of 8.00% Senior Secured Notes due April 15, 2008 (the "Initial Notes") pursuant to the Indenture dated as of April 17, 2003 (the "Indenture") by and among the Company, the Guarantors and The Bank of New York, as Trustee (together with its successors in such capacity, the "Trustee"). 3. Pursuant to the Term Loan Agreement, the Guarantors guarantee payment of the Initial Term Loans and all other Term Loan Obligations. Pursuant to the Indenture, the Guarantors guarantee payment of the Initial Notes and all other Note Obligations. 4. The Term Loan Agreement and Indenture require the Company and the Guarantors to secure payment of the Initial Term Loans and the Initial Notes and other Secured Obligations, Equally and Ratably, by security interests in the Collateral. Without providing any commitments to the Company as to the funding of any future indebtedness, the Term Loan Agreement and Indenture permit the Company from time to time to incur Indebtedness which it is otherwise permitted to incur under the Term Loan Agreement and Indenture in the form of additional Term Loans borrowed under the Term Loan Agreement or additional Notes issued under the Indenture (or both) and to secure such additional Term Loans and additional Notes, Equally and Ratably with the Initial Term Loans and the Initial Notes, by such security interests in the Collateral, up to an aggregate principal amount (including the Initial Term Loans and the Initial Notes) not exceeding $725,000,000 at any one time outstanding (the "Secured Principal Cap"). 5. The Term Loan Agreement and Indenture further require that such security interests in the Collateral be granted pursuant to the Security Documents to a collateral agent acting for the benefit of the holders of Term Loans, Notes and other Secured Obligations. This Agreement sets forth the terms on which the Collateral Agent has undertaken to accept, hold and enforce such security interests and all related rights, interests and powers as agent for, and for the benefit exclusively of, the present and future holders of the Term Loans, Notes and other Secured Obligations. NOW THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION Section 1.1 Defined Terms. (a) Capitalized terms used in this Agreement that are defined in the Term Loan Agreement and Indenture and not otherwise defined herein shall have the meanings set forth in the Term Loan Agreement and Indenture. (b) All capitalized terms used in this Agreement that are defined in Article 9 of the UCC, as in effect on the date of this Agreement in the State of New York, and not otherwise defined herein shall have the meanings therein set forth. (c) The following terms shall have the following meanings: "Act of the Secured Debtholders" means, as to any matter, a direction in writing delivered to the Collateral Agent by or with the written consent of (i) the number of Secured Debtholders required to consent to such matter under any express provision of the Term Loan Agreement or the Indenture requiring that all Secured Debtholders or a number of Secured Debtholders greater than the Required Secured Debtholders consent to such matter or (ii) the Required Secured Debtholders, in all other cases, accompanied by written confirmation (x) from the Administrative Agent (in a form reasonably satisfactory to the Administrative Agent and the Collateral Agent) as to the principal amount of outstanding Term Loans registered by the Administrative Agent as outstanding in the name of any consenting Secured Debtholder who is a Lender under the Term Loan Agreement and (y) from the Trustee (in a form reasonably satisfactory to the Trustee and the Collateral Agent) as to the principal amount of outstanding Notes registered by the Trustee as outstanding in the name of any consenting Secured Debtholder who is a Holder of Notes under the Indenture. "Actionable Default" means the failure by the Obligors to pay the Term Loans or the Notes when due and payable in full, whether at maturity, upon acceleration or otherwise, or the occurrence of any Event of Default described in Sections 7.01(i) or 7.01(j) of the Term Loan Agreement or Sections 6.01(i) or 6.01(j) of the Indenture. "Default" means a "Default" as defined in the Term Loan Agreement or a "Default" as defined in the Indenture. "Event of Default" means an "Event of Default" as defined in the Term Loan Agreement or an "Event of Default" as defined in the Indenture. "Indemnified Liabilities" means any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or 2 nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement or any of the other Security Documents, including any of the foregoing relating to the use of proceeds of the Terms Loans or the Notes or the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the Company or any of its Subsidiaries or any of the Collateral and the reasonable fees and expenses of legal counsel in connection with claims, actions or proceedings by any Indemnitee against the Company or any Guarantor under any Term Loan Document. "Indemnitee" has the meaning given in Section 6.8(a). "Joinder Agreement" means an agreement substantially in the form of Exhibit A. "Notice of Actionable Default" means written notice given to the Collateral Agent by the Administrative Agent, the Trustee or the Required Secured Debtholders, stating that an Actionable Default has occurred and is continuing. "Opinion of Counsel" means a written opinion from legal counsel who is reasonably acceptable to the Collateral Agent that meets the requirements of Section 14.05 of the Indenture. The opinion may include exceptions and qualifications consistent with customary practice for written third party legal opinions relating to the subject matter of the opinion. The counsel may be the Company's chief legal officer or independent legal counsel to the Company. "Required Secured Debtholders" means, at any time, Secured Debtholders then holding a majority in aggregate outstanding principal amount of Term Loans and Notes then outstanding, voting as a single class. For this purpose only, Term Loans and Notes registered in the name of, or beneficially owned by, the Company or any Affiliate of the Company shall be deemed not to be outstanding. "Secured Debtholder" means, at any time, a Person which then is a Lender, as defined in the Term Loan Agreement, or a Holder, as defined in the Indenture. Section 1.2.Rules of Interpretation. The rules of interpretation or construction set forth in Section 1.03 of the Term Loan Agreement and Section 1.04 of the Indenture shall apply with like effect to this Agreement. ARTICLE II. OBLIGATIONS AND POWERS OF COLLATERAL AGENT Section 2.1. Undertaking of the Collateral Agent. (a) The Collateral Agent hereby irrevocably undertakes and agrees, on the terms and conditions set forth in this Agreement, to act as agent for the benefit exclusively of the present and future holders of Term Loans, Notes and other Secured Obligations and in such capacity to accept, hold, administer and enforce all collateral security at any time delivered to it by the Company or any Guarantor as security for the Secured Obligations and all rights, interests and powers at any time granted or enforceable in respect of such collateral security under the 3 Security Documents or applicable law. Without limiting the generality of the foregoing, the Collateral Agent agrees that it will, as agent for the benefit exclusively of the present and future holders of Term Loans, Notes and other Secured Obligations, but subject to the terms and conditions hereof: (i) enter into the Security Documents, receive, hold, administer and enforce the security interests granted to it thereunder, perform its obligations thereunder and protect, exercise and enforce the interests, rights, powers and remedies granted or available to it thereunder or pursuant thereto or in connection therewith; (ii) upon direction of one Required Secured Debtholder, take all lawful and commercially reasonable actions that it may deem necessary or advisable to protect or preserve its interest in the Collateral and such interests, rights, powers and remedies; (iii) establish the Asset Sale Proceeds Account and maintain sole dominion and control over the Asset Sale Proceeds Account and all deposits therein and investments thereof; (iv) deliver and receive notices pursuant to the Security Documents and the Intercreditor Agreement; (v) sell, assign, collect, assemble, foreclose on, institute legal proceedings with respect to, or otherwise exercise or enforce the rights and remedies of a secured party (including a mortgagee, trust deed beneficiary and insurance beneficiary or loss payee) with respect to the Collateral and its other interests, rights, powers and remedies; (vi) remit to the Trustee and the Administrative Agent, Equally and Ratably, all cash proceeds received by the Collateral Agent from the collection, foreclosure or enforcement of its interest in the Collateral or any of its other interests, rights, powers or remedies; (vii) amend the Security Documents as from time to time authorized and directed by Act of the Secured Debtholders; (viii) release any Lien granted to it by any Security Document upon any Collateral if and as required by Section 3.1; and (ix) enter into the Intercreditor Agreement dated as of the Closing Date. (b) The Company and the Guarantors acknowledge and consent to the undertaking of the Collateral Agent set forth in Section 2.1(a) and agree to each of the other provisions of this Agreement applicable to them, as expressly noted thereby. Section 2.2 Documents and Communications. The Collateral Agent will permit the Administrative Agent, the Trustee or any Secured Debtholder at any time or from time to time, during normal business hours, to inspect and copy any and all Security Documents and other documents, notices, certificates, instructions or communications received by the Collateral Agent in its capacity as such. 4 Section 2.3 Release or Subordination of Liens. The Collateral Agent will not release or consent to the release or subordination of any Lien granted by any Security Document, except as required by Article 3 and except as ordered pursuant to applicable law by order of a court of competent jurisdiction. Section 2.4 Actionable Default. If the Collateral Agent at any time receives a Notice of Actionable Default or has actual knowledge that an Actionable Default has occurred and is continuing, it shall promptly deliver written notice thereof to the Administrative Agent and the Trustee. Thereafter, subject to Article 4, the Collateral Agent shall act, or decline to act, as directed by Act of the Secured Debtholders, in the exercise and enforcement the Collateral Agent's interests, rights, powers and remedies in respect of the Collateral or under the Security Documents or applicable law. Unless it has been directed to the contrary by Act of the Secured Debtholders, the Collateral Agent in any event may (but shall not be obligated to) take or refrain from taking such action with respect to such Actionable Default as it may deem advisable and in the best interest of the holders of Secured Obligations. Section 2.5 Equal and Ratable Sharing. Notwithstanding (i) anything to the contrary contained in the Note Documents or the Term Loan Documents, (ii) the time, order or method of attachment of the Collateral Agent's Liens, (iii) the time or order of filing or recording of financing statements or other documents filed or recorded to perfect any Lien upon any Collateral, (iv) the time of taking possession or control over any Collateral or (v) the rules for determining priority under the UCC or any other law governing relative priorities of secured creditors: (a) all Liens at any time granted to secure any Secured Obligations will secure Equally and Ratably all of the Notes (including additional Notes permitted by clause (2) of the definition of "Permitted Liens"), all other present and future Note Obligations, all of the Term Loans (including additional Term Loans permitted by clause (2) of the definition of "Permitted Liens") and all other present and future Term Loan Obligations; and (b) all proceeds of Collateral encumbered by such Liens shall be allocated and distributed Equally and Ratably on account of the Note Obligations and Term Loan Obligations. Section 2.6 Application of Proceeds. (a) After the occurrence of an Actionable Default, all proceeds of Collateral shall be applied in the following order of priority: (i) first, to the payment of advances made and liabilities incurred by the Collateral Agent in order to protect the Liens granted by the Security Documents or the collateral security afforded thereby, with interest thereon at the rate that would then be applicable to the Term Loans, and the payment of all reasonable costs and expenses incurred by the Collateral Agent, the Administrative Agent or the Trustee in connection with the preservation, collection, foreclosure or enforcement of the Liens granted by the Security Documents or any interest, right, power or remedy of the Collateral Agent or in connection with the collection or enforcement of any of the Secured Obligations or the proof, protection, administration or resolution of any claim based upon the Secured Obligations in any bankruptcy case or insolvency or liquidation 5 proceeding, including all reasonable fees and disbursements of attorneys, accountants, auditors, consultants, appraisers and other professionals engaged by the Collateral Agent, the Administrative Agent or the Trustee and reasonable compensation of the Collateral Agent or the Trustee for services rendered in connection therewith; (ii) second, Equally and Ratably, to the payment of the Secured Obligations then outstanding; and (iii) third, to the extent of any surplus remaining after payment in full of all Term Loans and Notes and all other Secured Obligations, to the Company or other applicable Obligor, or its successors or assigns, or as a court of competent jurisdiction may direct. For this purpose, "proceeds" of Collateral includes any and all cash, securities and other property realized from collection, foreclosure or enforcement of the Collateral Agent's Liens upon the Collateral (including distributions of Collateral in satisfaction of any Secured Obligations) or distributed in any bankruptcy case or insolvency or liquidation proceeding in respect of any claim upon any Secured Obligation that is allowed or enforceable therein as a claim secured by Collateral pursuant to the Security Documents. Section 2.7 Credit Bid Rights. (a) If, during the continuance of an Actionable Default, the Collateral Agent forecloses any of its Liens upon any Collateral, whether by public sale or private sale or judicial foreclosure or otherwise, and if directed by an Act of the Secured Debtholders to exercise its credit bid rights as provided in this Section 2.7(a), the Collateral Agent, acting for and on behalf of the Secured Debtholders and other holders of Secured Obligations, shall be entitled (to the fullest extent it may lawfully do so) to use and apply then matured Secured Obligations as a credit on account of the purchase price payable by the Collateral Agent for any Collateral sold to the Collateral Agent at the corresponding foreclosure sale, for all purposes related to bidding and making settlement or payment of the purchase price at such foreclosure sale. (b) If, in connection with or, during the continuance of an Actionable Default, in anticipation of any foreclosure of any of the Collateral Agent's Liens upon any Collateral, Term Loans and Notes representing at least a majority in outstanding principal amount of Term Loans and Notes then outstanding are transferred to and registered in the name of a single transferee for purposes of facilitating or executing a bid for such Collateral at the corresponding foreclosure sale, such transferee shall be entitled (to the fullest extent it may lawfully do so) to use and apply all then matured Secured Obligations outstanding to such transferee as a credit on account of the purchase price payable by such transferee for any Collateral sold to such transferee at such foreclosure sale, for all purposes related to bidding and making settlement or payment of the purchase price at such foreclosure sale, but only if all Secured Debtholders consent thereto or if: (i) each Secured Debtholder has been offered the opportunity to transfer to such transferee any or all of the Term Loans and Notes outstanding held by such Secured Debtholder on terms equivalent to the most favorable terms offered by such transferee to any Secured Debtholder for or in connection with any transfer of Term Loans or Notes to such transferee; and 6 (ii) effective provision is made (or found by order of a court of competent jurisdiction to have been made) for sharing proceeds of the Collateral Equally and Ratably, even if the proceeds received by Secured Debtholders other than such transferee are different in kind (if reasonably equivalent in value with at least equivalent liquidity) from the proceeds to be realized by such transferee if it is the successful bidder at the foreclosure sale. (c) Each of the Company and Guarantors hereby grants, confirms and agrees to cooperate with and permit the exercise and enforcement of the rights set forth in this Section 2.7. Section 2.8 Powers of the Collateral Agent. (a) The Collateral Agent is irrevocably authorized and empowered to enter into and perform its obligations and protect, perfect, exercise and enforce its interest, rights, powers and remedies, in each case pursuant to the Security Documents and applicable law and to act as set forth in this Article 2 or as requested in any lawful directions given to it from time to time in respect of any matter by Act of the Secured Debtholders. (b) Subject to Article 4, the Collateral Agent shall take direction only pursuant to (i) an Act of the Secured Debtholders or (ii) the Administrative Agent and the Trustee as required or permitted by the Term Loan Agreement and the Indenture. (c) No direction given to the Collateral Agent (whether given by Act of the Secured Debtholders or by the Administrative Agent or Trustee or otherwise by any Person) which imposes, or purports to impose, upon the Collateral Agent any obligation not set forth in or arising under this Agreement or any other Security Document accepted by the Collateral Agent shall be binding upon the Collateral Agent unless the Collateral Agent elects, at its sole option, to accept direction (i) pursuant to an Act of the Secured Debtholders or (ii) from the Administrative Agent and the Trustee as required or permitted by the Term Loan Agreement and the Indenture. (d) No Act of the Secured Debtholders shall be effective to impose any obligation or liability upon any Secured Debtholder, the Administrative Agent or the Trustee, unless it is a signatory party thereto. (e) The Administrative Agent and the Trustee are party to this Agreement solely to confirm their consent to the undertaking of the Collateral Agent set forth in Section 2.1(a) and their acceptance of the rights granted to them by this Agreement. Neither the Administrative Agent nor the Trustee nor any Secured Debtholder nor any other holder of Secured Obligations shall have (i) any obligation under this Agreement or under any Act of the Secured Debtholders to which it is not a signatory party; (ii) any responsibility or duty whatsoever in respect of the Collateral or the Security Documents or any other interest, right, power or remedy granted to or enforceable by the Collateral Agent, it being understood and agreed by the Collateral Agent and by the Company and the Guarantors that only the Collateral Agent shall be bound by, or liable for breach of, the obligations of the Collateral Agent set forth in or arising under the Security Documents, including all obligations imposed by law upon a secured party relating the protection, maintenance, release or enforcement of any security interest in any Collateral or any other interest, right, power or remedy of the Collateral Agent; or (iii) any liability whatsoever for 7 any act or omission of the Collateral Agent, whether or not constituting a breach of its undertaking and obligations under this Agreement or otherwise constituting wrongful conduct. Section 2.9 For Sole Benefit of Holders of Secured Obligations, Equally and Ratably. The Collateral Agent shall accept, hold, administer and enforce all collateral security at any time delivered to it by the Company or any Guarantor and all other interests, rights, powers and remedies at any time granted to or enforceable by the Collateral Agent solely and exclusively for the benefit of the Secured Debtholders and the other present and future holders from time to time of Secured Obligations, Equally and Ratably, and shall distribute all cash proceeds received by it in realization thereon or from enforcement thereof solely and exclusively to the Administrative Agent and the Trustee, for the benefit Equally and Ratably of the Secured Debtholders and the other present and future holders of Secured Obligations. ARTICLE III. OBLIGATIONS ENFORCEABLE BY THE COMPANY AND GUARANTORS Section 3.1 Release of Liens. The Collateral Agent agrees for the benefit of the Company and Guarantors that if the Collateral Agent at any time receives an Officers' Certificate stating that (a) the Collateral Agent is required by the Term Loan Agreement and the Indenture or by an Act of the Secured Debtholders to release any property of the Company or a Guarantor described in such Officers' Certificate from any Lien granted by a Security Document specified in such Officers' Certificate, (b) if such release is required as a result of a Sale of Collateral, the proceeds thereof will be applied in accordance with the Term Loan Documents and the Note Documents, and (c) no Default or Event of Default will result from the release of such Lien, accompanied by the proposed instrument releasing such Lien as to such property and an Opinion of Counsel for the Company to the effect that the release of such Lien as to such property is permitted by the Term Loan Agreement and the Indenture or by an Act of the Secured Debtholders and that such proposed instrument is effective solely to release such Lien as to such property, without requiring the Collateral Agent to make any representation or warranty in respect thereof, without releasing or satisfying any obligation secured by such Lien, and without imposing any obligation or liability upon the Collateral Agent or any other Person, then, subject to Article 4, the Collateral Agent will, within ten Business Days thereafter, release such Lien upon such property by executing (and if necessary acknowledging in recordable form) such proposed instrument reasonably requested by the Company and delivering it to the Company or such Guarantor. Section 3.2 Subordination of Liens. The Collateral Agent agrees for the benefit of the Company and Guarantors that if the Collateral Agent at any time receives an Officers' Certificate stating that the Company or any Guarantor intends to incur Indebtedness that will be secured by a purchase money security interest permitted under clause (4) in the definition of "Permitted Liens" upon property identified therein with reasonable specificity to be acquired with such Indebtedness, accompanied by (a) a proposed lien subordination agreement subordinating the Liens under the Security Documents to such purchase money security interest, to the extent it attaches to such property and secures Indebtedness incurred to acquire such property, and (b) an Opinion of Counsel for the Company to the effect that the subordination of such Liens to such 8 purchase money security interest, and to such extent, is permitted by the Term Loan Agreement and the Indenture or by an Act of the Secured Debtholders and that such proposed lien subordination agreement is effective solely to subordinate such Lien as to such property to such extent, without requiring the Collateral Agent to make any representation or warranty in respect thereof, without releasing or satisfying any such Lien or any obligation secured thereby, and without imposing any obligation or liability upon the Collateral Agent or any other Person, then, subject to Article 4, the Collateral Agent will, within ten Business Days thereafter, execute such lien subordination agreement and deliver to the Company or such Guarantor, subject to and effective upon the incurrence of such Indebtedness and the use of the proceeds thereof to acquire such property. Section 3.3 Delivery of Copies to the Administrative Agent and Trustee. The Company shall deliver to the Administrative Agent and the Trustee a copy of each Officers' Certificate delivered to the Collateral Agent pursuant to Section 3.1 or 3.2, together with copies of all documents delivered to the Collateral Agent with such Officers' Certificate. The Administrative Agent and Trustee shall not be obligated to take notice thereof or to act thereon. Section 3.4 Collateral Agent not Required to Serve, File or Record. The Collateral Agent is not required to serve, file, register or record any instrument releasing or subordinating its security interest in any Collateral. ARTICLE IV. IMMUNITIES OF THE COLLATERAL AGENT. Section 4.1 No Implied Duty. The Collateral Agent shall not have any duties or responsibilities except those expressly assumed by it in this Agreement and the other Security Documents and shall not be required to take any action which is contrary to applicable law or any provision of this Agreement or the other Security Documents. The Collateral Agent makes no representation as to the validity, value, genuineness or the collectability of any security or other document or other instrument held by or delivered to the Collateral Agent. The Collateral Agent shall not be called upon to advise any party as to the wisdom in taking or refraining to take any action with respect to the Collateral. Section 4.2 Appointment of Co-Agents and Sub-Agents. The Collateral Agent may employ agents and appoint sub-agents or co-collateral agents as it determines appropriate in the performance of its duties hereunder. The Collateral Agent will exercise reasonable care in selecting any such agent, sub-agent or co-collateral agent and in supervising the performance of any duties delegated to any such agent, sub-agent or co-collateral agent but shall not otherwise be responsible or liable for any act or omission of any such agent, sub-agent or co-collateral agent. Section 4.3 Other Agreements. The Collateral Agent has accepted and is bound by the Security Documents delivered to it as of the date of this Agreement and, subject to this Article 4, shall accept and be bound by all Security Documents delivered to it at any time after the date of this Agreement. The Collateral Agent shall not otherwise be bound by, or obligated to take 9 cognizance of the provisions of, any agreement to which it is not a party, including the Term Loan Agreement and the Indenture. Section 4.4 Solicitation of Instructions. The Collateral Agent may at any time solicit confirmatory instructions, including an Act of the Secured Debtholders or an order of a court of competent jurisdiction, as to any action which it may be requested or required to take, or which it may propose to take, in the performance of any of its obligations under this Agreement. Section 4.5 Limitation of Liability. The Collateral Agent shall not be responsible or liable for any action taken or omitted to be taken by it hereunder or under any Security Document, except for its own gross negligence or willful misconduct. Section 4.6 Documents in Satisfactory Form. The Collateral Agent shall be entitled to require that all agreements, certificates, opinions, instruments and other documents at any time submitted to it, including those expressly provided for in this Agreement, be delivered to it in a form and upon substantive provisions reasonably satisfactory to it. Section 4.7 Entitled to Rely. The Collateral Agent may rely conclusively upon any certificate, notice or other document (including any teletransmission) reasonably believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons and need not investigate any fact or matter stated in any such document. The Collateral Agent may seek and rely upon any judicial order or judgment, upon any advice, opinion or statement of legal counsel, independent consultants and other experts selected by it in good faith and upon any certification, instruction, notice or other writing delivered to it by the Company in compliance with the provisions of this Agreement or delivered to it by the Administrative Agent or the Trustee as to the Secured Debtholders whose action or consent is required for an Act of the Secured Debtholders, without being required to determine the authenticity thereof or the correctness of any fact stated therein or the propriety or validity of service thereof. The Collateral Agent may act in reliance upon any instrument comporting with the provisions of this Agreement or any signature reasonably believed by it to be genuine and may assume that any Person purporting to give notice or receipt or advice or make any statement or execute any document in connection with the provisions hereof has been duly authorized to do so. To the extent an Officers' Certificate or an Opinion of Company Counsel is required or permitted under this Agreement to be delivered to the Collateral Agent in respect of any matter, the Collateral Agent may rely conclusively on such Officers' Certificate or Opinion of Company Counsel as to such matter. Section 4.8 Defaults and Events of Default. The Collateral Agent shall not be required to inquire as to the occurrence or absence of any Default or Event of Default and shall not be affected by or required to act upon any notice or knowledge as to the occurrence of any Default or Event of Default unless and until it receives a Notice of Actionable Default or a responsible officer of the Collateral Agent has actual knowledge that an Actionable Default has occurred and is continuing. Section 4.9 Actions by Collateral Agent. As to any matter not expressly provided for by this Agreement, the Collateral Agent shall act or refrain from acting as directed by Act of the Secured Debtholders and shall be fully protected in doing so. 10 Section 4.10 Security or Indemnity in favor of the Collateral Agent. The Collateral Agent shall not be required to advance or expend any funds or otherwise incur any financial liability in the performance of its duties or the exercise of its powers or rights hereunder unless it has been provided with security or indemnity which it, in its discretion, deems sufficient against any and all liability or expense which may be incurred by it by reason of taking or continuing to take such action. The Company and Guarantors hereby jointly and severally agree to provide such security or indemnity to the Collateral Agent promptly upon request by the Collateral Agent therefor. Section 4.11 Not Responsible for Recitals. The recitals contained herein shall be taken as statements of the Company and the Guarantors, and the Collateral Agent assumes no responsibility for their correctness. The Collateral Agent makes no representation as to the validity or sufficiency of this Agreement. ARTICLE V. RESIGNATION AND REMOVAL OF THE COLLATERAL AGENT. Section 5.1 Resignation or Removal of Collateral Agent. Subject to the appointment of a successor Collateral Agent as provided in Section 5.1 and the acceptance of such appointment by the successor Collateral Agent, (a) the Collateral Agent may resign at any time by giving not less than 30 days' notice of resignation to the Administrative Agent, the Trustee and the Company and (b) the Collateral Agent may be removed at any time, with or without cause, by an Act of the Secured Debtholders. Section 5.2 Appointment of Successor Collateral Agent. Upon any such resignation or removal, a successor Collateral Agent may be appointed by the Administrative Agent and Trustee, acting jointly, or by Act of the Secured Debtholders. If no successor Collateral Agent shall have been so appointed and shall have accepted such appointment within 30 days after the predecessor Collateral Agent gave notice of resignation or was removed, the retiring Collateral Agent may appoint a successor Collateral Agent, or petition a court of competent jurisdiction for appointment of a successor Collateral Agent, which shall be a bank or trust company (a) authorized to exercise corporate trust powers, (b) acceptable to the Administrative Agent or the Trustee, (c) having a combined capital and surplus of at least $50,000,000, and (d) maintaining an office in New York, New York. Section 5.3 Succession. When the Person so appointed as successor Collateral Agent accepts such appointment: (i) such Person shall succeed to and become vested with all the rights, powers, privileges and duties of the predecessor Collateral Agent, and the predecessor Collateral Agent shall be discharged from its duties and obligations hereunder, and (ii) the predecessor Collateral Agent, upon payment of all amounts owed to it, shall promptly transfer all Collateral within its possession or control to the possession or control 11 of the successor Collateral Agent and shall execute and deliver such notices, instructions and assignments as may be necessary or desirable or reasonably requested by the successor Collateral Agent to transfer to the successor Collateral Agent all Liens, interests, rights, powers and remedies of the predecessor Collateral Agent in respect of the Collateral or under the Security Documents. Thereafter the predecessor Collateral Agent shall remain entitled to enforce the immunities granted to it in Article 4. Section 5.4 Limitation. The Collateral Agent shall not be the same Person as, or an Affiliate of, the Administrative Agent or the Trustee. If the Collateral Agent at any time becomes an Affiliate of the Administrative Agent or the Trustee, it shall promptly resign subject to appointment of a successor Collateral Agent and acceptance of such appointment as provided in this Article 5. ARTICLE VI. MISCELLANEOUS PROVISIONS. Section 6.1 Amendment. (a) This Agreement may be amended or supplemented from time to time by written agreement of the Company, the Guarantors, the Administrative Agent, the Trustee and the Collateral Agent, acting pursuant to an Act of the Secured Debtholders. (b) The Collateral Agent shall not amend or supplement any of the provisions of the Security Documents without the consent or direction by an Act of the Secured Debtholders; provided that (i) no amendment or supplement to the provisions of the Security Documents that adversely affects the right of any holder of Secured Obligations to share in the Collateral equally and ratably will become effective without the consent of each such holder and (ii) any amendment or supplement to the provisions of the Security Documents that releases all or substantially all of the Collateral will be governed by the provisions described under Section 9.06 of the Term Loan Agreement and Section 10.06 of the Indenture. (c) Any amendment or supplement to any Security Document that imposes any obligation upon the Collateral Agent or adversely affects the rights of the Collateral Agent in its individual capacity will become effective only with the consent of the Collateral Agent in its individual capacity. Section 6.2 Further Assurances. (a) At any time or from time to time, each of the Company and Guarantors will, at its expense, promptly execute, acknowledge and deliver such further documents and do such other acts and things as may be necessary or appropriate, or as the Collateral Agent, the Administrative Agent or the Trustee may reasonably request, in order to assure and confirm that each Subsidiary required by the Term Loan Agreement or the Indenture to guarantee payment of the Secured Obligations has duly guaranteed payment of all the Secured Obligations and that the Collateral 12 Agent holds, for the exclusive benefit of all present and future holders of Secured Obligations, duly created, enforceable and perfected first priority Liens (subject only to Permitted Prior Liens) upon all interests in Collateral at any time owned or acquired by the Company or any of such Subsidiary or as the Collateral Agent, the Administrative Agent or the Trustee otherwise may reasonably request in order to carry out and give full effect to the intents and purposes of the Term Loan Documents and the Note Documents. (b) Upon request of the Collateral Agent at any time and from time to time, the Company will, and will cause each of its Subsidiaries to, promptly execute, acknowledge and deliver such security documents, instruments, certificates, notices and other documents and take such other actions as shall be required or which the Collateral Agent may reasonably request to create, perfect, protect, assure or enforce the Liens and benefits intended to be conferred, as contemplated by the Indenture, the Term Loan Agreement and the Security Documents, upon the Collateral Agent for the exclusive benefit of the holders of the Secured Obligations. If the Company or such Subsidiary fails to do so, the Collateral Agent is hereby irrevocably authorized and empowered, with full power of substitution, to execute, acknowledge and deliver such security documents, instruments, certificates, notices and other documents and, subject to the provisions of the Note Documents and the Term Loan Documents, take such other actions in the name, place and stead of the Company or such Subsidiary, but the Collateral Agent will have no obligation to do so and no liability for any action taken or omitted by it in good faith in connection therewith. Section 6.3 Successors and Assigns. (a) This Agreement is legally binding upon and enforceable against the Collateral Agent. Except as provided in Section 4.2, the Person acting as Collateral Agent may not, in its individual capacity, delegate any of its duties or assign any of its rights hereunder, and any attempted delegation or assignment of any such duties or rights shall be void. All obligations of the Collateral Agent hereunder shall inure to the benefit of, and be enforceable by, the Administrative Agent, the Trustee and each present and future holder of Secured Obligations, each of whom shall be entitled to enforce this Agreement as a third party beneficiary hereof, and all of their respective successors and assigns. (b) This Agreement is further binding upon each of the Company and the Guarantors and theirs respective successors. Neither the Company nor any Guarantor may delegate any of its duties or assign any of its rights hereunder, and any attempted delegation or assignment of any such duties or rights shall be void. All obligations of the Company and Guarantors hereunder shall inure to the benefit of, and be enforceable by, the Collateral Agent, the Administrative Agent, the Trustee and each present and future holder of Secured Obligations, each of whom shall be entitled to enforce this Agreement as a third party beneficiary hereof, and all of their respective successors and assigns. (c) The obligations of the Collateral Agent set forth in Sections 3.1 and 3.2 of this Agreement shall also be enforceable by the Company and any Guarantor directly affected by any breach thereof and their respective successors and assigns. 13 Section 6.4 Delay and Waiver. No failure to exercise, no course of dealing with respect to the exercise of, and no delay in exercising, any right, power or remedy arising under this Agreement or any of the other Security Documents shall impair any such right, power or remedy or operate as a waiver thereof. No single or partial exercise of any such right, power or remedy shall preclude any other or future exercise thereof or the exercise of any other right, power or remedy. The remedies herein are cumulative and are not exclusive of any remedies provided by law. Section 6.5 Notices. Any communications, including notices and instructions, between the parties hereto or notices provided herein to be given may be given to the following addresses: If to the Collateral Agent: Wilmington Trust Company Attention: Mary St. Amand Assistant Vice President Corporate Trust Administration 1100 North Market Street Wilmington, Delaware 19890 Phone: 302-636-6436 Fax: 302-636-4145 If to the Trustee: The Bank of New York Attention: Corporate Trust Administration 101 Barclay Street - Floor 8 West New York, New York 10286 Phone: 212-815-5498 Fax: 212-815-5131 If to the Administrative Agent: Goldman Sachs Credit Partners L.P. as the Administrative Agent 85 Broad Street New York, New York 10004 Attention: Sandra Stulberger Phone: 212-902-1000 Fax: 212-902-3000 If to the Company or any Guarantor: Tesoro Petroleum Corporation 300 Concord Plaza Drive San Antonio, Texas 78216-6999 Attention: Finance Department Phone: 210-828-8484 Fax: 210-283-2080 14 Each notice hereunder shall be in writing and may be personally served, telexed or sent by telefacsimile or United States mail or courier service and shall be deemed to have been given when delivered in person or by courier service and signed for against receipt thereof, upon receipt of telefacsimile or telex, or three Business Days after depositing it in the United States mail with postage prepaid and properly addressed; provided, no notice to the Collateral Agent, Administrative Agent or Trustee shall be effective unless and until received its officer responsible for the administration of the transaction contemplated hereby. Each party may change its address for notice hereunder to any other location within the continental United States by giving written notice thereof to the other parties as set forth in this Section 6.5. Section 6.6 Entire Agreement. This Agreement states the complete agreement of the parties relating to the undertaking of the Collateral Agent set forth herein and supersedes all oral negotiations and prior writings in respect of such undertaking. Section 6.7 Compensation; Expenses. Whether or not the transactions contemplated hereby shall be consummated, each of the Company and Guarantors jointly and severally agrees to pay, promptly within 30 days following demand: (a) reasonable compensation to the Collateral Agent and its agents, co-agents and sub-agents; (b) all reasonable costs and expenses incurred in the preparation, execution, delivery, filing, recordation, administration or enforcement of this Agreement or any other Security Document or any consent, amendment, waiver or other modification relating thereto; (c) all reasonable fees, expenses and disbursements of legal counsel and any auditors, accountants, consultants or appraisers or other professional advisors and agents engaged by the Collateral Agent in connection with the negotiation, preparation, closing, administration, performance or enforcement of this Agreement and the other Security Documents or any consent, amendment, waiver or other modification relating thereto and any other document or matter requested by the Company; (d) all reasonable costs and expenses of creating, perfecting, releasing or enforcing the Collateral Agent's security interests in the Collateral, including filing and recording fees, expenses and taxes, stamp or documentary taxes, search fees, title insurance premiums; (e) all reasonable costs of any Opinion of Company Counsel required hereby to be delivered to the Collateral Agent; (f) all other reasonable costs and expenses incurred by the Collateral Agent in connection with the negotiation, preparation and execution of the Security Documents and any consents, amendments, waivers or other modifications thereto and the transactions contemplated thereby or the exercise of its rights or performance of its obligations by the Collateral Agent thereunder; and (g) after the occurrence and during the continuance of an Actionable Default, all reasonable costs and expenses incurred by the Collateral Agent, the Administrative Agent or the Trustee in connection with the preservation, collection, foreclosure or enforcement of the Liens 15 granted by the Security Documents or any interest, right, power or remedy of the Collateral Agent or in connection with the collection or enforcement of any of the Secured Obligations or the proof, protection, administration or resolution of any claim based upon the Secured Obligations in any bankruptcy case or insolvency or liquidation proceeding, including all reasonable fees and disbursements of attorneys, accountants, auditors, consultants, appraisers and other professionals engaged by the Collateral Agent, the Administrative Agent or the Trustee. (h) The agreements in this Section 6.7 shall survive repayment of the Notes and Term Loans and all other amounts payable hereunder. Section 6.8 Indemnity. (a) In addition to the payment of costs and expenses pursuant to Section 6.7, whether or not the transactions contemplated hereby shall be consummated, each of the Company and the Guarantors jointly and severally agrees to defend (subject to Indemnitees' selection of counsel), indemnify, pay and hold harmless, the Collateral Agent, the Administrative Agent and the Trustee and each of their respective Affiliates and each and all of the directors, officers, partners, trustees, employees, attorneys and agents, and (in each case) their respective heirs, representatives, successors and assigns (each of the foregoing, an "Indemnitee") from and against any and all Indemnified Liabilities; provided, no Indemnitee shall be entitled to indemnification hereunder with respect to any Indemnified Liability to the extent such Indemnified Liability is found by a final and nonappealable decision of a court of competent jurisdiction to have resulted directly and primarily from the gross negligence or willful misconduct of such Indemnitee. (b) All amounts due under Section 6.8(a) shall be payable not later than 10 days after written demand therefor. (c) To the extent that the undertakings to defend, indemnify, pay and hold harmless set forth in Section 6.8(a) may be unenforceable in whole or in part because they are violative of any law or public policy, each of the Company and Guarantors shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of them. (d) Neither the Company nor any Guarantor shall ever assert any claim against any Indemnitee, on any theory of liability, for any lost profits or special, indirect or consequential damages or (to the fullest extent lawful) any punitive damages arising out of, in connection with, or as a result of, this Agreement or any other Term Loan Document or Note Document or any agreement or instrument or transaction contemplated hereby or relating in any respect to any Indemnified Liability, and each of the Company and Guarantors hereby forever waives, releases and agrees not to sue upon any claim for any such lost profits or special, indirect, consequential or (to the fullest extent lawful) punitive damages, whether or not accrued and whether or not known or suspected to exist in its favor. (e) The agreements in this Section 6.8 shall survive repayment of the Notes and Term Loans and all other amounts payable hereunder. Section 6.9 Severability. If any provision of this Agreement is invalid, illegal or unenforceable in any respect or in any jurisdiction, the validity, legality and enforceability of 16 such provision in all other respects and of all remaining provisions, and of such provision in all other jurisdictions, shall not in any way be affected or impaired thereby. Section 6.10 Headings. Section headings herein are included herein for convenience of reference only and shall not constitute a part hereof for any other purpose or be given any substantive effect. Section 6.11 Obligations Secured. All obligations of the Company or any Guarantor set forth in or arising under this Agreement shall be Secured Obligations and are secured by all Liens granted by the Security Documents. Section 6.12 Applicable Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF. Section 6.13 Consent to Jurisdiction. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PARTY HERETO ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER SECURITY DOCUMENTS MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH PARTY HERETO, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (a) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (b) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (c) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO SUCH PARTY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 6.5; (d) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (c) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH PARTY IN ANY SUCH PROCEEDING IN ANY SUCH COURT AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND (e) AGREES EACH PARTY HERETO RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY PARTY IN THE COURTS OF ANY OTHER JURISDICTION. Section 6.14 Waiver of Jury Trial. EACH PARTY HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER SECURITY DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT OR THE INTENTS AND PURPOSES OF THE OTHER SECURITY DOCUMENTS. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE OTHER SECURITY DOCUMENTS, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH PARTY HERETO HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH PARTY HERETO WILL CONTINUE TO RELY ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS. EACH PARTY 17 HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 6.14 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF OR TO THIS AGREEMENT OR ANY OF THE OTHER SECURITY DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING THERETO. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. Section 6.15 Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. The delivery of an executed signature page of this Agreement, or any Joinder Agreement in connection herewith, by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. Section 6.16 Effectiveness. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto and receipt by each party of written or telephonic notification of such execution and authorization of delivery thereof. Section 6.17 Additional Obligors. The Company will cause each Subsidiary of the Company that becomes an Obligor or is required to become a party to this Agreement under Section 5.17 of the Term Loan Agreement and Section 4.17 of the Indenture to become party to this Agreement, for all purposes of this Agreement on the terms set forth herein applicable to a Guarantor, by causing such Subsidiary to execute and deliver to the parties hereto a Joinder Agreement, whereupon such Subsidiary shall be bound by the terms hereof to the same extent as if it had executed and delivered this Agreement as a Guarantor as of the date hereof. 18 IN WITNESS WHEREOF, the parties hereto have caused this Collateral Agency Agreement to be executed by their respective officers or representatives hereunto duly authorized as of the day and year first above written. TESORO PETROLEUM CORPORATION By: /s/ GREGORY A. WRIGHT ------------------------------ Name: Gregory A. Wright Title: Senior Vice President and Chief Financial Officer (signatures continue on next page) [Collateral Agency Agreement] THE GUARANTORS: DIGICOMP INC. KENAI PIPE LINE COMPANY SMILEY'S SUPER SERVICE, INC. TESORO ALASKA COMPANY TESORO ALASKA PIPELINE COMPANY TESORO AVIATION COMPANY TESORO GAS RESOURCES COMPANY, INC. TESORO HAWAII CORPORATION TESORO HIGH PLAINS PIPELINE COMPANY TESORO MARINE SERVICES HOLDING COMPANY TESORO MARINE SERVICES, LLC By: Tesoro Marine Services Holding Company, as sole member TESORO MARITIME COMPANY TESORO NORTHSTORE COMPANY TESORO PETROLEUM COMPANIES, INC. TESORO REFINING AND MARKETING COMPANY TESORO TECHNOLOGY COMPANY TESORO TRADING COMPANY TESORO VOSTOK COMPANY TESORO WASATCH, LLC By: Tesoro Petroleum Corporation, as sole member Executing this Agreement as Senior Vice President and Chief Financial Officer and on behalf of and so as to bind, each of the Persons named above under the caption "The Guarantors" By: /s/ GREGORY A. WRIGHT ------------------------------ Name: Gregory A. Wright (signatures continue on next page) [Collateral Agency Agreement] THE GUARANTORS: FAR EAST MARITIME COMPANY GOLD STAR MARITIME COMPANY TESORO FINANCIAL SERVICES HOLDING COMPANY VICTORY FINANCE COMPANY Executing this Agreement as Vice President and Treasurer and on behalf of and so as to bind, each of the Persons named above under the caption "The Guarantors" By: /s/ SHARON L. LAYMAN ------------------------------ Name: Sharon L. Layman (signatures continue on next page) [Collateral Agency Agreement] WILMINGTON TRUST COMPANY, as Collateral Agent By: /s/ MICHAEL W. DIAZ --------------------------------- Name: Michael W. Diaz Title: Authorized Signer (signatures continue on next page) [Collateral Agency Agreement] GOLDMAN SACHS CREDIT PARTNERS L.P., as Administrative Agent By: /s/ GOLDMAN, SACHS & CO. --------------------------------- Name: Goldman, Sachs & Co. On behalf of each of the Purchasers (signatures continue on next page) [Collateral Agency Agreement] THE BANK OF NEW YORK as Trustee By: /s/ VON K. BROWN --------------------------------- Name: Von K. Brown Title: Vice President EXHIBIT A Wilmington Trust Company, as Collateral Agent 1100 North Market Street Wilmington, Delaware 19890 Attention: Mary St. Amand, Corporate Trust Administration Goldman Sachs Credit Partners L.P., 85 Broad Street New York, New York 10004 Attention: Sandra Stulberger The Bank of New York, as Trustee 101 Barclay Street - Floor 8 West New York, New York 10286 Attention: Corporate Trust Administration JOINDER AGREEMENT The undersigned, [INSERT OBLIGOR'S NAME], a [INSERT DESCRIPTION OF OBLIGOR], hereby agrees to become party to the Collateral Agency Agreement dated as of April 17, 2003, by and among Tesoro Petroleum Corporation, a Delaware corporation, the subsidiaries of the Company party thereto, Goldman Sachs Credit Partners L.P., as Administrative Agent under the Term Loan Agreement (as defined therein), The Bank of New York, as Trustee under the Indenture (as defined therein), and Wilmington Trust Company, as Collateral Agent, for all purposes thereof on the terms set forth therein applicable to a "Guarantor", as defined therein, and to be bound by the terms of said Collateral Agency Agreement as fully as if the undersigned had executed and delivered said Collateral Agency Agreement as a Guarantor thereunder as of the date thereof. The provisions of Article VI of said Collateral Agency Agreement shall apply with like effect to this Joinder Agreement. IN WITNESS WHEREOF, the undersigned has executed and delivered this Joinder Agreement as of ___________________, 20____. [___________________________________] By: --------------------------------- Name: Title: EX-5.1 11 h05116exv5w1.txt OPINION OF FULBRIGHT & JAWORSKI LLP EXHIBIT 5.1 (FULBRIGHT & JAWORSKI L.L.P. LETTERHEAD) June 2, 2003 Tesoro Petroleum Corporation 300 Concord Plaza Drive San Antonio, Texas 78216-6999 Ladies and Gentlemen: We have acted as counsel to Tesoro Petroleum Corporation, a Delaware corporation (the "Company"), and the subsidiaries listed on Schedule I hereto (collectively, the "Guarantors") in connection with the execution and delivery by the Company and the Guarantors, as applicable, of the Indenture dated as of April 17, 2003, between the Company and The Bank of New York, as trustee (the "Trustee"), and the issuance thereunder of $375,000,000 principal amount of the Company's 8% Senior Secured Notes due 2008, Series B (the "Series B Notes") in exchange for an equivalent principal amount of its outstanding 8% Senior Secured Notes due 2008 (the "Original Notes"). The terms of the offer to exchange the Series B Notes for the Original Notes (the "Exchange Offer") are described in the Registration Statement on Form S-4 filed by the Company with the Securities and Exchange Commission (the "Registration Statement") for the registration of the Series B Notes under the Securities Act of 1933. The guarantees of the Guarantors with respect to the Series B Notes are collectively referred to herein as the "Guarantees" and each a "Guarantee". In connection with the foregoing, we have examined originals or copies of such corporate records, as applicable, of the Company and the Guarantors, certificates and other communications of public officials, certificates of officers of the Company and the Guarantors and such other documents as we have deemed necessary for the purpose of rendering the opinions expressed herein. As to questions of fact material to those opinions, we have, to the extent we deemed appropriate, relied on certificates of officers of the Company and the Guarantors and on certificates and other communications of public officials. We have assumed the genuineness of all signatures on, and the authenticity of, all documents submitted to us as originals, the conformity to authentic original documents of all documents submitted to us as copies, the due authorization, execution and delivery by the parties thereto of all documents examined by us, and the legal capacity of each individual who signed any of those documents. Based upon the foregoing, and having regard for such legal considerations as we deem relevant, we are of the opinion that the Series B Notes and Guarantees have been duly authorized for issuance and, when the Registration Statement has become effective under the 1933 Act and the Series B Notes and the Guarantees have been duly executed and authorized in accordance with the Indenture and the Series B Notes have been issued and sold in exchange for the Original Notes as contemplated by the Registration Statement and in accordance with the Exchange Offer, the Series B Notes will constitute valid and legally binding obligations of the Company and each Tesoro Petroleum Corporation June 2, 2003 Page 2 Guaranty will constitute a valid and legally binding obligation of its respective Guarantor, subject to (a) bankruptcy, insolvency, reorganization, moratorium, liquidation, rearrangement, fraudulent transfer, fraudulent conveyance and other similar laws (including court decisions) now or hereafter in effect and affecting the rights and remedies of creditors generally or providing for the relief of debtors, (b) the refusal of a particular court to grant (i) equitable remedies, including, without limiting the generality of the foregoing, specific performance and injunctive relief or (ii) a particular remedy sought under such documents as opposed to another remedy provided for therein or another remedy available at law or in equity, (c) general principles of equity (regardless of whether such remedies are sought in a proceeding in equity or at law) and (d) judicial discretion. This opinion is expressly limited by, subject to and based upon the assumptions, exceptions, limitations and qualifications set forth below: A. We express no opinion as to the legality, validity, enforceability or binding effect of provisions relating to indemnities and rights of contribution to the extent prohibited by public policy or which might require indemnification for losses or expenses caused by negligence, gross negligence, willful misconduct, fraud or illegality of an indemnified party. B. This opinion is given as of the date hereof, and we assume no obligation to update or supplement this opinion to reflect any facts or circumstances which may hereafter come to our attention or any changes in laws which may hereafter occur. The opinions expressed herein are limited exclusively to the federal laws of the United States of America, the laws of the States of New York and Texas and the General Corporation Law of the State of Delaware, and we are expressing no opinion as to the effect of the laws of any other jurisdiction. To the extent that any of the Guarantors are incorporated under the laws of another jurisdiction, we have assumed the following: (i) that such Guarantor has been duly incorporated and is validly existing as a corporation in good standing under the laws of its state of incorporation; (ii) that each of the Indenture and the Guarantees have been duly authorized by it, the Indenture has been duly executed by it and it has full corporate power and authority to enter into each of such agreements; and (iii) no consent, approval, authorization or order of any court or governmental agency or body of its state of incorporation is required of it for the consummation of the transactions contemplated by the Indenture or Guarantees. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the statements made with respect to under the caption "Legal Matters" in the Prospectus included as part of the Registration Statement. Very truly yours, /s/ Fulbright & Jaworski L.L.P. SCHEDULE I Digicomp, Inc., a Delaware corporation Far East Maritime Company, a Delaware corporation Gold Star Maritime Company, a Delaware corporation Kenai Pipe Line Company, a Delaware corporation Smiley's Super Service, Inc., a Hawaii corporation Tesoro Alaska Company, a Delaware corporation Tesoro Alaska Pipeline Company, a Delaware corporation Tesoro Aviation Company, a Delaware corporation Tesoro Financial Services Holding Company, a Delaware corporation Tesoro Gas Resources Company, Inc., a Delaware corporation Tesoro Hawaii Corporation, a Hawaii corporation Tesoro High Plains Pipeline Company, a Delaware corporation Tesoro Marine Services Holding Company, a Delaware corporation Tesoro Marine Services, LLC, a Delaware limited liability company Tesoro Maritime Company, a Delaware corporation Tesoro Northstore Company, an Alaska corporation Tesoro Petroleum Companies, Inc., a Delaware corporation Tesoro Refining and Marketing Company, a Delaware corporation Tesoro Technology Company, a Delaware corporation Tesoro Trading Company, a Delaware corporation Tesoro Vostock Company, a Delaware corporation Tesoro Wasatch, LLC, a Delaware limited liability company Victory Finance Company, a Delaware corporation EX-10.33 12 h05116exv10w33.txt AMENDMENT TO EXECUTIVE LONG-TERM INCENTIVE PLAN EXHIBIT 10.33 SECOND AMENDMENT TO THE TESORO PETROLEUM CORPORATION AMENDED AND RESTATED EXECUTIVE LONG-TERM INCENTIVE PLAN THIS AGREEMENT by Tesoro Petroleum Corporation (the "Sponsor"), WITNESSETH: WHEREAS, the Sponsor maintains the Plan known as the "Tesoro Petroleum Corporation Amended and Restated Executive Long-Term Incentive Plan" (the "Plan"); and WHEREAS, the Sponsor retained the right in Section 14.1 of the Plan to amend the Plan from time to time; and WHEREAS, the Directors of the Sponsor have approved resolutions to amend the Plan; NOW, THEREFORE, the Sponsor agrees that, subject to and contingent upon the approval of this amendment by the Sponsor's stockholders, Section 1.3 of the Plan is hereby amended in its entirety to read as follows: 1.3 DURATION OF THE PLAN. The Plan shall commence on the Effective Date, as described in Section 1.1 herein, and shall remain in effect, subject to the right of the Board of Directors to terminate the Plan at any time pursuant to Article 14 herein, until all Shares subject to it shall have been purchased or acquired according to the Plan's provisions. However, in no event may an Award be granted under the Plan on or after September 15, 2008 and in no event may an Incentive Stock Option be granted under the Plan on or after September 15, 2003. Approved by the Directors: March 13, 2003 EX-12.1 13 h05116exv12w1.txt STATEMENT OF COMPUTATION OF RATIO OF EARNINGS . . . EXHIBIT 12.1 TESORO PETROLEUM CORPORATION COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND EARNINGS
PRO FORMA AS ADJUSTED PRO FORMA FOR THE AS CALIFORNIA ADJUSTED ACQUISITION PRO FORMA FOR THE AND THE AS ADJUSTED CALIFORNIA FINANCING FOR THE ACQUISITION TRANSACTIONS TESORO FINANCING TESORO HISTORICAL (a) (a) HISTORICAL TRANSACTIONS ------------------------------------------ ----------- ------------ ---------- ------------ YEARS ENDED DECEMBER 31, ----------------------------------------------------------------------- THREE MONTHS ENDED 1998 1999 2000 2001 2002 2002 2002 MARCH 31, 2003 ----- ------ ------ ------ ------- ----------- ------------ ------------------------- (DOLLARS IN MILLIONS) EARNINGS: Earnings (Loss) from continuing operations before income taxes and extraordinary loss...... $12.1 $ 51.2 $123.5 $146.9 $(181.3) $(258.6) $(248.7) $32.5 $36.5 Interest expense, net of capitalized interest(b)............. 24.8 36.7 31.7 51.6 157.8 179.8 166.9 44.0 39.2 Amortization of debt discount................ 0.1 0.2 0.2 0.3 6.3 10.0 10.8 2.6 2.8 Amortization of debt issuance costs.......... 0.3 0.7 0.8 0.9 2.0 2.2 4.4 0.6 1.2 Estimated interest portion of rents(c)............. 17.4 22.4 19.8 17.0 27.5 28.8 28.8 7.4 7.4 ----- ------ ------ ------ ------- ------- ------- ----- ----- Total Earnings.......... $54.7 $111.2 $176.0 $216.7 $ 12.3 $ (37.8) $ (37.8) $87.1 $87.1 ----- ------ ------ ------ ------- ------- ------- ----- ----- FIXED CHARGES: Interest expense whether expensed or capitalized(b).......... $24.9 $ 37.3 $ 32.4 $ 56.7 $ 160.3 $ 182.3 $ 169.4 $45.3 $40.5 Amortization of debt discount................ 0.1 0.2 0.2 0.3 6.3 10.0 10.8 2.6 2.8 Amortization of debt issuance costs.......... 0.3 0.7 0.8 0.9 2.0 2.2 4.4 0.6 1.2 Estimated interest portion of rents(c)............. 17.4 22.4 19.8 17.0 27.5 28.8 28.8 7.4 7.4 ----- ------ ------ ------ ------- ------- ------- ----- ----- Total Fixed Charges..... $42.7 $ 60.6 $ 53.2 $ 74.9 $ 196.1 $ 223.3 $ 213.4 $55.9 $51.9 ----- ------ ------ ------ ------- ------- ------- ----- ----- Ratio of Earnings to Fixed Charges................... 1.28x 1.83x 3.31x 2.89x (d) (e) (f) 1.56x 1.68x ----- ------ ------ ------ ------- ------- ------- ----- -----
- --------------- (a) The pro forma information giving effect to the California Acquisition is based on historical data and we believe it is not indicative of the results of future operations. A major turnaround at our California refinery, including the refinery's fluid coker, was completed in March 2002, and a turnaround of the larger crude unit was completed in the second quarter of 2002. The inclusion of the results of our California Acquisition prior to May 17, 2002, the date of the consummation of that acquisition, in our pro forma as adjusted results for the year ended December 31, 2002 resulted in a $46 million increase in our net loss from our historical results (a) for the same period. The next scheduled turnaround at our California refinery is for the hydrocracker in the fourth quarter of 2004. (b) Includes interest expense and other financing costs. (c) For a majority of the marine charter leases, the interest portion of rents was estimated by using our incremental borrowing rate in effect at the inception of the leases. For the remaining leases, interest expense was estimated by using one third of the rental payments. Total rental expense, including marine charters, was approximately $54 million, $64 million, $60 million, $66 million and $92 million for the years ended 1998, 1999, 2000, 2001 and 2002, respectively, and $25 million for the three months ended March 31, 2003. (d) For the year ended December 31, 2002, fixed charges exceeded earnings by $183.8 million. (e) For the year ended December 31, 2002, fixed charges exceeded earnings by $261.1 million on a pro forma basis as adjusted for the California Acquisition. See footnote (a) above. (f) For the year ended December 31, 2002, fixed charges exceeded earnings by $251.2 million on a pro forma basis as adjusted for the California Acquisition and the Financing Transactions. See footnote (a) above. 2 EX-23.1 14 h05116exv23w1.txt CONSENT OF DELOITTE & TOUCHE LLP EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Registration Statement of Tesoro Petroleum Corporation on Form S-4 of our report dated February 14, 2003, appearing in the Annual Report on Form 10-K of Tesoro Petroleum Corporation for the year ended December 31, 2002, and to the reference to us under the heading "Experts" in the Prospectus, which is part of this Registration Statement. /s/ DELOITTE & TOUCHE LLP San Antonio, Texas May 30, 2003 EX-25.1 15 h05116exv25w1.txt FORM T-1, STATEMENT OF ELIGIBILITY EXHIBIT 25.1 ================================================================================ FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) [ ] THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) One Wall Street, New York, N.Y. 10286 (Address of principal executive offices) (Zip code) TESORO PETROLEUM CORPORATION (Exact name of obligor as specified in its charter) Delaware 95-0862768 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) Digicomp Inc................................... Delaware 74-2521015 Far East Maritime Company...................... Delaware 74-2886469 Gold Star Maritime Company..................... Delaware 74-2886462 Kenai Pipe Line Company........................ Delaware 94-6062891 Smiley's Super Service, Inc.................... Hawaii 99-0088611 Tesoro Alaska Company.......................... Delaware 94-1646130 Tesoro Alaska Pipeline Company................. Delaware 74-1839523 Tesoro Aviation Company........................ Delaware 74-2922277 Tesoro Financial Services Holding Company...... Delaware 51-0377202 Tesoro Gas Resources Company, Inc.............. Delaware 92-0150083 Tesoro Hawaii Corporation...................... Hawaii 99-0143882 Tesoro High Plains Pipeline Company............ Delaware 74-3009696 Tesoro Marine Services Holding Company......... Delaware 74-2807425 Tesoro Marine Services, LLC.................... Delaware 74-2766974
Tesoro Maritime Company........................ Delaware 74-2886466 Tesoro Northstore Company...................... Alaska 92-0098209 Tesoro Petroleum Companies, Inc................ Delaware 74-2385513 Tesoro Refining and Marketing Company.......... Delaware 76-0489496 Tesoro Technology Company...................... Delaware 74-2521013 Tesoro Trading Company......................... Delaware 75-3025497 Tesoro Vostock Company......................... Delaware 74-2257610 Tesoro Wasatch, LLC............................ Delaware 74-3009694 Victory Finance Company........................ Delaware 51-0377203
300 Concord Plaza Drive San Antonio, Texas 78216-6999 (Address of principal executive offices) (Zip code) ------------- 8% Senior Secured Notes due 2008, Series B (Title of the indenture securities) ================================================================================ 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT.
- -------------------------------------------------------------------------------------------------- Name Address - -------------------------------------------------------------------------------------------------- Superintendent of Banks of the State of 2 Rector Street, New York, New York N.Y. 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York 10005
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. Yes. 2. AFFILIATIONS WITH OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. None. 16. LIST OF EXHIBITS. EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE 7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R. 229.10(d). 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 29th day of May, 2003. THE BANK OF NEW YORK By: /s/ ROBERT MASSIMILLO --------------------------------------- Name: ROBERT MASSIMILLO Title: VICE PRESIDENT EXHIBIT 7 - -------------------------------------------------------------------------------- Consolidated Report of Condition of THE BANK OF NEW YORK of One Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business December 31, 2002, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts In Thousands --------------- ASSETS Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin ..................... $ 4,706,760 Interest-bearing balances .............................................. 4,418,381 Securities: Held-to-maturity securities ............................................ 954,049 Available-for-sale securities .......................................... 16,118,007 Federal funds sold in domestic offices .................................... 460,981 Securities purchased under agreements to resell ................................................................. 837,242 Loans and lease financing receivables: Loans and leases held for sale ......................................... 765,097 Loans and leases, net of unearned income...............31,906,960 LESS: Allowance for loan and lease losses............798,223 Loans and leases, net of unearned income and allowance ................................................. 31,108,737 Trading Assets ............................................................ 6,969,387 Premises and fixed assets (including capitalized leases) ................................................................ 823,932 Other real estate owned ................................................... 660 Investments in unconsolidated subsidiaries and associated companies ................................................... 238,412 Customers' liability to this bank on acceptances outstanding ............................................................ 307,039 Intangible assets Goodwill ............................................................... 2,003,150 Other intangible assets ................................................ 74,880 Other assets .............................................................. 5,161,558 ---------------
Total assets .............................................................. $ 74,948,272 =============== LIABILITIES Deposits: In domestic offices .................................................... $ 33,108,526 Noninterest-bearing ................................ 13,141,240 Interest-bearing ................................... 19,967,286 In foreign offices, Edge and Agreement subsidiaries, and IBFs ............................................... 22,650,772 Noninterest-bearing ................................ 203,426 Interest-bearing ................................... 22,447,346 Federal funds purchased in domestic offices ................................................................. 513,773 Securities sold under agreements to repurchase ............................ 334,896 Trading liabilities ....................................................... 2,673,823 Other borrowed money: (includes mortgage indebtedness and obligations under capitalized leases) .............................................. 644,395 Bank's liability on acceptances executed and outstanding ............................................................ 308,261 Subordinated notes and debentures ......................................... 2,090,000 Other liabilities ......................................................... 5,584,456 --------------- Total liabilities ......................................................... $ 67,908,902 =============== Minority interest in consolidated subsidiaries ........................................................... 519,470 EQUITY CAPITAL Perpetual preferred stock and related surplus ................................................................ 0 Common stock .............................................................. 1,135,284 Surplus ................................................................... 1,056,295 Retained earnings ......................................................... 4,208,213 Accumulated other comprehensive income .................................... (120,108) Other equity capital components ........................................... 0 --------------- Total equity capital ...................................................... 6,519,900 --------------- Total liabilities minority interest and equity capital .................... $ 74,948,272 ===============
I, Thomas J. Mastro, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition is true and correct to the best of my knowledge and belief. Thomas J. Mastro, Senior Vice President and Comptroller We, the undersigned directors, attest to the correctness of this statement of resources and liabilities. We declare that it has been examined by us, and to the best of our knowledge and belief has been prepared in conformance with the instructions and is true and correct. Thomas A. Renyi Gerald L. Hassell Directors Alan R. Griffith EX-99.1 16 h05116exv99w1.txt FORM OF LETTER OF TRANSMITTAL LETTER OF TRANSMITTAL TESORO PETROLEUM CORPORATION OFFER TO EXCHANGE ITS 8% SENIOR SECURED NOTES DUE 2008, SERIES B WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 FOR ANY AND ALL OF ITS OUTSTANDING 8% SENIOR SECURED NOTES DUE 2008 (PRINCIPAL AMOUNT $1,000 PER NOTE) PURSUANT TO THE PROSPECTUS - -------------------------------------------------------------------------------- THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2003 UNLESS THE OFFER IS EXTENDED - -------------------------------------------------------------------------------- Deliver to The Bank of New York (the "Exchange Agent") By Hand Delivery, Overnight Courier or By Facsimile Transmission Registered or Certified Mail: (for Eligible Institutions Only): The Bank of New York (212) 298-1915 Reorganization Unit Attention: ________________ 101 Barclay Street - 7 East Reorg Unit ____ New York, New York 10286 To confirm by telephone or for information: Attention: ________________ (212) 815-2742 Reorg Unit ____
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OR TRANSMISSION OF INSTRUCTIONS TO A FACSIMILE NUMBER OTHER THAN THOSE SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. The undersigned hereby acknowledges receipt of the Prospectus dated , 2003 (the "Prospectus") of Tesoro Petroleum Corporation (the "Company") and this Letter of Transmittal, which together constitute the Company's offer (the "Exchange Offer") to exchange each $1,000 principal amount of its 8% Senior Secured Notes due 2008, Series B (the "Exchange Notes") for each $1,000 principal amount of its outstanding 8% Senior Secured Notes due 2008 (the "Outstanding Notes"). The Exchange Notes will be unsecured obligations of the Company and are identical in all material respects to the Outstanding Notes, except that (1) the Exchange Notes have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement of which the Prospectus is a part, (2) the Exchange Notes will not be subject to transfer restrictions and (3) provisions providing for an increase in the stated interest rate on the Outstanding Notes will be eliminated after completion of the Exchange Offer. The term "Expiration Date" shall mean 5:00 p.m., New York City time, on , 2003, unless the Company, in its sole discretion, extends the duration of the Exchange Offer. Capitalized terms used but not defined herein have the respective meanings given to them in the Prospectus. PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING IT. YOU MUST FOLLOW THE INSTRUCTIONS BEGINNING ON PAGE 8. List below the Outstanding Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, the Certificate or Registration Numbers and Principal amounts should be listed on a separately signed schedule affixed hereto. - -------------------------------------------------------------------------------------------------------------- DESCRIPTION OF NOTES TENDERED HEREBY - -------------------------------------------------------------------------------------------------------------- NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE OR AGGREGATE PRINCIPAL EXACTLY AS NAME(S) APPEAR(S) ON NOTES REGISTRATION AMOUNT REPRESENTED PRINCIPAL AMOUNT (PLEASE FILL IN) NUMBERS* BY OUTSTANDING NOTES TENDERED** - -------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- TOTAL - --------------------------------------------------------------------------------------------------------------
* Need not be completed by book-entry holders. ** Unless otherwise indicated, the holder will be deemed to have tendered the full aggregate principal amount represented by such Outstanding Notes. All tenders must be in integral multiples of $1,000. The term "Holder" means any person in whose name Outstanding Notes are registered on the books of the Company or any other person who has obtained a properly completed bond power from a registered holder of Outstanding Notes. This Letter of Transmittal is to be used if the Holder desires to tender Outstanding Notes (i) by delivery of certificates representing such Outstanding Notes or by book-entry transfer to an account maintained by the Exchange Agent at The Depository Trust Company ("DTC"), according to the procedures set forth in the Prospectus under the caption "The Exchange Offer -- Procedures for Tendering" or (ii) according to the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery Procedures." See Instruction 2 of this Letter of Transmittal for a summary of the information provided in the Prospectus. The Holder must complete, execute and deliver this Letter of Transmittal to indicate the action such Holder desires to take with respect to the Exchange Offer. Holders who wish to tender their Notes must complete this Letter of Transmittal in its entirety. [ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A BOOK ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution ---------------------------------------------- Account Number ------------------------------------------------------------- Transaction Code Number ---------------------------------------------------- Holders who desire to tender Outstanding Notes for exchange and who cannot comply with the procedures for tender on a timely basis set forth in the Prospectus under the caption "The Exchange Offer -- Procedures for Tendering" or whose Outstanding Notes are not immediately available must tender their Outstanding Notes according to the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery Procedures." 2 [ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s) ------------------------------------------------ Date of Execution of Notice of Guaranteed Delivery ----------------------------- Name of Eligible Institution that Guaranteed Delivery -------------------------- If delivered by book-entry transfer: Name of Tendering Institution: ----------------------------------------------- Account Number -------------------------------------------------------------- Transaction Code Number ------------------------------------------------------ [ ] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OUTSTANDING NOTES ARE TO BE RETURNED BY CREDITING THE BOOK-ENTRY TRANSFER FACILITY ACCOUNT NUMBER SET FORTH ABOVE. [ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name --------------------------------------------------------------------------- Address ------------------------------------------------------------------------ Area Code and Telephone Number: ------------------------------------------------ 3 SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: I, the undersigned, hereby tender to the Company the principal amount of the Outstanding Notes indicated above. I hereby exchange, assign and transfer to the Company all right, title and interest in and to such Outstanding Notes, including all rights to accrued and unpaid interest thereon as of the Expiration Date. I hereby irrevocably constitute and appoint the Exchange Agent my true and lawful agent and attorney-in-fact (with full knowledge that the Exchange Agent is also acting as the agent of the Company in connection with the Exchange Offer) with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest) and full power and authority to assign, transfer and exchange the Outstanding Notes, including, but limited to, the power and authority to: (i) deliver Certificates for Outstanding Notes together with all accompanying evidence of transfer and authenticity to, or upon the order of, the Company, upon receipt by the Exchange Agent, as the undersigned's agent, of the Exchange Notes to be issued in exchange for such Outstanding Notes, (ii) present Certificates for such Outstanding Notes for transfer, and to transfer the Outstanding Notes on the books of the Company, and (iii) receive for the account of the Company all benefits and otherwise exercise all rights of beneficial ownership of such Outstanding Notes, all in accordance with the terms and conditions of the Exchange Offer. I fully understand that the Exchange Agent is acting as the agent of the Company in connection with the Exchange Offer. I represent and warrant that I have full power and authority to tender, assign and transfer the Outstanding Notes and to acquire Exchange Notes in exchange therefor. I represent that the Company, upon accepting the Outstanding Notes for exchange, will acquire good and unencumbered title to the Outstanding Notes, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims. I further represent that (i) I am not an "affiliate" of the Company, (ii) the Exchange Notes are being obtained in the ordinary course of business of the person receiving such Exchange Notes, whether or not I am such person, and (iii) neither I nor any such other person receiving the Exchange Notes is engaged or intends to engage in, or has an arrangement or understanding with any person to participate in, the distribution of such Exchange Notes. If I am or such other person is a broker-dealer who is receiving the Exchange Notes for its own account in exchange for Outstanding Notes that were acquired as a result of market-making or other trading activities, I acknowledge that I or such other person will deliver a prospectus in connection with any resale of such Exchange Notes. However, by so acknowledging or by delivering a prospectus, I will not be deemed to admit that I am an "underwriter" within the meaning of the Securities Act. If I am or any such other person is participating in the exchange offer for the purpose of distributing the Exchange Notes, we acknowledge that (i) we cannot rely on the position of the staff of the Securities and Exchange Commission enunciated in Exxon Capital Holdings Corporation (available April 13, 1989), Morgan Stanley & Co., Inc. (available June 5, 1991) or similar no-action letters regarding exchange offers and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction and (ii) we may incur liability under the Securities Act if we fail to comply with such requirements, liability from which we are not indemnified by the Company. If I am or any such other person is an affiliate (as defined under Rule 405 of the Securities Act) of the Company, I understand and acknowledge that I or such other person may not offer for resale, resell or otherwise transfer such Exchange Notes without registering them under the Securities Act or without an exemption therefrom. I also warrant that I will, upon request, execute and deliver any additional documents deemed necessary or desirable by the Exchange Agent or the Company to complete the exchange, assignment and transfer of tendered Outstanding Notes. I further agree that the Company's acceptance of any tendered Outstanding Notes and its issuance of Exchange Notes in exchange therefor shall constitute performance in full by the Company of its obligations under the Registration Rights Agreement. The Company shall have no further obligations or liabilities thereunder for the registration of the Outstanding Notes or the Exchange Notes. The Exchange Offer is subject to certain conditions set forth in the Prospectus under the caption "The Exchange Offer -- Conditions." I recognize that the Company may not be required to exchange the 4 Outstanding Notes tendered hereby under certain circumstances. In such event, the Outstanding Notes tendered hereby but not exchanged will be returned to me. The authority I am hereby conferring or have agreed to confer shall survive my death or incapacity. My obligations under this Letter of Transmittal shall be binding upon my heirs, personal representatives, successors and assigns. Unless otherwise indicated in the box entitled "Special Registration Instructions" or the box entitled "Special Delivery Instructions" in this Letter of Transmittal, certificates for all Exchange Notes delivered in exchange for the Outstanding Notes tendered hereby, and for any Outstanding Notes tendered hereby but not exchanged, will be registered in my name and returned to me or, in the case of a book-entry transfer of Outstanding Notes, will be credited to the account indicated above at DTC. If an Exchange Note is to be issued or mailed to a person other than me, or to me at an address different from the address shown on this Letter of Transmittal, I will complete the appropriate boxes on page 7 of this Letter of Transmittal. I UNDERSTAND THAT IF I AM SURRENDERING OUTSTANDING NOTES AND HAVE COMPLETED EITHER THE BOX ENTITLED "SPECIAL REGISTRATION INSTRUCTIONS" OR THE BOX ENTITLED "SPECIAL DELIVERY INSTRUCTIONS" IN THIS LETTER OF TRANSMITTAL, THE SIGNATURE(S) ON THIS LETTER OF TRANSMITTAL MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION (PER INSTRUCTION 4 OF THIS LETTER OF TRANSMITTAL). 5 SPECIAL REGISTRATION INSTRUCTIONS (SEE INSTRUCTION 5) To be completed ONLY if the Exchange Notes are to be issued in the name of someone other than the undersigned. Issue Exchange Notes to: Name: - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- Area Code and Telephone Number: - -------------------------------------------------------------------------------- Tax Identification or Social Security Number: - -------------------------------------------------------------------------------- (PLEASE PRINT OR TYPE) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTION 5) To be completed ONLY if the Exchange Notes are to be sent to someone other than the undersigned, or to the undersigned at an address other than that shown under "Description of Notes Tendered Hereby." Mail Exchange Notes to: Name: - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- Area Code and Telephone Number: - -------------------------------------------------------------------------------- Tax Identification or Social Security Number: - -------------------------------------------------------------------------------- (PLEASE PRINT OR TYPE) REGISTERED HOLDER(S) OF OUTSTANDING NOTES SIGN HERE (IN ADDITION, COMPLETE SUBSTITUTE FORM W-9 BELOW) x - -------------------------------------------------------------------------------- x - -------------------------------------------------------------------------------- (SIGNATURE(S) OF REGISTERED HOLDER(S)) Must be signed by registered holder(s) exactly as name(s) appear(s) on the Outstanding Notes or on a security position listing as the owner of the Outstanding Notes or by person(s) authorized to become registered holder(s) by properly completed bond powers transmitted herewith. If signature is by attorney-in-fact, trustee, executor, administrator, guardian, officer of a corporation or other person acting in a fiduciary capacity, please provide the following information (PLEASE PRINT OR TYPE): Name and Capacity (full title): - -------------------------------------------------------------------------------- Address (including zip): - -------------------------------------------------------------------------------- Area Code and Telephone Number: - -------------------------------------------------------------------------------- Tax Identification or Social Security Number: - -------------------------------------------------------------------------------- Dated: - ------------------------------------------------ SIGNATURE GUARANTEE (IF REQUIRED -- SEE INSTRUCTION 4) Authorized Signature: - -------------------------------------------------------------------------------- (SIGNATURE OF REPRESENTATIVE OF SIGNATURE GUARANTOR) Name and Title: - -------------------------------------------------------------------------------- Name of Firm: - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Area Code and Telephone Number: - -------------------------------------------------------------------------------- Dated: - ------------------------------------------------ 6 PAYOR'S NAME: - -------------------------------------------------------------------------------- THIS SUBSTITUTE FORM W-9 MUST BE COMPLETED AND SIGNED Please provide your social security number or other taxpayer identification number on the following Substitute Form W-9 and certify therein that you are not subject to backup withholding. - ---------------------------------------------------------------------------------------------------------------------- SUBSTITUTE Part 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX FORM W-9 AT RIGHT AND CERTIFY BY SIGNING AND DATING ------------------------------ BELOW. Social Security Number or Employer Identification Number ---------------------------------------------------------------------------------- DEPARTMENT OF THE TREASURY Part 2 -- Check the box if you are NOT subject to backup withholding under the INTERNAL REVENUE SERVICE provisions of the Internal Revenue Code because: (a) You are exempt from backup withholding, or (B) you have not been notified that you are subject to backup withholding as a result of failure to report all interest or dividends, or (C) the Internal Revenue Service has notified you that you are no longer subject to backup withholding. [ ]
----------------------------------------------------------------------------------- PAYOR'S REQUEST CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I FOR TAXPAYER CERTIFY THAT THE INFORMATION PROVIDED ON THIS FORM IS IDENTIFICATION NUMBER TRUE, CORRECT AND COMPLETE. ("TIN") Part 3 -- SIGNATURE: Awaiting ----------------------------------------- TIN [ ] DATED: --------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING ON ANY CASH PAYMENTS IN EXCESS OF $10.00 MADE TO YOU. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9. - -------------------------------------------------------------------------------- CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office, or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number within 60 days, backup withholding will apply to all reportable payments made to me thereafter until I provide a number. Moreover, I understand that during this 60-day period, the applicable backup withholding rate on all reportable payments made to me will be withheld commencing seven business days after the payor receives this Certificate of Awaiting Taxpayor Indentification Number and terminating on the date I provide a certified TIN to the payor. SIGNATURE DATE ----------------------------------------------------- -------------------- 7 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES FOR TENDERED OUTSTANDING NOTES All certificates representing Outstanding Notes or any confirmation of a book-entry transfer to the Exchange Agent's account at DTC, as well as a properly completed and duly executed copy or facsimile of this Letter of Transmittal, and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at any of its addresses set forth herein prior to the Expiration Date. THE HOLDER ASSUMES THE RISK ASSOCIATED WITH THE DELIVERY OF THIS LETTER OF TRANSMITTAL, THE OUTSTANDING NOTES, AND ANY OTHER REQUIRED DOCUMENTS. EXCEPT AS OTHERWISE PROVIDED BELOW, DELIVERY WILL BE DEEMED MADE ONLY WHEN THE EXCHANGE AGENT HAS ACTUALLY RECEIVED THE APPLICABLE ITEMS. IF SUCH DELIVERY IS BY MAIL, IT IS SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, BE USED. DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH HEREIN, OR TRANSMISSION TO A FACSIMILE NUMBER OTHER THAN THE ONES SET FORTH HEREIN, WILL NOT CONSTITUTE A VALID DELIVERY. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering Holders, by execution of this Letter of Transmittal (or facsimile thereof), shall waive any right to receive notice of the acceptance of the Outstanding Notes for exchange. 2. GUARANTEED DELIVERY PROCEDURES Holders who desire to tender Outstanding Notes for exchange, but who cannot comply with the procedures for tendering on a timely basis set forth in the Prospectus under the caption "The Exchange Offer -- Procedures for Tendering" or whose Outstanding Notes are not immediately available may tender in one of the following two ways: (1) (a) The tender is made through a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., through a commercial bank or trust company having an office or correspondent in the United States or through an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution"); (b) prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) (i) setting forth the name and address of the Holder, the registration or certificate number(s) of the Outstanding Notes tendered and the principal amount of such Outstanding Notes, (ii) stating that the tender is being made thereby, and (iii) guaranteeing that, within three business days after the Expiration Date, the Letter of Transmittal (or facsimile thereof), together with the certificates representing the Outstanding Notes, or a book-entry confirmation, and any other required documents, will be deposited by the Eligible Institution with the Exchange Agent; and (c) such properly completed and executed Letter of Transmittal (or facsimile thereof), as well as duly executed certificates representing all tendered Outstanding Notes in proper form for transfer, or a book-entry confirmation, and all other required documents are received by the Exchange Agent within three business days after the Expiration Date. or (2) (a) Prior to the Expiration Date, the Exchange Agent receives an agent's message from DTC stating that DTC has received an express acknowledgment from the participant in DTC tendering the Outstanding Notes that they have received and agree to be bound by the Notice of Guaranteed Delivery; and 8 (b) the Exchange Agent receives, within three business days after the Expiration Date, either (1) a book-entry confirmation, including an agent's message, transmitted via DTC's Automated Tender Offer Program, or (2) a properly completed and executed letter of transmittal or facsimile thereof, together with the certificate(s) representing all tendered Outstanding Notes in proper form for transfer, or a book-entry confirmation, and all other required documents. Upon request, the Exchange Agent will send a Notice of Guaranteed Delivery to a Holder who wishes to tender Outstanding Notes according to the guaranteed delivery procedures set forth above. Such Holder must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery prior to the Expiration Date. Failure to complete the guaranteed delivery procedures outlined above will not, of itself, affect the validity or effect a revocation of any properly completed and executed Letter of Transmittal properly completed and executed by a Holder who attempted to use the guaranteed delivery procedures. 3. PARTIAL TENDERS; WITHDRAWALS A Holder who tenders less than the entire principal amount of Outstanding Notes evidenced by a submitted certificate should fill in the principal amount tendered in the column entitled "Principal Amount Tendered" of the box entitled "Description of Notes Tendered Hereby" on page 2 of this Letter of Transmittal. A newly-issued Outstanding Note for that portion of the principal amount not tendered will be sent to such Holder after the Expiration Date. All Outstanding Notes delivered to the Exchange Agent will be deemed to have been tendered in full unless otherwise indicated. Tenders of Outstanding Notes will be accepted only in integral multiples of $1,000. A Holder may withdraw a tender of Outstanding Notes at any time prior to the Expiration Date. Thereafter, tenders of Outstanding Notes are irrevocable. To be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Exchange Agent. Any such notice of withdrawal must (i) specify the name of the withdrawing Holder (ii) identify the Outstanding Notes to be withdrawn (including the certificate registration number(s) and principal amount of such Outstanding Notes, or, in the case of Outstanding Notes transferred by book-entry transfer, the name and number of the account at the book-entry transfer facility to be credited), (iii) be signed by the Holder in the same manner as the original signature on this Letter of Transmittal (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the Trustee with respect to the Outstanding Notes register the transfer of such Outstanding Notes into the name of the person withdrawing the tender and (iv) specify the name in which any such Outstanding Notes are to be registered, if different from that of the depositor. Any Outstanding Notes that have been tendered but not accepted for exchange will be returned to the Holder thereof without cost to such Holder as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. 4. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND ENDORSEMENTS; GUARANTEE OF SIGNATURES If this Letter of Transmittal is signed by the registered Holder(s) of the Outstanding Notes, the signature must correspond with the name(s) as written on the face of the certificates without alteration or enlargement. If this Letter of Transmittal is signed by a participant in the book-entry transfer facility, the signature must correspond with the name as it appears on the security position listing as the holder of the Outstanding Notes. If there are two or more joint owners of record of Outstanding Notes, they must all sign this Letter of Transmittal. If a number of Outstanding Notes registered in different names are tendered, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations of Outstanding Notes. Signatures on this Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by an Eligible Institution unless the Outstanding Notes are tendered (i) by a registered Holder 9 who has not completed the box entitled "Special Registration Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. If this Letter of Transmittal is signed by the registered Holder of Outstanding Notes (which term, for the purposes described herein, shall include a participant in the book-entry transfer facility whose name appears on a security listing as the holder of the Outstanding Notes) listed and tendered hereby, no endorsements of the tendered Outstanding Notes or separate written instruments of transfer or exchange are required. In any other case, the registered Holder (or acting Holder) must either properly endorse the Outstanding Notes or properly transmit completed bond powers with this Letter of Transmittal (in either case, executed exactly as the name(s) of the registered Holder(s) appear(s) on the Outstanding Notes, and, with respect to a participant in the book-entry transfer facility whose name appears on a security position listing as the owner of Outstanding Notes, exactly as the name of the participant appears on such security position listing), with the signature on the Notes or bond power guaranteed by an Eligible Institution (except where the Outstanding Notes are tendered for the account of an Eligible Institution). If this Letter of Transmittal, any certificates or separate written instruments of transfer or exchange are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority so to act must be submitted. 5. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS Holders should indicate, in the applicable box, the name (or account at the book-entry transfer facility) in which and address to which the Exchange Notes (or newly issued Outstanding Notes for principal amounts not tendered or any Outstanding Notes not accepted for exchange) are to be issued (or deposited) if different from the names and addresses or accounts of the person signing this Letter of Transmittal. In the case of issuance in a different name, the employer identification number or social security number of the person named must also be indicated and the Holder should complete the applicable box on page 7 of this Letter of Transmittal. If no instructions are given, the Exchange Notes (or any newly issued Outstanding Notes for principal amounts not tendered or any Outstanding Notes not accepted) will be issued in the name of and sent to the acting Holder of the Outstanding Notes or deposited at such Holder's account at the book-entry transfer facility. 6. TRANSFER TAXES The Company shall pay all transfer taxes, if any, applicable to the transfer and exchange of Outstanding Notes to it or its order pursuant to the Exchange Offer. If a transfer tax is imposed for any other reason other than the transfer and exchange of Outstanding Notes to the Company or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered Holder or any other person) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exception therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering Holder. Except as provided in this Instruction 6 of this Letter of Transmittal, it will not be necessary for transfer stamps to be affixed to the Notes listed herein. 7. WAIVER OF CONDITIONS The Company reserves the absolute right to waive, in whole or in part, any of the conditions to the Exchange Offer set forth in the Prospectus. 10 8. MUTILATED, LOST, STOLEN OR DESTROYED NOTES Any Holder whose Outstanding Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above for further instructions. 9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES Questions relating to the procedure for tendering as well as requests for additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent at the address and telephone number(s) set forth above. In addition, all questions relating to the Exchange Offer, as well as requests for assistance or additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Company at 300 Concord Plaza Drive, San Antonio, Texas 78216-6999, Attention: Corporate Communications (telephone: (210) 828-8484). 10. VALIDITY AND FORM The Company will determine in its sole discretion all questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of tendered Outstanding Notes, which determination will be final and binding. The Company reserves the absolute right to reject any and all Outstanding Notes not properly tendered or any Outstanding Notes the Company's acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the right to waive any defects, irregularities or conditions of tender as to particular Outstanding Notes. The Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions in this Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Outstanding Notes must be cured within such time as the Company shall determine. Although the Company intends to notify Holders of defects or irregularities with respect to tenders of Outstanding Notes, neither the Company, the Exchange Agent nor any other person shall incur any liability for failure to give such notification. Tenders of Outstanding Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Outstanding Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering Holders as soon as practicable following the Expiration Date. IMPORTANT TAX INFORMATION Under federal income tax law, a Holder tendering Outstanding Notes is required to provide the Exchange Agent with such holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9 above. If such Holder is an individual, the TIN is the Holder's social security number. The Certificate of Awaiting Taxpayer Identification Number should be completed if the tendering Holder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future. If the Exchange Agent is not provided with the correct TIN, the Holder may be subject to a $50 penalty imposed by the Internal Revenue Service on each failure to provide a correct TIN. In addition, payments that are made to such Holder with respect to tendered Outstanding Notes may be subject to backup withholding. Certain Holders (including, among others, all corporations and certain foreign individuals and foreign entities) are not subject to these backup withholding and reporting requirements. For such a Holder to qualify as an exempt recipient, such Holder should complete the Substitute Form W-9 above and write "EXEMPT" on the face thereof to avoid possible erroneous withholding. A foreign person may qualify as an exempt recipient by completing the Substitute Form W-9 as described above and by submitting a properly completed Certification of Foreign Status to the Exchange Agent on Internal Revenue Service Form W-8BEN, W-8ECI, W-8EXP, or W-8IMY, whichever is applicable, signed under penalties of perjury, attesting to that Holder's foreign status. Such forms can be obtained from the Exchange Agent. If backup withholding applies, the Exchange Agent is required to withhold the applicable backup withholding rate on any amounts otherwise payable to the Holder. For reportable payments made during calendar year 2002, the applicable backup withholding rate is 30%. Backup withholding is not an additional 11 tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding on payments that are made to a Holder with respect to Notes tendered for exchange, the Holder is required to notify the Exchange Agent of his or her correct TIN by completing the form herein certifying that the TIN provided on Substitute Form W-9 is correct (or that such Holder is awaiting a TIN) and that (i) such Holder has not been notified by the Internal Revenue Service that he or she is subject to backup withholding as a result of failure to report all interest or dividends or (ii) the Internal Revenue Service has notified such Holder that he or she is no longer subject to backup withholding. WHAT NUMBER TO GIVE THE EXCHANGE AGENT Each Holder is required to give the Exchange Agent the social security number or employer identification number of the record Holder(s) of the Notes. If Notes are in more than one name or are not in the name of the actual Holder, consult the instructions on Internal Revenue Service Form W-9, which may be obtained from the Exchange Agent, for additional guidance on which number to report. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER If the tendering holder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, write "Applied For" in the space for the TIN on Substitute Form W-9, sign and date the form and the Certificate of Awaiting Taxpayer Identification Number and return them to the Exchange Agent. If such certificate is completed and the Exchange Agent is not provided with the TIN within 60 days, the Exchange Agent will withhold at the applicable backup withholding rate on all payments made thereafter until a TIN is provided to the Exchange Agent. Further, during this 60-day period, the Exchange Agent will withhold at the applicable backup withholding rate on all reportable payments made after seven business days after the Exchange Agent receives a Certificate of Awaiting Taxpayer Identification Number until a TIN is provided to the Exchange Agent. IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE THEREOF (TOGETHER WITH OUTSTANDING NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE. 12 EX-99.2 17 h05116exv99w2.txt FORM OF NOTICE OF GUARANTEED DELIVERY TESORO PETROLEUM CORPORATION NOTICE OF GUARANTEED DELIVERY FOR TENDER OF 8% SENIOR SECURED NOTES DUE 2008 (PRINCIPAL AMOUNT $1,000 PER NOTE) A holder of Tesoro Petroleum Corporation's 8% Senior Secured Notes due 2008 (the "Outstanding Notes") who wishes to tender such Outstanding Notes pursuant to the exchange offer (the "Exchange Offer") extended by the Prospectus dated , 2003 (the "Prospectus") and the Letter of Transmittal accompanying this Notice of Guaranteed Delivery (the "Letter of Transmittal") must complete and deliver this form or one substantially equivalent to it under the following circumstances: (i) certificates representing the Outstanding Notes are not immediately available, (ii) the Outstanding Notes or other required documents will not reach the Exchange Agent prior to the Expiration Date (as defined in the Letter of Transmittal and the Prospectus), or (iii) the appropriate procedures for book-entry transfer will not be completed prior to the Expiration Date. This requirement is set forth in the Prospectus in the section entitled "The Exchange Offer -- Procedures for Tendering" and in the Letter of Transmittal in Instruction 2. This form may be delivered by hand or sent by overnight courier, facsimile transmission or registered or certified mail to the Exchange Agent. The Exchange Agent must receive this form prior to 5:00 p.m., New York City time, on , 2003. To The Bank of New York (the "Exchange Agent") By Hand Delivery, Overnight Courier or By Facsimile Transmission Registered or Certified Mail: (for Eligible Institutions Only): The Bank of New York (212) 298-1915 Reorganization Unit Attention: ________________ 101 Barclay Street - 7 East Reorg Unit ____ New York, New York 10286 To confirm by telephone or for information: Attention: ________________ (212) 815-2742 Reorg Unit ____
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OR TRANSMISSION TO A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE BOX ON THE LETTER OF TRANSMITTAL FOR GUARANTEE OF SIGNATURES. Ladies and Gentlemen: I, the undersigned, hereby tender to Tesoro Petroleum Corporation the principal amount of the Outstanding Notes listed below, upon the terms of and subject to the conditions set forth in the Prospectus and the Letter of Transmittal and the instructions thereto, which I have received, pursuant to the guaranteed delivery procedures set forth in such Prospectus, as follows:
AGGREGATE PRINCIPAL AMOUNT REPRESENTED PRINCIPAL AMOUNT CERTIFICATE OR BY OUTSTANDING TENDERED (MUST BE IN INTEGRAL REGISTRATION NOS. NOTE(S) MULTIPLES OF $1,000) - ---------------------------------------------------------------------------------------------------------- - ------------------------------- --------------------------------------- -------------------------------- - ------------------------------- --------------------------------------- -------------------------------- - ------------------------------- --------------------------------------- -------------------------------- - ------------------------------- --------------------------------------- --------------------------------
If Outstanding Notes will be tendered by book-entry transfer, provide the following information: DTC Account Number: ------------------------------------------------------------- Transaction Code (if available): ------------------------------------------------ Date: --------------------------------------------------------------------------- All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. PLEASE SIGN HERE X ------------------------------------------------------------------------------ X ------------------------------------------------------------------------------ Signature(s) of Owner(s) or Authorized Signatory Date: -------------------------------- Taxpayer Identification Number or Social Security Number: ----------------------- Area Code and Telephone Number: ------------------------------------------------- Must be signed by the holder(s) of the Outstanding Notes as their name(s) appear(s) on certificates for Outstanding Notes or on a security position listing, or by person(s) authorized to become registered holder(s) by endorsement and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below. PLEASE PRINT NAME(S) AND ADDRESS(ES) Name(s): ------------------------------------------------------------------------ Capacity: ----------------------------------------------------------------------- Address(es): -------------------------------------------------------------------- THE GUARANTEE ON THE NEXT PAGE MUST BE COMPLETED 2 GUARANTEE OF DELIVERY (NOT TO BE USED FOR SIGNATURE GUARANTEE) I, the undersigned, a firm or other entity identified as an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, guarantee (a) that the above named person(s) own(s) the principal amount of 8% Senior Secured Notes due 2008 of Tesoro Petroleum Corporation (the "Outstanding Notes") tendered hereby within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as amended, (b) that such tender of such Outstanding Notes complies with Rule 14e-4, and (c) that I will deliver to the Exchange Agent the certificates representing the Outstanding Notes tendered hereby or confirmation of book-entry transfer of such Outstanding Notes into the Exchange Agent's account at The Depository Trust Company, in proper form for transfer, together with the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees and any other required documents, within three (3) business days after the Expiration Date. - -------------------------------------------------------------------------------------------------------- - --------------------------------------------------- --------------------------------------------------- NAME OF FIRM AUTHORIZED SIGNATURE - --------------------------------------------------- --------------------------------------------------- ADDRESS TITLE Name - --------------------------------------------------- ---------------------------------------------- ZIP CODE PLEASE TYPE OR PRINT Dated - --------------------------------------------------- --------------------------------------------- AREA CODE AND TEL. NO - --------------------------------------------------------------------------------------------------------
NOTE: DO NOT SEND CERTIFICATES REPRESENTING OUTSTANDING NOTES WITH THIS FORM. CERTIFICATES REPRESENTING OUTSTANDING NOTES SHOULD BE SENT ONLY WITH A LETTER OF TRANSMITTAL. 3 EX-99.3 18 h05116exv99w3.txt FORM OF LETTER TO REGISTERED HOLDERS LETTER TO REGISTERED HOLDERS AND DTC PARTICIPANTS REGARDING THE OFFER TO EXCHANGE $375,000,000 PRINCIPAL AMOUNT OF 8% SENIOR SECURED NOTES DUE 2008 OF TESORO PETROLEUM CORPORATION To Registered Holders and The Depository Trust Company Participants: We are enclosing herewith the materials listed below relating to the offer by Tesoro Petroleum Corporation (the "Company") to exchange the Company's new 8% Senior Secured Notes due 2008 (the "New Notes"), pursuant to an offering registered under the Securities Act of 1933, as amended (the "Securities Act"), for a like principal amount of its issued and outstanding 8% Senior Secured Notes due 2008, (the "Old Notes") upon the terms and subject to the conditions set forth in the Company's Prospectus, dated , 2003, and the related Letter of Transmittal (which together constitute the "Exchange Offer"). Enclosed herewith are copies of the following documents: 1. Prospectus dated , 2003; 2. Letter of Transmittal; 3. Notice of Guaranteed Delivery; 4. Instructions to Registered Holder or DTC Participant from Beneficial Owner; and 5. Letter which may be sent to your clients for whose account you hold definitive registered notes or book-entry interests representing Old Notes in your name or in the name of your nominee, to accompany the instruction form referred to above, for obtaining such client's instruction with regard to the Exchange Offer. WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2003, UNLESS EXTENDED. The Exchange Offer is not conditioned upon any minimum number of Old Notes being tendered. To participate in the Exchange Offer, a beneficial holder must either (i) cause to be delivered to U.S. Bank Trust National Association (the "Exchange Agent"), at the address set forth in the Letter of Transmittal, definitive registered notes representing Old Notes in proper form for transfer together with a properly executed Letter of Transmittal or (ii) cause a DTC Participant to tender such holder's Old Notes to the Exchange Agent's account maintained at The Depository Trust Company ("DTC") for the benefit of the Exchange Agent through DTC's Automated Tender Offer Program ("ATOP"), including transmission of a computer-generated message that acknowledges and agrees to be bound by the terms of the Letter of Transmittal. By complying with DTC's ATOP procedures with respect to the Exchange Offer, the DTC Participant confirms on behalf of itself and the beneficial owners of tendered Old Notes all provisions of the Letter of Transmittal applicable to it and such beneficial owners as fully as if it completed, executed and returned the Letter of Transmittal to the Exchange Agent. You will need to contact those of your clients for whose account you hold definitive registered notes or book-entry interests representing Old Notes and seek their instructions regarding the Exchange Offer. Pursuant to the Letter of Transmittal, each holder of Old Notes will represent to the Company and the Guarantors (as defined in the Prospectus) that: (i) the New Notes or book-entry interests therein to be acquired by such holder and any beneficial owner(s) of such Old Notes or interests therein ("Beneficial Owner(s)") in connection with the Exchange Offer are being acquired by such holder and any Beneficial Owner(s) in the ordinary course of business of the holder and any Beneficial Owner(s), (ii) the holder and each Beneficial Owner are not participating, do not intend to participate, and have no arrangement or understanding with any person to participate, in the distribution of the New Notes, (iii) if the holder or Beneficial Owner is a resident of the State of California, it falls under the self-executing institutional investor exemption set forth under Section 25102(i) of the Corporate Securities Law of 1968 and Rules 260.102.10 and 260.105.14 of the California Blue Sky Regulations, (iv) if the holder or Beneficial Owner is a resident of the Commonwealth of Pennsylvania, it falls under the self-executing institutional investor exemption set forth under Sections 203(c), 102(d) and (k) of the Pennsylvania Securities Act of 1972, Section 102.111 of the Pennsylvania Blue Sky Regulations and an interpretive opinion dated November 16, 1985, (v) the holder and each Beneficial Owner acknowledge and agree that any person who is a broker-dealer registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act") or is participating in the Exchange Offer for the purpose of distributing the New Notes must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction of the New Notes or interests therein acquired by such person and cannot rely on the position of the staff of the Securities and Exchange Commission (the "Commission") set forth in certain no-action letters, (vi) the holder and each Beneficial Owner understand that a secondary resale transaction described in clause (v) above and any resales of New Notes or interests therein obtained by such holder in exchange for Old Notes or interests therein originally acquired by such holder directly from the Company should be covered by an effective registration statement containing the selling security holder information required by Item 507 or Item 508, as applicable, of Regulation S-K of the Commission and (vii) neither the holder nor any Beneficial Owner(s) is an "affiliate," as defined in Rule 405 under the Securities Act, of the Company. Upon a request by the Company, a holder or beneficial owner will deliver to the Company a legal opinion confirming its representation made in clause (vii) above. If the tendering holder of Old Notes is a broker-dealer (whether or not it is also an "affiliate") or any Beneficial Owner(s) that will receive New Notes for its own or their account pursuant to the Exchange Offer, the tendering holder will represent on behalf of itself and the Beneficial Owner(s) that the Old Notes to be exchanged for the New Notes were acquired as a result of market-making activities or other trading activities, and acknowledge on its own behalf and on the behalf of such Beneficial Owner(s) that it or they will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes; provided, however, by so acknowledging and by delivering a prospectus, such tendering holder will not be deemed to admit that it or any Beneficial Owner is an "underwriter" within the meaning of the Securities Act. The enclosed "Instructions to Registered Holder or DTC Participant from Beneficial Owner" form contains an authorization by the beneficial owners of Old Notes for you to make the foregoing representations. You should forward this form to your clients and ask them to complete it and return it to you. You will then need to tender Old Notes on behalf of those of your clients who ask you to do so. The Company will not pay any fee or commission to any broker or dealer or to any other persons (other than the Exchange Agent) in connection with the solicitation of tenders of Old Notes pursuant to the Exchange Offer. The Company will pay or cause to be paid any transfer taxes payable on the transfer of Old Notes to it, except as otherwise provided in the section "The Exchange Offer -- Solicitation of Tenders; Fees and Expenses" of the enclosed Prospectus. 2 Additional copies of the enclosed materials may be obtained from the Exchange Agent. Very truly yours, TESORO PETROLEUM CORPORATION - -------------------------------------------------------------------------------- NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU THE AGENT OF THE COMPANY OR THE EXCHANGE AGENT OR AUTHORIZE YOU TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON THEIR BEHALF IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. - -------------------------------------------------------------------------------- 3 EX-99.4 19 h05116exv99w4.txt FORM OF INSTRUCTIONS FROM BENEFICIAL OWNERS INSTRUCTIONS TO REGISTERED HOLDER OR DTC PARTICIPANT FROM BENEFICIAL OWNER FOR 8% SENIOR SECURED NOTES DUE 2008 OF TESORO PETROLEUM CORPORATION The undersigned hereby acknowledges receipt of the Prospectus dated , 2003 (the "Prospectus"), of Tesoro Petroleum Corporation, a Delaware corporation (the "Company"), and the accompanying Letter of Transmittal (the "Letter of Transmittal") that together constitute the Company's offer (the "Exchange Offer") to exchange $375,000,000 of its 8% Senior Secured Notes due 2008, Series B ("New Notes") registered under the Securities Act of 1933 (the "Securities Act") for an identical principal amount of its 8% Senior Secured Notes due (the "Old Notes"). Capitalized terms used but not defined herein have the meanings assigned to them in the Prospectus and the Letter of Transmittal. This will instruct you as to the action to be taken by you relating to the Exchange Offer with respect to the Old Notes held by you for the account of the undersigned. The principal amount of the Old Notes held by you for the account of the undersigned is (fill in amount): $ principal amount of Old Notes. With respect to the Exchange Offer, the undersigned hereby instructs you (check appropriate box): [ ] To TENDER the following principal amount of Old Notes held by you for the account of the undersigned (insert amount of Old Notes to be tendered, if any, in integral multiples of $1,000): $ principal amount of Old Notes. [ ] NOT to TENDER any Old Notes held by you for the account of the undersigned. If the undersigned instructs you to tender the Old Notes held by you for the account of the undersigned, it is understood that you are authorized: (a) to make, on behalf of the undersigned (and the undersigned, by its signature below, hereby makes to you), the representations and warranties contained in the Letter of Transmittal that are to be made with respect to the undersigned as a beneficial owner, including but not limited to the representations that (i) the New Notes or book-entry interests therein to be acquired by the undersigned (the "Beneficial Owner(s)") in connection with the Exchange Offer are being acquired by the undersigned in the ordinary course of business of the undersigned, (ii) the undersigned is not participating, does not intend to participate, and has no arrangement or understanding with any person to participate, in the distribution of the New Notes, (iii) if the undersigned is a resident of the State of California, it falls under the self-executing institutional investor exemption set forth under Section 25102(i) of the Corporate Securities Law of 1968 and Rules 260.102.10 and 260.105.14 of the California Blue Sky Regulations, (iv) if the undersigned is a resident of the Commonwealth of Pennsylvania, it falls under the self-executing institutional investor exemption set forth under Sections 203(c), 102(d) and 102(k) of the Pennsylvania Securities Act of 1972, Section 102.111 of the Pennsylvania Blue Sky Regulations and an interpretive opinion dated November 16, 1985, (v) the undersigned acknowledges and agrees that any person who is a broker-dealer registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or is participating in the Exchange Offer for the purpose of distributing the New Notes must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction of the New Notes or interests therein acquired by such person and cannot rely on the position of the staff of the Securities and Exchange Commission (the "Commission") set forth in certain no-action letters, (vi) the undersigned understands that a secondary resale transaction described in clause (v) above and any resales of New Notes or interests therein obtained by such holder in exchange for Old Notes or interests therein originally acquired by such holder directly from the Company should be covered by an effective registration statement containing the selling security holder information required by Item 507 or Item 508, as applicable, of Regulation S-K of the Commission and (vii) the undersigned is not an "affiliate," as defined in Rule 405 under the Securities Act, of the Company. Upon a request by the Company, a holder or beneficial owner will deliver to the Company a legal opinion confirming its representation made in clause (vii) above. If the undersigned is a broker-dealer (whether or not it is also an "affiliate") that will receive New Notes for its own account pursuant to the Exchange Offer, the undersigned represents that the Old Notes to be exchanged for the New Notes were acquired by it as a result of market-making activities or other trading activities, and acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes; provided, however, by so acknowledging and by delivering a prospectus, the undersigned does not and will not be deemed to admit that is an "underwriter" within the meaning of the Securities Act; (b) to agree, on behalf of the undersigned, as set forth in the Letter of Transmittal; and (c) to take such other action as necessary under the Prospectus or the Letter of Transmittal to effect the valid tender of such Old Notes.
SIGN HERE (PLEASE PRINT): Name of Beneficial Owner(s): Address: --------------------------------------------- - ----------------------------------------------------- Telephone Number: ------------------------------------ Taxpayer Identification or Social Security Signature(s): Number: ---------------------------------------- ---------------------------------------------- Name(s): Date: --------------------------------------------- -----------------------------------------------
2 EX-99.5 20 h05116exv99w5.txt FORM OF LETTER TO CLIENTS LETTER TO CLIENTS REGARDING THE OFFER TO EXCHANGE $375,000,000 PRINCIPAL AMOUNT OF 8% SENIOR SECURED NOTES DUE 2008 OF TESORO PETROLEUM CORPORATION To Our Clients: We are enclosing herewith a Prospectus, dated , 2003, of Tesoro Petroleum Corporation (the "Company") and a related Letter of Transmittal (which together constitute the "Exchange Offer") relating to the offer by the Company to exchange the Company's new 8% Senior Secured Notes due 2008, Series B (the "New Notes"), pursuant to an offering registered under the Securities Act of 1933, as amended (the "Securities Act"), for a like principal amount of its issued and outstanding 8% Senior Secured Notes due 2008 (the "Old Notes") upon the terms and subject to the conditions set forth in the Prospectus and the Letter of Transmittal. - -------------------------------------------------------------------------------- PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2003, UNLESS EXTENDED. - -------------------------------------------------------------------------------- The Exchange Offer is not conditioned upon any minimum number of Old Notes being tendered. We are the Registered Holder or DTC participant through which you hold an interest in the Old Notes. A tender of such Old Notes can be made only by us pursuant to your instructions. The Letter of Transmittal is furnished to you for your information only and cannot be used by you to tender your beneficial ownership of Old Notes held by us for your account. Pursuant to the Letter of Transmittal, each holder of Old Notes must make certain representations and warranties that are set forth in the Letter of Transmittal and in the attached form that we have provided to you for your instructions regarding what action we should take in the Exchange Offer with respect to your interest in the Old Notes. We request instructions as to whether you wish to tender any or all of your Old Notes held by us for your account pursuant to the terms and subject to the conditions of the Exchange Offer. We also request that you confirm that we may on your behalf make the representations contained in the Letter of Transmittal that are to be made with respect to you as beneficial owner. Your instructions to us should be forwarded as promptly as possible in order to permit us to tender Old Notes on your behalf in accordance with the provisions of the Exchange Offer. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2003. Old Notes tendered pursuant to the Exchange Offer may be withdrawn, subject to the procedures described in the Prospectus, at any time prior to such Expiration Date. If you wish to have us tender any or all of your Old Notes held by us for your account or benefit, please so instruct us by completing, executing and returning to us the attached instruction form. The accompanying Letter of Transmittal is furnished to you for informational purposes only and may not be used by you to tender Old Notes held by us and registered in our name for your account or benefit. -----END PRIVACY-ENHANCED MESSAGE-----