-----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, BbTsRwdJs29KE1bNv6CdpbYjmrfQlnouFpsgM4g/GBVgzv671McCFwNnzykYfGVI UHEpODkv/WtFloTRRJ5Huw== 0000950129-03-003255.txt : 20030620 0000950129-03-003255.hdr.sgml : 20030620 20030620105759 ACCESSION NUMBER: 0000950129-03-003255 CONFORMED SUBMISSION TYPE: S-4/A PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20030620 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/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-17 FILM NUMBER: 03751113 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/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-19 FILM NUMBER: 03751131 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/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783 FILM NUMBER: 03751126 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 CO CENTRAL INDEX KEY: 0000911614 IRS NUMBER: 741646130 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-12 FILM NUMBER: 03751118 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/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-11 FILM NUMBER: 03751119 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/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-09 FILM NUMBER: 03751121 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/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-08 FILM NUMBER: 03751122 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/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-07 FILM NUMBER: 03751123 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: DIGICOMP INC CENTRAL INDEX KEY: 0001061666 IRS NUMBER: 742521015 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-10 FILM NUMBER: 03751120 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/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-03 FILM NUMBER: 03751132 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/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-02 FILM NUMBER: 03751133 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/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-01 FILM NUMBER: 03751134 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/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-16 FILM NUMBER: 03751114 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/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-15 FILM NUMBER: 03751115 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 PETROLEUM CO INC CENTRAL INDEX KEY: 0001061678 IRS NUMBER: 742385513 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-06 FILM NUMBER: 03751124 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/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-05 FILM NUMBER: 03751125 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/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-04 FILM NUMBER: 03751135 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: VICTORY FINANCE CO CENTRAL INDEX KEY: 0001144849 IRS NUMBER: 510377203 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-14 FILM NUMBER: 03751116 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/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-13 FILM NUMBER: 03751117 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/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-23 FILM NUMBER: 03751127 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/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-22 FILM NUMBER: 03751128 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 MARITIME CO CENTRAL INDEX KEY: 0001144857 IRS NUMBER: 742886466 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-21 FILM NUMBER: 03751129 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/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-20 FILM NUMBER: 03751130 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/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-105783-18 FILM NUMBER: 03751112 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 S-4/A 1 h05116a1sv4za.txt TESORO PETROLEUM CORP.- AMEND.NO.1 - 333-105783 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 20, 2003 REGISTRATION NO. 333-105783 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- AMENDMENT NO. 1 TO 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. [ ] --------------------- 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
(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 July 22, 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 June 20, 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........................... 46 Description of the Exchange Notes........................... 49 Certain Federal Income Tax Considerations................... 107 Plan of Distribution........................................ 111 Legal Matters............................................... 111 Experts..................................................... 112
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 July 22, 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. You may 9 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 form a part of a confirmation of book-entry transfer in which you 10 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 evidence the same debt as the outstanding 8% notes, and both the outstanding 8% notes and the exchange 11 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. (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. 16 (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 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. 17 (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 ----- ----- ----- ------ 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 ----- ----- ----- ------
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THREE MONTHS YEAR ENDED DECEMBER 31, ENDED ------------------------ MARCH 31, 2000 2001 2002 2003 ------ ------ ------ ------------ 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 Liquidity -- 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 June 16, 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 July 22, 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: Santino Ginocchietti Reorg Unit-7E By Facsimile Transmission: (for eligible institutions only) (212) 298-1915 Attention: Santino Ginocchietti Reorg Unit-7E 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. 45 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 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 46 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. 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. 47 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. 48 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 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. 49 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 - 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 50 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 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 51 (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". 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"); 52 (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; (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 53 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 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. 54 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"; (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. 55 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 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). 56 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 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 57 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 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. 58 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 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. 59 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. 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 60 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 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 61 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 (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; 62 (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 (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, 63 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 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 64 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. 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 65 (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 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; 66 (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 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. 67 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 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 68 Guarantees to be issued pursuant to the registration rights agreement, in each case, together with the related Note Obligations; (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 69 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 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; 70 (2) make loans or advances to Tesoro or any of its Restricted Subsidiaries; or (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. 71 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; 72 (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; 73 (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 74 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. 75 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). 76 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 77 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. 78 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; 79 (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 80 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 81 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 82 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 83 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. 84 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 85 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. 86 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 87 (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 88 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) 89 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). 90 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) 91 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; 92 (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 93 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 94 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 95 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. 96 "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 97 (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). 98 "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. 99 "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; 100 (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; 101 (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; 102 (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 103 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 104 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. 105 "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. 106 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 107 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 108 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 109 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 110 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. 111 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. 112 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- $375,000,000 (TESORO PETROLEUM CORPORATION LOGO) TESORO PETROLEUM CORPORATION 8% SENIOR SECURED NOTES DUE 2008, SERIES B -------------------- PROSPECTUS -------------------- JUNE 20, 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 May 16, 2003, 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 Second Amended and Restated Credit Agreement, dated as of June 17, 2003, 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 April 17, 2003, by and between the Company, certain of its subsidiary parties thereto and Bank One NA as Agent. **10.45 Affirmation of Security Agreement and Guarantee dated as of June 17, 2003 by certain of the Company's subsidiary parties thereto. *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 of the Company's Registration Statement on Form S-4, Reg. No. 333-105783, filed on June 2, 2003). **24.2 Certified copies of resolutions of each of the Registrants' Boards of Directors authorizing the Attorney-in-Fact to sign on behalf of the officers of such Registrants. *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 with Registration Statement on Form S-4, Reg. No. 333-105783 on June 2, 2003. ** Filed herewith. + 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 instruments 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 II-8 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. 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 19, 2003. TESORO PETROLEUM CORPORATION By: /s/ GREGORY A. WRIGHT ------------------------------------ Gregory A. Wright Senior Vice President and Chief Financial Officer POWER OF ATTORNEY 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 --------- ----- ---- * Chairman of the Board of Directors, June 19, 2003 - -------------------------------------- President and Chief Executive Bruce A. Smith Officer (Principal Executive Officer) * Lead Director June 19, 2003 - -------------------------------------- Steven H. Grapstein * Senior Vice President and Chief June 19, 2003 - -------------------------------------- Financial Officer (Principal Gregory A. Wright Financial Officer) * Vice President and Controller June 19, 2003 - -------------------------------------- (Principal Accounting Officer) Otto C. Schwethelm * Director June 19, 2003 - -------------------------------------- William J. Johnson * Director June 19, 2003 - -------------------------------------- A. Maurice Myers * Director June 19, 2003 - -------------------------------------- Donald H. Schmude * Director June 19, 2003 - -------------------------------------- Patrick J. Ward *By: /s/ CHARLES S. PARRISH ------------------------------ Charles S. Parrish Attorney-in-Fact
II-10 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 19, 2003. DIGICOMP INC. By: /s/ GREGORY A. WRIGHT ------------------------------------ Gregory A. Wright Senior Vice President and Chief Financial Officer POWER OF ATTORNEY 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 --------- ----- ---- * Director, President June 19, 2003 - -------------------------------------- (Principal Executive Officer) Bruce A. Smith * Director, Executive Vice President June 19, 2003 - -------------------------------------- William T. Van Kleef * Director, Executive Vice President, June 19, 2003 - -------------------------------------- General Counsel and Secretary James C. Reed, Jr. * Senior Vice President and Chief June 19, 2003 - -------------------------------------- Financial Officer (Principal Gregory A. Wright Financial Officer) * Vice President and Controller June 19, 2003 - -------------------------------------- (Principal Accounting Officer) Otto C. Schwethelm *By: /s/ CHARLES S. PARRISH ------------------------------ Charles S. Parrish Attorney-in-Fact
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 19, 2003. TESORO PETROLEUM COMPANIES, INC. By: /s/ BRUCE A. SMITH ------------------------------------ Bruce A. Smith Chairman of the Board of Directors and President POWER OF ATTORNEY 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 --------- ----- ---- * Chairman of the Board of Directors June 19, 2003 - -------------------------------------- and President Bruce A. Smith * Director, Executive Vice President June 19, 2003 - -------------------------------------- William T. Van Kleef * Director, Executive Vice President, June 19, 2003 - -------------------------------------- General Counsel and Secretary James C. Reed, Jr. * Senior Vice President and Chief June 19, 2003 - -------------------------------------- Financial Officer (Principal Gregory A. Wright Financial Officer) * Vice President and Controller June 19, 2003 - -------------------------------------- (Principal Accounting Officer) Otto C. Schwethelm *By: /s/ CHARLES S. PARRISH ------------------------------ Charles S. Parrish Attorney-in-Fact
II-12 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 19, 2003. FAR EAST MARITIME COMPANY GOLD STAR MARITIME COMPANY By: /s/ TIMOTHY F. PLUMMER ------------------------------------ Timothy F. Plummer President POWER OF ATTORNEY 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 --------- ----- ---- * Chairman of the Board of Directors June 19, 2003 - -------------------------------------- and President (Principal Executive Timothy F. Plummer Officer) * Director June 19, 2003 - -------------------------------------- Gregory A. Wright * Treasurer (Principal Financial and June 19, 2003 - -------------------------------------- Accounting Officer) James B. Willcox *By: /s/ CHARLES S. PARRISH ------------------------------ Charles S. Parrish Attorney-in-Fact
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 19, 2003. KENAI PIPE LINE COMPANY By: /s/ RODNEY S. CASON ------------------------------------ Rodney S. Cason President POWER OF ATTORNEY 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 --------- ----- ---- * Chairman of the Board of Directors June 19, 2003 - -------------------------------------- Bruce A. Smith * Director, Executive Vice President June 19, 2003 - -------------------------------------- William T. Van Kleef * Director, Executive Vice President June 19, 2003 - -------------------------------------- and Secretary James C. Reed, Jr. * President (Principal Executive June 19, 2003 - -------------------------------------- Officer) Rodney S. Cason * Vice President and Controller June 19, 2003 - -------------------------------------- (Principal Financial and Accounting Otto C. Schwethelm Officer) *By: /s/ CHARLES S. PARRISH ------------------------------ Charles S. Parrish Attorney-in-Fact
II-14 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 19, 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 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 --------- ----- ---- * Director, President June 19, 2003 - -------------------------------------- (Principal Executive Officer) Bruce A. Smith * Director, Executive Vice President June 19, 2003 - -------------------------------------- William T. Van Kleef * Director, Executive Vice President June 19, 2003 - -------------------------------------- and Secretary James C. Reed, Jr. * Senior Vice President, June 19, 2003 - -------------------------------------- Chief Financial Officer and Gregory A. Wright Treasurer (Principal Financial Officer) * Vice President and Controller June 19, 2003 - -------------------------------------- (Principal Accounting Officer) Otto C. Schwethelm *By: /s/ CHARLES S. PARRISH ------------------------------ Charles S. Parrish Attorney-in-Fact
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 19, 2003. TESORO ALASKA COMPANY By: /s/ GREGORY A. WRIGHT ------------------------------------ Gregory A. Wright Senior Vice President and Chief Financial Officer POWER OF ATTORNEY 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 --------- ----- ---- * Chairman of the Board of Directors June 19, 2003 ------------------------------------------------ Bruce A. Smith * Director, Executive Vice President June 19, 2003 ------------------------------------------------ William T. Van Kleef * Director, Executive Vice President June 19, 2003 ------------------------------------------------ and Secretary James C. Reed, Jr. * President (Principal Executive June 19, 2003 ------------------------------------------------ Officer) Rodney S. Cason * Senior Vice President and Chief June 19, 2003 ------------------------------------------------ Financial Officer (Principal Gregory A. Wright Financial Officer) * Vice President and Controller June 19, 2003 ------------------------------------------------ (Principal Accounting Officer) Otto C. Schwethelm *By: /s/ CHARLES S. PARRISH ------------------------------------------ Charles S. Parrish Attorney-in-Fact
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 19, 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 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 --------- ----- ---- * Chairman of the Board of Directors June 19, 2003 ------------------------------------------------ Bruce A. Smith * Director, Executive Vice President June 19, 2003 ------------------------------------------------ William T. Van Kleef * Director, Executive Vice President June 19, 2003 ------------------------------------------------ and Secretary James C. Reed, Jr. * President (Principal Executive June 19, 2003 ------------------------------------------------ Officer) Rodney S. Cason * Senior Vice President and Chief June 19, 2003 ------------------------------------------------ Financial Officer (Principal Gregory A. Wright Financial Officer) * Vice President and Controller June 19, 2003 ------------------------------------------------ (Principal Accounting Officer) Otto C. Schwethelm *By: /s/ CHARLES S. PARRISH ------------------------------------------ Charles S. Parrish Attorney-in-Fact
II-17 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 19, 2003. TESORO AVIATION COMPANY By: /s/ GREGORY A. WRIGHT ------------------------------------ Gregory A. Wright Senior Vice President and Chief Financial Officer POWER OF ATTORNEY 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 --------- ----- ---- * Chairman of the Board of Directors June 19, 2003 - -------------------------------------- and President (Principal Executive Bruce A. Smith Officer) * Director, Executive Vice President June 19, 2003 - -------------------------------------- William T. Van Kleef * Director, Executive Vice President, June 19, 2003 - -------------------------------------- General Counsel and Secretary James C. Reed, Jr. * Senior Vice President and Chief June 19, 2003 - -------------------------------------- Financial Officer (Principal Gregory A. Wright Financial Officer) * Vice President and Controller June 19, 2003 - -------------------------------------- (Principal Accounting Officer) Otto C. Schwethelm *By: /s/ CHARLES S. PARRISH ------------------------------ Charles S. Parrish Attorney-in-Fact
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 19, 2003. TESORO FINANCIAL SERVICES HOLDING COMPANY VICTORY FINANCE COMPANY By: /s/ CHARLES L. MAGEE ------------------------------------ Charles L. Magee President POWER OF ATTORNEY 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 --------- ----- ---- * Director and President June 19, 2003 - -------------------------------------- (Principal Executive, Financial and Charles L. Magee Accounting Officer) * Director June 19, 2003 - -------------------------------------- Heather R. Hill *By: /s/ CHARLES S. PARRISH ------------------------------ Charles S. Parrish Attorney-in-Fact
II-19 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 19, 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 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 --------- ----- ---- * Chairman of the Board of Directors June 19, 2003 - -------------------------------------- and President Bruce A. Smith (Principal Executive Officer) * Director, Executive Vice President, June 19, 2003 - -------------------------------------- General Counsel and Secretary James C. Reed, Jr. * Vice President and Controller June 19, 2003 - -------------------------------------- (Principal Financial and Otto C. Schwethelm Accounting Officer) *By: /s/ CHARLES S. PARRISH ------------------------------ Charles S. Parrish Attorney-in-Fact
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 19, 2003. TESORO HAWAII CORPORATION By: /s/ GREGORY A. WRIGHT ------------------------------------ Gregory A. Wright Senior Vice President, Chief Financial Officer and Treasurer POWER OF ATTORNEY 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 --------- ----- ---- * Director, President and Chief June 19, 2003 - -------------------------------------- Executive Officer (Principal Bruce A. Smith Executive Officer) * Director, Executive Vice President June 19, 2003 - -------------------------------------- William T. Van Kleef * Director, Executive Vice President June 19, 2003 - -------------------------------------- and Secretary James C. Reed, Jr. * Senior Vice President, June 19, 2003 - -------------------------------------- Chief Financial Officer and Gregory A. Wright Treasurer (Principal Financial Officer) * Vice President and Controller June 19, 2003 - -------------------------------------- (Principal Accounting Officer) Otto C. Schwethelm *By: /s/ CHARLES S. PARRISH ------------------------------ Charles S. Parrish Attorney-in-Fact
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 19, 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 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 --------- ----- ---- * Chairman of the Board of Directors June 19, 2003 - -------------------------------------- and Bruce A. Smith President (Principal Executive Officer) * Director, Executive Vice President June 19, 2003 - -------------------------------------- William T. Van Kleef * Director, Executive Vice President, June 19, 2003 - -------------------------------------- General Counsel and Secretary James C. Reed, Jr. * Senior Vice President and June 19, 2003 - -------------------------------------- Chief Financial Officer Gregory A. Wright (Principal Financial Officer) * Vice President and Controller June 19, 2003 - -------------------------------------- (Principal Accounting Officer) Otto C. Schwethelm *By: /s/ CHARLES S. PARRISH ------------------------------ Charles S. Parrish Attorney-in-Fact
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 19, 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 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 --------- ----- ---- * Chairman of the Board of Directors June 19, 2003 ------------------------------------------------ of Holding Co. Bruce A. Smith * Director of Holding Co. and June 19, 2003 ------------------------------------------------ Executive Vice President of LLC and William T. Van Kleef Holding Co. * Director of Holding Co. and June 19, 2003 ------------------------------------------------ Executive Vice President, General James C. Reed, Jr. Counsel and Secretary of LLC and Holding Co. * Director of Holding Co. and June 19, 2003 ------------------------------------------------ President Donald A. Nyberg of LLC and Holding Co. (Principal Executive Officer) * Senior Vice President and Chief June 19, 2003 ------------------------------------------------ Financial Officer of LLC and Holding Gregory A. Wright Co. (Principal Financial Officer) * Controller of LLC and Holding Co. June 19, 2003 ------------------------------------------------ (Principal Accounting Officer) Dean M. Krakosky *By: /s/ CHARLES S. PARRISH ------------------------------------------ Charles S. Parrish Attorney-in-Fact
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 19, 2003. TESORO MARITIME COMPANY By: /s/ GREGORY A. WRIGHT ------------------------------------ Gregory A. Wright Senior Vice President and Chief Financial Officer POWER OF ATTORNEY 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 --------- ----- ---- * Chairman of the Board of Directors June 19, 2003 - -------------------------------------- and President (Principal Executive Timothy F. Plummer Officer) * Director, Senior Vice President and June 19, 2003 - -------------------------------------- Chief Financial Officer (Principal Gregory A. Wright Financial Officer) * Vice President and Controller June 19, 2003 - -------------------------------------- (Principal Accounting Officer) Otto C. Schwethelm *By: /s/ CHARLES S. PARRISH ------------------------------ Charles S. Parrish Attorney-in-Fact
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 19, 2003. TESORO REFINING AND MARKETING COMPANY By: /s/ GREGORY A. WRIGHT ------------------------------------ Gregory A. Wright Senior Vice President and Chief Financial Officer POWER OF ATTORNEY 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 --------- ----- ---- * Chairman of the Board of Directors June 19, 2003 - -------------------------------------- Bruce A. Smith * Director, President (Principal June 19, 2003 - -------------------------------------- Executive Officer) William T. Van Kleef * Director, Executive Vice President June 19, 2003 - -------------------------------------- and Secretary James C. Reed, Jr. * Senior Vice President and Chief June 19, 2003 - -------------------------------------- Financial Officer (Principal Gregory A. Wright Financial Officer) * Vice President and Controller June 19, 2003 - -------------------------------------- (Principal Accounting Officer) Otto C. Schwethelm *By: /s/ CHARLES S. PARRISH ------------------------------ Charles S. Parrish Attorney-in-Fact
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 19, 2003. TESORO TECHNOLOGY COMPANY By: /s/ BRUCE A. SMITH ------------------------------------ Bruce A. Smith Chairman of the Board of Directors and President POWER OF ATTORNEY 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 --------- ----- ---- * Chairman of the Board of Directors June 19, 2003 - -------------------------------------- and President (Principal Executive Bruce A. Smith Officer) * Director, Executive Vice President June 19, 2003 - -------------------------------------- William T. Van Kleef * Director, Executive Vice President, June 19, 2003 - -------------------------------------- General Counsel and Secretary James C. Reed, Jr. * Vice President and Controller June 19, 2003 - -------------------------------------- (Principal Financial and Accounting Otto C. Schwethelm Officer) *By: /s/ CHARLES S. PARRISH ------------------------------ Charles S. Parrish Attorney-in-Fact
II-26 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 19, 2003. TESORO TRADING COMPANY By: /s/ BRUCE A. SMITH ------------------------------------ Bruce A. Smith Chairman of the Board of Directors and President POWER OF ATTORNEY 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 --------- ----- ---- * Chairman of the Board of Directors June 19, 2003 - -------------------------------------- and President (Principal Executive Bruce A. Smith Officer) * Director, Executive Vice President June 19, 2003 - -------------------------------------- William T. Van Kleef * Director, Executive Vice President, June 19, 2003 - -------------------------------------- General Counsel and Secretary James C. Reed, Jr. * Vice President and Controller June 19, 2003 - -------------------------------------- (Principal Financial and Accounting Otto C. Schwethelm Officer) *By: /s/ CHARLES S. PARRISH ------------------------------ Charles S. Parrish Attorney-in-Fact
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 19, 2003. TESORO VOSTOK COMPANY By: /s/ BRUCE A. SMITH ------------------------------------ Bruce A. Smith Chairman of the Board of Directors and President POWER OF ATTORNEY 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 --------- ----- ---- * Chairman of the Board of Directors June 19, 2003 - -------------------------------------- and President (Principal Executive Bruce A. Smith Officer) * Director, Executive Vice President June 19, 2003 - -------------------------------------- William T. Van Kleef * Director, Executive Vice President June 19, 2003 - -------------------------------------- and Secretary James C. Reed, Jr. * Senior Vice President and Chief June 19, 2003 - -------------------------------------- Financial Officer (Principal Gregory A. Wright Financial Officer) * Vice President and Controller June 19, 2003 - -------------------------------------- (Principal Accounting Officer) Otto C. Schwethelm *By: /s/ CHARLES S. PARRISH ------------------------------ Charles S. Parrish Attorney-in-Fact
II-28 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 19, 2003. TESORO WASATCH, LLC By: /s/ BRUCE A. SMITH ------------------------------------ Bruce A. Smith Chairman of the Board of Directors and President POWER OF ATTORNEY 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 --------- ----- ---- * Chairman of the Board of Directors, June 19, 2003 - -------------------------------------- President (Principal Executive Bruce A. Smith Officer) * Director, Executive Vice President June 19, 2003 - -------------------------------------- William T. Van Kleef * Director, Executive Vice President, June 19, 2003 - -------------------------------------- General Counsel and Secretary James C. Reed, Jr. * Vice President and Controller June 19, 2003 - -------------------------------------- (Principal Financial and Accounting Otto C. Schwethelm Officer) *By: /s/ CHARLES S. PARRISH ------------------------------ Charles S. Parrish Attorney-in-Fact
II-29 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).
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 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). 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).
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 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). 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).
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 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). 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.
EXHIBIT NUMBER DESCRIPTION - ------- ----------- **4.14 Control Agreement related to Senior Secured Term Loans Due 2008 and 8% Senior Secured Notes due 2008, dated as of May 16, 2003, 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). +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).
EXHIBIT NUMBER DESCRIPTION - ------- ----------- +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). +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.)
EXHIBIT NUMBER DESCRIPTION - ------- ----------- +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). +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 Second Amended and Restated Credit Agreement, dated as of June 17, 2003, 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 April 17, 2003, by and between the Company, certain of its subsidiary parties thereto and Bank One NA as Agent. **10.45 Affirmation of Security Agreement and Guarantee dated as of June 17, 2003 by certain of the Company's subsidiary parties thereto. *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).
EXHIBIT NUMBER DESCRIPTION - ------- ----------- *24.1 Powers of Attorney of certain officers and directors of Tesoro Petroleum Corporation and other Registrants (included on the signature pages of the Company's Registration Statement on Form S-4, Reg. No. 333-105783, filed on June 2, 2003). **24.2 Certified copies of resolutions of each of the Registrants' Boards of Directors authorizing the Attorney-in-Fact to sign on behalf of the officers of such Registrants. *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 with Registration Statement on Form S-4, Reg. No. 333-105783 on June 2, 2003. ** Filed herewith. + 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 instruments 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. EX-4.14 3 h05116a1exv4w14.txt CONTROL AGREEMENT EXECUTION COPY ================================================================================ TESORO PETROLEUM CORPORATION SENIOR SECURED TERM LOANS DUE 2008 8% SENIOR SECURED NOTES DUE 2008 CONTROL AGREEMENT Dated as of May 16, 2003 ================================================================================ TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS SECTION 1.01. Credit Agreement and UCC Definitions........................................................2 SECTION 1.02. Rules of Interpretation.....................................................................2 ARTICLE II ASSET SALE PROCEEDS ACCOUNT SECTION 2.01. Asset Sale Proceeds Account.................................................................2 SECTION 2.02. Permitted Investments.......................................................................5 SECTION 2.03. Monies Received by the Company..............................................................6 SECTION 2.04. Books of Asset Sale Proceeds Account; Statements............................................7 ARTICLE III SECURITY AND RELATED PROVISIONS; SECURITIES INTERMEDIARY SECTION 3.01. Securities Asset Sale Proceeds Account......................................................7 SECTION 3.02. Certain Rights and Powers in Respect of Asset Sale Proceeds Account and Funds...............8 SECTION 3.03. Security Interest..........................................................................10 SECTION 3.04. Duties and Certain Rights of Depositary Agent..............................................11 SECTION 3.05. Remedies...................................................................................17 ARTICLE IV TERMINATION OF AGREEMENT SECTION 4.01. Rights and Obligations of Collateral Agent and Depositary Agent............................17 SECTION 4.02. Secured Obligations........................................................................17 ARTICLE V MISCELLANEOUS SECTION 5.01. Notices....................................................................................18
SECTION 5.02. Benefit of Agreement.......................................................................19 SECTION 5.03. No Waiver; Remedies Cumulative.............................................................20 SECTION 5.04. Severability...............................................................................20 SECTION 5.05. Amendments.................................................................................20 SECTION 5.06. Headings...................................................................................20 SECTION 5.07. Governing Law..............................................................................20 SECTION 5.08. CONSENT TO JURISDICTION....................................................................20 SECTION 5.09. WAIVER OF JURY TRIAL.......................................................................21 SECTION 5.10. Successors and Assigns.....................................................................22 SECTION 5.11. Entire Agreement...........................................................................22 SECTION 5.12. Survival of Agreements.....................................................................22 SECTION 5.13. Further Information........................................................................22 SECTION 5.14. Additional Depositary Agent Provisions.....................................................22 SECTION 5.15. Counterparts...............................................................................23 SECTION 5.16. Effectiveness..............................................................................23 SECTION 5.17. Collateral Agent's Obligations.............................................................23 EXHIBIT: A Remittance Instruction Form
2 This CONTROL AGREEMENT, dated as of May 16, 2003 (this "Agreement"), is entered into by and among TESORO PETROLEUM CORPORATION, a Delaware corporation (the "Company"), The Frost National Bank, as the bank and the securities intermediary (together with its permitted successors in such capacity, the "Depositary Agent") and WILMINGTON TRUST COMPANY, as Collateral Agent (together with its successors in such capacity, the "Collateral Agent"). RECITALS: 1. The Company has borrowed $200,000,000 in principal amount of Term Loans (the "Initial Term Loans") under the Credit and Guaranty 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 has issued $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. 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. 6. The Depositary Agent has agreed to act as depositary agent and, with respect to any securities entitlements held by it pursuant to this Agreement, as securities intermediary pursuant to the terms of this Agreement. 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 SECTION 1.01. Definitions. 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. 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. SECTION 1.02. 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 ASSET SALE PROCEEDS ACCOUNT SECTION 2.01. Asset Sale Proceeds Account. (a) Establishment of Asset Sale Proceeds Account. The Company hereby directs the Depositary Agent to establish and maintain at its San Antonio office an account in the name of the Company (as the entitlement holder) entitled "Asset Sale Proceeds Blocked Account Subject to the Security Interest of Wilmington Trust Company, as Collateral Agent" and numbered 61-8083487 (the "Asset Sale Proceeds Account"). The Asset Sales Proceeds Account shall at all times be under the sole and exclusive dominion and control of the Collateral Agent. (b) Deposits of Net Sale Consideration. The Collateral Agent and the Company shall, and the Company shall cause each Guarantor to, promptly deposit or cause to be deposited into the Asset Sale Proceeds Account all Net Sale Consideration (including all amounts and proceeds (including instruments) received by the Company, any Guarantor or the Collateral Agent (as loss payee or additional insured) under any insurance policy maintained by the Company or any Guarantor or any Person in respect of Collateral (the "Insurance Proceeds") or any amounts and proceeds (including instruments) received by the Company or any Guarantor by reason of any means any compulsory transfer or taking by condemnation, eminent domain or 2 exercise of a similar power, or transfer under threat of such compulsory transfer or taking, of any part of the Collateral, other than an immaterial portion thereof, by any agency, department, authority, commission, board, instrumentality or political subdivision of the state in which such Collateral is located, the United States or another Governmental Authority having jurisdiction which is not rescinded or revoked within 60 days after the date of such transfer or taking (the "Eminent Domain Proceeds" and, together with the Insurance Proceeds, the "Loss Proceeds")). (c) Withdrawals. (i) General Provisions Regarding Release of Net Sale Consideration. Deposits of Net Sale Consideration in the Asset Sales Proceeds Account, and income therefrom, may be withdrawn only upon order of the Collateral Agent. Upon the Collateral Agent's receipt of an Officer's Certificate from the Company stating that a specified amount of the funds on deposit in the Asset Sale Proceeds Account: (A) (1) will be used, promptly upon withdrawal from the Asset Sale Proceeds Account, 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 owing 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, and income therefrom, or (2) to make capital expenditures on (including, but not limited to, repairing, restoring or replacing Collateral which was the subject of a Minor Loss) or to acquire Refinery Assets, but not to repair or replace Collateral that has suffered a Major Loss, except as provided below, in each case, in accordance with the provisions of Section 4.10 of the Indenture and 5.10 of the Term Loan Agreement; or (B) will be applied, promptly upon withdrawal from the Asset Sale Proceeds Account, to fund payments due to the Holders of Notes and the Lenders under accepted Collateral Proceeds Offers made pursuant to Section 4.10 of the Indenture and Section 5.10 of the Term Loan Agreement; or (C) have been offered to the Holders of Notes and the Lenders in compliance with the provisions of Section 4.10 of the Indenture and Section 5.10 of the Term Loan Agreement in Collateral Proceeds Offers that were not accepted and have been released from the Collateral Agent's Liens and are required to be released to the Company pursuant to such provisions; then, if the conditions set forth in Section 3.01 of the Collateral Agency Agreement are satisfied, the Collateral Agent promptly shall instruct the Depositary Agent in writing using the form attached hereto as Exhibit A, to remit such amount to the Company as directed in any remittance instruction delivered to the Collateral Agent by the Company. The Depositary Agent shall comply with such instructions. 3 (ii) General Provisions Regarding a Major Loss. Provided that the conditions set forth in clauses (A) or (B) below have been satisfied or have been waived by the Collateral Agent, if there shall occur any damage, destruction, condemnation or other similar taking of Collateral or other event with respect to which Loss Proceeds for any single loss in excess of $25,000,000 are payable (a "Major Loss") such Loss Proceeds shall be released by the Collateral Agent to Company in accordance with clauses (A) and (B) below. (A) Release with no Provision for Repair, Replacement or Restoration. If there shall occur any Major Loss and upon the Collateral Agent's receipt of an Officer's Certificate from the Company (in addition to such other statements and certifications required pursuant to Section 2.01(c)(i)): (1) certifying that the Company has determined in its good faith judgment not to repair, restore or replace the property subject to a Major Loss and that such determination is not expected to result in a Material Adverse Effect; and (2) stating that no Default or Event of Default has occurred and is continuing, then, such Loss Proceeds shall be released by the Collateral Agent to Company in accordance with Section 2.01(c)(i). (B) Repair and Restoration Procedures. In regard to a Major Loss, the Collateral Agent shall instruct the Depositary Agent, in writing using the form attached hereto as Exhibit A, to remit to the Company, from the Asset Sales Proceeds Account, such amounts as directed in any remittance instruction delivered to the Collateral Agent by the Company, and, upon such remittance, the Collateral Agent's Liens thereon shall be released, for application to such Major Loss, only in accordance with the following requirements, and the Depository Agent shall comply with such instructions: (1) the Company will cause any restoration or replacement to be commenced and completed promptly and diligently; (2) disbursements of Loss Proceeds for application toward repair, restoration or replacement shall be instructed by the Collateral Agent upon the Company's written request and the presentation to the Collateral Agent of an Officer's Certificate: (I) describing in reasonable detail the nature of the proposed repair, restoration or replacement to be effected with such release; 4 (II) if the entity or entities that are required to pay Loss Proceeds to the Company are not collectively required to pay for all costs and expenses associated with completing any repair, restoration or replacement, without limitation, and until the final completion of such repair, restoration or replacement (other than a deductible which the Company has certified has been paid in full), then providing (A) a project budget for the proposed repair, restoration or replacement (which shall include a 10% contingency allowance) prepared in good faith and upon reasonable assumptions by the Company and (B) a certification from the Company that the aggregate amount requested by the Company in respect of such repair, restoration or replacement (when added to (x) any other Loss Proceeds received by the Company in respect of the event giving rise to the receipt of such Loss Proceeds, (y) the income therefrom and (z) other funds as are available or committed to complete the repair, restoration or replacement) will provide funding sufficient to pay the budgeted project costs (including the contingency allowance) in full to complete such proposed project; and (III) stating (A) the reasonably estimated overall cost of the proposed project, (B) the specific amount requested to be released from the Asset Sales Proceeds Account and (C) that such amount promptly will be applied to pay the costs associated with such proposed project and, if clause (II) above is applicable, in accordance with the budget referred to in clause (II) above; (IV) stating that no Default or Event of Default has occurred and is continuing. (iii) General Provisions Regarding a Minor Loss. If there shall occur any damage, destruction, condemnation or other similar taking of Collateral or other event with respect to which Loss Proceeds for any single loss less than $25,000,000 are payable (a "Minor Loss"), such Loss Proceeds, and related income, shall be released by the Collateral Agent to the Company in accordance with Section 2.01(c)(i). SECTION 2.02. Permitted Investments. (a) Directing the Making of Investments. No amount on deposit in the Asset Sale Proceeds Account maintained hereunder or interest paid thereon, if any, may be held as "investment property" (as defined in Section 9-102(49) of the UCC, and as so defined, the term investment property is used throughout this Agreement) or invested by the Company (or the Depositary Agent on its behalf) and the Asset Sale Proceeds Account shall be maintained as a "deposit account" (as defined in Section 9-102(a)(29) of the UCC), in each case, unless the 5 Depositary Agent has provided its prior written consent (and containing the agreements with respect thereto), which consent, if any, shall be at the sole discretion of the Depositary Agent. (b) Application of Permitted Investments. Permitted Investments, if any, purchased upon the direction of the Company under the provisions of this Agreement shall be deemed at all times to be a part of the Asset Sale Proceeds Account from which funds were withdrawn in order to acquire the Permitted Investment and shall be deemed to constitute funds on deposit in and credited to the Asset Sale Proceeds Account, and the income or interest earned and gains realized in excess of losses suffered by the Asset Sale Proceeds Account due to the investment of funds deposited therein shall be credited and retained in the Asset Sale Proceeds Account, except as otherwise expressly provided by the terms hereof. (c) Earnings. All earnings, if any, on funds in the Asset Sale Proceeds Account maintained hereunder shall be credited to the Company for tax reporting purposes. The Depositary Agent shall provide to the Company a statement with respect to all interest earned on the Asset Sale Proceeds Account as of the close of each calendar year for which income is earned on the Asset Sale Proceeds Account. The Company shall provide the Depositary Agent with its taxpayer identification number, documented, to the extent necessary, by an appropriate executed Form W-9, upon execution of this Agreement. This form shall, to the extent necessary, be renewed as required by the Internal Revenue Service and provided to the Depositary Agent. The Depositary Agent shall be entitled to rely on an opinion of legal counsel (which may be counsel to the Company) in connection with the reporting of any earnings with respect hereto. (d) Liquidation of Investments for Distributions. The Collateral Agent is hereby authorized to direct the Depositary Agent, in writing using the form attached hereto as Exhibit A, to liquidate or direct the liquidation of any Permitted Investment (without regard to maturity) in order to make or cause to be made any application required by any Section of this Article 2. In furtherance, and not in limitation, of any other indemnity or limitation of liability with respect to the Collateral Agent contained herein or in any other Term Loan Document or Note Document, the Collateral Agent and the Depositary Agent shall in no way be liable for any losses suffered by the Company, including losses due to early liquidation or market risk, which are a result of the Collateral Agent's exercise of its authority under this provision. (e) Value of Permitted Investments. Permitted Investments, if any, credited to the Asset Sale Proceeds Account shall be valued at their current market value. SECTION 2.03. Monies Received by the Company. In the event that the Company or any Guarantor receives any cash or Cash Equivalents constituting Net Sale Consideration (including any Loss Proceeds) or other amounts required by the terms hereof to be deposited into the Asset Sale Proceeds Account, the Company shall, or shall cause such Guarantor to, hold the same in precisely the form received in trust for and on behalf of the Secured Parties, segregated from other funds of the Company or such Guarantor, and without any notice or demand whatsoever, shall promptly deliver the same to the Depositary Agent for application in accordance with the terms of this Agreement. No balance in, or financial asset or other asset credited to, the Asset 6 Sale Proceeds Account maintained hereunder shall be disbursed or transferred by the Depositary Agent, except in accordance with the provisions hereof. SECTION 2.04. Books of Asset Sale Proceeds Account; Statements. The Depositary Agent shall maintain books of account on a cash basis and record therein all deposits into and transfers to and from the Asset Sale Proceeds Account and all investment transactions effected by the Depositary Agent pursuant to the terms hereof, and any such recordation shall constitute prima facie evidence of the information recorded. Not later than the tenth Business Day of each month or as soon as practicable thereof, but in no event later than the twentieth calendar day of each month, commencing with the first month to occur after the earliest of the receipt of Net Sale Consideration into the Asset Sale Proceeds Account in accordance with the terms hereof, the Depositary Agent shall deliver to the Company a statement setting forth the transactions in the Asset Sale Proceeds Account during the preceding month (including deposits, withdrawals and transfers from and to the Asset Sale Proceeds Account) and specifying the Net Sale Consideration, Permitted Investments and other amounts held in or credited to the Asset Sale Proceeds Account at the close of business on the last Business Day of the preceding month. In addition, the Depositary Agent shall promptly respond (during normal business hours) to requests by the Company for information regarding deposits, investments and transfers into, in respect of the Asset Sale Proceeds Account. ARTICLE III SECURITY AND RELATED PROVISIONS; SECURITIES INTERMEDIARY SECTION 3.01. Securities Asset Sale Proceeds Account. (a) Acknowledgement. The Depositary Agent hereby agrees and confirms that the Depositary Agent has established the Asset Sale Proceeds Account as set forth and defined in this Agreement. (b) Agreement. Each of the parties hereto agrees that: (i) the Asset Sale Proceeds Account will be maintained, to the extent that "financial assets" (within the meaning of Section 8-102(a)(9) of the UCC, and as so defined the term financial asset is so used throughout this Agreement) are deposited therein or credited thereto, as a "securities account" (within the meaning of Section 8-501 of the UCC), and, to the extent that credit balances not constituting financial assets are credited thereto, as a "deposit account" (within the meaning of Section 9-102(a)(29) of the UCC); (ii) the Company is an "entitlement holder" (within the meaning of Section 8-102(a)(7) of the UCC) in respect of any "financial assets" credited to the Asset Sale Proceeds Account; 7 (iii) all property (including a security, security entitlement, investment property, instrument or obligation, share, participation, interest, cash or other property whatsoever) delivered to the Depositary Agent will be promptly credited by the Depositary Agent to the Asset Sale Proceeds Account by an appropriate entry in its records in accordance with this Agreement; (iv) all financial assets and other assets in registered form or payable to or to order and credited to the Asset Sale Proceeds Account shall be registered in the name of, payable to or to the order of, or specially endorsed to, the Depositary Agent or in blank, or credited to another securities account maintained in the name of the Depositary Agent, and in no case will any such financial asset or other asset be credited to the Asset Sale Proceeds Account at any time, if, at such time, such asset is registered in the name of, payable to or to the order of, or endorsed to, the Collateral Agent (in such capacity) or the Company, except to the extent the foregoing have been subsequently endorsed by the Collateral Agent (in such capacity) or the Company to the Depositary Agent or in blank; (v) the Depositary Agent is acting as "securities intermediary" (within the meaning of Section 8-102(a)(14) of the UCC) with respect to the Asset Sale Proceeds Account and financial assets deposited therein or credited thereto and as a "bank" (within the meaning of Section 9-304 of the UCC) with respect to the Asset Sale Proceeds Account and credit balances not constituting financial assets credited thereto; and (vi) the Depositary Agent shall not change the name or account number of the Asset Sale Proceeds Account without the prior written consent of the Collateral Agent. SECTION 3.02. Certain Rights and Powers in Respect of Asset Sale Proceeds Account and Funds. (a) Rights to Asset Sale Proceeds Account. The Company shall not make, attempt to make or consent to the making of any withdrawal or transfer from the Asset Sale Proceeds Account except in strict adherence to the terms and conditions of this Agreement. The Company shall not have any rights or powers with respect to the remittance of amounts credited to, the disbursement of credited amounts out of, or the investment of credited amounts in, the Asset Sale Proceeds Account, except to have amounts credited thereto applied in accordance with this Agreement; provided, however, that the parties hereto acknowledge and agree that the foregoing provisions of this Section 3.02(a) shall not be deemed to divest the Company of its interest as an "entitlement holder" under the UCC, as provided in this Agreement. (b) Certain Powers of the Collateral Agent and the Depositary Agent. The Collateral Agent and, where appropriate, the Depositary Agent will have the right, but not the obligation, to (i) refuse any item for credit to the Asset Sale Proceeds Account except as required by the terms of this Agreement and (ii) refuse to honor any request for transfer on the Asset Sale Proceeds Account which is not consistent with this Agreement. If the Company fails to perform 8 any agreement contained herein and such failure to perform is continuing for a period of 30 days, the Collateral Agent may itself perform, or cause the performance of, such agreement, and the expenses of the Collateral Agent incurred in connection therewith shall be payable by the Company upon written demand. The Company hereby irrevocably appoints the Collateral Agent as the Company's attorney-in-fact, with full authority in the place and stead of the Company, and in the name of the Company 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 which the Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including: (i) to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Asset Sale Proceeds Account or the proceeds of financial assets or other assets held therein or credited thereto; (ii) to receive, endorse, and collect any drafts or other instruments, documents and chattel paper, in connection with clause (i) above; (iii) to file any claims or take any action or institute any proceedings which the Collateral Agent may deem necessary or desirable for the collection of any of the Asset Sale Proceeds Account or the proceeds of financial assets or other assets held therein or credited thereto or otherwise to enforce the rights of the Collateral Agent with respect to the Asset Sale Proceeds Account or the proceeds of financial assets or other assets held therein or credited thereto, provided that, with respect to this clause (iii), such rights shall be exercised in accordance with Section 3.06; and (iv) to perform the affirmative obligations of the Company hereunder if, and to the extent that, the Company fails to perform such obligations and such failure to perform is continuing for a period of 30 days. The Company hereby acknowledges, consents and agrees that the power of attorney granted pursuant to this Section 3.02(b) is irrevocable and coupled with an interest. The powers conferred on the Collateral Agent hereunder are solely to protect its interest (on behalf of the applicable Secured Parties) in the Asset Sale Proceeds Account and the proceeds of financial assets and other assets held therein or credited thereto and shall not impose any duty on the Collateral Agent to exercise any such powers. Except for the reasonable care of the Asset Sale Proceeds Account in its possession or under its control (as the case may be) and the accounting for moneys actually received by it hereunder, neither the Depositary Agent nor the Collateral Agent shall have any duty as to the Asset Sale Proceeds Account or the proceeds of financial assets or other assets held therein or credited thereto, or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to the Asset Sale Proceeds Account or proceeds. Each of the Depositary Agent and the Collateral Agent is required to exercise reasonable care in the custody and preservation of the Asset Sale Proceeds Account and the financial assets and other assets held therein or credited thereto in its possession or under its control (as the case may be); provided, however, that the Collateral Agent in any event shall be 9 deemed to have exercised reasonable care in the custody and preservation of the Asset Sale Proceeds Account if it takes such action for that purpose as the Company reasonably requests in writing at times other than upon the occurrence and during the continuance of any Event of Default, but, notwithstanding the foregoing, the failure of the Collateral Agent to comply with any such request at any time shall not in itself be deemed a failure to exercise reasonable care. SECTION 3.03. Security Interest. (a) Grant. To secure the timely payment in full in cash and performance in full of the Secured Obligations of the Company, the Company does hereby assign, grant, hypothecate and pledge to, and grant a first priority security interest in favor of the Collateral Agent, on behalf of and for the sole and exclusive benefit of the Secured Parties on all the estate, right, title, interest and security entitlements of the Company, whether now owned or hereafter acquired, in the Asset Sale Proceeds Account and in all cash, cash equivalents, instruments, investments, other securities, financial assets and other assets held therein or credited thereto and all proceeds thereof, including all rights of the Company to receive moneys due in respect of such Asset Sale Proceeds Account, all claims with respect to such Asset Sale Proceeds Account, all income or gain earned in respect of the financial assets and other assets held in or credited to such Asset Sale Proceeds Account, and all proceeds receivable or received when any financial asset or other asset held in or credited to an Asset Sale Proceeds Account is collected, exchanged or otherwise disposed of, whether voluntarily or involuntarily. (b) Acknowledgment. The Depositary Agent hereby acknowledges the first priority security interest in, and the pledge by the Company to the Collateral Agent for the benefit of the Secured Parties of all of the Company's assets held in or credited to the Asset Sale Proceeds Account and all proceeds thereof, and will so indicate on the records maintained by the Depositary Agent with respect to the Asset Sale Proceeds Account. The Depositary Agent agrees to hold all such assets for the purposes of, and on the terms set forth in, this Agreement. (c) Other Liens; Adverse Claim. (i) The Company represents and warrants that: (A) it has not assigned any of its rights under the Asset Sale Proceeds Account; (B) it has not executed and is not aware of any effective financing statement, security agreement, control agreement or other instrument similar in effect covering all or any part of the Asset Sale Proceeds Account except in favor of the Collateral Agent; and (C) it has full power and authority to grant a security interest in and assign its right, title and interest in the Asset Sale Proceeds Account and all financial assets and other assets held therein or credited thereto and all proceeds thereof hereunder. 10 (ii) The Company represents, warrants and covenants that it has not granted, and shall not grant, to any Person other than the Collateral Agent any interest in Asset Sale Proceeds Account and that it has kept, and shall keep, the Asset Sale Proceeds Account free from all Liens other than Permitted Liens. (iii) The Depositary Agent represents and warrants that it has no knowledge (without having conducted an independent investigation) of any Lien on the Asset Sale Proceeds Account other than the claims and interest of the parties hereto as provided herein. In the event that the Depositary Agent has or subsequently obtains by agreement, operation of law or otherwise a security interest in the Asset Sale Proceeds Account or any financial asset or other asset credited thereto, the Depositary Agent hereby agrees that such security interest shall be subordinate to the security interest of the Collateral Agent for the benefit of the Secured Parties. (iv) Each of the Collateral Agent and the Depositary Agent represents and warrants that it has no notice (without having conducted an independent investigation) of any adverse claim to the financial assets or other assets deposited in or credited to the Asset Sale Proceeds Account or to security entitlements with respect thereto. (v) The financial assets and other assets credited to the Asset Sale Proceeds Account shall not be subject to deduction, set-off, banker's lien, or any other right in favor of any Person other than the Collateral Agent, except as set forth in clause (vi) below. (vi) The Company authorizes the Depositary Agent to debit its primary account number 01-0322466 to pay for all usual and customary service charges, transfer fees and account maintenance fees of the Depositary Agent in connection with the Asset Sale Proceeds Account. If the Company has insufficient funds in its primary account to pay such charges and fees, the Depositary Agent may thereafter exercise its right of set-off against amounts on deposit in the Asset Sale Proceeds Account, but only to the extent of such fees in respect of the Asset Sale Proceeds Account. SECTION 3.04. Duties and Certain Rights of Depositary Agent. (a) General. The duties of the Depositary Agent shall be determined solely by the express provisions of this Agreement and by applicable law and no duties, implied covenants or obligations shall be read into this Agreement against the Depositary Agent as depositary agent, securities intermediary and bank. (b) Acceptance of Appointment. The Depositary Agent hereby agrees to act as depositary agent and securities intermediary with respect to the Asset Sale Proceeds Account and pursuant to this Agreement. The other parties hereto hereby acknowledge that the Depositary Agent shall act as depositary agent, securities intermediary and bank with respect to the Asset Sale Proceeds Account and pursuant to this Agreement. 11 (c) Financial Assets Election. The Depositary Agent hereby agrees that each item of property (including a security, security entitlement, investment property, instrument or obligation, share or participation) credited to the Asset Sale Proceeds Account shall be treated as a financial asset under Article 8 of the UCC other than cash from time to time and at any time deposited in the Asset Sale Proceeds Account, and interest accrued or paid thereon. (d) Negative Pledge. Subject to the terms of this Agreement, the Depositary Agent hereby agrees that it shall not grant any Lien in the financial assets and other assets that it is obligated to maintain under this Agreement. (e) Entitlement Orders, Instructions. If at any time the Depositary Agent shall receive any entitlement order, instruction or any other order from the Collateral Agent directing the transfer or redemption of any financial asset or other asset relating to the Asset Sale Proceeds Account, or directing the disposition of any funds in the Asset Sale Proceeds Account, the Depositary Agent shall comply with such entitlement order, instruction or other order without further consent by the Company or any other Person. The parties hereto agree that until the Depositary Agent's obligations under this Agreement shall terminate in accordance with the terms hereof, the Collateral Agent shall have control of each of the Company's security entitlements with respect to the financial assets and other assets credited to the Asset Sale Proceeds Account; provided, however, that the Company, as the entitlement holder with respect to the financial assets credited to the Asset Sale Proceeds Account and the Person for whom the Asset Sale Proceeds Account are maintained, is entitled, subject to Section 2.02 and the other provisions of this Agreement, to make substitutions for the security entitlements with respect to the financial assets credited to the Asset Sale Proceeds Account. The Depositary Agent hereby represents that it has not entered into, and agrees that, until the termination of this Agreement and the other Term Loan Documents or Note Documents in accordance their terms, it will not enter into, any agreement with any other Person in respect such Asset Sale Proceeds Account pursuant to which it would agree to comply with entitlement orders made by such Person. (f) Degree of Care. The Depositary Agent shall exercise due care in accordance with reasonable commercial standards in administering the Asset Sale Proceeds Account, accounting for assets credited to the Asset Sale Proceeds Account and performing its duties as a bank with respect to the Asset Sale Proceeds Account, and to the extent that any "investment property" is on deposit, accounting for financial assets and other assets credited to the Asset Sale Proceeds Account and performing its duties as securities intermediary with respect to the Asset Sale Proceeds Account and, in each case, such assets deposited therein or credited thereto and the credit balances credited thereto under this Agreement. (g) Action Upon Notices; Exercise of Judgment. The Depositary Agent shall be permitted to conclusively rely and act upon any notice, entitlement order, instruction, request, waiver, consent, receipt or other paper or document whether in its original or facsimile form reasonably believed by the Depositary Agent to be signed by the Collateral Agent, the Company or any other authorized Person. The Depositary Agent shall not be liable for any error of judgment or for any act done or step taken or omitted by it in good faith or for any mistake of fact or law or for anything which the Depositary Agent may do or refrain from doing in 12 connection herewith, except its own gross negligence or willful misconduct. The Depositary Agent shall have duties only to the Collateral Agent (on behalf of the Secured Parties). (h) Indemnification and Liability. In consideration of the appointment of Depositary Agent, the Company agrees: (i) to fully indemnify and hold the Depositary Agent and each Affiliate, officer, director, shareholder, employee and agent of the Depositary Agent (each, an "Indemnified Person") harmless from and against any and all claim, loss, liability, damage, cost or expense (including reasonable legal fees and expenses) incurred by the Indemnified Person by reason of or resulting from this Agreement (including its having accepted such appointment or by reason of its carrying out of any of the terms of this Agreement); and (ii) to reimburse each Indemnified Person for all its expenses, including reasonable fees and expenses of counsel and court costs incurred by reason of any position or action taken by the Indemnified Person pursuant to this Agreement or in connection with any action brought to interpret or enforce the provisions of this Agreement or any part thereof; except, with respect to each of clauses (i) and (ii), to the extent that any such claim, loss, liability, damage, cost or expense is determined by a court of competent jurisdiction in a final non-appealable judgment to have been caused by the Indemnified Person's gross negligence or willful misconduct. The parties hereto hereby agree that no Indemnified Person shall be liable to such parties for any actions taken by any Indemnified Person pursuant to and in compliance with the terms hereof except in respect of any liability or expenses incurred by the Indemnified Person arising from its gross negligence or willful misconduct. Any Indemnified Person may consult with legal counsel of its selection in the event of any dispute or question as to the construction of this Agreement or the Indemnified Person's duties hereunder, and the Indemnified Person shall incur no liability and shall be fully protected in acting in accordance with the opinion and instructions of such counsel. (i) Court Orders. The Depositary Agent is hereby authorized, in its exclusive discretion, to obey and comply with all writs, orders, judgments or decrees issued by any court or administrative agency affecting the Asset Sale Proceeds Account or any financial asset credited to the Asset Sale Proceeds Account. The Depositary Agent shall not be liable to any of the parties hereto, their successors or assigns by reason of the Depositary Agent's compliance with such writs, orders, judgments or decrees, notwithstanding that such writ, order, judgment or decree may later be reversed, modified, set aside or vacated. (j) Resignation and Termination. (i) The Depositary Agent may at any time resign by giving notice to each other party to this Agreement, such resignation to be effective upon the appointment of a successor Depositary Agent as provided below. The Collateral Agent may remove 13 the Depositary Agent at any time by giving notice to each other party to this Agreement, such removal to be effective upon the appointment of a successor Depositary Agent as provided below. (ii) In the event of any removal of the Depositary Agent, a successor Depositary Agent, which shall be a bank or trust company organized under the laws of the United States of America or of the State of New York capable of acting as a "securities intermediary" (within the meaning of Section 8-102(a)(14) of the UCC) and a "bank" (within the meaning of Section 9-102(a)(8) of the UCC), having a corporate trust office in New York, New York and a capital and surplus of not less than $50,000,000, shall be appointed by the Collateral Agent upon agreement by the Company, and such agreement shall not be unreasonably withheld. If a successor Depositary Agent shall not have been appointed and accepted its appointment as Depositary Agent within 45 days after such notice of removal of the Depositary Agent, the Depositary Agent, the Collateral Agent or the Company may apply to any court of competent jurisdiction at the expense of the Company to appoint a successor Depositary Agent to act until such time, if any, as a successor Depositary Agent shall have accepted its appointment as provided above. Any such successor Depositary Agent shall deliver to each party to this Agreement a written instrument accepting such appointment and thereupon: (A) the Company or the Collateral Agent shall deliver an entitlement order, instruction or any other order to the predecessor Depositary Agent directing it to transfer to the successor Depositary Agent all balances deposited in and all financial assets and other assets credited to, the Asset Sale Proceeds Account; (B) the successor Depositary Agent shall establish and maintain at its New York office the Asset Sale Proceeds Account and deposit in and credit to the Asset Sale Proceeds Account all financial assets and other assets from the Asset Sale Proceeds Account maintained by the predecessor Depositary Agent transferred by the predecessor Depositary Agent to the successor Depositary Agent; and (C) the successor Depositary Agent shall succeed to all the rights and duties of the Depositary Agent under this Agreement and under applicable law. (iii) In the event of any resignation of the Depositary Agent, a successor Depositary Agent, which shall be a bank or trust company organized under the laws of the United States of America or of any state thereof capable of acting as a "securities intermediary" (within the meaning of Section 8-102(a)(14) of the UCC) and a "bank" (within the meaning of Section 9-102(a)(8) of the UCC) and having a capital and surplus of not less than $50,000,000, shall be appointed by the Collateral Agent upon agreement by the Company, and such agreement shall not be unreasonably withheld. 14 Any such successor Depositary Agent shall deliver to each party to this Agreement a written instrument accepting such appointment and thereupon: (A) the Company or the Collateral Agent shall deliver an entitlement order, instruction or any other order to the predecessor Depositary Agent directing it to transfer to the Collateral Agent all balances deposited in and all financial assets credited to, the Asset Sale Proceeds Account; (B) the successor Depositary Agent shall establish and maintain at its New York office the Asset Sale Proceeds Account and deposit in and credit to the Asset Sale Proceeds Account all financial assets and other assets from the Asset Sale Proceeds Account maintained by the predecessor Depositary Agent transferred by the predecessor Depositary Agent to the successor Depositary Agent; and (C) the successor Depositary Agent, unless the Collateral Agent is acting in such capacity, shall succeed to all the rights and duties of the Depositary Agent under this Agreement and under applicable law. (iv) In the event that a successor Depositary Agent is not appointed within 30 Business Days after such notice of resignation of the Depositary Agent: (A) the Depositary Agent shall, if any "investment property" is then on deposit, liquidate such investments; (B) the Collateral Agent shall act as the successor to the Depositary Agent until such time as a successor Depositary Agent is appointed pursuant to Section 3.04(j)(iii), and in so acting shall maintain a deposit account as the Asset Sale Proceeds Account to be held in the name of the Collateral Agent, and shall succeed to all the rights and duties of the Depositary Agent under applicable law; (C) the provisions of Article 2 shall survive the termination of this Agreement and shall continue to apply to such account held by the Collateral Agent into which the predecessor Depositary Agent has transferred all balances deposited in the Asset Sale Proceeds Account; and (D) the Company shall deliver to the Collateral Agent such legal opinion or opinions and such other documentation, in each case, in form and substance satisfactory to the Collateral Agent. In the event of the resignation or termination of the Depositary Agent, the Depositary Agent shall be entitled to its fees and expenses in accordance with the terms hereof up to the time such resignation becomes effective in accordance with this Section 3.04(j). 15 (k) General. (i) No provision of this Agreement shall require the Depositary Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, except to the extent resulting from the gross negligence or willful misconduct of the Depositary Agent. (ii) All written directions and instructions (which may be provided by facsimile transmission) by the Company or the Collateral Agent to the Depository Agent pursuant to this Agreement shall be executed by an authorized signatory of the Company or the Collateral Agent, as applicable. (iii) The Depository Agent 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, or any other evidence of indebtedness or other paper or document, but the Depositary Agent, in its discretion, may make further inquiry or investigation into such facts or matters as it may see fit. (iv) The Depository Agent shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Agreement. (v) The Depositary Agent shall not be deemed to have notice of any Default or Event of Default unless the Depositary Agent has actual knowledge thereof or unless written notice thereof is received by the Depositary Agent. (vi) The Depositary Agent shall be under no obligation to notify the Collateral Agent of any Event of Default or any other event except for those events for which this Agreement specifically provides that such notice is required. (vii) If any checks, drafts or other items deposited in the Asset Sale Proceeds Account are returned or unpaid or otherwise dishonored, the Depositary Agent shall have the right to charge any and all such returned or dishonored items against the Asset Sale Proceeds Account or to demand reimbursement therefor directly from the Company. (viii) In no event shall the Depositary Agent be liable for losses or delays resulting from computer malfunction, interruption of communication facilities, labor difficulties, in each case, that are beyond the Depositary Agent's reasonable control or other causes beyond the Depositary Agent's reasonable control or for indirect, special or consequential damages. 16 SECTION 3.05. Remedies. If an Event of Default shall have occurred and be continuing: (i) the Collateral Agent may exercise in respect of the Asset Sale Proceeds Account, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the UCC at that time and consistent with the provisions of the other Term Loan Documents or Note Documents, including the right to proceed to protect and enforce the rights vested in it by this Agreement, to sell, liquidate or otherwise dispose of the Asset Sale Proceeds Account, and to cause the Asset Sale Proceeds Account to be sold, liquidated or otherwise disposed of, in each case in such manner as the Collateral Agent may elect; and (ii) the proceeds of any financial assets and other assets credited to or held in the Asset Sale Proceeds Account and all cash proceeds received by the Collateral Agent in respect of any sale of, collection from or other realization upon all or any part of the Asset Sale Proceeds Account may, in the discretion of the Collateral Agent, then or at any time thereafter, be applied (after payment of any amounts payable to the Depositary Agent pursuant to the terms hereof) in whole or in part by the Collateral Agent against all or any part of the Secured Obligations of the Company in accordance with the Collateral Agency Agreement. No right, power or remedy herein conferred upon or reserved to the Collateral Agent is intended to be exclusive of any other right, power or remedy and every such right, power and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right, power and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder or otherwise shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Resort to any or all security now or hereafter held by the Collateral Agent may be taken concurrently or successively and in one or several consolidated or independent judicial actions or lawfully taken nonjudicial proceedings, or both. ARTICLE IV TERMINATION OF AGREEMENT SECTION 4.01. Rights and Obligations of Collateral Agent and Depositary Agent. The rights and powers granted herein to the Collateral Agent have been granted in order, among other things, to perfect its security interests in the Asset Sale Proceeds Account, are powers coupled with an interest, and will neither be affected by the bankruptcy of the Company nor by the lapse of time. Except as otherwise provided herein, the obligations of the Depositary Agent hereunder shall continue in effect until the security interests of the Collateral Agent in the Asset Sale Proceeds Account have been terminated pursuant to the terms of this Agreement, the other Term Loan Documents and Note Documents and the Collateral Agent has notified the Depositary Agent of such termination in writing. SECTION 4.02. Secured Obligations. When each of the Term Loan Agreement and the Indenture has expired or has otherwise terminated and all Secured Obligations of the Company 17 to the Secured Parties under the Term Loan Documents and the Notes Documents have been paid in full, all commitments thereunder have terminated, all of the Hedging Obligations owed to any Secured Party have terminated, all right, title and interest of the Collateral Agent in the Asset Sale Proceeds Account shall be released. At such time, the Collateral Agent shall notify the Depositary Agent in writing using the form attached hereto as Exhibit A to, and upon such notification the Depositary Agent shall, pay any amounts (including Permitted Investments) then remaining in the applicable Asset Sale Proceeds Account to the Company. No termination of any interest of a Secured Party hereunder shall affect the rights of any other Secured Party hereunder. ARTICLE V MISCELLANEOUS SECTION 5.01. 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: 18 If to the Collateral Agent: Wilmington Trust Company Attention: Mary St. Amand Assistant Vice President Corporate Trust Administration 1100 North Market Street Wilmington, DE 19890 Phone: 302-636-6436 Fax: 302-636-4145 If to the Company: Tesoro Petroleum Corporation Attention: Finance Department 300 Concord Plaza Drive San Antonio, TX 78216-6999 Phone: 210-828-8484 Fax: 210-283-2080 If to the Depositary Agent: The Frost National Bank 100 West Houston Street San Antonio, TX 78205 Attention: Jennifer Slator Phone: 210-220-5388 Fax: 210-220-6816 With a copy to: The Frost National Bank 100 West Houston Street San Antonio, TX 78205 Attention: Deposit Services Phone: 210-220-4711 Fax: 210-220-4681 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. 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 5.02. 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. 19 SECTION 5.03. No Waiver; Remedies Cumulative. No failure or delay on the part of the Collateral Agent or the Depositary 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 and the Depositary 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 5.04. 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. SECTION 5.05. 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 5.06. 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 5.07. Governing Law. This Agreement, including all matters of construction, validity, performance and the creation, validity, enforcement or priority of the lien of, and security interests created by, this Agreement in or upon the Asset Sale Proceeds Account shall be governed by the laws of the State of New York, without reference to conflicts of law (other than Section 5-1401 of the New York General Obligations Law), except as required by mandatory provisions of law and except to the extent that the validity or perfection of the lien and security interest hereunder, or remedies hereunder, in respect of the Asset Sale Proceeds Account are governed by the laws of a jurisdiction other than the State of New York. Regardless of any provision in any other agreement, for purposes of the UCC, the jurisdiction of the Depositary Agent as securities intermediary (under Section 8-110(e) of the UCC) and as bank (under Section 9-304(b) of the UCC) with respect to the Asset Sale Proceeds Account is the State of New York. SECTION 5.08. CONSENT TO JURISDICTION. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PARTY HERETO ARISING OUT OF OR RELATING HERETO OR ANY OTHER TERM LOAN DOCUMENT OR NOTE 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 NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH PARTY HERETO, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, 20 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 5.01; (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 SECURED PARTIES 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 5.09. 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 NOTE DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS CONTROL AGREEMENT 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 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 SUBJECT MATTER OF THIS AGREEMENT. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. 21 SECTION 5.10. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, provided that (a) the Company may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Collateral Agent (which consent may be withheld in its sole discretion) and (b) the Depositary Agent may only assign or otherwise transfer any of its rights or obligations hereunder in accordance with the terms of this Agreement. SECTION 5.11. 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 5.12. Survival of Agreements. The provisions regarding the payment of expenses and indemnification obligations, including Section 3.04(h) and the provisions set forth in Sections 3.04(j) and 5.14, and in the event that the Depositary Agent resigns in accordance with Section 3.04(j)(iii) or 3.04(j)(iv), Article 2 shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the expiration or termination of the Term Loan Agreement or the Indenture, the payment in full of all Secured Obligations, the termination of any commitments thereunder, or the termination of this Agreement or any provision hereof. SECTION 5.13. Further Information. The Depositary Agent shall promptly provide the Collateral Agent and the Company with any information reasonably requested by the Collateral Agent or the Company concerning balances in the Asset Sale Proceeds Account and payments from the Asset Sale Proceeds Account. SECTION 5.14. Additional Depositary Agent Provisions. The Depositary Agent may engage or be interested in any financial or other transactions with any party to this Agreement and may act on, or as depositary, trustee or agent for, any committee or body of holders of obligations of such Persons as freely as if it were not the Depositary Agent hereunder. The Depositary Agent shall not be obligated to take any action which in its reasonable judgment would involve it in expense or liability unless it has been furnished with an indemnity reasonably satisfactory to it. The Depositary Agent shall act as an agent only and shall not be responsible or liable in any manner for soliciting any funds or for the sufficiency, correctness, genuineness or validity of any funds or securities deposited with or held by it, except in the case of its gross negligence or willful misconduct. The Depositary Agent shall be fully protected in acting or refraining from acting upon any written notice, certificate, instruction, request or other paper or document, (whether in its original or facsimile form) as to the due execution thereof and the validity and effectiveness of the provisions thereof and as to the truth of any information contained therein, which the Depositary Agent in good faith believes to be genuine. The Depositary Agent shall not be liable for any error of judgment or for any act done or step taken or omitted except in the case of its gross negligence or willful misconduct. In the event of any 22 dispute as to the construction or interpretation of any provision of this Agreement, the Depository Agent may consult with counsel of its own selection and the advice or opinion of such counsel shall be full and complete authorization and protection in respect of any action taken suffered or omitted by it hereunder in good faith and reliance thereon. SECTION 5.15. 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 by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. SECTION 5.16. Effectiveness. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto and receipt by the Company, the Depositary Agent and the Collateral Agent of written or telephonic notification of such execution and authorization of delivery thereof. SECTION 5.17. 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. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 23 IN WITNESS WHEREOF, the parties hereto, by their officers duly authorized, intending to be legally bound, have caused this Depositary Agreement to be duly executed and delivered as of the date first above written. TESORO PETROLEUM CORPORATION By: --------------------------------- Name: Title: WILMINGTON TRUST COMPANY, as the Collateral Agent By: --------------------------------- Name: Title: THE FROST NATIONAL BANK, as Depositary Agent By: --------------------------------- Name: Title: [Depositary Agreement Signature Page] EXHIBIT A DATE: _______________ THE FROST NATIONAL BANK P. O. BOX 1600 SAN ANTONIO, TEXAS 78209 ATTENTION: JENNIFER SLATOR PHONE: 210/220-5388 FAX: 210/220-6816 WITH COPY TO: THE FROST NATIONAL BANK P. O. BOX 1600 SAN ANTONIO, TEXAS 78209 ATTENTION: DEPOSIT SERVICES PHONE: 210/220-4711 FAX: 210/220-4681 RE: CONTROL AGREEMENT DATED MAY 16, 2003; ASSET SALE PROCEEDS ACCOUNT LADIES AND GENTLEMEN: REFERENCE IS MADE TO THE CONTROL AGREEMENT DATED MAY 16, 2003 (THE "AGREEMENT"; CAPITALIZED TERMS USED HEREIN SHALL HAVE THE MEANINGS ASSIGNED THERETO IN THE AGREEMENT) AMONG WILMINGTON TRUST COMPANY (THE "COLLATERAL AGENT"), THE FROST NATIONAL BANK (THE "DEPOSITARY AGENT") AND TESORO PETROLEUM CORPORATION (THE "COMPANY"). THIS LETTER CONSTITUTES AN INSTRUCTION UNDER THE AGREEMENT. You are hereby instructed and authorized to remit: Written $ Amount US --------------------- Numeric $ Amount $ --------------------- VIA WIRE TRANSFER TO: ACCOUNT #: ABA # --------- ------------------------------- ACCOUNT NAME: -------------------------------------------- ATTENTION: ----------------------------------------------- FROM THE ASSET SALES PROCEEDS ACCOUNT # MAINTAINED AT THE ------------------- FROST NATIONAL BANK THE UNDERSIGNED REPRESENTS AND WARRANTS TO THE FROST NATIONAL BANK THAT THE UNDERSIGNED IS AN AUTHORIZED SIGNATORY OF COLLATERAL AGENT. COLLATERAL AGENT BY: -------------------------------------- NAME: -------------------------------------- TITLE: -------------------------------------- EX-10.43 4 h05116a1exv10w43.txt $650,000,000 2ND AMENDED CREDIT AGREEMENT EXHIBIT 10.43 SECOND AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF JUNE 17, 2003 AMONG TESORO PETROLEUM CORPORATION, AS BORROWER THE FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTIES HERETO, AS LENDERS GOLDMAN SACHS CREDIT PARTNERS L.P., AS SYNDICATION AGENT BANK OF AMERICA, N.A. AND FLEET CAPITAL CORPORATION, AS CO-DOCUMENTATION AGENTS BANK OF AMERICA, N.A., AS COLLATERAL AGENT AND BANK ONE, NA (MAIN OFFICE CHICAGO), AS ADMINISTRATIVE AGENT ---------------------------------------------------------------------------- BANC ONE CAPITAL MARKETS, INC., AS SOLE LEAD ARRANGER AND SOLE BOOK RUNNER ----------------------------------------------------------------------------- SIDLEY AUSTIN BROWN & WOOD Bank One Plaza 10 South Dearborn Street Chicago, Illinois 60603 TABLE OF CONTENTS ARTICLE I DEFINITIONS............................................................................ 1 1.1. Certain Defined Terms...................................................................... 1 1.2. Plural Forms............................................................................... 28 ARTICLE II THE CREDITS............................................................................ 28 2.1. Commitments; Loans......................................................................... 28 2.2. Required Payments; Termination............................................................. 30 2.3. Ratable Loans; Types of Advances........................................................... 32 2.4. Commitment Fee; Aggregate Revolving Loan Commitment........................................ 32 2.5. Minimum Amount of Each Advance............................................................. 33 2.6. Optional Principal Payments................................................................ 33 2.7. Method of Selecting Types and Interest Periods for New Advances............................ 34 2.8. Conversion and Continuation of Outstanding Advances; No Conversion or Continuation of Eurodollar Advances After Default.......................................... 34 2.9. Changes in Interest Rate, etc.............................................................. 35 2.10. Rates Applicable After Default............................................................. 35 2.11. Method of Payment; Settlement.............................................................. 35 2.12. Noteless Agreement; Evidence of Indebtedness............................................... 38 2.13. Telephonic Notices......................................................................... 39 2.14. Payments of Interest....................................................................... 39 2.15. Notification of Advances, Interest Rates, Prepayments and Revolving Loan Commitment Reductions; Availability of Loans.......................................... 41 2.16. Lending Installations...................................................................... 41 2.17. Non-Receipt of Funds by the Agent.......................................................... 41 2.18. Replacement of Lender...................................................................... 42 2.19. Facility LCs............................................................................... 42 2.20. Increase of Aggregate Revolving Loan Commitment............................................ 47 ARTICLE III YIELD PROTECTION; TAXES................................................................ 48 3.1. Yield Protection........................................................................... 48 3.2. Changes in Capital Adequacy Regulations.................................................... 49 3.3. Availability of Types of Advances.......................................................... 49 3.4. Funding Indemnification.................................................................... 49 3.5. Taxes...................................................................................... 50 3.6. Lender Statements; Survival of Indemnity................................................... 52 3.7. Alternative Lending Installation........................................................... 52 ARTICLE IV CONDITIONS PRECEDENT................................................................... 52 4.1. Effectiveness of Revolving Loan Commitments................................................ 52 4.2. Each Credit Extension...................................................................... 54
i ARTICLE V REPRESENTATIONS AND WARRANTIES......................................................... 55 5.1. Existence and Standing..................................................................... 55 5.2. Authorization and Validity................................................................. 55 5.3. No Conflict; Government Consent............................................................ 55 5.4. Financial Statements....................................................................... 56 5.5. Material Adverse Change.................................................................... 56 5.6. Taxes...................................................................................... 56 5.7. Litigation and Contingent Obligations...................................................... 56 5.8. Subsidiaries............................................................................... 56 5.9. ERISA...................................................................................... 56 5.10. Accuracy of Information.................................................................... 57 5.11. Regulation U............................................................................... 57 5.12. Material Agreements........................................................................ 57 5.13. Compliance With Laws....................................................................... 57 5.14. Ownership of Properties.................................................................... 57 5.15. Plan Assets; Prohibited Transactions....................................................... 57 5.16. Environmental Matters...................................................................... 57 5.17. Investment Company Act..................................................................... 58 5.18. Public Utility Holding Company Act......................................................... 58 5.19. Insurance.................................................................................. 58 5.20. No Default or Unmatured Default............................................................ 58 5.21. Reportable Transaction..................................................................... 58 ARTICLE VI COVENANTS.............................................................................. 58 6.1. Financial Reporting........................................................................ 58 6.2. Use of Proceeds............................................................................ 61 6.3. Notice of Default.......................................................................... 61 6.4. Conduct of Business........................................................................ 61 6.5. Taxes...................................................................................... 61 6.6. Insurance.................................................................................. 61 6.7. Compliance with Laws....................................................................... 62 6.8. Maintenance of Properties.................................................................. 62 6.9. Inspection; Keeping of Books and Records................................................... 62 6.10. Restricted Payments........................................................................ 63 6.11. Merger..................................................................................... 63 6.12. Sale of Assets............................................................................. 63 6.13. Investments and Acquisitions............................................................... 64 6.14. Indebtedness............................................................................... 65 6.15. Liens; Negative Pledge..................................................................... 66 6.16. Affiliates................................................................................. 69 6.17. Financial Contracts........................................................................ 69 6.18. Subsidiary Covenants....................................................................... 69 6.19. Contingent Obligations..................................................................... 69 6.20. Amendments to Agreements................................................................... 69 6.21. Fixed Charge Coverage Ratio................................................................ 70
ii 6.22. Minimum Consolidated Tangible Net Worth.................................................... 70 6.23. Subsidiary Collateral Documents; Subsidiary Guarantors..................................... 70 6.24. Insurance and Condemnation Proceeds........................................................ 71 6.25. Collection Accounts........................................................................ 71 6.26. Subordinated Indebtedness.................................................................. 72 6.27. Multiemployer Plans........................................................................ 72 6.28. Consolidated Capital Expenditures.......................................................... 72 6.29. Other Permitted Availability............................................................... 72 ARTICLE VII DEFAULTS............................................................................... 73 ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES......................................... 75 8.1. Acceleration............................................................................... 75 8.2. Amendments................................................................................. 76 8.3. Preservation of Rights..................................................................... 78 ARTICLE IX GENERAL PROVISIONS..................................................................... 78 9.1. Survival of Representations................................................................ 78 9.2. Governmental Regulation.................................................................... 78 9.3. Headings................................................................................... 78 9.4. Entire Agreement........................................................................... 78 9.5. Several Obligations; Benefits of this Agreement............................................ 79 9.6. Expenses; Indemnification.................................................................. 79 9.7. Numbers of Documents....................................................................... 80 9.8. Accounting................................................................................. 80 9.9. Severability of Provisions................................................................. 80 9.10. Nonliability of Lenders.................................................................... 80 9.11. Confidentiality............................................................................ 81 9.12. Lenders Not Utilizing Plan Assets.......................................................... 81 9.13. Nonreliance................................................................................ 81 9.14. Disclosure................................................................................. 81 9.15. Performance of Obligations................................................................. 81 9.16. Syndication Agent, Co-Documentation Agents, Co-Collateral Agents, etc...................... 82 9.17. Subordination of Intercompany Indebtedness................................................. 82 9.18. Certifications Regarding Indentures........................................................ 83 ARTICLE X THE AGENT.............................................................................. 84 10.1. Appointment; Nature of Relationship........................................................ 84 10.2. Powers..................................................................................... 84 10.3. General Immunity........................................................................... 84 10.4. No Responsibility for Loans, Recitals, etc................................................. 85 10.5. Action on Instructions of Lenders.......................................................... 85 10.6. Employment of Agents and Counsel........................................................... 85 10.7. Reliance on Documents; Counsel............................................................. 85
iii 10.8. Agent's Reimbursement and Indemnification.................................................. 86 10.9. Notice of Default.......................................................................... 86 10.10. Rights as a Lender......................................................................... 86 10.11. Lender Credit Decision..................................................................... 86 10.12. Successor Agent............................................................................ 87 10.13. Agent and Arranger Fees.................................................................... 87 10.14. Delegation to Affiliates................................................................... 87 10.15. Collateral Documents....................................................................... 88 10.16. Intercreditor Agreement.................................................................... 88 ARTICLE XI SETOFF; RATABLE PAYMENTS............................................................... 90 11.1. Setoff..................................................................................... 90 11.2. Ratable Payments........................................................................... 90 11.3. Application of Payments.................................................................... 90 ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS...................................... 91 12.1. Successors and Assigns; Designated Lenders................................................. 91 12.2. Participations............................................................................. 93 12.3. Assignments................................................................................ 94 12.4. Dissemination of Information............................................................... 96 12.5. Tax Certifications......................................................................... 96 ARTICLE XIII NOTICES................................................................................ 96 13.1. Notices.................................................................................... 96 13.2. Change of Address.......................................................................... 96 ARTICLE XIV COUNTERPARTS........................................................................... 97 ARTICLE XV CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL........................... 97 ARTICLE XVI PRIOR CREDIT AGREEMENT................................................................. 98
iv SCHEDULES Commitment Schedule Pricing Schedule Schedule 1.1 - Eligible Carriers Schedule 2.19.1 - Letters of Credit under Existing Credit Agreement Schedule 5.8 - Subsidiaries Schedule 6.13 - Investments Schedule 6.14 - Indebtedness Schedule 6.15 - Liens EXHIBITS Exhibit A - Form of Borrower's Counsel's Opinion Exhibit B - Form of Compliance Certificate Exhibit C - Form of Assignment and Assumption Agreement Exhibit D - Form of Loan/Credit Related Money Transfer Instruction Exhibit E-1 - Form of Revolving Note (if requested) Exhibit E-2 - Form of Term Note (if requested) Exhibit F - Form of Designation Agreement Exhibit G - Form of Officer's Certificate Exhibit H - List of Closing Documents Exhibit I - Form of Intercreditor Agreement Exhibit J-1 - Form of Interim Collateral Report Exhibit J-2 - Form of Monthly Collateral Report v SECOND AMENDED AND RESTATED CREDIT AGREEMENT This Second Amended and Restated Credit Agreement, dated as of June 17, 2003, is entered into by and among Tesoro Petroleum Corporation, a Delaware corporation, the Lenders, the LC Issuers and Bank One, NA, a national banking association having its principal office in Chicago, Illinois, as Administrative Agent. The parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1. Certain Defined Terms. As used in this Agreement: "Accounting Changes" is defined in Section 9.8 hereof. "Account Debtor" means the account debtor or obligor with respect to any of the Receivables and/or the prospective purchaser with respect to any contract right, and/or any party who enters into or proposes to enter into any contract or other arrangement with the Borrower or any Subsidiary. "Acquisition" means any transaction, or any series of related transactions, consummated on or after the Closing Date, by which the Borrower or any of its Subsidiaries (i) acquires any going business or all or substantially all of the assets of any firm, corporation or limited liability company, or division thereof, whether through purchase of assets, merger or otherwise or (ii) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage of voting power) of the outstanding ownership interests of a partnership or limited liability company of any Person. "Advance" means a borrowing hereunder consisting of the aggregate amount of several Loans (i) made by some or all of the Lenders on the same Borrowing Date, or (ii) converted or continued by the Lenders on the same date of conversion or continuation, consisting, in either case, of the aggregate amount of the several Loans of the same Type and, in the case of Eurodollar Loans, for the same Interest Period. The term "Advance" shall, unless otherwise indicated, include Non-Ratable Loans and Collateral Protection Advances. "Affiliate" of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person. A Person shall be deemed to control another Person if the controlling Person is the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of 10% or more of any class of voting securities (or other ownership interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of voting securities, by contract or otherwise. "Agent" means Bank One in its capacity as contractual representative of the Lenders pursuant to Article X, and not in its individual capacity as a Lender, as Administrative Agent, and any successor Agent appointed pursuant to Article X. "Aggregate Outstanding Credit Exposure" means, at any time, the aggregate of the Outstanding Credit Exposure of all the Lenders. "Aggregate Outstanding Revolving Loan Credit Exposure" means, at any time, the aggregate of the Outstanding Revolving Loan Credit Exposures of all the Lenders. "Aggregate Revolving Loan Commitment" means the aggregate of the Revolving Loan Commitments of all the Lenders, as increased or reduced from time to time pursuant to the terms hereof. The initial Aggregate Revolving Loan Commitment is Five Hundred Million and 00/100 Dollars ($500,000,000). "Agreement" means this Amended and Restated Credit Agreement, as it may be amended, restated, supplemented or otherwise modified and as in effect from time to time. "Agreement Accounting Principles" means US GAAP, applied in a manner consistent with that used in preparing the financial statements of the Borrower referred to in Section 5.4; provided, however, that except as provided in Section 9.8, with respect to the calculation of the financial covenants set forth in Sections 6.21 and 6.22 (and the defined terms used in such Sections), "Agreement Accounting Principles" means US GAAP as in effect in the United States as of the Closing Date, applied in a manner consistent with that used in preparing the financial statements of the Borrower referred to in Section 5.4 hereof. "Alternate 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. "Applicable Fee Rate" means, with respect to the Commitment Fee at any time, the percentage rate per annum which is applicable at such time with respect to such fee as set forth in the Pricing Schedule. "Applicable Margin" means, with respect to Advances of any Type at any time, the percentage rate per annum which is applicable at such time with respect to Advances of such Type consisting of Revolving Loans or Term Loans, as applicable, as set forth in the Pricing Schedule. "Approved Fund" means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender. "Arranger" means Banc One Capital Markets, Inc., a Delaware corporation, and its successors, in its capacity as Sole Lead Arranger and Sole Book Runner. "Article" means an article of this Agreement unless another document is specifically referenced. "Assignment Agreement" is defined in Section 12.3.1. 2 "Authorized Officer" means any of the chief executive officer, president, chief operating officer, chief financial officer, treasurer, vice president-finance or vice president-controller of the Borrower, acting singly. "Available Aggregate Revolving Loan Commitment" means, at any time, the lesser of (i) the Aggregate Revolving Loan Commitment and (ii) the Borrowing Base then in effect, minus the Aggregate Outstanding Revolving Loan Credit Exposure at such time. "Bank One" means Bank One, NA, a national banking association having its principal office in Chicago, Illinois, in its individual capacity, and its successors. "Bank Products" means, with respect to any Lender, any of the following services provided to the Borrower or an Affiliate thereof by any Lender or the Agent: (i) Rate Management Transactions, (ii) commercial credit card services, (iii) cash management and other treasury management services (including, without limitation, controlled disbursements, automated clearinghouse transactions, return items, and interstate depository network services), and (iv) foreign exchange related services. "Borrower" means Tesoro Petroleum Corporation, a Delaware corporation, and its permitted successors and assigns (including, without limitation, a debtor in possession on its behalf). "Borrowing Base" means, as of any date of calculation, an amount equal to the lesser of (x) the Aggregate Revolving Loan Commitment plus the aggregate outstanding principal amount of the Term Loans, and (y) as set forth on the most current Interim Collateral Report or Monthly Collateral Report, as applicable, delivered to the Agent, the aggregate of (i) 100% of Perfected Cash Interests, plus (ii) eighty-five percent (85%) of the Gross Amount of Eligible Receivables, plus (iii) seventy-five percent (75%) of the Gross Amount of Eligible Petroleum Inventory, minus (iv) the Rental Reserve, minus (v) the Standard Reserve, and minus (vi) such reserves as the Agent may from time to time reasonably deem appropriate; provided, however, that the Agent, upon the occurrence and during the continuance of a Default, may, in its reasonable discretion and without the Borrower's consent, decrease the foregoing percentages. "Borrowing Date" means a date on which an Advance is made hereunder. "Borrowing Notice" is defined in Section 2.7. "Business Activity Report" means (A) a Notice of Business Activities Report filed with the State of Minnesota, Department of Revenue or (B) any similar report required by any other State relating to the ability of the Borrower or any Subsidiary Guarantor to enforce its Receivables claims against Account Debtors located in any such state. "Business Day" means (i) with respect to any borrowing, payment or rate selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on which banks generally are open in Chicago, Illinois and New York, New York for the conduct of substantially all of their commercial lending activities, interbank wire transfers can be made on the Fedwire system and dealings in Dollars are carried on in the London interbank market and (ii) for all other purposes, a day (other than a Saturday or Sunday) on which banks generally are open in Chicago, Illinois and New York, New York for the conduct of 3 substantially all of their commercial lending activities and interbank wire transfers can be made on the Fedwire system. "Capitalized Lease" of a Person means any lease of Property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles. "Capitalized Lease Obligations" of a Person means the amount of the obligations of such Person under Capitalized Leases which would be shown as a liability on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles. "Cash Equivalent Investments" means (i) short-term obligations of, or fully guaranteed by, the United States of America, (ii) commercial paper rated A-1 or better by S&P or P-1 or better by Moody's, (iii) demand deposit accounts maintained in the ordinary course of business, and (iv) certificates of deposit issued by and time deposits with commercial banks (whether domestic or foreign) having capital and surplus in excess of $100,000,000; provided in each case that the same provides for payment of both principal and interest (and not principal alone or interest alone) and is not subject to any contingency regarding the payment of principal or interest. "Change in Control" means the occurrence of any of the following events: (i) there shall be consummated (A) any consolidation or merger of the Borrower in which the Borrower is not the continuing or surviving corporation or pursuant to which shares of the Borrower's common stock would be converted into cash, securities or other property, other than a merger of the Borrower where a majority of the Board of Directors of the surviving corporation are, and for a two year period after the merger continue to be, persons who were directors of the Borrower immediately prior to such merger or were elected as directors, or nominated for election as directors, by a vote of at least two-thirds of the directors then still in office who were directors of the Borrower immediately prior to such merger, or (B) any sale, lease, exchange or transfer (in one transaction or a series of transactions) of all or substantially all of the assets of the Borrower, unless, immediately following such sale, lease, exchange or transfer, such assets are owned, directly or indirectly, by the Borrower or one or more Subsidiaries of the Borrower; (ii) the shareholders of the Borrower shall approve any plan or proposal for the liquidation or dissolution of the Borrower; (iii) (A) any "person" as defined in the Securities Exchange Act of 1934 (the "Exchange Act"), other than the Borrower or a Subsidiary or any employee benefit plan sponsored by the Borrower or a Subsidiary, shall become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Borrower representing 50% or more of the combined voting power of the Borrower's then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise, and (B) at any time during a period of two consecutive years thereafter, individuals who immediately prior to the beginning of such period constituted the Board of Directors of the Borrower shall cease for any reason to constitute at least a majority thereof, unless the election or the nomination by the Board of Directors for election by the Borrower's shareholders of each new director during such period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such 4 period; or (iv) a "Change of Control" or like event under any agreement, document or instrument evidencing Material Indebtedness. "Closing Date" means June 17, 2003. "Co-Agent" means each Co-Collateral Agent and each Documentation Agent. "Co-Collateral Agent" means each of Bank One and Bank of America, N.A., in each case together with its successors and assigns. "Code" means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time, and any rule or regulation issued thereunder. "Collateral" means all property and interests in property now owned or hereafter acquired by the Borrower or any of its Subsidiary Guarantors in or upon which a security interest or lien is granted to the Agent, for the benefit of the Holders of Secured Obligations, or to the Agent, for the benefit of the Lenders, whether under the Security Agreement, under any of the other Collateral Documents or under any of the other Loan Documents. "Collateral Documents" means all agreements, instruments and documents executed in connection with this Agreement that are intended to create or evidence Liens to secure the Secured Obligations, including, without limitation, the Security Agreement and all other security agreements, loan agreements, notes, guarantees, subordination agreements, pledges, powers of attorney, consents, assignments, contracts, fee letters, notices, leases, financing statements and all other written matter whether heretofore, now, or hereafter executed by or on behalf of the Borrower or any of its Subsidiary Guarantors and delivered to the Agent or any of the Lenders, together with all agreements and documents referred to therein or contemplated thereby. "Collateral Protection Advance" is defined in Section 2.1.2. "Collateral Shortfall Amount" is defined in Section 8.1. "Collection Account" is defined in Section 6.25. "Commitment Fee" is defined in Section 2.4.1. "Commitment Schedule" means the Schedule identifying each Lender's Revolving Loan Commitment as of the Closing Date and the principal amount of Term Loans held by each Lender, if any, as of the Closing Date, as attached hereto and identified as such. "Consolidated Capital Expenditures" means, for any period, with respect to the Borrower and its Subsidiaries, the aggregate of all expenditures by the Borrower and its Subsidiaries for the acquisition or leasing (pursuant to a Capitalized Lease) of fixed or capital assets or additions to equipment (including replacements, capitalized repairs, and improvements during such period) which are capitalized under Agreement Accounting Principles on the Borrower's or any Subsidiary's balance sheet. 5 "Consolidated EBITDA" means Consolidated Net Income plus, to the extent deducted from revenues in determining Consolidated Net Income, (i) Consolidated Interest Expense, (ii) income and franchise tax expense, (iii) depreciation, (iv) amortization and (v) any other non-cash charges, minus, to the extent included in Consolidated Net Income, (i) interest income (except to the extent deducted in determining Consolidated Interest Expense) and (ii) any other non-cash income, all reported for the Borrower and its Subsidiaries on a consolidated basis. "Consolidated Interest Expense" means, with reference to any period, the accrued interest expense of the Borrower and its Subsidiaries reported on a consolidated basis for such period, including, without limitation, yield or any other financing costs resembling interest which are payable under any Receivables Purchase Facility. "Consolidated Net Income" means, with reference to any period, the consolidated net earnings (or loss) of the Borrower and its Subsidiaries reported for such period. "Consolidated Tangible Net Worth" means at any time, with respect to any Person, the consolidated total stockholders' equity of such Person and its Subsidiaries reported on a consolidated basis in accordance with Agreement Accounting Principles and as reported in such Person's most recent Form 10-K or Form 10-Q filing, as applicable, with the U.S. Securities and Exchange Commission, minus at all times all items that are reported in such Form 10-K or Form 10-Q filing, as applicable, as "acquired intangibles net" and "goodwill." "Contingent Obligation" of a Person means any agreement, undertaking or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person against loss; provided, however, that amounts held or allocated as reserves for obligations arising under or in connection with (i) any Plan or other pension fund related item, (ii) litigation, judgments and legal proceedings, and (iii) compliance with Environmental Laws, including, without limitation, the remediation of any environmental related issues with respect to its Property, shall not constitute "Contingent Obligations." "Continuing Director" means, with respect to any Person as of any date of determination, any member of the board of directors of such Person who (i) was a member of such board of directors on the Closing Date, or (ii) was nominated for election or elected to such board of directors with the approval of the required majority of the Continuing Directors who were members of such board at the time of such nomination or election; provided that any individual who is so elected or nominated in connection with a merger, consolidation, acquisition or similar transaction shall not be a Continuing Director unless such individual was a Continuing Director prior thereto. "Controlled Group" means all members of a controlled group of corporations or other business entities and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code. 6 "Conversion/Continuation Notice" is defined in Section 2.8. "Credit Extension" means the making of an Advance or the issuance of a Facility LC hereunder. "Credit Extension Date" means the Borrowing Date for an Advance or the issuance date for a Facility LC. "Current Petroleum Inventory Market Price" means, with respect to any Petroleum Inventory, the market price for such Petroleum Inventory as set forth in a published or reported price index maintained by a third-party that is not an Affiliate of the Borrower and that prepares such index in the ordinary course of its business or such other price as the Agent may ascribe thereto in its reasonable credit judgment. Current Petroleum Inventory Market Price shall be determined using published or reported price indices created or distributed by Oil Price Information Service, commonly known as OPIS, and/or Platts Oilgram Price Report, commonly known as Platts. In the event OPIS or Platts no longer provides the aforementioned price indices, or in the event the Borrower and the Agent determine that either OPIS or Platts no longer accurately provides pricing information for Petroleum Inventory, the Borrower and the Agent shall replace one or both of the OPIS and Platts price indices, as applicable, with other third-party price indices reasonably acceptable to each of the Borrower and the Agent. "Default" means an event described in Article VII. "Designated Lender" means, with respect to each Designating Lender, each Eligible Designee designated by such Designating Lender pursuant to Section 12.1.2. "Designating Lender" means, with respect to each Designated Lender, the Lender that designated such Designated Lender pursuant to Section 12.1.2. "Designation Agreement" is defined in Section 12.1.2. "Documentation Agent" means each of Bank of America, N.A. and Fleet Capital Corporation, in each case together with its successors and assigns. "Dollar", "dollar" and "$" means the lawful currency of the United States of America. "Eligible Carrier" means any of the carriers and pipeline companies listed or described in Schedule 1.1 to this Agreement, as such Schedule 1.1 may be revised by the Borrower from time to time with the consent of the Agent, such consent not to be unreasonably withheld. "Eligible Designee" means a special purpose corporation, partnership, trust, limited partnership or limited liability company that is administered by the respective Designating Lender or an Affiliate of such Designating Lender and (i) is organized under the laws of the United States of America or any state thereof, (ii) is engaged primarily in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and (iii) issues (or the parent of which issues) commercial paper rated at least A-1 or the equivalent thereof by S&P or P-1 or the equivalent thereof by Moody's. 7 "Eligible Petroleum Inventory" means Petroleum Inventory of the Borrower and the Subsidiary Guarantors which is held for sale or lease in the ordinary course of business or furnished under any contract of service by the Borrower or such Subsidiary Guarantors in the ordinary course of business which is at all times and shall continue to meet standards of eligibility from time to time established in accordance with this Agreement. Initially, standards of eligibility will be established by the Agent in its reasonable credit judgment (which credit judgment shall be exercised in a manner that is not arbitrary or capricious) and may be revised from time to time by the Agent in its reasonable credit judgment (which credit judgment shall be exercised in a manner that is not arbitrary or capricious). In general, without limiting the foregoing, the following Petroleum Inventory includes as Eligible Petroleum Inventory: (a) (i) Petroleum Inventory that is subject to a valid, first priority perfected lien and security interest in favor of the Agent on behalf of the Holders of Secured Obligations or (ii) Petroleum Inventory that has been delivered to an Eligible Carrier subject to a valid, first priority perfected lien and security interest in favor of the Agent on behalf of the Holders of Secured Obligations with UCC financing statements (or any other applicable form) perfecting or continuing the perfection of the security interest of the Agent on behalf of the Holders of Secured Obligations in such Petroleum Inventory having been duly filed where necessary and either (x) no document of title is issued with respect to such Petroleum Inventory by such Eligible Carrier, or (y) if a document of title is issued with respect to such Petroleum Inventory by such Eligible Carrier, the original of such document of title is delivered to the Agent or its designated bailee or agent, (b) Petroleum Inventory that is in good saleable condition, is not deteriorating in quality and is not obsolete, and is of a quality which (in locations where sold by the Borrower) is marketable at prevailing market prices for such products and meets all applicable governmental regulations and standards at the place of intended sale, (c) Petroleum Inventory that is owned by the Borrower or its Subsidiaries (provided all documentation necessary to provide the Agent with a first priority, perfected Lien thereon shall be in full force and effect) or, in the case of Petroleum Inventory described in clause (ii) of paragraph (a) above, the Borrower has the absolute and unconditional right to obtain such Petroleum Inventory or Petroleum Inventory equivalent to such Petroleum Inventory from an Eligible Carrier, in each case, free and clear of any and all Liens whatsoever, other than those (1) in favor of the Agent on behalf of the Holders of Secured Obligations created pursuant to the Collateral Documents and (2) those in favor of an Eligible Carrier that arise under applicable law and for which appropriate amounts have been allocated under the Rental Reserve, (d) Petroleum Inventory that is (1) located at a location owned by the Borrower or a Subsidiary Guarantor, (2) delivered to an Eligible Carrier under an arrangement described in clause (ii) of paragraph (a) above, or (3) located at a location leased by the Borrower or a Subsidiary Guarantor so long as such location is either subject to a Third Party Agreement or such location is subject to the Rental Reserve; provided, however, that no Rental Reserve shall be applied to and no Third Party Agreement shall be required with respect to any property described in this clause (d)(3) during the first ninety (90) days after the Closing Date, 8 (e) Petroleum Inventory that is not commingled with Petroleum Inventory of any Person other than the Borrower and/or its Subsidiaries or has been delivered to an Eligible Carrier under an arrangement described in clause (ii) of paragraph (a) above, (f) Petroleum Inventory that is in full conformity with the representations and warranties made by the Borrower or a Subsidiary Guarantor to the Agent with respect thereto whether contained in this Agreement or the Security Agreement, and (g) To the extent Petroleum Inventory is in transit on the high seas to or from a non-Affiliate, (1) it does not constitute a Receivable, (2) if purchased with a Letter of Credit, a copy of such Letter of Credit has been delivered to the Agent, (3) it is covered by insurance in form and substance acceptable to the Agent, and (4) all applicable documents of title have been delivered to the Agent; provided, however, that with respect to the high seas Petroleum Inventory described in this clause (g), the amount of such high seas Petroleum Inventory on any date of determination in excess of 15% of the aggregate amount of all Petroleum Inventory then owned by the Borrower and its Subsidiary Guarantors on such date of determination shall not constitute Eligible Petroleum Inventory. Notwithstanding anything to the contrary set forth in this Agreement or any other Loan Document, no Petroleum Inventory located, stored or maintained at any retail service station or in a railroad car, or otherwise in transit upon a railway system, shall constitute Eligible Petroleum Inventory. "Eligible Receivables" means Receivables created by the Borrower or any Subsidiary Guarantor, in each case in the ordinary course of its business arising out of the sale of goods or rendition of services by the Borrower or such Subsidiary Guarantor, which Receivables are and at all times shall continue to meet standards of eligibility from time to time reasonably established in accordance with this Agreement. Initially, standards of eligibility will be established by the Agent in its reasonable credit judgment (which credit judgment shall be exercised in a manner that is not arbitrary or capricious) and may be revised from time to time by the Agent in its reasonable credit judgment (which credit judgment shall be exercised in a manner that is not arbitrary or capricious). In general, without limiting the foregoing, the following Receivables are not Eligible Receivables: (a) Receivables which remain unpaid sixty (60) days after the date on which payment was due or ninety (90) days after the date of the original applicable invoice; (b) Receivables on any date of determination which are owing by an Account Debtor and its Affiliates to the extent that the aggregate amount of Receivables owing by such Account Debtor and its Affiliates to the Borrower or any Subsidiary Guarantor exceeds 15% times the aggregate amount of all Eligible Receivables on such date; (c) all Receivables owing by a single Account Debtor (including Receivables which remain unpaid fewer than sixty (60) days after the date on which payment was due or ninety (90) days after the date of the original applicable invoice) if fifty percent (50%) of the aggregate balance owing by such Account Debtor, calculated without taking into account any credit balances of such Account Debtor, remains unpaid ninety (90) days after the date of the original 9 applicable invoice or has otherwise become, or has been determined by the Agent to be ineligible in accordance with the provisions of this definition; (d) Receivables with respect to which the Account Debtor is a director, officer, employee, Subsidiary or Affiliate of the Borrower or any Subsidiary thereof; (e) (i) Receivables with respect to which the Account Debtor is the United States of America, any federal, state, local or other political subdivision thereof or any department, agency or instrumentality of any of the foregoing, unless the Borrower or applicable Subsidiary Guarantor has complied with the provisions of the Federal Assignment of Claims Act or other applicable statutes, including executing and delivering to the Agent all statements of assignment and/or notification which are in form and substance acceptable to the Agent and which are deemed necessary by the Agent to effectuate the assignment of such Receivables to the Agent for the benefit of the Holders of Secured Obligations; and (ii) Receivables with respect to which the Account Debtor is a foreign government, any federal, state, local or other political subdivision thereof, or any department, agency, or instrumentality of any of the foregoing described in this clause (ii); (f) Receivables not denominated in Dollars; (g) Receivables with respect to which the Account Debtor is not a resident of the United States (which shall not be deemed to include any territories of the United States) or Canada unless (i) the Account Debtor has supplied the Borrower or applicable Subsidiary Guarantor with an irrevocable letter of credit (which letter of credit shall be delivered to the Agent and shall be in form and substance acceptable to the Agent), or (ii) the full payment of such Receivable shall have been insured by the Borrower or applicable Subsidiary Guarantor pursuant to an insurance policy in form and substance acceptable to the Agent issued by a financial institution satisfactory to the Agent, which policy names the Agent as the loss payee or beneficiary thereof; (h) Receivables that are subject to any dispute, contra-account, defense, offset or counterclaim, volume rebate or advertising or other allowance; provided that if any portion of any such Receivables is not subject to any dispute, contra-account, defense, offset, counterclaim, volume rebate or advertising or other allowance and the payment of such portion is not being withheld or delayed or otherwise affected in any manner due to the portion that is subject to such dispute, contra-account, defense, offset, counterclaim, volume rebate or advertising or other allowance, then such portion which is not subject to any dispute, contra-account, defense, offset, counterclaim, volume rebate or advertising or other allowance shall not be excluded from Eligible Receivables because of this clause (h); provided, further, that the portion of a contra-account that arises from a claim against the Borrower or a Subsidiary Guarantor that is supported by a letter of credit issued on behalf of the Borrower or a Subsidiary Guarantor in favor of a customer as payment for goods or services shall not be excluded from Eligible Receivables because of this clause (h); (i) Receivables with respect to which the Account Debtor is the subject of a bankruptcy or similar insolvency proceeding or has made an assignment for the benefit of creditors or whose assets have been conveyed to a receiver, trustee or assignee for the benefit of creditors; 10 (j) Receivables with respect to which the Account Debtor's obligation to pay the Receivable is conditional upon the Account Debtor's approval or is otherwise subject to any repurchase obligation or return right, as with sales made on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval (except with respect to Receivables in connection with which Account Debtors are entitled to return Petroleum Inventory on the basis of the quality of such Petroleum Inventory) or consignment basis, or where such Receivables represent progress billings; (k) Receivables with respect to which the Account Debtor is located in Minnesota (or any other jurisdiction which adopts a statute or other requirement with respect to which any Person that obtains business from within such jurisdiction or is otherwise subject to such jurisdiction's tax law requiring such Person to file a Business Activity Report or make any other required filings in a timely manner in order to enforce its claims in such jurisdiction's courts or arising under such jurisdiction's laws); provided, however, such Receivables shall nonetheless be eligible if the Borrower or applicable Subsidiary Guarantor has filed a Business Activity Report (or other applicable report) with the applicable state office, or is qualified to do business in such jurisdiction and, at the time the Receivable was created, was qualified to do business in such jurisdiction, or had on file with the applicable state office a current Business Activity Report (or other applicable report), or is exempt from such filing requirement; (l) Receivables with respect to which the Account Debtor's obligation does not constitute its legal, valid and binding obligation, enforceable against it in accordance with its terms; (m) Receivables with respect to which the Borrower or applicable Subsidiary Guarantor has not yet shipped the applicable goods or performed the applicable service; (n) any Receivable which is not in conformity with the representations and warranties made by the Borrower or the applicable Subsidiary Guarantors to the Agent with respect thereto, whether contained in this Agreement or the Security Agreement; (o) Receivables in connection with which the Borrower or applicable Subsidiary Guarantor (or any other party to such Receivable) is in default in the performance or observance of any of the terms thereof (other than payment of such Receivable) in any material respect; (p) Receivables that are not bona fide existing obligations created by the sale and actual delivery of inventory, goods or other property or the furnishing of services of other good and sufficient consideration to customers of the Borrower or the applicable Subsidiary Guarantors in the ordinary course of business; (q) Receivables subject to any Lien or the Petroleum Inventory, goods, property, services or other consideration of which any such Receivable constitutes proceeds is subject to any such Lien, in either case other than the Lien granted to the Agent in connection herewith for the benefit of the Holders of Secured Obligations; (r) Receivables that have been classified by the Borrower or any Subsidiary Guarantor as doubtful or that have otherwise failed to meet established or customary credit standards of the Borrower or the Subsidiary Guarantors, to the extent of such write-down; 11 (s) Receivables evidenced by a promissory note or other similar instrument; (t) Receivables that are subordinate or junior in right or priority of payment to any other obligation or claim; (u) Receivables that are consigned or otherwise assigned to any Person for collection or otherwise; and (v) Receivables generated by sales on a cash-on-delivery basis. "Environmental Laws" means any and all federal, state and local statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to (i) the protection of the environment, (ii) the effect of the environment on human health, (iii) emissions, discharges or releases of pollutants, contaminants, hazardous substances or wastes into surface water, ground water or land, or (iv) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, hazardous substances or wastes or the clean-up or other remediation thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any rules or regulations promulgated thereunder. "Eurodollar Advance" means an Advance which, except as otherwise provided in Section 2.10, bears interest at the applicable Eurodollar Rate. "Eurodollar Base Rate" means, with respect to a Eurodollar Advance 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 Agent, the applicable Eurodollar Base Rate for the relevant Interest Period shall instead be the rate determined by the Agent to be the rate at which Bank One or one of its affiliate banks offers to place deposits in Dollars with first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period, in the approximate amount of Bank One's relevant Eurodollar Loan and having a maturity equal to such Interest Period. "Eurodollar Loan" means a Loan which, except as otherwise provided in Section 2.10, bears interest at the applicable Eurodollar Rate. "Eurodollar Rate" means, with respect to a Eurodollar Advance for the relevant Interest Period, the sum of (i) the quotient of (a) the Eurodollar Base Rate applicable to such Interest Period, divided by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to such Interest Period, plus (ii) the then Applicable Margin, changing as and when the Applicable Margin changes. "Excess Availability" means, on any date of determination, the excess of the Borrowing Base over the Aggregate Outstanding Credit Exposure on such date. 12 "Excluded Subsidiary" means each of Tesoro Indonesia Petroleum Company, Tesoro Equipment Company, Tesoro Crude Oil Company, Tesoro Gasoline Marketing Company, Tesoro Pump & Valve Company, Tesoro Environmental Resources Company, Tesoro Environmental Products Company, Tesoro Latin America Company, Tesoro High Plains Company, Tesoro South Pacific Petroleum Company, Tesoro Building Project, L.P., Interior Fuels Company, Coastwide Marine Services, Inc., Tesoro Petroleum (Singapore) Pte. Ltd., the Pipeline Subsidiaries, and such other Subsidiaries that the Borrower, with the Agent's prior written consent, may identify to the Agent and the Lenders from time to time. "Excluded Taxes" means, in the case of each Lender or applicable Lending Installation and the Agent, taxes imposed on its overall net income, and franchise taxes imposed on it, by (i) the jurisdiction under the laws of which such Lender or the Agent is incorporated or organized or any political combination or subdivision or taxing authority thereof or (ii) the jurisdiction in which the Agent's or such Lender's principal executive office or such Lender's applicable Lending Installation is located. "Exhibit" refers to an exhibit to this Agreement, unless another document is specifically referenced. "Existing Credit Agreement" means the Amended and Restated Credit Agreement, dated as of May 17, 2002, by and among the Borrower, certain financial institutions, and Bank One, as Administrative Agent, as amended or modified from time to time. "Facility LC" is defined in Section 2.19.1. "Facility LC Application" is defined in Section 2.19.3. "Facility LC Collateral Account" is defined in Section 2.19.11. "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 average of the quotations at approximately 10:00 a.m. (Chicago time) on such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent in its sole discretion. "Financing" means, with respect to any Person, (i) the issuance or sale by such Person of any equity interests in such Person, or (ii) the issuance or sale by such Person of any Indebtedness other than Indebtedness described in Sections 6.14.1 through 6.14.5; provided, however, that the foregoing clause (ii) shall not permit the incurrence by the Borrower or any Subsidiary of any Indebtedness if such incurrence is not otherwise permitted by this Agreement. "Fixed Charges" means, for any period of determination, the sum of (i) Consolidated Interest Expense on a cash basis, and (ii) scheduled cash payments of the principal amount of Indebtedness, including, without limitation, scheduled principal payments on the Term Loans; 13 provided, however, that payments of principal owing under or in connection with the Loans other than the Term Loans shall not be included in any determination of Fixed Charges. "Floating Rate" means, for any day, a rate per annum equal to the sum of (i) the Alternate Base Rate for such day, changing when and as the Alternate Base Rate changes plus (ii) the then Applicable Margin, changing as and when the Applicable Margin changes. "Floating Rate Advance" means an Advance which, except as otherwise provided in Section 2.10, bears interest at the Floating Rate. "Floating Rate Loan" means a Revolving Loan which, except as otherwise provided in Section 2.10, bears interest at the Floating Rate. "Fund" means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business. "Gross Amount of Eligible Petroleum Inventory" means Eligible Petroleum Inventory valued at market value, less (i) the value of reserves which have been recorded by the Borrower and the Subsidiary Guarantors with respect to obsolete, slow-moving or excess Petroleum Inventory, and (ii) such other reserves as the Agent elects to establish in accordance with its reasonable credit judgment (which credit judgment shall be exercised in a manner that is not arbitrary or capricious). "Gross Amount of Eligible Receivables" means the outstanding face amount of Eligible Receivables, determined in accordance with Agreement Accounting Principles, consistently applied, less (i) all financing charges, late fees and other fees that are unearned, (ii) the value of any accrual that has been recorded by the Borrower and the Subsidiary Guarantors with respect to downward price adjustments, and (iii) such other reserves as the Agent elects to establish in accordance with its reasonable credit judgment (which credit judgment shall be exercised in a manner that is not arbitrary or capricious). "Guaranty" means the Subsidiary Guaranty, dated as of April 17, 2003, made by certain Subsidiaries of the Borrower in favor of the Agent for the benefit of the Holders of Secured Obligations, as the same may be amended, restated, supplemented or otherwise modified from time to time. "Highest Lawful Rate" means, at any time, the maximum rate of interest the Holders of Secured Obligations may lawfully contract for, charge, or receive in respect of the Secured Obligations as allowed by any applicable law. For purposes of determining the Highest Lawful Rate under applicable law of the State of Texas, the applicable rate ceiling shall be (a) the "weekly ceiling" described in and computed in accordance with the provisions of Section 303.003 of the Texas Finance Code, as amended, or (b) if the parties subsequently contract as allowed by any applicable law, the "quarterly ceiling" or the "annualized ceiling" computed pursuant to Section 303.008 of the Texas Finance Code, as amended; provided, however, that at any time the "weekly ceiling", the "quarterly ceiling", or the "annualized ceiling" shall be less than eighteen percent (18.0%) per annum or more than twenty-four percent (24.0%) per annum, 14 the provisions of Section 303.009(a) and Section 300.009(b) of the Texas Finance Code, as amended, shall control for purposes of such determination, as applicable. "Holders of Secured Obligations" means the holders of the Secured Obligations from time to time and shall refer to (i) each Lender in respect of its Loans, (ii) each LC Issuer in respect of Reimbursement Obligations, (iii) the Agent, the Lenders and LC Issuers in respect of all other present and future obligations and liabilities of the Borrower or any of its Subsidiary Guarantors of every type and description arising under or in connection with this Agreement or any other Loan Document, (iv) each Person benefiting from indemnities made by the Borrower or any Subsidiary Guarantor hereunder or under other Loan Documents in respect of the obligations and liabilities of the Borrower or such Subsidiary Guarantor to such Person, (v) each Lender (or affiliate thereof), in respect of all Rate Management Obligations of the Borrower to such Lender (or such affiliate) as exchange party or counterparty under any Rate Management Transaction, and (vi) their respective successors, transferees and assigns. "Indebtedness" of a Person means, at any time, without duplication, such Person's (i) obligations for borrowed money, (ii) obligations representing the deferred purchase price of Property or services (other than current accounts payable arising in the ordinary course of such Person's business payable on terms customary in the trade), (iii) obligations, whether or not assumed, secured by Liens or payable out of the proceeds or production from Property now or hereafter owned or acquired by such Person, (iv) obligations which are evidenced by notes, bonds, debentures, acceptances, or other instruments, (v) obligations to purchase securities or other Property arising out of or in connection with the sale of the same or substantially similar securities or Property, (vi) Capitalized Lease Obligations, (vii) Contingent Obligations of such Person, (viii) reimbursement obligations under Letters of Credit, bankers' acceptances, surety bonds and similar instruments, (ix) Off-Balance Sheet Liabilities, (x) obligations under Sale and Leaseback Transactions, (xi) Net Mark-to-Market Exposure under Rate Management Transactions, (xii) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any capital stock of such Person, (xiii) the liquidation value of any mandatorily redeemable preferred capital stock of such Person or its Subsidiaries held by any Person other than such Person and its wholly-owned Subsidiaries, (xiv) obligations of any partnership or unincorporated joint venture in which such Person is a general partner or a joint venturer, but only to the extent to which there is recourse to such Person for the payment of such obligations, and (xv) any other obligation for borrowed money which in accordance with Agreement Accounting Principles would be shown as a liability on the consolidated balance sheet of such Person. Obligations of the Borrower and its Subsidiaries to pay dues to Marine Spill Response Corporation in an aggregate amount of up to $7,000,000 shall not be deemed to constitute Indebtedness. "Intercreditor Agreement" means, collectively, (x) Article XI of the Senior Note Indenture and Article X of the Senior Term Loan Agreement, attached hereto as Exhibit I, as in effect on the Closing Date, and (y) an intercreditor agreement between the Agent and the Multiparty Collateral Agent, in form and substance acceptable to each such party, entered into pursuant to Section 11.01 of the Senior Note Indenture and Section 10.01 of the Senior Term Loan Agreement. 15 "Interest Period" means, with respect to a Eurodollar Advance, a period of one, two, three or six months, commencing on a Business Day selected by the Borrower pursuant to this Agreement. Such Interest Period shall end on but exclude the day which corresponds numerically to such date one, two, three or six months thereafter, provided, however, that if there is no such numerically corresponding day in such next, second, third or sixth succeeding month, such Interest Period shall end on the last Business Day of such next, second, third or sixth succeeding month. If an Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next succeeding Business Day, provided, however, that if said next succeeding Business Day falls in a new calendar month, such Interest Period shall end on the immediately preceding Business Day. Notwithstanding the foregoing or anything to the contrary in any Loan Document, from the Closing Date through the date on which the Agent confirms to the Borrower that the syndication of the Loans and Revolving Loan Commitments has been completed (the "Syndication Period"), each Interest Period for Eurodollar Advances shall equal seven days. "Interim Collateral Report" means a report, in form and substance substantially similar to Exhibit J-1 hereto and acceptable to the Agent. "Investment" of a Person means any loan, advance (other than commission, travel and similar advances to officers and employees made in the ordinary course of business), extension of credit (other than accounts receivable arising in the ordinary course of business on terms customary in the trade) or contribution of capital by such Person; stocks, bonds, mutual funds, partnership interests, notes, debentures or other securities owned by such Person; any deposit accounts and certificates of deposit owned by such Person; and structured notes, derivative financial instruments and other similar instruments or contracts owned by such Person. "LC Fee" is defined in Section 2.19.4. "LC Issuer" means Bank One (or any subsidiary or affiliate of Bank One designated by Bank One) or any other Lender, subject to the Agent's prior written consent (which consent shall not be unreasonably withheld), in its separate capacity as an issuer of Facility LCs hereunder. "LC Obligations" means, at any time, the sum, without duplication, of (i) the aggregate undrawn stated amount under all Facility LCs outstanding at such time plus (ii) the aggregate unpaid amount at such time of all Reimbursement Obligations. "LC Payment Date" is defined in Section 2.19.5. "Lenders" means the lending institutions listed on the signature pages of this Agreement or lending institutions parties to Assignment Agreements delivered pursuant to Section 12.3, in each case together with their respective successors and assigns. Unless otherwise specified, the term "Lenders" includes each LC Issuer, the Non-Ratable Lender, and the Agent with respect to Collateral Protection Advances. "Lending Installation" means, with respect to a Lender or the Agent, the office, branch, subsidiary or affiliate of such Lender or the Agent listed on the signature pages hereof or on the administrative information sheets provided to the Agent in connection herewith or on a Schedule or otherwise selected by such Lender or the Agent pursuant to Section 2.16. 16 "Letter of Credit" of a Person means a letter of credit or similar instrument which is issued upon the application of such Person or upon which such Person is an account party or for which such Person is in any way liable. "Lien" means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement, and, in the case of stock, stockholders agreements, voting trust agreements and all similar arrangements). "Loan" means, with respect to a Lender, any loan of such Lender made pursuant to Article II (or any conversion or continuation thereof), including, without limitation, Revolving Loans, Term Loans, Collateral Protection Advances and Non-Ratable Loans. "Loan Documents" means this Agreement, the Facility LC Applications, the Collateral Documents, the Guaranty, the Intercreditor Agreement, and all other documents, instruments, notes (including any Notes issued pursuant to Section 2.12 (if requested)) and agreements executed in connection herewith or therewith or contemplated hereby or thereby, as the same may be amended, restated or otherwise modified and in effect from time to time. "Marine Services Assets" means the Property of Tesoro Marine Services, LLC, and the equity interests of each of Tesoro Marine Services Holding Company and Tesoro Marine Services, LLC, which equity interests are held by the Borrower as of the Closing Date. "Material Adverse Effect" means a material adverse effect on (i) the business, Property, condition (financial or otherwise), operations or results of operations or prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the ability of the Borrower or any Subsidiary Guarantor to perform its obligations under the Loan Documents, or (iii) the validity or enforceability of the Loan Documents or the rights or remedies of the Agent, the LC Issuers or the Lenders thereunder or their rights with respect to the Collateral. "Material Indebtedness" means any Indebtedness in an outstanding principal amount of $25,000,000 or more in the aggregate (or the equivalent thereof in any currency other than Dollars). "Material Indebtedness Agreement" means any agreement under which any Material Indebtedness was created or is governed or which provides for the incurrence of Indebtedness in an amount which would constitute Material Indebtedness (whether or not an amount of Indebtedness constituting Material Indebtedness is outstanding thereunder). "Modify" and "Modification" are defined in Section 2.19.1. "Monthly Collateral Report" means a report, in form and substance substantially similar to Exhibit J-2 hereto and acceptable to the Agent, which shall include, among other things, the following additional information: 17 (i) a detailed aged trial balance of each Receivable of the Borrower and its Subsidiaries in existence as of the date of such report specifying the name and balance due for the applicable Account Debtor, as reconciled in a manner reasonably acceptable to the Agent; (ii) with respect to Petroleum Inventory, a detailed listing of product type, volume on hand by location, and Current Petroleum Inventory Market Price; (iii) a spreadsheet which identifies all Eligible Receivables and Eligible Petroleum Inventory and all non-Eligible Receivables and non-Eligible Petroleum Inventory; and (iv) a schedule and aging of the Borrower's and its Subsidiaries' accounts payable. "Moody's" means Moody's Investors Services, Inc. and any successor thereto. "Multiemployer Plan" means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, which is covered by Title IV of ERISA and to which the Borrower or any member of the Controlled Group is obligated to make contributions. "Multiparty Collateral Agent" means Wilmington Trust Company, together with its successors and permitted assigns, in its capacity as "Collateral Agent" for the Senior Noteholders and the Senior Term Loan Holders. "Net Cash Proceeds" means, with respect to any sale of Property or any Financing by any Person, (a) cash (freely convertible into Dollars) received by such Person or any Subsidiary of such Person from such sale of Property (including cash received as consideration for the assumption or incurrence of liabilities incurred in connection with or in anticipation of such sale of Property) or Financing, after (i) provision for all income or other taxes measured by or resulting from such sale of Property, (ii) payment of all reasonable brokerage commissions and other fees and expenses related to such sale of Property or Financing, and (iii) all amounts used to repay Indebtedness secured by a Lien on any asset disposed of in such sale of Property which is or may be required (by the express terms of the instrument governing such Indebtedness) to be repaid in connection with such sale of Property (including payments made to obtain or avoid the need for the consent of any holder of such Indebtedness) or Financing. "Net Consolidated Capital Expenditures" means, with respect to any fiscal quarter, Consolidated Capital Expenditures for such quarter minus Net Cash Proceeds resulting from Asset Sales during such quarter minus the aggregate amount of purchase money Indebtedness incurred during such quarter. "Net Mark-to-Market Exposure" of a Person means, as of any date of determination, the excess (if any) of all unrealized losses over all unrealized profits of such Person arising from Rate Management Transactions. "Unrealized losses" means the fair market value of the cost to such Person of replacing such Rate Management Transaction as of the date of determination (assuming the Rate Management Transaction were to be terminated as of that date), and "unrealized profits" means the fair market value of the gain to such Person of replacing such Rate Management Transaction as of the date of determination (assuming such Rate Management Transaction were to be terminated as of that date). 18 "Non-Lender Asset Sale Proceeds" means any amount (x) that results from a sale of the Borrower's or any Subsidiary's Property, (y) that does not constitute Collateral, and (z) that is not required to be applied in reduction of the principal amount of outstanding Loans under Section 2.2.2. "Non-Ratable Lender" means Bank One or such other Lender which may succeed to Bank One's rights and obligations as Non-Ratable Lender pursuant to the terms of this Agreement. "Non-Ratable Loan" has the meaning set forth in Section 2.1.3. "Non-U.S. Lender" is defined in Section 3.5(iv). "Note" is defined in Section 2.12. "Obligations" means all Revolving Loans, all Term Loans, all Non-Ratable Loans, all Reimbursement Obligations, advances, debts, liabilities, obligations, covenants and duties owing by the Borrower to the Agent, any Lender, the Non-Ratable Lender, any LC Issuer, the Arranger, any affiliate of the Agent, any Lender, the Non-Ratable Lender, any LC Issuer or the Arranger, or any indemnitee under the provisions of Section 9.6 or any other provisions of the Loan Documents, in each case of any kind or nature, present or future, arising under this Agreement or any other Loan Document, whether or not evidenced by any note, guaranty or other instrument, whether or not for the payment of money, whether arising by reason of an extension of credit, loan, foreign exchange risk, guaranty, indemnification, or in any other manner, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and however acquired. The term includes, without limitation, all interest, charges, expenses, fees, attorneys' fees and disbursements, paralegals' fees (in each case whether or not allowed), and any other sum chargeable to the Borrower or any of its Subsidiaries under this Agreement or any other Loan Document. "Off-Balance Sheet Liability" of a Person means the principal component of (i) any repurchase obligation or liability of such Person with respect to Receivables sold by such Person, (ii) any liability under any Sale and Leaseback Transaction which is not a Capitalized Lease, (iii) any liability under any so-called "synthetic lease" or "tax ownership operating lease" transaction entered into by such Person, (iv) any Receivables Purchase Facility, or (v) any obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the consolidated balance sheets of such Person, but excluding from this clause (v) all Operating Leases. "Operating Lease" of a Person means any lease of Property (other than a Capitalized Lease) by such Person as lessee which has an original term (including any required renewals and any renewals effective at the option of the lessor) of one year or more. "Operating Lease Obligations" means, as of any date of determination, the amount obtained by aggregating the present values, determined in the case of each particular Operating Lease by applying a discount rate (which discount rate shall equal the discount rate which would be applied under Agreement Accounting Principles if such Operating Lease were a Capitalized Lease) from the date on which each fixed lease payment is due under such Operating Lease to 19 such date of determination, of all fixed lease payments due under all Operating Leases of the Borrower and its Subsidiaries. "Other Senior Secured Debt" means the Senior Term Loans and the Senior Notes. "Other Senior Secured Debt Collateral Proceeds" means any amount constituting the Borrower's or any Subsidiary's Property (including proceeds thereof) that secures obligations owing by the Borrower or its Subsidiaries to the Senior Noteholders under the Senior Notes or the Senior Term Loan Holders under the Senior Term Loan Agreement. "Other Taxes" is defined in Section 3.5(ii). "Outstanding Credit Exposure" means, as to any Lender at any time, the sum of (i) the aggregate principal amount of its Revolving Loans outstanding at such time (which shall include, without limitation, the amount of its ratable obligation to purchase participations in (a) the aggregate principal amount of Non-Ratable Loans outstanding at such time, (b) the LC Obligations at such time, and (c) Collateral Protection Advances outstanding at such time), and (ii) the aggregate principal amount of its Term Loans outstanding at such time. "Outstanding Revolving Loan Credit Exposure" means, as to any Lender at any time, the sum of (i) the aggregate principal amount of its Revolving Loans outstanding at such time, plus (ii) an amount equal to its Revolving Loan Pro Rata Share of the LC Obligations at such time. "Participants" is defined in Section 12.2.1. "Payment Date" means April 1st, July 1st, October 1st, and January 1st of each calendar year, the Revolving Facility Termination Date, and the Term Loan Termination Date. Each Payment Date other than the Revolving Facility Termination Date and the Term Loan Termination Date shall relate to the calendar quarter immediately preceding it. For example, quarterly payments which accrue in respect of the quarter ending March 31st shall be due and payable on April 1st. "PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto. "Perfected Cash Interests" means Dollars or Cash Equivalent Investments on deposit in collection accounts subject to control agreements in form and substance acceptable to the Agent that grant the Agent first priority perfected security interests in such accounts and the Dollars and Cash Equivalent Investments (including proceeds thereof) on deposit or otherwise maintained therein. "Permitted Acquisition" is defined in Section 6.13.3. "Person" means any natural person, corporation, firm, joint venture, partnership, limited liability company, association, enterprise, trust or other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof. "Petroleum Inventory" means inventory consisting of crude oil, petroleum, refined petroleum products, byproducts and intermediate feedstocks, and other energy-related 20 commodities, including, without limitation, blend components commonly used in the petroleum industry to improve characteristics of, or meet governmental or customer specifications for, petroleum or refined petroleum products, all of which inventory shall be valued at market. "Pipeline Subsidiaries" means each of Kenai Pipeline Company, Tesoro Alaska Pipeline Company, Tesoro High Plains Pipeline Company, and each other Person (i) that does not own Collateral or Property required to be Collateral hereunder, and (ii) substantially all of the assets of which consist of one or more pipelines comparable to the ones owned by Kenai Pipe Line Company, Tesoro Alaska Pipeline Company, and Tesoro High Plains Pipeline Company, in each case together with their respective permitted successors and assigns, including, without limitation, debtors in possession on their behalf. "Plan" means an employee pension benefit plan, excluding any Multiemployer Plan, which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code as to which the Borrower or any member of the Controlled Group, may have any liability. "Pricing Schedule" means the Schedule identifying the Applicable Margin and Applicable Fee Rate attached hereto and identified as such. "Prime Rate" means a rate per annum equal to the prime rate of interest announced from time to time by Bank One or its parent (which is not necessarily the lowest rate charged to any customer), changing when and as said prime rate changes. "Property" of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person. "Pro Rata Share" means, with respect to a Lender, a portion equal to a fraction the numerator of which is the sum of such Lender's Revolving Loan Commitment and the aggregate outstanding principal amount of such Lender's Term Loans at such time (in each case, as adjusted from time to time in accordance with the provisions of this Agreement), and the denominator of which is the sum of the Aggregate Revolving Loan Commitment at such time and the aggregate outstanding principal amount of all of the Term Loans at such time; provided, that if the Revolving Loan Commitments have been terminated, "Pro Rata Share" means a fraction the numerator of which is such Lender's Outstanding Credit Exposure at such time and the denominator of which is the sum of the Aggregate Outstanding Credit Exposure at such time. "Purchase Price" means the total consideration and other amounts payable in connection with any Acquisition, including, without limitation, any portion of the consideration payable in cash, all Indebtedness, liabilities and contingent obligations incurred or assumed in connection with such Acquisition and all transaction costs and expenses incurred in connection with such Acquisition, but exclusive of the value of any capital stock or other equity interests of the Borrower or any Subsidiary issued as consideration for such Acquisition. "Purchasers" is defined in Section 12.3.1. "Rate Management Obligations" of a Person means any and all obligations of such Person, whether absolute or contingent and howsoever and whensoever created, arising, 21 evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all Rate Management Transactions, and (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any Rate Management Transactions. "Rate Management Transaction" means any transaction (including an agreement with respect thereto) now existing or hereafter entered by the Borrower or a Subsidiary which is a rate swap, basis swap, forward rate transaction, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, or equity prices. "Receivable(s)" means and includes any and all of the Borrower's and its Subsidiaries' presently existing and hereafter arising or acquired accounts, accounts receivable, and all present and future rights of the Borrower and its Subsidiaries to payment for goods sold or leased or for services rendered (except those evidenced by instruments or chattel paper), whether or not they have been earned by performance, and all rights in and to any merchandise or goods which any of the same may represent, and all rights, title, security and guaranties with respect to each of the foregoing, including, without limitation, any right of stoppage in transit. "Receivables Purchase Documents" means any series of receivables purchase or sale agreements generally consistent with terms contained in comparable structured finance transactions pursuant to which the Borrower or any of its Subsidiaries, in their respective capacities as sellers or transferors of any Receivables, sell or transfer to SPVs all of their respective right, title and interest in and to certain Receivables for further sale or transfer (or granting of Liens to other purchasers of or investors in such assets or interests therein (and the other documents, instruments and agreements executed in connection therewith), as any such agreements may be amended, restated, supplemented or otherwise modified from time to time, or any replacement or substitution therefor. "Receivables Purchase Facility" means any securitization facility made available to the Borrower or any of its Subsidiaries, pursuant to which Receivables of the Borrower or any of its Subsidiaries are transferred to one or more SPVs, and thereafter to certain investors, pursuant to the terms and conditions of the Receivables Purchase Documents. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks, non-banks and non-broker lenders for the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System. 22 "Regulation X" means Regulation X of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by foreign lenders for the purpose of purchasing or carrying margin stock (as defined therein). "Reimbursement Obligations" means, at any time, the aggregate of all obligations of the Borrower then outstanding under Section 2.19 to reimburse each LC Issuer for amounts paid by such LC Issuer in respect of any one or more drawings under Facility LCs. "Rental Reserve" means (i) with respect to any Eligible Carrier, such amount as the Agent in its reasonable credit judgment shall establish from time to time for such Eligible Carrier and (ii) with respect to any location not owned by the Borrower or a Subsidiary Guarantor at which Petroleum Inventory is located, stored, processed, maintained or otherwise held, until such time as such location is subject to a Third Party Agreement, an amount equal to 1 month's rent for such location. "Reportable Event" means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan subject to Title IV of ERISA, excluding, however, such events as to which the PBGC has by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event, provided, however, that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code. "Required Lenders" means Lenders in the aggregate having greater than 50% of the sum of (i) the Aggregate Revolving Loan Commitment and (ii) the aggregate outstanding principal amount of the Term Loans; provided, that if the Revolving Loan Commitment has been terminated, "Required Lenders" means Lenders in the aggregate holding greater than 50% of the Aggregate Outstanding Credit Exposure. "Reserve Requirement" means, with respect to an Interest Period, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D on "Eurocurrency liabilities" (as defined in Regulation D). "Restricted Payments" is defined in Section 6.10. "Retail Property" means Property of the Borrower or any Subsidiary owned in connection with the sale of motor fuels and convenience products and services to consumers in the retail market. "Revolver Prepayment Event" is defined in Section 2.2.6. "Revolving Facility Termination Date" means the earlier of (a) June 30, 2006 and (b) the date of termination in whole of the Aggregate Revolving Loan Commitment pursuant to Section 2.4 hereof or the Revolving Loan Commitments pursuant to Section 8.1 hereof. 23 "Revolving Loan" means, with respect to a Lender, such Lender's loan made pursuant to its commitment to lend set forth in Section 2.1 (and any conversion or continuation thereof); provided, however, that no Term Loan shall constitute a Revolving Loan. "Revolving Loan Commitment" means, for each Lender, including, without limitation, each LC Issuer, such Lender's obligation to make Revolving Loans to, and participate in Facility LCs issued upon the application of, the Borrower in an aggregate amount not exceeding the amount set forth for such Lender on the Commitment Schedule or in an Assignment Agreement delivered pursuant to Section 12.3, as such amount may be modified from time to time pursuant to the terms hereof. "Revolving Loan Pro Rata Share" means, with respect to a Lender, a portion equal to a fraction the numerator of which is such Lender's Revolving Loan Commitment at such time and the denominator of which is the Aggregate Revolving Loan Commitment at such time; provided, however, that if the Revolving Loan Commitments have been terminated pursuant to the terms of this Agreement, "Revolving Loan Pro Rata Share" means a portion equal to a fraction the numerator of which is such Lender's Outstanding Revolving Loan Credit Exposure at such time and the denominator of which is the Aggregate Outstanding Revolving Loan Credit Exposure at such time. "S&P" means Standard and Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc., and any successor thereto. "Sale and Leaseback Transaction" means any sale or other transfer of Property by any Person with the intent to lease such Property as lessee. "Schedule" refers to a specific schedule to this Agreement, unless another document is specifically referenced. "Section" means a numbered section of this Agreement, unless another document is specifically referenced. "Secured Obligations" means, collectively, (i) the Obligations, (ii) all Rate Management Obligations owing in connection with Rate Management Transactions to any Lender or any affiliate of any Lender, and (iii) to the extent not covered in clauses (i) and (ii), amounts owing to any Lender or the Agent under or in connection with Bank Products provided by such Lender or the Agent to the Borrower or its Affiliates. "Security Agreement" means the Security Agreement, dated as of April 17, 2003, by and among the Borrower, certain Subsidiaries thereof and the Agent for the benefit of the Holders of Secured Obligations, as the same may be amended, restated, supplemented or otherwise modified from time to time. "Senior Note Indenture" means the Indenture, dated as of April 17, 2003, by and among the Borrower, certain Subsidiaries of the Borrower, in their capacities as "Guarantors" thereunder, and the Senior Note Trustee, together with the agreements, documents and instruments delivered in connection therewith or issued pursuant thereto, including, without limitation, the Senior Notes and any guarantees, security documents, mortgages, and collateral 24 agency agreement required thereunder, in each case as the same may be amended, restated, supplemented or otherwise modified from time to time. "Senior Note Trustee" means The Bank of New York, together with its successors and permitted assigns. "Senior Noteholders" means those Persons that from time to time hold Senior Notes. "Senior Notes" means the Indebtedness evidenced by the promissory notes from time to time issued by the Borrower under the Senior Note Indenture. "Senior Term Loan Agreement" means the Credit and Guaranty Agreement, dated as of April 17, 2003, by and among the Borrower, certain Subsidiaries of the Borrower as "Guarantors", Goldman Sachs Credit Partners L.P., as sole lead arranger, sole bookrunner, and syndication agent, and the Senior Term Loan Agreement Agent, together with the agreements, documents and instruments delivered in connection therewith or issued pursuant thereto, including, without limitation, the promissory notes issued thereunder and any guarantees, security documents, mortgages and collateral agency agreement required thereunder, in each case as the same may be amended, restated, supplemented or otherwise modified from time to time. "Senior Term Loan Agreement Agent" means Goldman Sachs Credit Partners L.P., together with its successors and permitted assigns. "Senior Term Loan Holders" means the Persons from time to time party to the Senior Term Loan Agreement as "Lenders" and the Senior Term Loan Agreement Agent. "Senior Term Loans" means the Indebtedness incurred by the Borrower under the Senior Term Loan Agreement. "Single Employer Plan" means a Plan maintained by the Borrower or any member of the Controlled Group for employees of the Borrower or any member of the Controlled Group. "Specified Customers" means nine customers of the Borrower and the Subsidiary Guarantors from time to time identified as "Specified Customers" to the Agent by the Borrower. The Agent may from time to time request that the Borrower update or revise, to the Agent's reasonable satisfaction, the list of "Specified Customers." The Agent agrees that it has received an initial list of "Specified Customers" as of the Closing Date. "SPV" means any special purpose entity established for the purpose of purchasing Receivables in connection with a Receivables securitization transaction permitted under the terms of this Agreement. "Standard Reserve" means (a) from the Closing Date through the date on which the Borrower's financial information for the quarter ending June 30, 2003 is required to be delivered to the Agent under Section 6.1.3, $50,000,000, and (b) after the date on which the aforementioned financial information for the quarter ending June 30, 2003 is required to be delivered to the Agent: 25 (i) $50,000,000 at such time the "Fixed Charge Coverage Ratio" is calculated pursuant to Section 6.21 and equals or exceeds (A) 0.90 to 1.00 for the fiscal quarter ending June 30, 2003, with the "Fixed Charge Coverage Ratio" being based upon the two then most-recently ended fiscal quarters, (B) 0.95 to 1.00 for the fiscal quarter ending September 30, 2003, with the "Fixed Charge Coverage Ratio" being based upon the three then most-recently ended fiscal quarters, and (C) 1.00 to 1.00 for each fiscal quarter thereafter, beginning with the fiscal quarter ending December 31, 2003, with the "Fixed Charge Coverage Ratio" being based upon the four then most-recently ended fiscal quarters; or (ii) the greater of $50,000,000 and 15% of the then effective Borrowing Base (as calculated without giving effect to or including the Standard Reserve, the first purchaser crude liability reserve and the taxes held in trust/priming lien reserve and as the amount of such Borrowing Base may change from time to time upon the delivery of Interim Collateral Reports or Monthly Collateral Reports) at such time the "Fixed Charge Coverage Ratio" is calculated pursuant to Section 6.21 and is less than (A) 0.90 to 1.00 for the fiscal quarter ending June 30, 2003, with the "Fixed Charge Coverage Ratio" being based upon the two then most-recently ended fiscal quarters, (B) 0.95 to 1.00 for the fiscal quarter ending September 30, 2003, with the "Fixed Charge Coverage Ratio" being based upon the three then most-recently ended fiscal quarters, and (C) 1.00 to 1.00 for each fiscal quarter thereafter, beginning with the fiscal quarter ending December 31, 2003, with the "Fixed Charge Coverage Ratio" being based upon the four then most-recently ended fiscal quarters. "Subordinated Indebtedness" means any Indebtedness the payment of which is subordinated to the payment of the Secured Obligations to the written satisfaction of the Agent and the Lenders. "Subsidiary" of a Person means (i) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, limited liability company, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a "Subsidiary" shall mean a Subsidiary of the Borrower and no Excluded Subsidiary shall constitute a Subsidiary of the Borrower. "Subsidiary Guarantors" means each of the following Subsidiaries of the Borrower subject to the Guaranty as of the Closing Date, together with those other Persons organized under the laws of the United States or a political subdivision thereof that become subject to the Guaranty in accordance with Section 6.23 after the Closing Date, in each case together with its permitted successors and assigns (including, without limitation, a debtor in possession on its behalf): Tesoro Petroleum Companies, Inc., Tesoro Technology Company, Digicomp, Inc., Tesoro Aviation Company, Tesoro Financial Services Holding Company, Victory Finance Company, Tesoro Alaska Company, Tesoro Northstore Company, Tesoro Hawaii Corporation, Smiley's Super Service, Inc., Tesoro Refining and Marketing Company, Tesoro Vostok 26 Company, Tesoro Maritime Company, Far East Maritime Company, Gold Star Maritime Company, Tesoro Wasatch, LLC, Tesoro Trading Company, Tesoro Marine Services Holding Company, Tesoro Marine Services, LLC, and Tesoro Gas Resources Company, Inc. "Substantial Portion" means, with respect to the Property of the Borrower and its Subsidiaries, Property which represents more than 10% of the consolidated assets of the Borrower and its Subsidiaries or property which is responsible for more than 10% of the consolidated net sales or of the Consolidated Net Income of the Borrower and its Subsidiaries, in each case, as would be shown in the consolidated financial statements of the Borrower and its Subsidiaries, as at the end of the four fiscal quarter period ending with the fiscal quarter immediately prior to the fiscal quarter in which such determination is made (or if financial statements have not been delivered hereunder for that fiscal quarter which ends the four fiscal quarter period, then the financial statements delivered hereunder for the quarter ending immediately prior to that quarter). "Taxes" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and any and all liabilities with respect to the foregoing, but excluding Excluded Taxes. "Term Loan" means, with respect to a Lender, such Lender's term loan made pursuant to Section 2.1.4. "Term Loan Prepayment Event" is defined in Section 2.2.6. "Term Loan Termination Date" means the earlier to occur of (i) April 17, 2007 and (ii) the date of termination of the Revolving Loan Commitments pursuant to Section 8.1 hereof. "Third Party Agreement" means a letter agreement, in form and substance acceptable to the Agent, pursuant to which a landlord, bailee, consignee, processor, warehouseman, or other third party who stores, processes, maintains or holds Collateral acknowledges, among other things, the Agent's Lien on such Collateral, the Agent's ability to enforce its Lien on such Collateral, and the subordination of any Lien held by such landlord, bailee, consignee, processor, warehouseman, or other third party on such Collateral to the Agent's Lien thereon. "Transferee" is defined in Section 12.4. "Type" means, with respect to any Advance, its nature as a Floating Rate Advance or a Eurodollar Advance and with respect to any Loan, its nature as a Floating Rate Loan or a Eurodollar Loan. "Unencumbered Property Proceeds" means any amount constituting proceeds from the sale of the Borrower's or any Subsidiary's Property (including proceeds thereof) that does not constitute or qualify as Collateral or Property securing amounts owing by the Borrower or its Subsidiaries to the Senior Noteholders under the Senior Notes or the Senior Term Loan Holders under the Senior Term Loan Agreement. "Unfunded Liabilities" means the amount, if any, by which the current liability as shown on line 1d(2)(a) of the most recently filed Schedule B of Form 5500 under each Single Employer 27 Plan subject to Title IV of ERISA exceeds the fair market value of all such Plan's assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan for which a Schedule B is available. "Unmatured Default" means an event which but for the lapse of time or the giving of notice, or both, would constitute a Default. "US GAAP" means generally accepted accounting principles as in effect in the United States from time to time. "Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of the outstanding voting securities of which shall at the time be owned or controlled, directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of such Person, or (ii) any partnership, limited liability company, association, joint venture or similar business organization 100% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. 1.2. Plural Forms. The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms. ARTICLE II THE CREDITS 2.1. Commitments; Loans. 2.1.1 Revolving Loans. From and including the Closing Date and prior to the Revolving Facility Termination Date, upon the satisfaction of the conditions precedent set forth in Sections 4.1 and 4.2, as applicable, each Lender severally and not jointly agrees, on the terms and conditions set forth in this Agreement, to (i) make Revolving Loans to the Borrower from time to time and (ii) participate in Facility LCs issued upon the request of the Borrower, in each case in an amount not to exceed in the aggregate at any one time outstanding of its Revolving Loan Pro Rata Share of the Available Aggregate Revolving Loan Commitment; provided that, unless caused by a Collateral Protection Advance, at no time shall the Aggregate Outstanding Credit Exposure hereunder exceed the Borrowing Base and at no time shall the Aggregate Outstanding Credit Exposure minus the portion thereof constituting Term Loans exceed the Aggregate Revolving Loan Commitment. Subject to the terms of this Agreement, the Borrower may borrow, repay and reborrow Revolving Loans at any time prior to the Revolving Facility Termination Date. The commitment of each Lender to lend hereunder shall automatically expire on the Revolving Facility Termination Date. Each LC Issuer will issue Facility LCs hereunder on the terms and conditions set forth in Section 2.19. 2.1.2 Collateral Protection Advances. Subject to the limitations set forth below, the Agent is authorized by the Borrower and the Lenders, from time to time in the Agent's sole discretion, (i) during the existence of a Default or an Unmatured Default, or (ii) at any time that any of the other conditions precedent set forth in Article IV have not been satisfied, to make Advances (each such advance to be a Floating Rate Advance) to 28 the Borrower on behalf of the Lenders in an aggregate amount outstanding at any time not to exceed $10,000,000 which the Agent, in its reasonable business judgment, deems necessary or desirable (A) to preserve or protect the Collateral, or any portion thereof, (B) to enhance the likelihood of, or maximize the amount of, repayment of the Secured Obligations, or (C) to pay any other amount chargeable to or required to be paid by the Borrower pursuant to the terms of this Agreement, including costs, fees, and expenses as described in Section 9.6 (any of such Advances are herein referred to as "Collateral Protection Advances"); provided that the Required Lenders may at any time revoke the Agent's authorization to make Collateral Protection Advances. Any such revocation must be in writing and shall become effective prospectively upon the Agent's receipt thereof. Absent such revocation, the Agent's determination that the making of a Collateral Protection Advance is required for any such purposes shall be conclusive. The Collateral Protection Advances shall be secured by the Liens in favor of the Agent in and to the Collateral and shall constitute Secured Obligations hereunder. Each Lender shall participate in each Collateral Protection Advance in an amount equal to its Revolving Loan Pro Rata Share thereof. 2.1.3 Making of Non-Ratable Loans. If the Agent elects to have the terms of this Section 2.1.3 apply to a Floating Rate Advance requested by the Borrower in order to fund such Floating Rate Advance pursuant to this Section 2.1.3 instead of Section 2.7, the Non-Ratable Lender shall make a Floating Rate Advance in the amount requested available to the Borrower on the applicable Borrowing Date by transferring same day funds to the Borrower's funding account. Each Advance made solely by the Non-Ratable Lender pursuant to this Section 2.1.3 is referred to in this Agreement as a "Non-Ratable Loan," and such Advances are referred to as the "Non-Ratable Loans." Each Non-Ratable Loan shall be subject to all the terms and conditions applicable to other Advances funded by the Lenders, except that all payments thereon shall be payable to the Non-Ratable Lender solely for its own account. The Agent shall not request the Non-Ratable Lender to make any Non-Ratable Loan if (A) the Agent has received written notice from any Lender that one or more of the applicable conditions precedent set forth in Article IV will not be satisfied on the requested Borrowing Date for the applicable Non-Ratable Loan, or (B) the requested Non-Ratable Loan exceeds the Available Aggregate Revolving Loan Commitment (before giving effect to such Non-Ratable Loan) or would cause the Aggregate Outstanding Credit Exposure (after giving effect to such Non-Ratable Loan) to exceed the Borrowing Base on the applicable Borrowing Date, or would cause the Aggregate Outstanding Credit Exposure (after giving effect to such Non-Ratable Loan) minus the portion thereof constituting Term Loans to exceed the Aggregate Revolving Loan Commitment on the applicable Borrowing Date. The Non-Ratable Loans shall be secured by the Liens granted to the Agent in and to the Collateral and shall constitute Secured Obligations hereunder. All Non-Ratable Loans shall be Floating Rate Advances. Each Lender shall participate in each Non-Ratable Loan in an amount equal to its Pro Rata Share thereof. 2.1.4 Term Loans. The Borrower, the Lenders and the Agent agree that term loans in an aggregate principal amount of $150,000,000 were outstanding under the Prior Credit Agreement described in Article XVI hereof. As of the Closing Date, the aggregate principal amount of such term loans is $150,000,000. The Borrower, the Agent, and the 29 Lenders agree that such term loans shall be re-evidenced as and shall constitute Term Loans under this Agreement. Each Lender holding a Term Loan on the Closing Date is identified, together with the principal amount of its Term Loan, on the Commitment Schedule to this Agreement. No Term Loan other than the aforementioned $150,000,000 of Term Loans shall be extended under or otherwise evidenced by this Agreement subsequent to the Closing Date. 2.2. Required Payments; Termination. 2.2.1 Generally. Any outstanding Advances and all other unpaid Secured Obligations not constituting Term Loans or amounts owing under or in connection with the Term Loans shall be paid in full by the Borrower on the Revolving Facility Termination Date, and outstanding Advances and other Secured Obligations constituting Term Loans or amounts owing under or in connection with Term Loans shall be paid in full by the Borrower on the Term Loan Termination Date. Notwithstanding the termination of the Revolving Loan Commitments under this Agreement on the Revolving Facility Termination Date, until all of the Secured Obligations (other than contingent indemnity obligations) shall have been fully paid and satisfied and all financing arrangements among the Borrower and the Lenders hereunder and under the other Loan Documents shall have been terminated, all of the rights and remedies under this Agreement and the other Loan Documents shall survive. In addition to the other mandatory prepayments required under this Agreement, if at any time and for any reason, including, without limitation, as a result of the reduction of the Aggregate Revolving Loan Commitment or a fluctuation of the Borrowing Base, the Aggregate Outstanding Credit Exposure exceeds the Borrowing Base, the Borrower shall immediately make a mandatory prepayment of the Secured Obligations in an amount equal to such excess. 2.2.2 Asset Sales; Insurance Proceeds. Upon the consummation by the Borrower or any Subsidiary of any sale of (i) Marine Services Assets or Retail Property, and (ii) any Property constituting Collateral (other than sales permitted under Sections 6.12.1 and 6.12.2), in each case except to the extent that the Net Cash Proceeds of such sale, when combined with the Net Cash Proceeds of all such sales during the immediately preceding twelve-month period, do not exceed $5,000,000 for any such sale or series of related sales, within three (3) Business Days after the Borrower's or any of its Subsidiaries' receipt of any Net Cash Proceeds from any such sale, or upon the Borrower's receipt of Net Cash Proceeds under any insurance policy covering Collateral as contemplated in Section 6.24, the Borrower shall make a mandatory prepayment of the outstanding principal amount of the Loans in the amount of such Net Cash Proceeds. Such mandatory prepayment shall be applied in accordance with Section 2.2.5. 2.2.3 Financings. Upon the consummation of any Financing by the Borrower or any Subsidiary of the Borrower, within three (3) Business Days after the Borrower's or any of its Subsidiaries' receipt of any Net Cash Proceeds from such Financing, the Borrower shall make a mandatory prepayment of the outstanding principal amount of the Loans in the amount of such Net Cash Proceeds. Such mandatory prepayment shall be applied in accordance with Section 2.2.5. 30 2.2.4 Effect on Aggregate Revolving Loan Commitment. No prepayment described in Sections 2.2.2 and 2.2.3 shall result in a reduction of the Aggregate Revolving Loan Commitment and the Borrower may request an Advance immediately after such prepayment so long as the terms and conditions hereunder for an Advance have been satisfied. 2.2.5 Application and Priority of Mandatory Prepayments. The Borrower shall remit a prepayment to the Agent in the amount of any Net Cash Proceeds described in Section 2.2.2 or 2.2.3 on the dates required under such Sections. The Agent shall deposit such prepayment in a Collection Account or another cash collateral account subject to the Agent's sole control and shall apply such prepayment first to the Revolving Loans and then to the Term Loans in accordance with the following. On the date of any such remittance to the Agent, the Agent shall apply such amount in reduction of the then outstanding Revolving Loans. If any portion of a prepayment remains after repaying all of the outstanding Revolving Loans, the Agent shall notify the Lenders holding Term Loans in writing of the remaining amount of such prepayment and shall communicate the Borrower's offer of a reduction of their Term Loans in their respective allocable amounts of the remaining portion of such prepayment. Each Term Loan Lender shall have three Business Days from the date the Agent transmits such prepayment offer to accept or decline such prepayment. Failure by a Lender holding Term Loans to respond to the Agent with respect to such prepayment offer in writing by the end of such three Business Day period shall be deemed to constitute the acceptance thereof by such Lender. At the end of such three Business Day period, the Agent shall remit to such accepting Lenders their respective allocable shares of the remaining portion of the applicable prepayment. Any portion of such prepayment remaining thereafter shall be returned to the Borrower for general corporate purposes. With respect to the reduction of the Loans on any date, prepayments made under Section 2.2.2 or 2.2.3 shall first be applied to Floating Rate Loans and to any Eurodollar Rate Loans maturing on such date and then to subsequently maturing Eurodollar Rate Loans in order of maturity. 2.2.6 Prepayment Fees. (a) Aggregate Revolving Loan Commitment. If, prior to April 17, 2005, the Borrower voluntarily reduces the Aggregate Revolving Loan Commitment by more than the $70,000,000 permitted in Section 2.4.2 (any such reduction, a "Revolver Prepayment Event"), then the Borrower shall pay to the Agent for the benefit of the Lenders with Revolving Loan Commitments in immediately available funds a prepayment fee on the date of such Revolver Prepayment Event equal to the Aggregate Revolving Loan Commitment in effect immediately prior to such reduction times (i) 0.50% if the Revolver Prepayment Event occurs prior to April 17, 2004 or (ii) 0.25% if the Revolver Prepayment Event occurs on or subsequent to April 17, 2004 but prior to April 17, 2005. Notwithstanding the foregoing, the Borrower shall not be required to pay any prepayment fee upon the occurrence of a Revolver Prepayment Event if such Revolver Prepayment Event occurs contemporaneously with a refinancing of the aggregate outstanding Obligations pursuant to a bank credit facility provided or arranged by Bank One or an Affiliate thereof. 31 (b) If, prior to April 17, 2005, the Borrower prepays all or any portion of the Term Loans (any such prepayment, a "Term Loan Prepayment Event"), then the Borrower shall pay to the Agent for the benefit of the Lenders holding Term Loans in immediately available funds a prepayment fee on the date of such Term Loan Prepayment Event equal to the amount of such prepayment times (i) 0.50% if the Term Loan Prepayment Event occurs prior to April 17, 2004 or (ii) 0.25% if the Term Loan Prepayment Event occurs on or subsequent to April 17, 2004 but prior to April 17, 2005. 2.2.7 Term Loan Principal Payments. The Term Loans shall be repaid in sixteen (16) consecutive quarterly installments, payable on each Payment Date beginning on June 30, 2003, and continuing thereafter until the Term Loan Termination Date, and the Term Loans shall be permanently reduced by the amount of each installment on the date payment thereof is made hereunder. Each quarterly installment, other than the final installment, shall be in an amount equal to 0.25% of the aggregate principal amount of the Term Loans outstanding on the applicable Payment Date immediately prior to the remittance of such payment, and the final installment, which shall occur no later than the Term Loan Termination Date, shall be in an amount equal to the remaining outstanding principal balance of the Term Loans. No installment of any Term Loan shall be reborrowed once repaid. 2.3. Ratable Loans; Types of Advances. (a) Other than the Term Loans outstanding on the Closing Date, each Advance hereunder (other than a Non-Ratable Loan or a Collateral Protection Advance) shall consist of Revolving Loans made from the several Lenders ratably in proportion to the ratio that their respective Revolving Loan Commitments bear to the Aggregate Revolving Loan Commitment. (a) The Advances may be Floating Rate Advances or Eurodollar Advances, or a combination thereof, selected by the Borrower in accordance with Sections 2.7 and 2.8, or Non-Ratable Loans selected by the Borrower in accordance with Section 2.1.3. 2.4. Commitment Fee; Aggregate Revolving Loan Commitment. 2.4.1 Commitment Fee. The Borrower shall pay to the Agent, for the account of the Lenders with Revolving Loan Commitments in accordance with their Revolving Loan Pro Rata Shares of the Aggregate Revolving Loan Commitment, from and after the Closing Date until the date on which the Aggregate Revolving Loan Commitment shall be terminated in whole, a commitment fee (the "Commitment Fee") accruing daily at the rate of the then Applicable Fee Rate on the Aggregate Revolving Loan Commitment minus the Aggregate Outstanding Revolving Loan Credit Exposure, each as in effect from time to time. All such Commitment Fees payable hereunder shall be payable quarterly in arrears on each Payment Date. 2.4.2 Reductions in Aggregate Revolving Loan Commitment. The Borrower may permanently reduce the Aggregate Revolving Loan Commitment to $0. Any such reduction shall require the payment of the prepayment fee described in Section 2.2.6. The Borrower may permanently reduce the Aggregate Revolving Loan Commitment from the initial amount of $500,000,000 (or from such higher amount if the Aggregate 32 Revolving Loan Commitment has been increased pursuant to Section 2.20) by $70,000,000 in integral multiples of $10,000,000. No prepayment fee under Section 2.2.6 shall be required with respect to such $70,000,000 reduction. No other optional reduction of the Aggregate Revolving Loan Commitment by the Borrower is permitted hereunder. Any such permitted reduction may only occur upon at least three (3) Business Days' written notice to the Agent, which notice shall specify the amount of any such reduction, provided, however, that the amount of the Aggregate Revolving Loan Commitment plus the aggregate outstanding principal amount of the Term Loans may not be reduced below the Aggregate Outstanding Credit Exposure, and the amount of the Aggregate Revolving Loan Commitment may not be reduced below the Aggregate Outstanding Credit Exposure minus the portion thereof constituting Term Loans. All accrued Commitment Fees shall be payable on the effective date of any termination of the obligations of the Lenders to make Credit Extensions hereunder and on the final date upon which all Loans are repaid. 2.5. Minimum Amount of Each Advance. Each Eurodollar Advance shall be in the minimum amount of $1,000,000 (and in multiples of $500,000 if in excess thereof), and each Floating Rate Advance (other than an Advance to repay Non-Ratable Loans or Collateral Protection Advances) shall be in the minimum amount of $100,000 (and in multiples of $50,000 if in excess thereof), provided, however, that any Floating Rate Advance may be in the amount of the Available Aggregate Revolving Loan Commitment. 2.6. Optional Principal Payments. The Borrower may from time to time pay, without penalty or premium, all outstanding Floating Rate Advances, or any portion of the outstanding Floating Rate Advances. Subject to Section 2.2.6 and 2.2.7, the Borrower may from time to time pay, subject to the payment of any funding indemnification amounts required by Section 3.4 but without penalty or premium, all outstanding Eurodollar Advances, or, in a minimum aggregate amount of $1,000,000 or any integral multiple of $500,000 in excess thereof, any portion of the outstanding Eurodollar Advances upon three (3) Business Days' prior notice to the Agent. With respect to optional prepayments of the principal portion of the Term Loans, until the date on which the Lenders holding Term Loans receive voluntary prepayments that equal $25,000,000 in the aggregate, the Lenders holding Term Loans shall be required to accept such prepayments. The Agent shall receive such prepayments from the Borrower and shall ratably apply such prepayments in reduction of the then outstanding Term Loans. Subsequent to the date on which the Lenders holding Term Loans receive voluntary prepayments that equal $25,000,000 in the aggregate, the Borrower shall notify the Agent in writing of its offer to make a prepayment and the amount thereof. The Agent shall promptly transmit such offer to each Lender holding Term Loans. Each Term Loan Lender shall have three Business Days from the date the Agent transmits the Borrower's prepayment offer to accept or decline such prepayment. Failure by a Lender holding Term Loans to respond to the Agent with respect to such prepayment offer in writing by the end of such three Business Day period shall be deemed to constitute the acceptance thereof by such Lender. At the end of such three Business Day period, the Agent shall notify the Borrower of those Lenders accepting prepayment and the Borrower shall remit to the Agent, for distribution to such accepting Lenders, their allocable shares of the applicable prepayment. Any portion of such prepayment not accepted by one or more Lenders holding Term Loans shall be retained by the Borrower. No such amount shall be required to be applied to the Revolving Loans. Notwithstanding the foregoing, if the Borrower offers to prepay all of 33 the outstanding Term Loans in their entirety, all Lenders holding Term Loans must accept such offer. With respect to the reduction of the Loans on any date under this Section 2.6, prepayments shall first be applied to Floating Rate Loans and to any Eurodollar Rate Loans maturing on such date and then to subsequently maturing Eurodollar Rate Loans in order of maturity. 2.7. Method of Selecting Types and Interest Periods for New Advances. The Borrower shall select the Type of Advance and, in the case of each Eurodollar Advance, the Interest Period applicable thereto from time to time; provided that there shall be no more than 8 Interest Periods in effect with respect to all of the Loans at any time, unless such limit has been waived by the Agent in its sole discretion; provided, further, that no Interest Period for Eurodollar Advances during the "Syndication Period," as defined in the definition of Interest Period, shall exceed seven days, and the Interest Periods with respect to such Eurodollar Advances during the Syndication Period shall be required to expire on the same date. The Borrower shall give the Agent irrevocable notice (a "Borrowing Notice") not later than 12:00 noon (Chicago time) on the Borrowing Date of each Floating Rate Advance (other than a Non-Ratable Loan) and three Business Days before the Borrowing Date for each Eurodollar Advance, specifying: (i) the Borrowing Date, which shall be a Business Day, of such Advance, (ii) the aggregate amount of such Advance, (iii) the Type of Advance selected, and (iv) in the case of each Eurodollar Advance, the Interest Period applicable thereto. Not later than 2:00 p.m. (Chicago time) on each Borrowing Date, each Lender shall make available its Loan or Loans in Federal or other funds immediately available in Chicago to the Agent at its address specified pursuant to Article XIII. The Agent will promptly make the funds so received from the Lenders available to the Borrower at the Agent's aforesaid address. 2.8. Conversion and Continuation of Outstanding Advances; No Conversion or Continuation of Eurodollar Advances After Default. Floating Rate Advances (other than Non-Ratable Loans) shall continue as Floating Rate Advances unless and until such Floating Rate Advances are converted into Eurodollar Advances pursuant to this Section 2.8 or are repaid in accordance with Section 2.6. Each Eurodollar Advance shall continue as a Eurodollar Advance until the end of the then applicable Interest Period therefor, at which time such Eurodollar Advance shall be automatically converted into a Floating Rate Advance unless (x) such Eurodollar Advance is or was repaid in accordance with Section 2.6 or (y) the Borrower shall have given the Agent a Conversion/Continuation Notice (as defined below) requesting that, at the end of such Interest Period, such Eurodollar Advance continue as a Eurodollar Advance for the same or another Interest Period. Subject to the terms of Section 2.5, the Borrower may elect from time to time to convert all or any part of an Advance of any Type (other than a Non-Ratable Loan) into any other Type or Types of Advances; provided that any conversion of any Eurodollar Advance shall be made on, and only on, the last day of the Interest Period applicable thereto. Notwithstanding anything to the contrary contained in this Section 2.8, during the continuance of a Default or an Unmatured Default, the Agent may (or shall at the direction of the 34 Required Lenders), by notice to the Borrower, declare that no Advance may be made, converted or continued as a Eurodollar Advance. The Borrower shall give the Agent irrevocable notice (a "Conversion/Continuation Notice") of each conversion of an Advance or continuation of a Eurodollar Advance not later than 11:00 a.m. (Chicago time) at least one (1) Business Day, in the case of a conversion into a Floating Rate Advance, or three (3) Business Days, in the case of a conversion into or continuation of a Eurodollar Advance, prior to the date of the requested conversion or continuation, specifying: (i) the requested date, which shall be a Business Day, of such conversion or continuation, (ii) the aggregate amount and Type of the Advance which is to be converted or continued, and (iii) the amount of such Advance which is to be converted into or continued as a Eurodollar Advance and the duration of the Interest Period applicable thereto. 2.9. Changes in Interest Rate, etc. Each Floating Rate Advance (other than a Non-Ratable Loan) shall bear interest on the outstanding principal amount thereof, for each day from and including the date such Advance is made or is automatically converted from a Eurodollar Advance into a Floating Rate Advance pursuant to Section 2.8, to but excluding the date it is paid or is converted into a Eurodollar Advance pursuant to Section 2.8 hereof, at a rate per annum equal to the Floating Rate for such day. Changes in the rate of interest on that portion of any Advance maintained as a Floating Rate Advance will take effect simultaneously with each change in the Alternate Base Rate. Each Eurodollar Advance shall bear interest on the outstanding principal amount thereof from and including the first day of the Interest Period applicable thereto to (but not including) the last day of such Interest Period at the Eurodollar Rate determined by the Agent as applicable to such Eurodollar Advance based upon the Borrower's selections under Sections 2.7 and 2.8 and otherwise in accordance with the terms hereof. No Interest Period with respect to Revolving Loans may end after the Revolving Facility Termination Date and no Interest Period with respect to Term Loans may end after the Term Loan Termination Date. 2.10. Rates Applicable After Default. During the continuance of a Default (including the Borrower's failure to pay any Loan at maturity), the Agent or the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that (i) each Eurodollar Advance shall bear interest at the rate otherwise applicable to such Interest Period plus 2% per annum, (ii) each Floating Rate Advance shall bear interest at a rate per annum equal to the Floating Rate in effect from time to time plus 2% per annum, and (iii) the LC Fee shall be increased by 2% per annum; provided that, during the continuance of a Default under Section 7.6 or 7.7, the interest rates set forth in clauses (i) and (ii) above and the increase in the LC Fee set forth in clause (iii) above shall be applicable to all Credit Extensions, Advances, fees and other Obligations hereunder without any election or action on the part of the Agent or any Lender. 2.11. Method of Payment; Settlement. 35 2.11.1 Method of Payment. All payments of the Obligations hereunder shall be made, without setoff, deduction, or counterclaim, in immediately available funds to the Agent at the Agent's address specified pursuant to Article XIII, or at any other Lending Installation of the Agent specified in writing by the Agent to the Borrower, by 12:00 p.m. (Chicago time) on the date when due and shall (except in the case of Reimbursement Obligations for which the applicable LC Issuer has not been fully indemnified by the Lenders, or as otherwise specifically required hereunder) be applied ratably by the Agent among the Lenders. Each payment delivered to the Agent for the account of any Lender shall be delivered promptly by the Agent to such Lender in the same type of funds that the Agent received at its address specified pursuant to Article XIII or at any Lending Installation specified in a notice received by the Agent from such Lender. The Agent is hereby authorized to charge the account of the Borrower maintained with Bank One for each payment of the Obligations as it becomes due hereunder. The Agent is also hereby authorized to charge each Collection Account into which Receivables collections and other proceeds of Collateral are deposited. The Agent shall apply such amounts on a daily basis to reduce outstanding Obligations. Notwithstanding the foregoing, amounts on deposit in the Collection Accounts shall not be applied in reduction of the Term Loans unless applied pursuant to Section 2.2.2, 2.2.3, 2.2.7, or 6.26 (including, without limitation, the retention thereof as cash collateral), applied pursuant to the Borrower's instructions, or otherwise applied pursuant to the terms of this Agreement. For purposes of computing interest, fees and the Available Aggregate Revolving Loan Commitment as of any date, (x) all amounts constituting immediately available goods funds shall be deemed received by the Agent on the Business Day on which such amounts are deposited into one of the aforementioned Collection Accounts maintained with Bank One or an Affiliate thereof, and (y) all amounts not constituting immediately available good funds shall be deemed received by the Agent on the first Business Day following the Business Day on which such amounts are deposited into one of the aforementioned Collection Accounts maintained with Bank One or an Affiliate thereof. In the event any such amount is applied and the payment item evidencing such amount is subsequently dishonored, returned for insufficient funds, required to be returned to the applicable Account Debtor, or required to be remitted to a Person other than the Agent or a Lender, the Obligations shall be increased by the amount originally applied in reduction thereof and interest shall be deemed to have accrued on such amount from the Business Day on which such amount was originally credited as a reduction of the Obligations through the Business Day on which such amount is repaid. The Borrower shall also be required to pay any fees that would have accrued during such period had such amount not been deemed paid during such period. Each reference to the Agent in this Section 2.11 shall also be deemed to refer, and shall apply equally, to each LC Issuer in the case of payments required to be made by the Borrower to such LC Issuer pursuant to Section 2.19.6. 2.11.2 Settlement. (a) Each Lender's funded portion of any Advance is intended by the Lenders to be equal at all times to such Lender's Pro Rata Share of such Advance; provided, however, that for purposes of this Section 2.11.2 and all other applicable provisions of this Agreement, only Lenders with Revolving Loan Commitments shall participate in Collateral Protection Advances and Non-Ratable Loans in amounts equal to their respective Revolving Loan Pro Rata Shares thereof. Notwithstanding such agreement, the Agent, the Non-Ratable Lender (with respect to the Non-Ratable Loans), and the Lenders agree (which agreement shall not be for the benefit of or enforceable by the Borrower) that in order to facilitate the administration of this Agreement and the other Loan Documents, settlement among them as to any Advance, 36 including the Non-Ratable Loans and the Collateral Protection Advances, shall take place on a periodic basis in accordance with this Section 2.11.2. (b) The Agent shall request settlement (a "Settlement") with the Lenders on at least a weekly basis, or on a more frequent basis at the Agent's election, (A) on behalf of the Non-Ratable Lender, with respect to each outstanding Non-Ratable Loan, (B) for itself, with respect to each Collateral Protection Advance, and (C) with respect to collections received, in each case, by notifying the Lenders of such requested Settlement by telephone or facsimile, no later than 12:30 pm (Chicago time) on the date of such requested Settlement (the "Settlement Date"). Each Lender (other than the Non-Ratable Lender, in the case of the Non-Ratable Loans, and the Agent in the case of the Collateral Protection Advances) shall transfer the amount of such Lender's Pro Rata Share of the outstanding principal amount of the applicable Advances with respect to which Settlement is requested to the Agent, to such account of the Agent as the Agent may designate, not later than 2:30 p.m. (Chicago time), on the Settlement Date applicable thereto. Settlements may occur during the existence of a Default or an Unmatured Default and whether or not the applicable conditions precedent set forth in Article IV have then been satisfied. Such amounts transferred to the Agent shall be applied against the amounts of the applicable Non-Ratable Loan or Collateral Protection Advance and, together with the portion of such Non-Ratable Loan or Collateral Protection Advance representing the Non-Ratable Lenders or the Agent's Pro Rata Share thereof, shall constitute Revolving Loans of such Lenders, respectively. If any such amount is not transferred to the Agent by any Lender on the Settlement Date applicable thereto, the Agent shall be entitled to recover such amount on demand from such Lender together with interest thereon at the Alternate Base Rate for the first three days from and after the Settlement Date and thereafter at the then applicable Floating Rate (1) on behalf of the Non-Ratable Lender with respect to each outstanding Non-Ratable Loan and (2) for itself with respect to each Collateral Protection Advance. (c) Notwithstanding the foregoing, not more than one Business Day after demand is made by the Agent (whether before or after the occurrence of a Default or an Unmatured Default and regardless of whether the Agent has requested a Settlement with respect to a Non-Ratable Loan or Collateral Protection Advance), each other Lender (A) shall irrevocably and unconditionally purchase and receive from the Non-Ratable Lender or the Agent, as applicable, without recourse or warranty, an undivided interest and participation in such Non-Ratable Loan or Collateral Protection Advance equal to such Lender's Pro Rata Share of such Non-Ratable Loan or Collateral Protection Advance, and (B) if Settlement has not previously occurred with respect to such Non-Ratable Loans or Collateral Protection Advances, upon demand by the Agent or the Non-Ratable Lender, as applicable, shall pay to the Agent or the Non-Ratable Lender, as applicable, as the purchase price of such participation an amount equal to 100% of such Lender's Pro Rata Share of such Non-Ratable Loans or Collateral Protection Advances. If such amount is not in fact transferred to the Agent or the Non-Ratable Lender, as applicable, by any Lender, the Agent shall be entitled to recover such amount on demand from such Lender together with interest thereon at the Alternate Base Rate for the first three days from and after such demand and thereafter at the then applicable Floating Rate. 37 (d) From and after the date, if any, on which any Lender purchases an undivided interest and participation in any Non-Ratable Loan or Collateral Protection Advance pursuant to Section 2.11.2(c), the Agent shall promptly distribute to such Lender such Lender's Pro Rata Share of all payments of principal and interest and all proceeds of Collateral received by the Agent in respect of such Non-Ratable Loan or Collateral Protection Advance. (e) Between Settlement Dates, to the extent no Collateral Protection Advances are outstanding, the Agent may pay over to the Non-Ratable Lender any payments received by the Agent, which in accordance with the terms of this Agreement would be applied to the reduction of the Revolving Loans, for application to the Non-Ratable Lender's Revolving Loans including Non-Ratable Loans. If, as of any Settlement Date, collections received since the then immediately preceding Settlement Date have been applied to the Non-Ratable Lender's Revolving Loans (other than to Non-Ratable Loans or Collateral Protection Advances in which a Lender has not yet funded its purchase of a participation pursuant to Section 2.11.2(c)), as provided for in the previous sentence, the Non-Ratable Lender shall pay to the Agent for the accounts of the Lenders, to be applied to the outstanding Revolving Loans of such Lenders, an amount such that each Lender shall, upon receipt of such amount, have, as of such Settlement Date, its Pro Rata Share of the Revolving Loans. Subject to Section 2.11.1, during the period between Settlement Dates, the Non-Ratable Lender with respect to Non-Ratable Loans, the Agent with respect to Collateral Protection Advances, and each Lender with respect to the Revolving Loans other than Non-Ratable Loans and Collateral Protection Advances, in each case ratably in accordance with the funds employed by each of them, shall be entitled to interest at the applicable rate or rates payable under this Agreement on the actual average daily amount of funds employed by the Non-Ratable Lender, the Agent, and the other Lenders. 2.12. Noteless Agreement; Evidence of Indebtedness. Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (i) The Agent shall also maintain accounts in which it will record (a) the date and the amount of each Loan made hereunder, the Type thereof and the Interest Period (in the case of a Eurodollar Advance) with respect thereto, (b) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder, (c) the original stated amount of each Facility LC and the amount of LC Obligations outstanding at any time, (d) the effective date and amount of each Assignment Agreement delivered to and accepted by it and the parties thereto pursuant to Section 12.3, (e) the amount of any sum received by the Agent hereunder from the Borrower and each Lender's share thereof, and (f) all other appropriate debits and credits as provided in this Agreement, including, without limitation, all fees, charges, expenses and interest. (ii) The entries maintained in the accounts maintained pursuant to paragraphs (i) and (ii) above shall be prima facie evidence of the existence and amounts of the 38 Obligations therein recorded; provided, however, that the failure of the Agent or any Lender to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Obligations in accordance with their terms. (iii) Any Lender may request that (a) its Revolving Loans be evidenced by a promissory note in substantially the form of Exhibit E-1 and (b) its Term Loans be evidenced by a promissory note in substantially the form of Exhibit E-2 (each, a "Note"). In such event, the Borrower shall prepare, execute and deliver to such Lender the appropriate Note payable to the order of such Lender. Thereafter, the Loans evidenced by such Note and interest thereon shall at all times (prior to any assignment pursuant to Section 12.3) be represented by one or more Notes payable to the order of the payee named therein, except to the extent that any such Lender subsequently returns any such Note for cancellation and requests that such Loans once again be evidenced as described in paragraphs (i) and (ii) above. 2.13. Telephonic Notices. The Borrower hereby authorizes the Lenders and the Agent to extend, convert or continue Advances, effect selections of Types of Advances and to transfer funds based on telephonic notices made by any person or persons the Agent or any Lender in good faith believes to be acting on behalf of the Borrower, it being understood that the foregoing authorization is specifically intended to allow Borrowing Notices and Conversion/Continuation Notices to be given telephonically. The Borrower agrees to deliver promptly to the Agent a written confirmation, signed by an Authorized Officer, if such confirmation is requested by the Agent or any Lender, of each telephonic notice. If the written confirmation differs in any material respect from the action taken by the Agent and the Lenders, the records of the Agent and the Lenders shall govern absent manifest error. 2.14. Payments of Interest. 2.14.1 Interest Payment Dates; Interest and Fee Basis. Interest accrued on each Floating Rate Advance shall be payable in arrears on each Payment Date, commencing with the first such date to occur after the Closing Date, and at maturity, whether due to acceleration or otherwise. Interest accrued on each Eurodollar Advance shall be payable on the last day of its applicable Interest Period, on any date on which the Eurodollar Advance is prepaid, whether by acceleration or otherwise, and at maturity. Interest accrued on each Eurodollar Advance having an Interest Period longer than three months shall also be payable on the last day of each three-month interval during such Interest Period. Interest on Eurodollar Advances, LC Fees and all other fees hereunder shall be calculated for actual days elapsed on the basis of a 360-day year. Interest on Floating Rate Advances shall be calculated for actual days elapsed on the basis of a 365/366-day year. Interest shall be payable for the day an Advance is made but not for the day of any payment (unless payment is on the same date as the Advance) on the amount paid if payment is received prior to 12:00 p.m. (Chicago time) at the place of payment. If any payment of principal of or interest on an Advance, any fees or any other amounts payable to the Agent or any Lender hereunder shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and, in the case of a principal payment, such extension of time shall be included in computing interest, fees and commissions in connection with such payment. 39 2.14.2 Limitation on Interest. The Borrower, the Agent and the Holders of Secured Obligations intend to strictly comply with all applicable laws, including applicable usury laws. Accordingly, the provisions of this Section 2.14.2 shall govern and control over every other provision of this Agreement or any other Loan Document which conflicts or is inconsistent with this Section 2.14.2, even if such provision declares that it controls. As used in this Section 2.14.2, the term "interest" includes the aggregate of all charges, fees, benefits, or other compensation which constitute interest under applicable law, provided that, to the maximum extent permitted by applicable law, (a) any non-principal payment shall be characterized as an expense or as compensation for something other than the use, forbearance, or detention of money and not as interest and (b) all interest at any time contracted for, reserved, charged, or received shall be amortized, prorated, allocated, and spread, in equal parts during the full term of the Secured Obligations. In no event shall the Borrower or any other Person be obligated to pay, or any Holder of Secured Obligations have any right or privilege to reserve, receive, or retain, (i) any interest in excess of the maximum amount of nonusurious interest permitted under the laws of the State of New York or the applicable laws (if any) of the U.S. or of any other applicable state or (ii) total interest in excess of the amount which such Holder of Secured Obligations could lawfully have contracted for, reserved, received, retained, or charged had the interest been calculated for the full term of the Secured Obligations at the Highest Lawful Rate. On each day, if any, that the interest rate (the "Stated Rate") called for under this Agreement or any other Loan Document exceeds the Highest Lawful Rate, the rate at which interest shall accrue shall automatically be fixed by operation of this sentence at the Highest Lawful Rate for that day, and shall remain fixed at the Highest Lawful Rate for each day thereafter until the total amount of interest accrued equals the total amount of interest which would have accrued if there were no such ceiling rate as is imposed by this sentence. Thereafter, interest shall accrue at the Stated Rate unless and until the Stated Rate again exceeds the Highest Lawful Rate when the provisions of the immediately preceding sentence shall again automatically operate to limit the interest accrual rate. The daily interest rates to be used in calculating interest at the Highest Lawful Rate shall be determined by dividing the applicable Highest Lawful Rate per annum by the number of days in the calendar year for which such calculation is being made. None of the terms and provisions contained in this Agreement or in any other Loan Document which directly or indirectly relate to interest shall ever be construed without reference to this Section 2.14.2, or be construed to create a contract to pay for the use, forbearance, or detention of money at an interest rate in excess of the Highest Lawful Rate. If the term of any Secured Obligation is shortened by reason of acceleration of maturity as a result of any Default or by any other cause, or by reason of any required or permitted prepayment, and if for that (or any other) reason any Holder of Secured Obligations at any time, including but not limited to, the stated maturity, is owed or receives (and/or has received) interest in excess of interest calculated at the Highest Lawful Rate, then and in any such event all of any such excess interest shall be canceled automatically as of the date of such acceleration, prepayment, or other event which produces the excess, and, if such excess interest has been paid to such Holder of Secured Obligations, it shall be credited pro tanto against the then outstanding principal balance of the Borrower's obligations to such Holder of Secured Obligations, effective as of the date or dates when the event occurs which causes it to be 40 excess interest, until such excess is exhausted or all of such principal has been fully paid and satisfied, whichever occurs first, and any remaining balance of such excess shall be promptly refunded to its payor. Chapter 346 of the Texas Finance Code (which regulates certain revolving credit accounts (formerly Tex. Rev. Civ. Stat. Ann. Art. 5069, Ch. 15)) shall not apply to this Agreement or to any Loan, nor shall this Agreement or any Loan be governed by or be subject to the provisions of such Chapter 346 in any manner whatsoever. 2.15. Notification of Advances, Interest Rates, Prepayments and Revolving Loan Commitment Reductions; Availability of Loans. Promptly after receipt thereof, the Agent will notify each Lender of the contents of each Aggregate Revolving Loan Commitment reduction notice, Borrowing Notice, Conversion/Continuation Notice, and repayment notice received by it hereunder. Promptly after notice from the applicable LC Issuer, the Agent will notify each Lender of the contents of each request for issuance of a Facility LC hereunder. The Agent will notify the Borrower and each Lender of the interest rate applicable to each Eurodollar Advance promptly upon determination of such interest rate and will give the Borrower and each Lender prompt notice of each change in the Alternate Base Rate. Not later than 2:00 p.m. (Chicago time) on each Borrowing Date, each Lender shall make available its Loan or Revolving Loans in funds immediately available in Chicago to the Agent at its address specified pursuant to Article XIII. The Agent will promptly make the funds so received from the Lenders available to the Borrower at the Agent's aforesaid address. 2.16. Lending Installations. Each Lender may book its Loans and its participation in any LC Obligations and each LC Issuer may book its Facility LCs at any Lending Installation selected by such Lender or such LC Issuer, as applicable, and may change its Lending Installation from time to time. All terms of this Agreement shall apply to any such Lending Installation and the Loans, Facility LCs, participations in LC Obligations and any Notes issued hereunder shall be deemed held by each Lender or the relevant LC Issuer, as applicable, for the benefit of any such Lending Installation. Each Lender and each LC Issuer may, by written notice to the Agent and the Borrower in accordance with Article XIII, designate replacement or additional Lending Installations through which Loans will be made by it or Facility LCs will be issued by it and for whose account Loan payments or payments with respect to Facility LCs are to be made. 2.17. Non-Receipt of Funds by the Agent. Unless the Borrower or a Lender, as the case may be, notifies the Agent prior to the date on which it is scheduled to make payment to the Agent of (i) in the case of a Lender, the proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal, interest or fees to the Agent for the account of the Lenders, that it does not intend to make such payment, the Agent may assume that such payment has been made. The Agent may, but shall not be obligated to, make the amount of such payment available to the intended recipient in reliance upon such assumption. If such Lender or the Borrower, as the case may be, has not in fact made such payment to the Agent, the recipient of such payment shall, on demand by the Agent, repay to the Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Agent until the date the Agent recovers such amount at a rate per annum equal to (x) in the case of payment by a Lender, the Federal Funds Effective Rate for such day 41 for the first three days and, thereafter, the interest rate applicable to the relevant Loan or (y) in the case of payment by the Borrower, the interest rate applicable to the relevant Loan. 2.18. Replacement of Lender. If the Borrower is required pursuant to Section 3.1, 3.2 or 3.5 to make any additional payment to any Lender or if any Lender's obligation to make or continue, or to convert Floating Rate Advances into, Eurodollar Advances shall be suspended pursuant to Section 3.3 (any Lender so affected an "Affected Lender"), the Borrower may elect, if such amounts continue to be charged or such suspension is still effective, to terminate or replace the Revolving Loan Commitment and Term Loans of such Affected Lender, provided that no Default or Unmatured Default shall have occurred and be continuing at the time of such termination or replacement, and provided further that, concurrently with such termination or replacement, (i) if the Affected Lender is being replaced, another bank or other entity which is reasonably satisfactory to the Borrower and the Agent shall agree, as of such date, to purchase for cash the Outstanding Credit Exposure of the Affected Lender pursuant to an Assignment Agreement substantially in the form of Exhibit C and to become a Lender for all purposes under this Agreement and to assume all obligations of the Affected Lender to be terminated as of such date and to comply with the requirements of Section 12.3 applicable to assignments, and (ii) the Borrower shall pay to such Affected Lender in immediately available funds on the day of such replacement (A) all interest, fees and other amounts then accrued but unpaid to such Affected Lender by the Borrower hereunder to and including the date of termination, including without limitation payments due to such Affected Lender under Sections 3.1, 3.2 and 3.5, and (B) an amount, if any, equal to the payment which would have been due to such Lender on the day of such replacement under Section 3.4 had the Loans of such Affected Lender been prepaid on such date rather than sold to the replacement Lender, in each case to the extent not paid by the purchasing lender and (iii) if the Affected Lender is being terminated, the Borrower shall pay to such Affected Lender all Obligations due to such Affected Lender (including the amounts described in the immediately preceding clauses (i) and (ii) plus the outstanding principal balance of such Affected Lender's Credit Extensions). 2.19. Facility LCs. 2.19.1 Issuance. Each LC Issuer hereby agrees, on the terms and conditions set forth in this Agreement, to issue standby and commercial letters of credit (each, a "Facility LC") and to renew, extend, increase, decrease or otherwise modify each Facility LC ("Modify," and each such action, a "Modification"), from time to time from and including the date of this Agreement and prior to the Revolving Facility Termination Date upon the request of the Borrower or any Subsidiary Guarantor; provided that immediately after each such Facility LC is issued or Modified, (i) the aggregate amount of the outstanding LC Obligations shall not exceed $400,000,000, (ii) the Aggregate Outstanding Credit Exposure shall not exceed the Borrowing Base and (iii) the Aggregate Outstanding Credit Exposure minus the portion thereof constituting Term Loans shall not exceed the Aggregate Revolving Loan Commitment. Any reference in this Section 2.19 to a request for a Facility LC by the Borrower shall be deemed to include requests by any Subsidiary Guarantor. The Borrower agrees that it is obligated to satisfy any amount arising under or in connection with Facility LCs issued hereunder at the request of any Subsidiary Guarantor, including, without limitation, all Reimbursement Obligations, and that no Facility LC requested by any such Person shall be issued hereunder unless all 42 conditions to issuance have been satisfied. No Facility LC shall have an expiry date later than the earlier of (x) the fifth Business Day prior to the Revolving Facility Termination Date and (y) one year after its issuance; provided, however, that any Facility LC with a one-year term may provide for the renewal thereof for additional one-year periods that do not extend beyond the date referenced in clause (x) hereof. Schedule 2.19.1 sets forth certain letters of credit issued under the Existing Credit Agreement. Subject to the satisfaction on the Closing Date of the conditions precedent set forth in Sections 4.1 and 4.2, such letters of credit shall constitute, on and after the Closing Date, Facility LCs and shall be subject to and benefit from this Agreement. In addition to the foregoing, all Facility LCs issued or outstanding under the Prior Credit Agreement described in Article XVI hereof shall constitute Facility LCs under this Agreement. 2.19.2 Participations. Upon the issuance or Modification by an LC Issuer of a Facility LC in accordance with this Section 2.19, such LC Issuer shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably sold to each Lender, and each Lender shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably purchased from such LC Issuer, a participation in such Facility LC (and each Modification thereof) and the related LC Obligations in proportion to its Revolving Loan Pro Rata Share. 2.19.3 Notice. Subject to Section 2.19.1, the Borrower shall give the applicable LC Issuer notice prior to 12:00 noon (Chicago time) at least one Business Day prior to the proposed date of issuance or Modification of the applicable Facility LC, specifying the beneficiary, the proposed date of issuance (or Modification) and the expiry date of such Facility LC, and describing the proposed terms of such Facility LC and the nature of the transactions proposed to be supported thereby. Upon receipt of such notice, the applicable LC Issuer shall promptly notify the Agent, and the Agent shall promptly notify each Lender, of the contents thereof and of the amount of such Lender's participation in such proposed Facility LC. The issuance or Modification by the applicable LC Issuer of a Facility LC shall, in addition to the conditions precedent set forth in Article IV (the satisfaction of which the applicable LC Issuer shall have no duty to ascertain), be subject to the conditions precedent that such Facility LC shall be satisfactory to the applicable LC Issuer and that the Borrower shall have executed and delivered such application agreement and/or such other instruments and agreements relating to such Facility LC as the applicable LC Issuer shall have reasonably requested (each, a "Facility LC Application"). In the event of any conflict between the terms of this Agreement and the terms of any Facility LC Application, the terms of this Agreement shall control. 2.19.4 LC Fees. The Borrower shall pay to the Agent, for the account of the Lenders ratably in accordance with their respective Revolving Loan Pro Rata Shares, with respect to each Facility LC, a letter of credit fee at a per annum rate equal to the Applicable Margin for Revolving Loans that are Eurodollar Loans in effect from time to time on the maximum stated amount under such Facility LC, such fee to be payable in arrears on each Payment Date. The Borrower shall also pay to the applicable LC Issuer for its own account (x) on the first Payment Date to occur after the issuance of a Facility LC issued by such LC Issuer, a fronting fee in an amount equal to 0.125% times the face amount of such Facility LC, and (y) documentary and processing charges in connection 43 with the issuance, amendment, cancellation, negotiation, transfer, or other Modification of and draws under Facility LCs in accordance with such LC Issuer's standard schedule for such charges as in effect from time to time. Each fee described in this Section 2.19.4 shall constitute an "LC Fee". 2.19.5 Administration; Reimbursement by Lenders. Upon receipt from the beneficiary of any Facility LC of any demand for payment under such Facility LC, the applicable LC Issuer shall notify the Agent and the Agent shall promptly notify the Borrower and each other Lender as to the amount to be paid by such LC Issuer as a result of such demand and the proposed payment date (the "LC Payment Date"). The responsibility of the applicable LC Issuer to the Borrower and each Lender shall be only to determine that the documents (including each demand for payment) delivered under each Facility LC issued by such LC Issuer in connection with such presentment shall be in conformity in all material respects with such Facility LC. Each LC Issuer shall endeavor to exercise the same care in the issuance and administration of its Facility LCs as it does with respect to letters of credit in which no participations are granted, it being understood that in the absence of any gross negligence or willful misconduct by such LC Issuer, each Lender shall be unconditionally and irrevocably liable without regard to the occurrence of any Default or any condition precedent whatsoever, to reimburse such LC Issuer on demand for (i) such Lender's Revolving Loan Pro Rata Share of the amount of each payment made by such LC Issuer under each Facility LC issued by it to the extent such amount is not reimbursed by the Borrower pursuant to Section 2.19.6 below, plus (ii) interest on the foregoing amount to be reimbursed by such Lender, for each day from the date of such LC Issuer's demand for such reimbursement (or, if such demand is made after 11:00 a.m. (Chicago time) on such date, from the next succeeding Business Day) to the date on which such Lender pays the amount to be reimbursed by it, at a rate of interest per annum equal to the Federal Funds Effective Rate for the first three days and, thereafter, at a rate of interest equal to the rate applicable to Floating Rate Advances. 2.19.6 Reimbursement by Borrower. The Borrower shall be irrevocably and unconditionally obligated to reimburse each LC Issuer on or before the applicable LC Payment Date for any amounts to be paid by such LC Issuer upon any drawing under any Facility LC, issued by it, without presentment, demand, protest or other formalities of any kind; provided that neither the Borrower nor any Lender shall hereby be precluded from asserting any claim for direct (but not consequential) damages suffered by the Borrower or such Lender to the extent, but only to the extent, caused by (i) the willful misconduct or gross negligence of such LC Issuer in determining whether a request presented under any Facility LC issued by it complied with the terms of such Facility LC or (ii) such LC Issuer's failure to pay under any Facility LC issued by it after the presentation to it of a request strictly complying with the terms and conditions of such Facility LC. All such amounts paid by such LC Issuer and remaining unpaid by the Borrower shall bear interest, payable on demand, for each day until paid at a rate per annum equal to (x) the rate applicable to Floating Rate Advances for such day if such day falls on or before the applicable LC Payment Date and (y) the sum of 2% plus the rate applicable to Floating Rate Advances for such day if such day falls after such LC Payment Date. The Agent and each LC Issuer will pay to each Lender ratably in accordance with its Revolving Loan Pro Rata Share all amounts received by it from the Borrower for application in payment, in whole 44 or in part, of the Reimbursement Obligation in respect of any Facility LC issued by it, but only to the extent such Lender has made payment to such LC Issuer in respect of such Facility LC pursuant to Section 2.19.5. Subject to the terms and conditions of this Agreement (including, without limitation, the submission of a Borrowing Notice in compliance with Section 2.7 and the satisfaction of the applicable conditions precedent set forth in Article IV), the Borrower may request an Advance hereunder for the purpose of satisfying any Reimbursement Obligation. 2.19.7 Obligations Absolute. The Borrower's obligations under this Section 2.19 shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower may have or have had against any LC Issuer, any Lender or any beneficiary of a Facility LC. The Borrower further agrees with each LC Issuer and the Lenders that the LC Issuers and the Lenders shall not be responsible for, and the Borrower's Reimbursement Obligation in respect of any Facility LC shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, fraudulent or forged, or any dispute between or among the Borrower, any of its Affiliates, the beneficiary of any Facility LC or any financing institution or other party to whom any Facility LC may be transferred or any claims or defenses whatsoever of the Borrower or of any of its Affiliates against the beneficiary of any Facility LC or any such transferee. No LC Issuer shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Facility LC. The Borrower agrees that any action taken or omitted by any LC Issuer or any Lender under or in connection with each Facility LC and the related drafts and documents, if done without gross negligence or willful misconduct, shall be binding upon the Borrower and shall not put any LC Issuer or any Lender under any liability to the Borrower. Nothing in this Section 2.19.7 is intended to limit the right of the Borrower to make a claim against the applicable LC Issuer for damages as contemplated by the proviso to the first sentence of Section 2.19.6. 2.19.8 Actions of LC Issuers. Each LC Issuer shall be entitled to rely, and shall be fully protected in relying, upon any Facility LC issued by it, draft, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by such LC Issuer. Each LC Issuer shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first have received such advice or concurrence of the Required Lenders as it reasonably deems appropriate or it shall first be indemnified to its reasonable satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Notwithstanding any other provision of this Section 2.19, each LC Issuer shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of the Required Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon the Lenders and any future holders of a participation in any Facility LC. 45 2.19.9 Indemnification. The Borrower hereby agrees to indemnify and hold harmless each Lender required to participate in Facility LCs under Section 2.19.2, each LC Issuer and the Agent, and their respective directors, officers, agents and employees from and against any and all claims and damages, losses, liabilities, costs or expenses which such Lender, such LC Issuer or the Agent may incur (or which may be claimed against such Lender, such LC Issuer or the Agent by any Person whatsoever) by reason of or in connection with the issuance, execution and delivery or transfer of or payment or failure to pay under any Facility LC or any actual or proposed use of any Facility LC, including, without limitation, any claims, damages, losses, liabilities, costs or expenses which such LC Issuer may incur by reason of or in connection with (i) the failure of any other Lender to fulfill or comply with its obligations to such LC Issuer hereunder (but nothing herein contained shall affect any rights the Borrower may have against any defaulting Lender) or (ii) by reason of or on account of such LC Issuer issuing any Facility LC which specifies that the term "Beneficiary" included therein includes any successor by operation of law of the named Beneficiary, but which Facility LC does not require that any drawing by any such successor Beneficiary be accompanied by a copy of a legal document, satisfactory to the applicable LC Issuer, evidencing the appointment of such successor Beneficiary; provided that the Borrower shall not be required to indemnify any Lender, any LC Issuer or the Agent for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by (x) the willful misconduct or gross negligence of such LC Issuer in determining whether a request presented under any Facility LC complied with the terms of such Facility LC or (y) such LC Issuer's failure to pay under any Facility LC issued by it after the presentation to it of a request strictly complying with the terms and conditions of such Facility LC. Nothing in this Section 2.19.9 is intended to limit the obligations of the Borrower under any other provision of this Agreement. 2.19.10 Lenders' Indemnification. Each Lender shall, ratably in accordance with its Revolving Loan Pro Rata Share, indemnify each LC Issuer, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense (including reasonable counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct or such LC Issuer's failure to pay under any Facility LC issued by it after the presentation to it of a request strictly complying with the terms and conditions of such Facility LC) that such indemnitees may suffer or incur in connection with this Section 2.19 or any action taken or omitted by such indemnitees hereunder. 2.19.11 Facility LC Collateral Account. Subsequent to the occurrence and during the continuance of a Default, or at any time the Aggregate Outstanding Credit Exposure exceeds the Borrowing Base, or at any time the Aggregate Outstanding Credit Exposure minus the portion thereof constituting Term Loans exceeds the Aggregate Revolving Loan Commitment, the Borrower agrees that it will, upon the request of the Agent or the Required Lenders and until the final expiration date of any Facility LC and thereafter as long as any amount is payable to any LC Issuer or the Lenders in respect of any Facility LC, maintain a special collateral account pursuant to arrangements satisfactory to the Agent (the "Facility LC Collateral Account") at the Agent's office at the address 46 specified pursuant to Article XIII, in the name of the Borrower but under the sole dominion and control of the Agent, for the benefit of the Lenders and in which the Borrower shall have no interest other than as set forth in Section 8.1. The Borrower hereby pledges, assigns and grants to the Agent, on behalf of and for the ratable benefit of the Lenders and the LC Issuers, a security interest in all of the Borrower's right, title and interest in and to all funds which may from time to time be on deposit in the Facility LC Collateral Account to secure the prompt and complete payment and performance of the Secured Obligations. The Agent will invest any funds on deposit from time to time in the Facility LC Collateral Account in certificates of deposit of Bank One having a maturity not exceeding 30 days. Nothing in this Section 2.19.11 shall either obligate the Agent to require the Borrower to deposit any funds in the Facility LC Collateral Account or limit the right of the Agent to release any funds held in the Facility LC Collateral Account in each case other than as required by Section 8.1. 2.19.12 Rights as a Lender. In its capacity as a Lender, each LC Issuer shall have the same rights and obligations as any other Lender. 2.20. Increase of Aggregate Revolving Loan Commitment. The Borrower may from time to time request that the Aggregate Revolving Loan Commitment be increased to an amount which does not exceed $550,000,000 minus the aggregate amount of all permitted partial reductions of the Aggregate Revolving Loan Commitment under Section 2.4.2; provided, however, that (x) if such request would cause the Aggregate Revolving Loan Commitment to exceed $500,000,000, no such request shall be made by the Borrower until the indenture referenced in clause (i) of Section 9.18 has been amended, to the Agent's satisfaction, to permit a senior secured revolving credit facility in excess of $500,000,000 plus the amount of the requested increase, (y) each requested increase shall be in an amount equal to $10,000,000 or an incremental amount in excess thereof, and (z) an increase in the Aggregate Revolving Loan Commitment hereunder may only be made at a time when no Unmatured Default or Default shall have occurred and be continuing or would result therefrom. In the event of such a requested increase in the Aggregate Revolving Loan Commitment under this clause (ii), each of the Lenders shall be given the opportunity to participate in the increased Aggregate Revolving Loan Commitment, (x) initially ratably in the proportion that its Revolving Loan Commitment bears to the Aggregate Revolving Loan Commitment and (y) to the extent that the requested increase in the Aggregate Revolving Loan Commitment is not fulfilled pursuant to the preceding clause, in such additional amounts as any Lender, including any new Lender, the Agent and the Borrower agree. No Lender shall have any obligation to increase its Revolving Loan Commitment pursuant to a request by the Borrower under this clause (ii). No increase hereunder shall be effective without the prior written consent of the Agent and any two Lenders constituting "Co-Agents" (no such consent to be unreasonably withheld), including, without limitation, the Agent's prior written consent to the documentation evidencing such increase. 47 ARTICLE III YIELD PROTECTION; TAXES 3.1. Yield Protection. If, on or after the Closing Date, the adoption of any law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive (whether or not having the force of law), or any change in any such law, rule, regulation, policy, guideline or directive or in the interpretation or administration thereof by any governmental or quasi-governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender or applicable Lending Installation or any LC Issuer with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency: (i) subjects any Lender or any applicable Lending Installation or any LC Issuer to any Taxes, or changes the basis of taxation of payments (other than with respect to Excluded Taxes) to any Lender or any LC Issuer in respect of its Eurodollar Loans, Facility LCs or participations therein, or (ii) imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or any applicable Lending Installation or any LC Issuer (other than reserves and assessments taken into account in determining the interest rate applicable to Eurodollar Advances), or (iii) imposes any other condition the result of which is to increase the cost to any Lender or any applicable Lending Installation of making, funding or maintaining its Revolving Loan Commitment or Eurodollar Loans or of issuing or participating in Facility LCs, or reduces any amount receivable by any Lender or any applicable Lending Installation or any LC Issuer in connection with its Revolving Loan Commitment or Eurodollar Loans or Facility LCs (including participations therein), or requires any Lender or any applicable Lending Installation or any LC Issuer to make any payment calculated by reference to the amount of Revolving Loan Commitment or Eurodollar Loans or Facility LCs (including participations therein) held or interest or LC Fees received by it, by an amount deemed material by such Lender or any LC Issuer, as applicable. and the result of any of the foregoing is to increase the cost to such Lender or applicable Lending Installation or such LC Issuer of making or maintaining its Eurodollar Loans or Revolving Loan Commitment or of issuing or participating in Facility LCs, as applicable, or to reduce the return received by such Lender or applicable Lending Installation or such LC Issuer in connection with such Eurodollar Loans or Revolving Loan Commitment, or Facility LCs (including participations therein), then, within 15 days of demand, accompanied by the written statement required by Section 3.6, by such Lender or LC Issuer, the Borrower shall pay such Lender or LC Issuer such additional amount or amounts as will compensate such Lender or LC Issuer for such increased cost or reduction in amount received. 48 3.2. Changes in Capital Adequacy Regulations. If a Lender or LC Issuer determines the amount of capital required or expected to be maintained by such Lender or LC Issuer, any Lending Installation of such Lender or LC Issuer or any corporation controlling such Lender or LC Issuer is increased as a result of a Change, then, within 15 days of demand, accompanied by the written statement required by Section 3.6, by such Lender or LC Issuer, the Borrower shall pay such Lender or LC Issuer the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital which such Lender or LC Issuer determines is attributable to this Agreement, its Outstanding Credit Exposure or its Revolving Loan Commitment to make Revolving Loans and issue or participate in Facility LCs, as applicable, hereunder (after taking into account such Lender's or LC Issuer's policies as to capital adequacy). "Change" means (i) any change after the Closing Date in the Risk-Based Capital Guidelines or (ii) any adoption of, or change in, or change in the interpretation or administration of any other law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) after the Closing Date which affects the amount of capital required or expected to be maintained by any Lender or LC Issuer or any Lending Installation or any corporation controlling any Lender or LC Issuer. "Risk-Based Capital Guidelines" means (i) the risk-based capital guidelines in effect in the United States on the Closing Date, including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities outside the United States implementing the July 1988 report of the Basle Committee on Banking Regulation and Supervisory Practices Entitled "International Convergence of Capital Measurements and Capital Standards," including transition rules, and any amendments to such regulations adopted prior to the Closing Date. 3.3. Availability of Types of Advances. If (x) any Lender determines that maintenance of its Eurodollar Loans at a suitable Lending Installation would violate any applicable law, rule, regulation, or directive, whether or not having the force of law, or (y) the Required Lenders determine that (i) deposits of a type and maturity appropriate to match fund Eurodollar Advances are not available or (ii) the interest rate applicable to Eurodollar Advances does not accurately reflect the cost of making or maintaining Eurodollar Advances, or (iii) no reasonable basis exists for determining the Eurodollar Base Rate, then the Agent shall suspend the availability of Eurodollar Advances and require any affected Eurodollar Advances to be repaid or converted to Floating Rate Advances on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law, subject to the payment of any funding indemnification amounts required by Section 3.4. 3.4. Funding Indemnification. If any payment of a Eurodollar Advance occurs on a date which is not the last day of the applicable Interest Period, whether because of acceleration, prepayment or otherwise, or a Eurodollar Advance is not made or continued, or a Floating Rate Advance is not converted into a Eurodollar Advance, on the date specified by the Borrower for any reason other than default by the Lenders, or a Eurodollar Advance is not prepaid on the date specified by the Borrower for any reason, the Borrower will indemnify each Lender for any loss or cost incurred by it resulting therefrom, including, without limitation, any loss or cost in liquidating or employing deposits acquired to fund or maintain such Eurodollar Advance. 3.4. Taxes. All payments by the Borrower to or for the account of any Lender, any LC Issuer or the Agent hereunder or under any Note shall be made free and clear of and without deduction for any and all Taxes. If the Borrower shall be required by law to deduct any Taxes 49 from or in respect of any sum payable hereunder to any Lender, any LC Issuer or the Agent, (a) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.5) such Lender, LC Issuer or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (b) the Borrower shall make such deductions, (c) the Borrower shall pay the full amount deducted to the relevant authority in accordance with applicable law and (d) the Borrower shall furnish to the Agent the original copy of a receipt evidencing payment thereof or, if a receipt cannot be obtained with reasonable efforts, such other evidence of payment as is reasonably acceptable to the Agent, in each case within 30 days after such payment is made. (i) In addition, the Borrower shall pay any present or future stamp or documentary taxes and any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under any Note or Facility LC Application or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note or Facility LC Application ("Other Taxes"). (ii) The Borrower shall indemnify the Agent, each LC Issuer and each Lender for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed on amounts payable under this Section 3.5) paid by the Agent, such LC Issuer or such Lender as a result of its Revolving Loan Commitment, any Credit Extensions made by it hereunder, any Facility LC issued or participated in by it hereunder, or otherwise in connection with its participation in this Agreement and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. Payments due under this indemnification shall be made within 30 days of the date the Agent, such LC Issuer or such Lender makes demand therefor pursuant to Section 3.6. (iii) Each Lender that is not incorporated under the laws of the United States of America or a state thereof (each a "Non-U.S. Lender") agrees that it will, not more than ten Business Days after the date on which it becomes a party to this Agreement (but in any event before a payment is due to it hereunder), (i) deliver to each of the Borrower and the Agent two duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI, certifying in either case that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, or (ii) in the case of a Non-U.S. Lender that is fiscally transparent, deliver to the Agent a United States Internal Revenue Form W-8IMY together with the applicable accompanying forms, W-8 or W-9, as the case may be, and certify that it is entitled to an exemption from United States withholding tax. Each Non-U.S. Lender further undertakes to deliver to the Borrower and the Agent (x) renewals or additional copies of such form (or any successor form) on or before the date that such form expires or becomes obsolete, and (y) after the occurrence of any event requiring a change in the most recent forms so delivered by it, such additional forms or amendments thereto as may be reasonably requested by the Borrower or the Agent. All forms or amendments described in the preceding sentence shall certify that such Lender is entitled to receive payments under this 50 Agreement without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form or amendment with respect to it and such Lender advises the Borrower and the Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax. (iv) For any period during which a Non-U.S. Lender has failed to provide the Borrower with an appropriate form pursuant to clause (iv) above (unless such failure is due to a change in treaty, law or regulation, or any change in the interpretation or administration thereof by any governmental authority, occurring subsequent to the date on which a form originally was required to be provided), such Non-U.S. Lender shall not be entitled to indemnification under this Section 3.5 with respect to Taxes imposed by the United States; provided that, should a Non-U.S. Lender which is otherwise exempt from or subject to a reduced rate of withholding tax become subject to Taxes because of its failure to deliver a form required under clause (iv) above, the Borrower shall take such steps as such Non-U.S. Lender shall reasonably request to assist such Non-U.S. Lender to recover such Taxes. (v) Any Lender that is entitled to an exemption from or reduction of withholding tax with respect to payments under this Agreement or any Note pursuant to the law of any relevant jurisdiction or any treaty shall deliver to the Borrower (with a copy to the Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate. (vi) If the U.S. Internal Revenue Service or any other governmental authority of the United States or any other country or any political subdivision thereof asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered or properly completed, because such Lender failed to notify the Agent of a change in circumstances which rendered its exemption from withholding ineffective, or for any other reason), such Lender shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax, withholding therefor, or otherwise, including penalties and interest, and including taxes imposed by any jurisdiction on amounts payable to the Agent under this subsection, together with all costs and expenses related thereto (including attorneys fees and time charges of attorneys for the Agent, which attorneys may be employees of the Agent). The obligations of the Lenders under this Section 3.5(vii) shall survive the payment of the Obligations and termination of this Agreement. 3.6. Lender Statements; Survival of Indemnity. Each Lender shall deliver a written statement of such Lender to the Borrower (with a copy to the Agent) as to the amount due, if any, under Section 3.1, 3.2, 3.4 or 3.5. Such written statement shall set forth in reasonable detail 51 the calculations upon which such Lender determined such amount and shall be final, conclusive and binding on the Borrower in the absence of manifest error. Determination of amounts payable under such Sections in connection with a Eurodollar Loan shall be calculated as though each Lender funded its Eurodollar Loan through the purchase of a deposit of the type, currency and maturity corresponding to the deposit used as a reference in determining the Eurodollar Rate applicable to such Loan, whether in fact that is the case or not. Unless otherwise provided herein, the amount specified in the written statement of any Lender shall be payable on demand after receipt by the Borrower of such written statement. The obligations of the Borrower under Sections 3.1, 3.2, 3.4 and 3.5 shall survive payment of the Obligations and termination of this Agreement. 3.7. Alternative Lending Installation. To the extent reasonably possible, each Lender shall designate an alternate Lending Installation with respect to its Eurodollar Loans to reduce any liability of the Borrower to such Lender under Sections 3.1, 3.2 and 3.5 or to avoid the unavailability of Eurodollar Advances under Section 3.3, so long as such designation is not, in the judgment of such Lender, reasonably disadvantageous to such Lender. A Lender's designation of an alternative Lending Installation shall not affect the Borrower's rights under Section 2.18 to replace a Lender. ARTICLE IV CONDITIONS PRECEDENT 4.1. Effectiveness of Revolving Loan Commitments. The Lenders' Revolving Loan Commitments shall not be effective hereunder and the term loans outstanding under the Prior Credit Agreement described in Article XVI hereof shall not constitute Term Loans hereunder until the Agent shall have received on the Closing Date a fully executed copy of this Agreement. The following conditions precedent were satisfied by the Borrower and copies of the following deliveries were received by the Agent on April 17, 2003, the "Closing Date" under the credit agreement that was amended and restated by the Prior Credit Agreement described in Article XVI hereof: 4.1.1 Copies of the articles or certificate of incorporation (or the equivalent thereof) of (a) the Borrower and (b) each Subsidiary Guarantor, in each case together with all amendments thereto, and a certificate of good standing, each certified by the appropriate governmental officer in its jurisdiction of organization. 4.1.2 Copies, certified by the Secretary or Assistant Secretary (or the equivalent thereof) of (a) the Borrower and (b) each Subsidiary Guarantor, in each case, of its by-laws and of its Board of Directors' resolutions and of resolutions or actions of any other body authorizing the execution of the Loan Documents to which the Borrower or such Subsidiary, as applicable, is a party. 4.1.3 An incumbency certificate, executed by the Secretary or Assistant Secretary (or the equivalent thereof) of (a) the Borrower and (b) each Subsidiary Guarantor, in each case which shall identify by name and title and bear the signatures of the Authorized Officers and any other officers of the Borrower and such Subsidiary authorized to sign 52 the Loan Documents to which the Borrower and such Subsidiary are parties, upon which certificate the Agent and the Lenders shall be entitled to rely until informed of any change in writing by the Borrower or such Subsidiary, as applicable. 4.1.4 A certificate, in substantially the form of Exhibit G, signed by the chief financial officer of the Borrower, stating that on the initial Credit Extension Date (a) no Default or Unmatured Default has occurred and is then continuing, (b) all of the representations and warranties in Article V shall be true and correct in all material respects as of such date (or an earlier date if a representation or warranty relates to a specified earlier date) and (c) no material adverse change in the business, Property, condition (financial or otherwise), operations or results of operations or prospects of the Borrower or any of its Subsidiary Guarantors has occurred since December 31, 2002. 4.1.5 A written opinion of the Borrower's counsel, in form and substance satisfactory to the Agent and addressed to the Lenders, in substantially the form of Exhibit A hereto. 4.1.6 Any Notes requested by a Lender pursuant to Section 2.12 payable to the order of each such requesting Lender. 4.1.7 Written money transfer instructions, in substantially the form of Exhibit D, addressed to the Agent and signed by an Authorized Officer, together with such other related money transfer authorizations as the Agent may have reasonably requested. 4.1.8 The Agent shall have determined that the Borrower has fully cooperated with the Agent's syndication efforts, including, without limitation, by providing the Agent with information regarding the Borrower's operations and prospects and such other information as the Agent deems necessary to successfully syndicate the Loans hereunder. 4.1.9 Evidence satisfactory to the Agent that the Existing Credit Agreement shall have been terminated prior to the Closing Date (except for those provisions that expressly survive the termination thereof), all loans outstanding and other amounts owed to the lenders or agents thereunder shall have been paid in full, and all liens and security interests granted in connection therewith shall have been terminated prior to the Closing Date. 4.1.10 A fully-executed copy of each of this Agreement, the Security Agreement, the Senior Note Indenture, and the Senior Term Loan Agreement. 4.1.11 Evidence satisfactory to the Agent that the Borrower has received Net Cash Proceeds resulting from the issuance of Other Senior Secured Debt in an aggregate amount equal to or greater than $550,000,000. 4.1.12 A Monthly Collateral Report for February 2003, an Interim Collateral Report dated as of April 17, 2003, and such other evidence reasonably requested by the Agent to demonstrate that, among other things, the excess of the Borrowing Base as set forth in the above-mentioned Interim Collateral Report over the Aggregate Outstanding 53 Credit Exposure on the Closing Date, after giving effect to all Advances requested by the Borrower and to be made on the Closing Date, equals or exceeds $175,000,000. 4.1.13 An initial compliance certificate dated as of April 17, 2003, in substantially the form of Exhibit B hereto, together with (i) the Borrower's most recently completed audited financial statements for the fiscal year ended December 31, 2002 as filed on Form 10-K with the U.S. Securities and Exchange Commission, (ii) the Borrower's most recently completed financial summaries, and (iii) the Borrower's financial projections, in a format reasonably acceptable to the Agent, for the period beginning January 1, 2003 and ending December 31, 2006. 4.1.14 All fees owing to the Agent and the Lenders on the Closing Date, including, without limitation, those referenced in Section 10.13, shall have been fully paid. 4.1.15 Those deliveries required in connection with the Intercreditor Agreement. 4.1.16 Such other documents as any Lender or its counsel may have reasonably requested, including, without limitation, those documents set forth in Exhibit H hereto. 4.2. Each Credit Extension. The Lenders shall not be required to make any Credit Extension (except as otherwise set forth in Section 2.1.3(d) with respect to Revolving Loans extended for purposes of repaying Non-Ratable Loans and other than in connection with Collateral Protection Advances) unless on the applicable Credit Extension Date: 4.2.1 There exists no Default or Unmatured Default. 4.2.2 The representations and warranties contained in Article V are true and correct as of such Credit Extension Date except (x) with respect to Sections 5.4 and 5.7, the representations and warranties set forth in such Sections shall have been true and correct on and as of the date of the most recent Form 10-K or Form 10-Q filing, as applicable, made by the Borrower with the U.S. Securities and Exchange Commission, and (y) with respect to any other representation and warranty set forth in Article V, to the extent such representation or warranty is stated to relate solely to an earlier date, such representation or warranty shall have been true and correct on and as of such earlier date. Each Borrowing Notice, or request for issuance of a Facility LC, with respect to each such Credit Extension shall constitute a representation and warranty by the Borrower that the conditions contained in Sections 4.2.1 and 4.2.2 have been satisfied. ARTICLE V REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to each Lender and the Agent as of each of (i) the Closing Date, (ii) the date of the initial Credit Extension hereunder (if different from the Closing Date) and (iii) each date as required by Section 4.2: 54 5.1. Existence and Standing. Each of the Borrower and its Subsidiaries is a corporation, partnership (in the case of Subsidiaries only) or limited liability company duly incorporated or organized, as the case may be, validly existing and (to the extent such concept applies to such entity) in good standing under the laws of its jurisdiction of incorporation or organization and has all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except where the failure to be so qualified does not or could not be expected to cause or result in the occurrence of a Material Adverse Effect. 5.2. Authorization and Validity. Each of the Borrower and each Subsidiary Guarantor has the power and authority and legal right to execute and deliver the Loan Documents to which the Borrower or each Subsidiary Guarantor, as applicable, is a party and to perform its obligations thereunder. The execution and delivery by each of the Borrower and each Subsidiary Guarantor of the Loan Documents to which the Borrower or each Subsidiary Guarantor, as applicable, is a party and the performance of its obligations thereunder have been duly authorized by proper proceedings, and the Loan Documents to which the Borrower or such Subsidiary Guarantor, as applicable, is a party constitute legal, valid and binding obligations of the Borrower or such Subsidiary Guarantor, as applicable, enforceable against the Borrower or such Subsidiary Guarantor, as applicable, in accordance with their terms, except as enforceability may be limited by (i) bankruptcy, insolvency, fraudulent conveyances, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally; (ii) general equitable principles (whether considered in a proceeding in equity or at law); and (iii) requirements of reasonableness, good faith and fair dealing. 5.3. No Conflict; Government Consent. Neither the execution and delivery by the Borrower or the Subsidiary Guarantors, as applicable, of the Loan Documents, nor the consummation of the transactions therein contemplated, nor compliance with the provisions thereof will violate (i) any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on the Borrower or any of the Subsidiary Guarantors, or (ii) the Borrower's or any Subsidiary Guarantor's articles or certificate of incorporation, partnership agreement, certificate of partnership, articles or certificate of organization, by-laws, or operating agreement or other management agreement, as the case may be, or (iii) the provisions of any indenture, instrument or agreement to which the Borrower or any of the Subsidiary Guarantors is a party or is subject, or by which it, or its Property, is bound, or conflict with, or constitute a default under, or result in, or require, the creation or imposition of any Lien in, of or on the Property of the Borrower or a Subsidiary Guarantor pursuant to the terms of, any such indenture, instrument or agreement. No order, consent, adjudication, approval, license, authorization, or validation of, or exemption by, any governmental or public body or authority, or any subdivision thereof, which has not been obtained by the Borrower or any of the Subsidiary Guarantors, is required to be obtained by the Borrower or any of the Subsidiary Guarantors in connection with the execution and delivery of the Loan Documents, the borrowings under this Agreement, the payment and performance by the Borrower of the Obligations or the legality, validity, binding effect or enforceability of any of the Loan Documents. 5.4. Financial Statements. The December 31, 2002 consolidated financial statements of the Borrower and its Subsidiaries heretofore delivered to the Agent and the Lenders were prepared in accordance with US GAAP in effect on the date such statements were prepared and fairly present the consolidated financial condition of the Borrower and its Subsidiaries at such date. 5.5. Material Adverse Change. Since December 31, 2002, there has been no change in the business, Property, prospects, condition (financial or otherwise) or results of operations of the 55 Borrower and its Subsidiaries, taken together, which could reasonably be expected to have a Material Adverse Effect. 5.6. Taxes. The Borrower and its Subsidiaries have filed all United States federal tax returns and all other tax returns which are required to be filed and have paid all taxes due pursuant to said returns or pursuant to any assessment received by the Borrower or any of its Subsidiaries, except in respect of such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided in accordance with Agreement Accounting Principles and as to which no Lien exists (except as permitted by Section 6.15.1). The United States income tax returns of the Borrower and its Subsidiaries have been audited by the Internal Revenue Service through the fiscal year ended 1998. No liens have been filed with respect to such taxes. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of any taxes or other governmental charges are adequate. 5.7. Litigation and Contingent Obligations. There is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or, to the knowledge of any of their officers, threatened against or affecting the Borrower or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect or which seeks to prevent, enjoin or delay the making of any Loans. Other than any liability incident to any litigation, arbitration or proceeding which could not reasonably be expected to have a Material Adverse Effect, the Borrower has no material contingent obligations not provided for or disclosed in the financial statements referred to in Section 5.4. 5.8. Subsidiaries. Schedule 5.8 contains an accurate list of all Subsidiaries of the Borrower as of the date of this Agreement, setting forth their respective jurisdictions of organization and the percentage of their respective capital stock or other ownership interests owned by the Borrower or other Subsidiaries. Schedule 5.8 also identifies those Subsidiaries that constitute Subsidiary Guarantors. All of the issued and outstanding shares of capital stock or other ownership interests of such Subsidiaries have been (to the extent such concepts are relevant with respect to such ownership interests) duly authorized and issued and are fully paid and non-assessable. 5.9. ERISA. As of the Closing Date, the Unfunded Liabilities of all Single Employer Plans do not in the aggregate exceed $75,000,000. As of the Closing Date, each Plan complies with all minimum funding requirements under ERISA. As of the Closing Date, neither the Borrower nor any member of the Controlled Group is party to a Multiemployer Plan or has, or could reasonably be expected to have, any liability to a Multiemployer Plan. 5.10. Accuracy of Information. The information, exhibits or reports furnished by the Borrower to the U.S. Securities and Exchange Commission on Form 10-K and Form 10-Q do not contain any material misstatement of fact or omit to state a material fact or any fact necessary to make the statements contained therein not misleading. The information furnished by the Borrower in each Monthly Collateral Report and Interim Collateral Report is, to the best of the Borrower's knowledge, accurate in all material respects. 5.11. Regulation U. Neither the Borrower nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the 56 purpose, whether immediate, incidental or ultimate of buying or carrying margin stock (as defined in Regulation U), and after applying the proceeds of each Credit Extension, margin stock (as defined in Regulation U) constitutes less than 25% of the value of those assets of the Borrower and its Subsidiaries which are subject to any limitation on sale, pledge, or any other restriction hereunder. 5.12. Material Agreements. Neither the Borrower nor any Subsidiary is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in (i) any agreement or instrument to which it is a party, which default could reasonably be expected to have a Material Adverse Effect or (ii) any agreement or instrument evidencing or governing Indebtedness. 5.13. Compliance With Laws. The Borrower and its Subsidiaries have complied with all applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government or any instrumentality or agency thereof having jurisdiction over the conduct of their respective businesses or the ownership of their respective Property, except where the failure to do so has not caused or resulted in the occurrence of a Material Adverse Effect. 5.14. Ownership of Properties. On the date of this Agreement, the Borrower and its Subsidiaries have indefeasible title, free of all Liens other than those permitted by Section 6.15, to all of the assets reflected in the Borrower's most recent consolidated financial statements provided to the Agent, as owned by the Borrower and its Subsidiaries. 5.15. Plan Assets; Prohibited Transactions. The Borrower is not an entity deemed to hold "plan assets" within the meaning of 29 C.F.R. Section 2510.3-101 of an employee benefit plan (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA or any plan (within the meaning of Section 4975 of the Code), and neither the execution of this Agreement nor the making of Revolving Loans hereunder gives rise to a prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code. 5.16. Environmental Matters. In the ordinary course of its business, the officers of the Borrower consider the effect of Environmental Laws on the business of the Borrower and its Subsidiaries, in the course of which they identify and evaluate potential risks and liabilities accruing to the Borrower due to Environmental Laws. On the basis of this consideration, the Borrower has concluded that Environmental Laws cannot reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor any Subsidiary has received any notice to the effect that its operations are not in material compliance with any of the requirements of applicable Environmental Laws or are the subject of any federal or state investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, which non-compliance or remedial action could reasonably be expected to have a Material Adverse Effect. 5.17. Investment Company Act. Neither the Borrower nor any Subsidiary is an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. 57 5.18. Public Utility Holding Company Act. The Borrower is not a "holding company" as such term is defined in the Public Utility Holding Company Act of 1935, as amended. 5.19. Insurance. The Borrower maintains, and has caused each Subsidiary to maintain, with financially sound and reputable insurance companies, insurance on all their Property in such amounts, subject to such deductibles and self-insurance retentions and covering such properties and risks as is consistent with sound business practice. The Borrower has delivered to the Agent and the Lenders a complete and accurate list of its insurance policies and programs and the Property subject thereto. The Borrower has caused all such policies to be subject to provisions which prohibit the cancellation thereof by the provider thereof without at least 30 days' prior written notice to the Borrower and each loss payee thereof. 5.20. No Default or Unmatured Default. No Default or Unmatured Default has occurred and is continuing. 5.21. Reportable Transaction. The Borrower does not intend to treat the Advances and related transactions as being a "reportable transaction" (within the meaning of Treasury Regulation Section 1.6011-4). In the event the Borrower determines to take any action inconsistent with such intention, it will promptly notify the Agent thereof. ARTICLE VI COVENANTS During the term of this Agreement, unless the Required Lenders shall otherwise consent in writing: 6.1. Financial Reporting. The Borrower will maintain, for itself and each Subsidiary, a system of accounting established and administered in accordance with US GAAP, and furnish to the Agent for the benefit of the Lenders: 6.1.1 Within 105 days after the close of each of its fiscal years, (a) financial statements prepared in accordance with Agreement Accounting Principles on a consolidated basis for itself and its Subsidiaries, as filed on Form 10-K with the U.S. Securities and Exchange Commission, accompanied by (i) an auditor's report, unqualified as to scope, of a nationally recognized firm of independent public accountants or other independent public accountants reasonably acceptable to the Required Lenders; (ii) any management letter prepared by said accountants; and (iii) a certificate of said accountants that, in the course of their examination necessary for their certification of the foregoing, they have obtained no knowledge of any Default or Unmatured Default, or if, in the opinion of such accountants, any Default or Unmatured Default shall exist, stating the nature and status thereof. 6.1.2 Within (x) 30 days after the end of each calendar month other than those calendar months that end the first three fiscal quarters of each of the Borrower's fiscal years, and (y) 45 days after the end of each December of each calendar year, for itself and its Subsidiaries, the Borrower's financial summaries for such month, which shall be in form and substance substantially similar to the financial summaries delivered on or prior 58 to the Closing Date or shall otherwise be in form and substance reasonably acceptable to the Agent. 6.1.3 Within 45 days after the close of each of the first three fiscal quarters of each of its fiscal years, for itself and its Subsidiaries, consolidated unaudited financial statements for such period as filed on Form 10-Q with the U.S. Securities and Exchange Commission, prepared in accordance with Agreement Accounting Principles and (except for the exclusion of any disclosure permitted by the U.S. Securities and Exchange Commission) certified as to fairness of presentation and consistency by its chief financial officer or treasurer. 6.1.4 Together with the financial statements required under Sections 6.1.1 and 6.1.3, a compliance certificate in substantially the form of Exhibit B signed by its chief financial officer or treasurer showing the calculations necessary to determine compliance with this Agreement, an officer's certificate in substantially the form of Exhibit G stating that no Default or Unmatured Default exists, or if any Default or Unmatured Default exists, stating the nature and status thereof, and, together with the financial statements required under Section 6.1.1 and Section 6.1.3, a certificate executed and delivered by the chief executive officer or chief financial officer stating that the Borrower is in compliance with all requirements of Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002 and all rules and regulations related thereto. 6.1.5 Within 270 days after the close of each fiscal year of the Borrower, a copy of the actuarial report and Form 5500 with Schedule B showing the Unfunded Liabilities of each Single Employer Plan as of the valuation date occurring in such fiscal year, certified by an actuary enrolled under ERISA. 6.1.6 As soon as practicable and in any event within 10 days after the Borrower knows that any Reportable Event has occurred with respect to any Plan, a statement, signed by the chief financial officer or treasurer of the Borrower, describing said Reportable Event and the action which the Borrower proposes to take with respect thereto. 6.1.7 As soon as practicable and in any event within 10 days after receipt by the Borrower, a copy of (a) any notice or claim to the effect that the Borrower or any of its Subsidiaries is or may be liable to any Person as a result of the release by the Borrower, any of its Subsidiaries, or any other Person of any toxic or hazardous waste or substance into the environment, and (b) any notice alleging any violation of any federal, state or local environmental, health or safety law or regulation by the Borrower or any of its Subsidiaries, which, in either case, could reasonably be expected to have a Material Adverse Effect. 6.1.8 Promptly upon the filing thereof, copies of all registration statements and annual, quarterly, or other regular reports which the Borrower or any of its Subsidiaries files with the Securities and Exchange Commission, including, without limitation, all certifications and other filings required by Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002 and all rules and regulations related thereto. 59 6.1.9 On each date on which an Interim Collateral Report or a Monthly Collateral Report is delivered, the Borrower shall provide the Agent with all supporting documents the Agent reasonably deems desirable, all certified as being true and correct by an Authorized Officer of the Borrower. The Borrower may update Interim Collateral Reports and Monthly Collateral Reports more frequently than the periods set forth below and, so long as such Interim Collateral Reports or Monthly Collateral Reports are delivered together with all supporting information reasonably requested by the Agent, the most recently delivered Interim Collateral Report or Monthly Collateral Report, as applicable, shall be the applicable Interim Collateral Report or Monthly Collateral Report for purposes of determining the Borrowing Base at any time. 6.1.10 As soon as practicable, and in any event within 15 calendar days of the end of each calendar month, the Borrower shall provide the Agent with a Monthly Collateral Report for such calendar month certified as being true and correct in all material respects by an Authorized Officer of the Borrower. In addition to the foregoing, the Borrower, upon the Agent's reasonable request, shall deliver copies of invoices, purchase orders, credit memoranda, shipping and delivery documents and other information related to Eligible Receivables and Eligible Petroleum Inventory identified in the applicable Monthly Collateral Report. 6.1.11 As soon as practicable, and in any event (x) on or prior to December 31, 2003, within 3 Business Days after the end of each calendar week; provided, however, that if Excess Availability is less than 15% of the Borrowing Base then in effect, Receivables will be updated twice each calendar week, and (y) so long as Excess Availability is equal to or greater than 25% of the Borrowing Base then in effect, subsequent to December 31, 2003, with the Agent's prior consent, within 3 Business Days after the end of each of the second and fourth full calendar weeks of any calendar month, the Borrower shall provide to the Agent an Interim Collateral Report for such one-week or two-week period, as applicable, certified as being true and correct by an Authorized Officer of the Borrower. Each Interim Collateral Report shall identify, for the applicable reporting period, the aggregate amount of all contra-accounts related to Specified Customers net of the aggregate of the face amounts of all letters of credit issued on behalf of the Borrower or the applicable Subsidiary Guarantor to Specified Customers as payment for goods or services purchased by the Borrower or the applicable Subsidiary Guarantor from the Specified Customers. 6.1.12 Within 30 days after the close of each of its fiscal years, a copy of the plan and forecast (including a projected balance sheet, projected income statements, and projected funds flow statement) of the Borrower and its Subsidiaries, for the upcoming fiscal year prepared in such detail as shall be reasonably satisfactory to the Agent. Any plan and forecast in form and substance substantially similar to the plan and forecast delivered on or prior to the Closing Date shall be deemed to be reasonably satisfactory by the Agent. 6.1.13 Such other information (including non-financial information) as the Agent or any Lender may from time to time reasonably request. 60 6.2. Use of Proceeds. The Borrower will, and will cause each Subsidiary to, use the proceeds of the Credit Extensions for general corporate purposes, including, without limitation, for working capital, to repay certain Indebtedness, expenditures constituting Consolidated Capital Expenditures, Permitted Acquisitions, and to pay fees and expenses incurred in connection with this Agreement. The Borrower shall use the proceeds of Credit Extensions in compliance with all applicable legal and regulatory requirements and any such use shall not result in a violation of any such requirements, including, without limitation, Regulation U and X, the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder. 6.3. Notice of Default. Within five (5) Business Days after an Authorized Officer becomes aware thereof, the Borrower will, and will cause each Subsidiary Guarantor to, give notice in writing to the Lenders of the occurrence of any Default or Unmatured Default and of any other development, financial or otherwise, which could reasonably be expected to have a Material Adverse Effect. 6.4. Conduct of Business. The Borrower will, and will cause each Subsidiary Guarantor to, carry on and conduct its business in substantially the same manner and in substantially the same fields of enterprise as it is presently conducted and do all things necessary to remain duly incorporated or organized, validly existing and (to the extent such concept applies to such entity) in good standing as a corporation, partnership or limited liability company in its jurisdiction of incorporation or organization, as the case may be, and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except where the failure to do so could not reasonably be expected to cause or result in the occurrence of a Material Adverse Effect. 6.5. Taxes. The Borrower will, and will cause each Subsidiary to, timely file complete and correct United States federal and applicable foreign, state and local tax returns required by law and pay when due all taxes, assessments and governmental charges and levies upon it or its income, profits or Property, except those which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside in accordance with Agreement Accounting Principles. 6.6. Insurance. The Borrower will, and will cause each Subsidiary to, maintain with financially sound and reputable insurance companies insurance on all their Property in such amounts, subject to such deductibles and self-insurance retentions, and covering such risks as is consistent with sound business practice and as is reasonably satisfactory to the Agent. The Agent confirms that the Borrower's and its Subsidiaries' insurance on the Closing Date is reasonably satisfactory to the Agent. The Borrower will furnish to the Agent (for distribution to any Lender) upon request full information as to the insurance carried. The Borrower shall deliver to the Agent lender's loss payable endorsements in form and substance acceptable to the Agent to all insurance policies providing coverage for the Collateral. In the event the Borrower or any of its Subsidiaries at any time or times hereafter shall fail to obtain or maintain any of the policies or insurance required herein or to pay any premium in whole or in part relating thereto, then the Agent, without waiving or releasing any obligations or resulting Default hereunder, 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 61 which the Agent deems advisable. All sums so disbursed by the Agent shall constitute part of the Obligations, payable as provided in this Agreement. Each such policy maintained by the Borrower or a Subsidiary shall be subject to a provision that prevents the cancellation thereof without thirty days' prior written notice to the Borrower or the applicable Subsidiary, and the Agent. 6.7. Compliance with Laws. The Borrower will, and will cause each Subsidiary to, comply with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject including, without limitation, (i) Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002, and (ii) except where the failure to do so could not reasonably be expected to cause or result in the occurrence of a Material Adverse Effect, all Environmental Laws. 6.8. Maintenance of Properties. Subject to Section 6.12, the Borrower will, and will cause each Subsidiary to, do all things necessary to maintain, preserve, protect and keep its Property used in the operation of its business in good repair, working order and condition, (ordinary wear and tear excepted), and make all necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times in the ordinary course; provided, however, that the foregoing shall not prohibit, limit or impair the Borrower's or any Subsidiary's ability to sell or discontinue the use of, in its reasonable business judgment, any Property. 6.9. Inspection; Keeping of Books and Records. The Borrower will, and will cause each Subsidiary to, permit the Agent, by its respective representatives and agents, to inspect any of the Property, books and financial records of the Borrower and each Subsidiary, to examine and make copies of the books of accounts and other financial records of the Borrower and each Subsidiary, and to discuss the affairs, finances and accounts of the Borrower and each Subsidiary with, and to be advised as to the same by, their respective officers at such reasonable times and intervals as the Agent may designate. The Borrower shall keep and maintain, and cause each of its Subsidiaries to keep and maintain, in all material respects, proper books of record and account in which entries in conformity with Agreement Accounting Principles shall be made of all dealings and transactions in relation to their respective businesses and activities. If a Default has occurred and is continuing, the Borrower, upon the Agent's request, shall turn over copies of any such records to the Agent or its representatives. The Agent agrees that it shall conduct any such inspection or examination in reasonable accordance with the Borrower's and its Subsidiaries' safety policies and procedures and shall not materially interfere with or impair the Borrower's or its Subsidiaries' operations. Without limiting the foregoing, the Agent shall have the right to enter the Borrower's or any Subsidiary's premises for any of the purposes described on the Closing Date in Section 11.04 of the Senior Note Indenture and Section 10.04 of the Senior Term Loan Agreement. 6.10. Restricted Payments. The Borrower will not, nor will it permit any Subsidiary to, declare or pay any dividend or make any distribution on its capital stock (other than dividends or other distributions payable in its own capital stock) or redeem, repurchase or otherwise acquire or retire any of its capital stock at any time outstanding (any of the foregoing, a "Restricted Payment"), except that (x) any Subsidiary may declare and pay dividends or make distributions to the Borrower or any Subsidiary Guarantor, and (y) so long as, on a pro forma basis, both 62 immediately before and immediately after the making of such Restricted Payment, (i) no Default or Unmatured Default exists, (ii) the "Fixed Charge Coverage Ratio" as calculated in Section 6.21 on a rolling four quarter basis equals or exceeds 1.10 to 1.00, and (iii) in any calendar year, the aggregate amount of such Restricted Payments does not exceed $30,000,000, then the Borrower and its Subsidiaries may make Restricted Payments. 6.11. Merger. The Borrower will not, nor will it permit any Subsidiary to, merge or consolidate with or into any other Person, except that a Subsidiary may merge into the Borrower or a Wholly Owned Subsidiary that is party to the Guaranty. 6.12. Sale of Assets. The Borrower will not, nor will it permit any Subsidiary to, lease, sell or otherwise dispose of its Property to any other Person, except: 6.12.1 Sales of inventory in the ordinary course of business. 6.12.2 A disposition of assets by a Subsidiary to the Borrower or a Subsidiary Guarantor or by the Borrower to a Subsidiary Guarantor. 6.12.3 A disposition of obsolete property, property no longer used in the business of the Borrower or its Subsidiaries or other assets in the ordinary course of business of the Borrower or any Subsidiary. 6.12.4 Sales of Marine Services Assets and Retail Property. 6.12.5 Leases, sales or other dispositions of its Property that, together with all other Property of the Borrower and its Subsidiaries previously leased, sold or disposed of (other than dispositions otherwise permitted by this Section 6.12) as permitted by this Section during the twelve-month period ending with the month in which any such lease, sale or other disposition occurs, do not result in proceeds (including non-cash proceeds, whether in the form of an instrument or otherwise) in excess of $30,000,000; provided, however, that the Borrower and its Subsidiaries may lease, sell, or otherwise dispose of Property which results in proceeds (including non-cash proceeds, whether in the form of an instrument or otherwise) in excess of the aforementioned $30,000,000 limitation if (i) immediately before and immediately after such lease, sale, or disposition, no Default or Unmatured Default exists, and (ii) the Borrower or the applicable Subsidiary demonstrates to the Agent's satisfaction, on a pro forma basis for the four fiscal quarter period reflected in the compliance certificate most recently delivered to the Agent pursuant to Section 6.1.4, and without giving effect to the Property to be subject to such lease, sale or other disposition, that the Borrower's "Fixed Charge Coverage Ratio" as calculated in Section 6.21 on a rolling four quarter basis equals or exceeds 1.00 to 1.00. 6.13. Investments and Acquisitions. The Borrower will not, nor will it permit any Subsidiary to, make or suffer to exist any Investments (including without limitation, loans and advances to, and other Investments in, Subsidiaries), or commitments therefor, or to create any Subsidiary or to become or remain a partner in any partnership or joint venture, or to make any Acquisition of any Person, except: 6.13.1 Cash Equivalent Investments. 63 6.13.2 Existing Investments in Subsidiary Guarantors and other Investments in existence on the date hereof and described in Schedule 6.13. 6.13.3 Acquisitions meeting the following requirements, or otherwise approved by the Required Lenders (each such Acquisition constituting a "Permitted Acquisition"): (i) as of the date of the consummation of such Acquisition, no Default or Unmatured Default shall have occurred and be continuing or would result from such Acquisition, and the representation and warranty contained in Section 5.11 shall be true both before and after giving effect to such Acquisition; (ii) such Acquisition is consummated on a non-hostile basis pursuant to a negotiated acquisition agreement approved by the board of directors or other applicable governing body of the seller or entity to be acquired, and no material challenge to such Acquisition (excluding the exercise of appraisal rights) shall be pending or threatened by any shareholder or director of the seller or entity to be acquired; (iii) the business to be acquired in such Acquisition is similar or related to one or more of the lines of business in which the Borrower and its Subsidiaries are engaged on the Closing Date; (iv) as of the date of the consummation of such Acquisition, all material governmental and corporate approvals required in connection therewith shall have been obtained; (v) the Purchase Price for each such Acquisition together with the Purchase Price of all other Permitted Acquisitions shall not exceed an amount equal to (a) $50,000,000 during any period of twelve consecutive months; and (b) $100,000,000 during the period beginning on the Closing Date and ending on the Revolving Facility Termination Date; provided, however, the aggregate Purchase Price for all such Acquisitions may exceed the aforementioned $50,000,000 and $100,000,000 limitations if any such excess amount was paid solely with Other Senior Secured Debt Collateral Proceeds. (vi) with respect to each Permitted Acquisition, not less than thirty (30) days prior to the consummation of such Permitted Acquisition, the Borrower shall have delivered to the Agent a pro forma consolidated balance sheet, income statement and cash flow statement of the Borrower and its Subsidiaries (the "Acquisition Pro Forma"), based on the Borrower's most recent financial statements delivered pursuant to Section 6.1.1 and using historical financial statements for the acquired entity provided by the seller(s) or which shall be complete and shall fairly present, in all material respects, the financial condition and results of operations and cash flows of the Borrower and its Subsidiaries in accordance with Agreement Accounting Principles, but taking into account such Permitted Acquisition and the funding of all Credit Extensions in connection therewith, and such Acquisition Pro Forma shall reflect that, on a pro forma basis, for the four fiscal quarter period reflected in the compliance certificate most recently delivered to the Agent 64 pursuant to Section 6.1.4 prior to the consummation of such Permitted Acquisition (giving effect to such Permitted Acquisition and all Credit Extensions funded in connection therewith as if made on the first day of such period), the Borrower's "Fixed Charge Coverage Ratio" as calculated in Section 6.21 on a rolling four quarter basis is equal to or greater than 1.10 to 1.00 and that Excess Availability equals or exceeds 25% of the Borrowing Base then in effect; and (vii) prior to each such Permitted Acquisition, the Borrower shall deliver to the Agent a documentation, information and certification package in form and substance acceptable to the Agent, including, without limitation; (A) all of the Collateral Documents necessary for the perfection of a first priority security interest in all of the assets to be acquired that constitute or qualify as Collateral, including, without limitation, Petroleum Inventory, Receivables and related cash or cash equivalents, instruments, general intangibles and intercompany Indebtedness; (B) a supplement to the Guaranty if the Permitted Acquisition is an Acquisition of equities and the target company will not be merged with the Borrower or any existing Subsidiary Guarantor; (C) financial information for the target entity in form and substance reasonably acceptable to the Agent; (D) a copy of the acquisition agreement for such Acquisition, together with drafts of the material schedules thereto; (E) a copy of all documents, instruments and agreements with respect to any Indebtedness to be incurred or assumed in connection with such Acquisition; and (F) such other documents or information as shall be reasonably requested by any Agent or any Lender. 6.14. Indebtedness. The Borrower will not, nor will it permit any Subsidiary to, create, incur or suffer to exist any Indebtedness, except: 6.14.1 The Obligations and the Other Senior Secured Debt so long as the aggregate principal amount of the Other Senior Secured Debt does not at any time exceed $575,000,000. 6.14.2 Indebtedness existing on the date hereof and described in Schedule 6.14. 6.14.3 Indebtedness arising under Rate Management Transactions; 6.14.4 Purchase money Indebtedness, whether secured or unsecured (including Capitalized Leases), incurred by the Borrower or any of its Subsidiaries after the Closing Date to finance the acquisition of assets used in its business, if (1) at the time of such 65 incurrence, no Default or Unmatured Default has occurred and is continuing or would result from such incurrence, (2) such Indebtedness does not exceed the lower of the fair market value or the cost of the applicable assets on the date acquired, (3) such Indebtedness does not exceed the lower of the fair market value or the costs of the applicable assets on the date acquired, (4) such Indebtedness does not exceed $100,000,000 in the aggregate outstanding at any time, and (5) any Lien securing such Indebtedness is permitted under Section 6.15 (such Indebtedness being referred to herein as "Permitted Purchase Money Indebtedness"). 6.14.5 Indebtedness arising from intercompany loans and advances (i) made by any Subsidiary to the Borrower or any Subsidiary Guarantor, (ii) made by the Borrower to any Subsidiary Guarantor, or (iii) made by the Borrower to any Excluded Subsidiary or Wholly-Owned Subsidiary not constituting a Subsidiary Guarantor in an aggregate principal amount in Dollars not to exceed $10,000,000 at any time for all such Indebtedness; provided that all such Indebtedness shall be expressly subordinated to the Secured Obligations. 6.15. Liens; Negative Pledge. The Borrower will not, nor will it permit any Subsidiary to, create, incur, or suffer to exist any Lien in, of or on the Property of the Borrower or any of its Subsidiaries, except for the following, which are permitted hereunder: 6.15.1 Liens, if any, securing (x) Secured Obligations, and (y) Other Senior Secured Debt permitted under Section 6.14.1. 6.15.2 Liens for taxes, assessments or governmental charges or levies on its Property if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings and for which adequate reserves in accordance with Agreement Accounting Principles shall have been set aside on its books. 6.15.3 Liens for landlords', wage earners', carriers', warehousemen's and mechanics' liens and other similar liens arising in the ordinary course of business which secure payment of obligations not more than 45 days past due or which are being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with Agreement Accounting Principles shall have been set aside on its books. 6.15.4 Liens arising out of pledges or deposits under worker's compensation laws, unemployment insurance, old age pensions, or other social security or retirement benefits, or similar legislation. 6.15.5 Liens existing on the date hereof and described in Schedule 6.15. 6.15.6 Deposits securing liability to insurance carriers under insurance or self-insurance arrangements. 6.15.7 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. 66 6.15.8 Easements, reservations, rights-of-way, restrictions, survey exceptions and other similar encumbrances as to real property of the Borrower and its Subsidiaries which customarily exist on properties of corporations engaged in similar activities and similarly situated and which do not materially interfere with the conduct of the business of the Borrower or such Subsidiary conducted at the property subject thereto. 6.15.9 Liens arising by reason of any judgment, decree or order of any court or other governmental authority, if appropriate legal proceedings are being diligently prosecuted and shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired, in an aggregate amount not to at any time exceed $15,000,000. 6.15.10 Liens existing on any asset of any Subsidiary of the Borrower at the time such Subsidiary becomes a Subsidiary and not created in contemplation of such event. 6.15.11 Liens on any asset securing Indebtedness incurred or assumed for the purpose of financing or refinancing all or any part of the cost of acquiring or constructing such asset; provided that such Lien attaches to such asset concurrently with or within eighteen (18) months after the acquisition or completion or construction thereof. 6.15.12 Liens existing on any asset of any Subsidiary of the Borrower at the time such Subsidiary is merged or consolidated with or into the Borrower or any Subsidiary and not created in contemplation of such event. 6.15.13 Liens existing on any asset prior to the acquisition thereof by the Borrower or any Subsidiary and not created in contemplation thereof; provided that such Liens do not encumber any other property or assets. 6.15.14 Liens arising out of the refinancing, extension, renewal or refunding of any Indebtedness secured by any Lien permitted under Sections 6.15.11 through 6.15.14; provided that (a) such Indebtedness is not secured by any additional assets, and (b) the amount of such Indebtedness secured by any such Lien is not increased. 6.15.15 Purchase money Liens securing Permitted Purchase Money Indebtedness (as defined in Section 6.14); provided, that such Liens shall not apply to any property of the Borrower or its Subsidiaries other than that purchased with the proceeds of such Permitted Purchase Money Indebtedness. 6.15.16 any Lien securing Indebtedness, neither assumed nor guaranteed by the Borrower 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 Borrower 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 Section 6.15.16 does not materially impair the use of the Property covered by such Lien for the purposes of which such Property is held by the Borrower or any of its Subsidiaries. 67 6.15.17 Liens arising under ERISA provided that such Liens do not secure liabilities which, in the aggregate, equal or exceed $5,000,000. 6.15.18 any obligations or duties affecting any of the Property of the Borrower 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. 6.15.19 defects, irregularities and deficiencies in title of any rights of way or other Property constituting real estate of the Borrower or any Subsidiary thereof which in the aggregate do not materially impair the use of such rights of way or other Property constituting real estate for the purposes for which such rights of way and other Property constituting real estate are held by the Borrower or any Subsidiary, and defects, irregularities and deficiencies in title to any Property constituting real estate of the Borrower or its Subsidiaries, which defects, irregularities or deficiencies have been cured by possession under applicable statues of limitation. 6.15.20 any interest or title of a lessor under any lease entered into by the Borrower or any other Subsidiary in the ordinary course of its business and covering only the assets so leased. 6.15.21 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 Borrower or any of its Subsidiaries on deposit with or in possession of such bank. 6.15.22 Liens upon Marine Services Assets not constituting Collateral and Liens upon Retail Property not constituting Collateral. 6.15.23 Liens in favor of counterparties arising in connection with the Borrower's or any Subsidiary's commodity hedging activities, including, without limitation, hydrocarbon hedging. Notwithstanding the foregoing or anything to the contrary contained in any Loan Document, neither the Borrower nor any Subsidiary shall pledge, encumber or otherwise grant a Lien to any Person upon any equity interest held by the Borrower or such Subsidiary in any other Subsidiary or an Affiliate of the Borrower or such Subsidiary, except for equity interests in the Pipeline Subsidiaries granted by the Borrower to the Multiparty Collateral Agent in order to secure Other Senior Secured Debt. 6.16. Affiliates. The Borrower will not, and will not permit any Subsidiary to, enter into any transaction (including, without limitation, the purchase or sale of any Property or service) with, or make any payment or transfer to, any Affiliate (other than the Borrower and its Subsidiaries) except in the ordinary course of business and pursuant to the reasonable requirements of the Borrower's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary than the Borrower or such Subsidiary would obtain in a comparable arm's-length transaction. 68 6.17. Financial Contracts. The Borrower will not, nor will it permit any Subsidiary to, enter into or remain liable upon any Rate Management Transactions except for those entered into in the ordinary course of business for bona fide hedging purposes and not for speculative purposes. 6.18. Subsidiary Covenants. The Borrower will not, and will not permit any Subsidiary to, create or otherwise cause to become effective any consensual encumbrance or restriction of any kind on the ability of any Subsidiary (i) to pay dividends or make any other distribution on its stock, (ii) to pay any Indebtedness or other obligation owed to the Borrower or any other Subsidiary, (iii) to make loans or advances or other Investments in the Borrower or any other Subsidiary, or (iv) to sell, transfer or otherwise convey any of its property to the Borrower or any other Subsidiary. 6.19. Contingent Obligations. The Borrower will not, nor will it permit any Subsidiary to, make or suffer to exist any Contingent Obligation (including, without limitation, any Contingent Obligation with respect to the obligations of a Subsidiary), except (i) by endorsement of instruments for deposit or collection in the ordinary course of business, (ii) the Reimbursement Obligations, (iii) any guaranty of the Secured Obligations, (iv) any guaranty of Other Senior Secured Debt, and (v) Contingent Obligations arising in connection with Indebtedness permitted under Section 6.14. 6.20. Amendments to Agreements. The Borrower will not amend, modify or supplement, or permit any Subsidiary to amend, modify or supplement (or consent to any amendment, modification or supplement of), any document, agreement or instrument evidencing the Senior Notes or the Senior Term Loans (or any replacements, substitutions or renewals thereof), or pursuant to which the Senior Notes or the Senior Term Loans are issued or extended, where such amendment, modification or supplement provides for the following or which has any of the following effects: (a) increases the overall principal amount of any such Indebtedness or increases the amount of any single scheduled installment of principal or interest in excess of amounts otherwise permitted under this Agreement; (b) shortens or accelerates the date upon which any installment of principal or interest becomes due or adds any additional mandatory redemption provisions; (c) shortens the final maturity date of such Indebtedness or otherwise accelerates the amortization schedule with respect to such Indebtedness; (d) increases the rate of interest accruing on such Indebtedness; (e) provides for the payment of additional fees or increases existing fees; (f) amends or modifies any financial or negative covenant (or covenant which prohibits or restricts the Borrower or any of its Subsidiaries from taking certain actions) in a manner which is more onerous or more restrictive in any material respect to the Borrower or such Subsidiary or which is otherwise materially adverse to the Borrower, its Subsidiaries and/or the Lenders or, in the case of adding covenants, which places material additional restrictions on 69 the Borrower or such Subsidiary or which requires the Borrower or such Subsidiary to comply with more restrictive financial ratios or which requires the Borrower to better its financial performance from that set forth in the existing financial covenants (taking into account the aggregate adjustments, if any, to the thresholds and exceptions applicable thereto on a covenant by covenant basis); (g) results in this Agreement, the other Loan Documents, and the credit facilities evidenced hereby, not constituting a "Qualified Credit Facility" under the Senior Note Indenture or the Senior Term Loan Agreement; or (h) amends, modifies or adds any affirmative covenant in a manner which, when taken as a whole, is materially adverse to the Borrower, its Subsidiaries and/or the Lenders. 6.21. Fixed Charge Coverage Ratio. The Borrower, as of the end of the following fiscal quarters, will not permit the ratio of (x) Consolidated EBITDA, minus expenses for cash federal income taxes paid, minus Net Consolidated Capital Expenditures, minus Restricted Payments, to (y) Fixed Charges, all calculated for the Borrower and its Subsidiaries, on a consolidated basis, and without duplication with respect to Capitalized Leases, to be less than (i) for the fiscal quarter ending June 30, 2003, with compliance for such fiscal quarter based upon the two then most-recently ended fiscal quarters, 0.90 to 1.00, (ii) for the fiscal quarter ending September 30, 2003, with compliance for such fiscal quarter based upon the three then most-recently ended fiscal quarters, 0.95 to 1.00, and (iii) for each fiscal quarter thereafter, beginning with the fiscal quarter ending December 31, 2003, with compliance for each such fiscal quarter based upon the four then most-recently ended fiscal quarters, 1.00 to 1.00; provided, however, that the aforementioned ratio may be less than 1.00 to 1.00 for any fiscal quarter referenced in clause (iii) that occurs after the quarter ending December 31, 2003 if Excess Availability at the end of such fiscal quarter exceeds 15% of the Borrowing Base then in effect. 6.22. Minimum Consolidated Tangible Net Worth. The Borrower will at all times maintain Consolidated Tangible Net Worth of not less than (i) $500,000,000, plus (ii) 75% of Consolidated Net Income (if positive) earned in each fiscal quarter beginning with the fiscal quarter ending June 30, 2003, plus (iii) 75% of the amount of all Net Cash Proceeds resulting from any issuance of the Borrower's or any Subsidiary's capital stock. 6.23. Subsidiary Collateral Documents; Subsidiary Guarantors. The Borrower shall execute or shall cause to be executed: (i) on the date any Person that is organized under the laws of the United States or any political subdivision thereof becomes a Subsidiary of the Borrower, (a) a supplement to the Guaranty pursuant to which such Person shall become a party thereto; provided, that such Person shall not guaranty any of its own obligations owing to the Holders of Secured Obligations or Secured Obligations that arose prior to its becoming a party to the Guaranty, (b) a Security Agreement in substantially the form executed on April 17, 2003 (or a supplement thereto); and (c) a supplement to Schedule 5.8 identifying the applicable additional new Subsidiary Guarantor; 70 (ii) in order to further effect the requirements of this Section 6.23, the Borrower shall deliver or cause to be delivered to the Agent all Collateral Documents, together with appropriate corporate resolutions and other documentation (including opinions, UCC financing statements, and such other documents as shall be reasonably requested to perfect the Agent's Lien), in each case in form and substance reasonably satisfactory to the Agent, necessary to reasonably satisfy the Agent that it has a first priority perfected pledge of, security interest in and Lien upon the Collateral owned by such new Subsidiary Guarantor. (iii) The Borrower shall cause each Subsidiary Guarantor to acknowledge and agree that such Subsidiary Guarantor's entry into the Guaranty is a condition to and is given as an inducement for and in consideration of credit accommodations extended to the Borrower under this Agreement and the other Loan Documents and not for any credit accommodation extended to such Subsidiary Guarantor. (iv) This Section 6.23 shall not apply with respect to Excluded Subsidiaries, including, without limitation, Pipeline Subsidiaries. 6.24. Insurance and Condemnation Proceeds. The Borrower directs (and, if applicable, shall cause its Subsidiaries to direct) all insurers under policies relating to Property constituting Collateral to pay all proceeds payable under such policies or with respect to such claim or award for any loss with respect to the Collateral directly to the Agent, for the benefit of the Agent and the Holders of the Secured Obligations; provided, however, in the event that such proceeds or awards are less than $1,000,000 ("Excluded Proceeds"), unless a Default shall have occurred and be continuing, the Agent shall remit such Excluded Proceeds to the Borrower. Such amounts shall reduce outstanding principal Obligations pursuant to the mandatory prepayment provision of Section 2.2. Each such policy shall contain a long-form loss-payable endorsement naming the Agent as loss payee, which endorsement shall be in form and substance acceptable to the Agent. 6.25. Collection Accounts. The Borrower and its Subsidiaries shall cause the majority of their deposit, collection and other cash management accounts to be maintained with Bank One, NA or an Affiliate thereof. The Borrower and its Subsidiaries shall cause all collections of Receivables constituting Collateral and all proceeds of Collateral to be directly deposited into collection accounts (such accounts, "Collection Accounts") subject to account control agreements, in form and substance acceptable to the Agent, which grant the Agent control over and a first-priority perfected security interest in such collection accounts, including, without limitation, amounts and other items on deposit therein. Amounts and other items on deposit in Collection Accounts that are not maintained with Bank One, NA or an Affiliate thereof shall be transferred at least once a week to one or more Collection Accounts maintained with Bank One, NA or an Affiliate thereof. If any collections are received by the Borrower, a Subsidiary, or any other Person, such collections shall be deemed to have been received by the Borrower, such Subsidiary or such other Person in trust for the Agent, and, upon the Borrower's, such Subsidiary's, or such other Person's receipt thereof, the Borrower shall (or shall cause such Subsidiary or other Person) to immediately remit all of such collections, in their original form, to the Agent, Bank One or an Affiliate thereof for deposit into a Collection Account. Following the occurrence and during the continuance of a Default, all amounts received by the Agent, all amounts on deposit in the Collection Accounts, and all amounts constituting collections required 71 to be deposited into Collection Accounts shall be the sole property of the Agent for the benefit of the Holders of Secured Obligations and shall be deemed received by the Agent for application to the Secured Obligations pursuant to the terms of this Agreement. With respect to any Collection Account described in this Section 6.25, the Borrower and its Subsidiaries shall have 90 days from the later of the Closing Date and the date on which such Collection Account is opened or converted to cause such account to become subject to one of the aforementioned account control agreements. 6.26. Subordinated Indebtedness. The Borrower will not, and will not permit any Subsidiary to, make any amendment or modification to any indenture, note agreement or other agreement, document or instrument evidencing or governing Subordinated Indebtedness, or directly or indirectly voluntarily prepay, defease, or in substance defease, purchase, redeem, retire or otherwise acquire, any Subordinated Indebtedness; provided, however, that the Borrower or any such Subsidiary may make a prepayment of Subordinated Indebtedness if, immediately before and after such prepayment (i) no Default or Unmatured Default exists, (ii) no Revolving Loans are outstanding, (iii) Excess Availability equals or exceeds 25% of the Borrowing Base then in effect, and (iv) the "Fixed Charge Coverage Ratio" as calculated in Section 6.21 on a rolling four quarter basis equals or exceeds 1.10 to 1.00. Notwithstanding the foregoing, or anything else to the contrary set forth in this Agreement, the Borrower's one-time principal prepayment of Subordinated Indebtedness on April 17, 2003 in an amount that did not exceed $25,000,000 was not prohibited under the Prior Credit Agreement or the credit agreement amended and restated thereby and is therefore not prohibited hereunder. 6.27. Multiemployer Plans. The Borrower will not, nor will it permit any Subsidiary to, become a party to a Multiemployer Plan. 6.28. Consolidated Capital Expenditures. At any time Non-Lender Asset Sale Proceeds are on deposit in accounts subject to the Multiparty Collateral Agent's control, including, without limitation, any "Asset Sale Proceeds Account" described in the Senior Note Indenture and the Senior Term Loan Agreement, the Borrower shall, and shall cause each Subsidiary to, fund all Consolidated Capital Expenditures with respect to Property constituting or required to constitute collateral securing Other Senior Secured Debt under the Senior Note Indenture and the Senior Term Loan Agreement and otherwise permitted hereunder with such Non-Lender Asset Sale Proceeds prior to using any other amounts to fund such Consolidated Capital Expenditures. 6.29. Other Permitted Availability. The Borrower shall not incur Indebtedness under clause (xii) of the definition of "Permitted Debt" set forth in the Senior Note Indenture (or any comparable provision of the Senior Note Indenture which from time to time may replace or modify such clause but which has the same intended effect thereof) in an aggregate principal amount in excess of the amount which is $10,000,000 less than the maximum amount of Indebtedness permitted under such clause (xii) (or any replacement or modification thereof as described above). The Borrower, subsequent to the Closing Date, also shall not incur Indebtedness under (a) clause (xiii) of the definition of "Permitted Debt" set forth in the indenture referred to in clause (i) of Section 9.18, (b) clause (xii) of the definition of "Permitted Debt" set forth in the indenture referred to in clause (ii) of Section 9.18, or (c) clause (xii) of the definition of "Permitted Debt" set forth in the indenture referred to in clause (iii) of Section 9.18 (in each case together with any other comparable provision of each such indenture which from 72 time to time may replace or modify the applicable clause set forth therein but which has the same intended effect thereof) in an aggregate principal amount in excess of the amount which is $10,000,000 less than the maximum amount of Indebtedness permitted under such applicable clause set forth in the applicable definition of "Permitted Debt" (or any replacement or modification thereof as described above). ARTICLE VII DEFAULTS The occurrence of any one or more of the following events shall constitute a Default: 7.1. Any representation or warranty made or deemed made by or on behalf of the Borrower or any of its Subsidiaries to the Lenders or the Agent under or in connection with this Agreement, any Credit Extension, or any certificate or information delivered in connection with this Agreement or any other Loan Document shall be false in any material respect on the date as of which made or deemed made. 7.2. Nonpayment of (i) principal of any Loan when due, (ii) any Reimbursement Obligation within one Business Day after the same becomes due, or (iii) interest upon any Loan or any Commitment Fee, LC Fee or other Obligations under any of the Loan Documents within one (1) Business Day after such interest, fee or other Obligation becomes due. 7.3. The breach by the Borrower of any of the terms or provisions of Section 6.1.9 (solely with respect to the Interim Collateral Reports described therein), 6.1.11, 6.2, 6.3, 6.4, 6.6, 6.7, 6.9, 6.10, 6.11, 6.12, 6.13, 6.14, 6.15, 6.16, 6.17, 6.18, 6.19, 6.20, 6.21, 6.22, 6.23, 6.24, 6.25, 6.26, 6.27, 6.28, and 6.29. 7.4. The breach by the Borrower (other than a breach which constitutes a Default under another Section of this Article VII) of (x) 6.1.1, 6.1.2, 6.1.3, 6.1.4, 6.1.6, 6.1.7, 6.1.9 (solely with respect to the Monthly Collateral Reports described therein), 6.1.10, or 6.1.12 and such breach is not remedied within five (5) Business Days of the earlier to occur of (i) written notice from the Agent or any Lender to the Borrower or (ii) an Authorized Officer otherwise becomes aware of any such breach, and (y) any of the other terms or provisions of this Agreement or any Loan Document which is not remedied within twenty (20) Business Days after the earlier to occur of (i) written notice from the Agent or any Lender to the Borrower or (ii) an Authorized Officer otherwise becomes aware of any such breach. 7.5. Failure of the Borrower or any of its Subsidiaries to pay when due any Material Indebtedness; or the default by the Borrower or any of its Subsidiaries in the performance (beyond the applicable grace period with respect thereto, if any) of any term, provision or condition contained in any Material Indebtedness Agreement, or any other event shall occur or condition exist, the effect of which default, event or condition is to cause, or to permit the holder(s) of such Material Indebtedness or the lender(s) under any Material Indebtedness Agreement to cause, such Material Indebtedness to become due prior to its stated maturity or any commitment to lend under any Material Indebtedness Agreement to be terminated prior to its stated expiration date; or any Material Indebtedness of the Borrower or any of its Subsidiaries 73 shall be declared to be due and payable or required to be prepaid or repurchased (other than by a regularly scheduled payment) prior to the stated maturity thereof; or the Borrower or any of its Subsidiaries shall not pay, or admit in writing its inability to pay, its debts generally as they become due. 7.6. The Borrower or any of its Subsidiaries shall (i) have an order for relief entered with respect to it under the Federal bankruptcy laws as now or hereafter in effect, (ii) make an assignment for the benefit of creditors, (iii) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any Substantial Portion of its Property, (iv) institute any proceeding seeking an order for relief under the Federal bankruptcy laws as now or hereafter in effect or seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (v) take any corporate or partnership action to authorize or effect any of the foregoing actions set forth in this Section 7.6 or (vi) fail to contest in good faith any appointment or proceeding described in Section 7.7. 7.7. Without the application, approval or consent of the Borrower or any of its Subsidiaries, a receiver, trustee, examiner, liquidator or similar official shall be appointed for the Borrower or any of its Subsidiaries or any Substantial Portion of its Property, or a proceeding described in Section 7.6(iv) shall be instituted against the Borrower or any of its Subsidiaries and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of 45 consecutive days. 7.8. Any court, government or governmental agency shall condemn, seize or otherwise appropriate, or take custody or control of, all or any portion of the Property of the Borrower and its Subsidiaries which, when taken together with all other Property of the Borrower and its Subsidiaries so condemned, seized, appropriated, or taken custody or control of, during the twelve-month period ending with the month in which any such action occurs, constitutes a Substantial Portion. 7.9. The Borrower or any of its Subsidiaries shall fail within 30 days to pay, bond or otherwise discharge one or more (i) judgments or orders for the payment of money in excess of $15,000,000 (or the equivalent thereof in currencies other than Dollars) in the aggregate, or (ii) nonmonetary judgments or orders which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, which judgment(s), in any such case, is/are not stayed on appeal or otherwise being appropriately contested in good faith. 7.10. The Unfunded Liabilities of all Single Employer Plans shall exceed $75,000,000 in the aggregate, or any Reportable Event shall occur in connection with any Plan. 7.11. Any Change in Control shall occur. 7.12. The Borrower or any of its Subsidiaries shall (i) be the subject of any proceeding or investigation pertaining to the release by the Borrower, any of its Subsidiaries or any other Person of any toxic or hazardous waste or substance into the environment, or (ii) violate any 74 Environmental Law, which, in the case of an event described in clause (i) or clause (ii), has resulted in liability to the Borrower or any of its Subsidiaries in an amount equal to $30,000,000 or more, which liability is not paid, bonded, covered in its entirety by an insurance policy provided to the Borrower or the applicable Subsidiary by a non-Affiliate, or otherwise discharged within 45 days or which is not stayed on appeal and being appropriately contested in good faith. 7.13. Any Loan Document shall fail to remain in full force or effect or any action shall be taken to discontinue or to assert the invalidity or unenforceability of any Loan Document or any Lien in favor of the Agent under the Loan Documents, or such Lien shall not have the priority contemplated by the Loan Documents. 7.14. An event (such event, an "Off-Balance Sheet Trigger Event") shall occur which (i) permits the investors or purchasers in respect of Off-Balance Sheet Liabilities of the Borrower or any Affiliate of the Borrower to require the amortization or liquidation of such Off-Balance Sheet Liabilities and (x) such Off-Balance Sheet Trigger Event shall not be remedied or waived within the later to occur of the tenth day after the occurrence thereof or the expiry date of any grace period related thereto under the agreement evidencing such Off-Balance Sheet Liabilities, or (y) such investors shall require the amortization or liquidation of such Off-Balance Sheet Liabilities as a result of such Off-Balance Sheet Trigger Event, (ii) results in the termination of reinvestments of collections or proceeds of receivables and related assets under the agreements evidencing such Off-Balance Sheet Liabilities, or (iii) causes or otherwise permits the replacement or substitution of the Borrower or any Affiliate thereof as the servicer under the agreements evidencing such Off-Balance Sheet Liabilities; provided, however, that this Section 7.14 shall not apply on any date with respect to any voluntary request by the Borrower or an Affiliate thereof for an above-described amortization, liquidation, or termination of reinvestments so long as the aforementioned investors or purchasers cannot independently require on such date such amortization, liquidation or termination of reinvestments. ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES 8.0. Acceleration. (i) If any Default described in Section 7.6 or 7.7 occurs with respect to the Borrower, the obligations of the Lenders to make Loans hereunder and the obligation and power of the LC Issuers to issue Facility LCs shall automatically terminate and the Secured Obligations shall immediately become due and payable without any election or action on the part of the Agent, any LC Issuer or any Lender, and the Borrower will be and become thereby unconditionally obligated, without any further notice, act or demand, to pay the Agent an amount in immediately available funds, which funds shall be held in the Facility LC Collateral Account, equal to the difference of (x) the amount of LC Obligations at such time less (y) the amount or deposit in the Facility LC Collateral Account at such time which is free and clear of all rights and claims of third parties and has not been applied against the Obligations (the "Collateral Shortfall Amount"). If any other Default occurs, the Required Lenders (or the Agent with the consent of the Required Lenders) may (a) terminate or suspend the obligations of the Lenders to make Loans hereunder and the obligation and power of the LC Issuers to issue Facility LCs, or declare the Secured Obligations to be due and payable, or both, whereupon the Secured Obligations shall 75 become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which the Borrower hereby expressly waives and (b) upon notice to the Borrower and in addition to the continuing right to demand payment of all amounts payable under this Agreement, make demand on the Borrower to pay, and the Borrower will forthwith upon such demand and without any further notice or act pay to the Agent the Collateral Shortfall Amount which funds shall be deposited in the Facility LC Collateral Account. (i) If at any time while any Default is continuing, the Agent determines that the Collateral Shortfall Amount at such time is greater than zero, the Agent may make demand on the Borrower to pay, and the Borrower will, forthwith upon such demand and without any further notice or act, pay to the Agent the Collateral Shortfall Amount, which funds shall be deposited in the Facility LC Collateral Account. (ii) The Agent may at any time or from time to time after funds are deposited in the Facility LC Collateral Account, apply such funds to the payment of the Secured Obligations and any other amounts as shall from time to time have become due and payable by the Borrower to the Lenders or the LC Issuers under the Loan Documents. (iii) At any time while any Default is continuing, neither the Borrower nor any Person claiming on behalf of or through the Borrower shall have any right to withdraw any of the funds held in the Facility LC Collateral Account. After all of the Secured Obligations have been indefeasibly paid in full and the Aggregate Revolving Loan Commitment has been terminated, any funds remaining in the Facility LC Collateral Account shall be returned by the Agent to the Borrower or paid to whomever may be legally entitled thereto at such time. (iv) If, after acceleration of the maturity of the Obligations or termination of the obligations of the Lenders to make Loans and the obligation and power of the LC Issuers to issue Facility LCs hereunder as a result of any Default (other than any Default as described in Section 7.6 or 7.7 with respect to the Borrower) and before any judgment or decree for the payment of the Obligations due shall have been obtained or entered, the Required Lenders (in there sole discretion) shall so direct, the Agent shall, by notice to the Borrower, rescind and annul such acceleration and/or termination. 8.2. Amendments. Subject to the provisions of this Section 8.2, the Required Lenders (or the Agent with the consent in writing of the Required Lenders) and the Borrower may enter into agreements supplemental hereto for the purpose of adding or modifying any provisions to the Loan Documents, including, without limitation, the Intercreditor Agreement, or changing in any manner the rights of the Lenders or the Borrower hereunder or thereunder or waiving any Default hereunder or thereunder; provided, however, that no such supplemental agreement shall, without the consent of all of the Lenders: 8.2.1 Extend the Revolving Facility Termination Date, extend the Term Loan Termination Date, extend the final maturity of any Loan or extend the expiry date of any Facility LC to a date after the Revolving Facility Termination Date, or postpone any regularly scheduled payment of principal of any Loan or forgive all or any portion of the principal amount thereof, or any Reimbursement Obligation related thereto, or reduce the rate or extend the time of payment of interest or fees thereon or Reimbursement 76 Obligations related thereto (other than (x) a waiver of the application of the default rate of interest pursuant to Section 2.10 hereof and (y) any reduction of the amount of or any extension of the payment date for the mandatory payments required under Section 2.2 (other than Sections 2.2.1 and 2.2.7) , in each case which shall only require the approval of the Required Lenders). 8.2.2 Reduce the percentage specified in the definition of Required Lenders or any other percentage of Lenders specified to be the applicable percentage in this Agreement to act on specified matters or amend the definitions of "Pro Rata Share" or "Revolving Loan Pro Rata Share." 8.2.3 Increase the amount of the Revolving Loan Commitment or the Term Loans of any Lender hereunder or the commitment to issue Facility LCs, or permit the Borrower to assign its rights or obligations under this Agreement. 8.2.4 Amend, modify or waive this Section 8.2. 8.2.5 Other than in connection with a transaction permitted under this Agreement, release in any calendar year Collateral with an aggregate value equal to or in excess of $10,000,000. 8.2.6 Other than in connection with a transaction permitted under this Agreement, release any Subsidiary party to the Guaranty from its obligations thereunder. 8.2.7 Increase the advance rate percentages for Perfected Cash Interests, Eligible Receivables and Eligible Petroleum Inventory set forth in the definition of Borrowing Base as of the Closing Date. 8.2.8 Amend, modify or waive Section 11.2, Section 11.3 or any other provision of this Agreement requiring ratable payments to, or distributions by, the Lenders. No amendment of any provision of this Agreement relating to the Agent shall be effective without the written consent of the Agent. The Agent may waive payment of the fee required under Section 12.3.3 without obtaining the consent of any other party to this Agreement. No amendment of any provision of this Agreement relating to the Non-Ratable Lender or any Non-Ratable Loan shall be effective without the written consent of the Non-Ratable Lender. No amendment of any provision of this Agreement relating to an LC Issuer shall be effective without the written consent of such LC Issuer. The limit set forth in Section 2.1.2 on the aggregate amount of Collateral Protection Advances that may be outstanding at any time shall not be increased without the written consent of the Agent and the Lenders in the aggregate having 75% or more of the sum of (i) the Aggregate Revolving Loan Commitment and (ii) the aggregate outstanding principal amount of the Term Loans; provided, however, that if all of the Revolving Loan Commitments have been terminated, the consent of Lenders holding 75% or more of the Aggregate Outstanding Credit Exposure shall be required to approve any such increase. 8.3. Preservation of Rights. No delay or omission of the Lenders, the LC Issuers or the Agent to exercise any right under the Loan Documents shall impair such right or be construed to be a waiver of any Default or an acquiescence therein, and the making of a Credit Extension notwithstanding the existence of a Default or Unmatured Default or the inability of the Borrower to satisfy the conditions precedent to such Credit Extension shall not constitute any waiver or acquiescence. Any single or partial exercise of any such right shall not preclude other 77 or further exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in writing signed by, or by the Agent with the consent of, the requisite number of Lenders required pursuant to Section 8.2, and then only to the extent in such writing specifically set forth. All remedies contained in the Loan Documents or by law afforded shall be cumulative and all shall be available to the Agent, the LC Issuers and the Lenders until all of the Secured Obligations have been paid in full. ARTICLE IX GENERAL PROVISIONS 9.1. Survival of Representations. All representations and warranties of the Borrower contained in this Agreement shall survive the making of the Credit Extensions herein contemplated. 9.2. Governmental Regulation. Anything contained in this Agreement to the contrary notwithstanding, neither any LC Issuer nor any Lender shall be obligated to extend credit to the Borrower in violation of any limitation or prohibition provided by any applicable statute or regulation. 9.3. Headings. Section headings in the Loan Documents are for convenience of reference only, and shall not govern the interpretation of any of the provisions of the Loan Documents. 9.4. Entire Agreement. The Loan Documents embody the entire agreement and understanding among the Borrower, the Agent, the LC Issuers and the Lenders and supersede all prior agreements and understandings among the Borrower, the Agent, the LC Issuers and the Lenders relating to the subject matter thereof other than those contained in the fee letter described in Section 10.13 which shall survive and remain in full force and effect during the term of this Agreement. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 9.5. Several Obligations; Benefits of this Agreement. The respective obligations of the Lenders hereunder are several and not joint and no Lender shall be the partner or agent of any other (except to the extent to which the Agent is authorized to act as such). The failure of any Lender to perform any of its obligations hereunder shall not relieve any other Lender from any of its obligations hereunder. This Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and assigns, provided, however, that the parties hereto expressly agree that the Arranger shall 78 enjoy the benefits of the provisions of Sections 9.6, 9.10 and 10.11 to the extent specifically set forth therein and shall have the right to enforce such provisions on its own behalf and in its own name to the same extent as if it were a party to this Agreement. 9.6. Expenses; Indemnification. (i) The Borrower shall reimburse the Agent and the Arranger for any reasonable costs, internal charges and out-of-pocket expenses (including outside attorneys' and paralegals' fees and time charges of attorneys for the Agent and expenses of and fees for other advisors and professionals engaged by the Agent or the Arranger) paid or incurred by the Agent or the Arranger in connection with the investigation, preparation, negotiation, documentation, execution, delivery, syndication, distribution (including, without limitation, via the internet), review, amendment, modification and administration of the Loan Documents. The Borrower also agrees to reimburse the Agent, the Arranger, the LC Issuers and the Lenders for any reasonable costs, internal charges and out-of-pocket expenses (including outside attorneys' and paralegals' fees and time charges and expenses of attorneys and paralegals for the Agent, the Arranger, the LC Issuers and the Lenders) paid or incurred by the Agent, the Arranger, any LC Issuer or any Lender in connection with the collection and enforcement of the Loan Documents. In addition to expenses set forth above, the Borrower agrees to reimburse, without duplication, the Agent and each Co-Agent, promptly after the Agent's or the applicable Co-Agent's request therefor, for each audit, or other business analysis performed by or for the benefit of the Holders of Secured Obligations in connection with this Agreement or the other Loan Documents in an amount equal to the Agent's or the applicable Co-Agent's then customary charges for each person employed to perform such audit or analysis (which, solely with respect to charges for audits of Collateral, shall not exceed a rate of $750 per day for each Agent and each applicable Co-Agent performing such audit), plus all reasonable costs and expenses (including without limitation, travel expenses) incurred by the Agent or the applicable Co-Agent in the performance of such audit or analysis. (ii) The Borrower hereby further agrees to indemnify the Agent, the Arranger, each LC Issuer, each Lender, and their respective affiliates, and each of their directors, officers and employees against all losses, claims, damages, penalties, judgments, liabilities and expenses (including, without limitation, all expenses of litigation or preparation therefor whether or not the Agent, the Arranger, any LC Issuer, any Lender or any affiliate is a party thereto, and all attorneys' and paralegals' fees, time charges and expenses of attorneys and paralegals of the party seeking indemnification, which attorneys and paralegals may or may not be employees of such party seeking indemnification) which any of them may pay or incur arising out of or relating to this Agreement, the other Loan Documents, the transactions contemplated hereby or the direct or indirect application or proposed application of the proceeds of any Credit Extension hereunder except to the extent that they have resulted from the gross negligence or willful misconduct of the party seeking indemnification. The obligations of the Borrower under this Section 9.6 shall survive the termination of this Agreement. 9.7. Numbers of Documents. All statements, notices, closing documents, and requests hereunder shall be furnished to the Agent with sufficient counterparts so that the Agent may furnish one to each of the Lenders, to the extent that the Agent deems necessary. 9.8. Accounting. Except as provided to the contrary herein, all accounting terms used in the calculation of any financial covenant or test shall be interpreted and all accounting 79 determinations hereunder in the calculation of any financial covenant or test shall be made in accordance with Agreement Accounting Principles. If any changes in US GAAP are hereafter required or permitted and are adopted by the Borrower or any of its Subsidiaries with the agreement of its independent certified public accountants and such changes result in a change in the method of calculation of any of the financial covenants, tests, restrictions or standards herein or in the related definitions or terms used therein ("Accounting Changes"), the parties hereto agree, at the Borrower's request, to enter into negotiations, in good faith, in order to amend such provisions in a credit neutral manner so as to reflect equitably such changes with the desired result that the criteria for evaluating the Borrower's and its Subsidiaries' financial condition shall be the same after such changes as if such changes had not been made; provided, however, until such provisions are amended in a manner reasonably satisfactory to the Agent and the Required Lenders, no Accounting Change shall be given effect in such calculations. In the event such amendment is entered into, all references in this Agreement to Agreement Accounting Principles shall mean US GAAP as of the date of such amendment. Notwithstanding the foregoing, all financial statements to be delivered by the Borrower pursuant to Section 6.1 shall be prepared in accordance with US GAAP in effect at such time. 9.9. Severability of Provisions. Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable. 9.10. Nonliability of Lenders. The relationship between the Borrower on the one hand and the Lenders, the LC Issuers and the Agent on the other hand shall be solely that of borrower and lender. Neither the Agent, the Arranger, any LC Issuer nor any Lender shall have any fiduciary responsibilities to the Borrower. Neither the Agent, the Arranger, any LC Issuer nor any Lender undertakes any responsibility to the Borrower to review or inform the Borrower of any matter in connection with any phase of the Borrower's business or operations. The Borrower agrees that neither the Agent, the Arranger, any LC Issuer nor any Lender shall have liability to the Borrower (whether sounding in tort, contract or otherwise) for losses suffered by the Borrower in connection with, arising out of, or in any way related to, the transactions contemplated and the relationship established by the Loan Documents, or any act, omission or event occurring in connection therewith, unless it is determined in a final non-appealable judgment by a court of competent jurisdiction that such losses resulted from the gross negligence or willful misconduct of the party from which recovery is sought. Neither the Agent, the Arranger, any LC Issuer nor any Lender shall have any liability with respect to, and the Borrower hereby waives, releases and agrees not to sue for, any special, indirect, consequential or punitive damages suffered by the Borrower in connection with, arising out of, or in any way related to the Loan Documents or the transactions contemplated thereby. 9.11. Confidentiality. Each Lender agrees to hold any confidential information which it may receive from the Borrower pursuant to this Agreement in confidence, except for disclosure (i) to its Affiliates and to other Lenders and their respective Affiliates, for use solely in connection with the transactions contemplated hereby, (ii) to legal counsel, accountants, and other professional advisors to such Lender or to a Transferee, in each case which have been informed as to the confidential nature of such information, (iii) to regulatory officials having 80 jurisdiction over it, (iv) to any Person as required by law, regulation, or legal process, (v) to any Person in connection with any legal proceeding to which such Lender is a party, (vi) to such Lender's direct or indirect contractual counterparties in swap agreements or to legal counsel, accountants and other professional advisors to such counterparties, in each case which have been informed as to the confidential nature of such information, and (vii) permitted by Section 12.4. Notwithstanding anything herein to the contrary, confidential information shall not include, and each Lender (and each employee, representative, or other agent of any Lender) may disclose to any and all Persons, without limitation of any kind, the "tax treatment" and "tax structure" (in each case, within the meaning of Treasury Regulation Section 1.6011-4) of the transactions contemplated hereby and all materials of any kind (including opinions or other tax analyses) that are or have been provided to such Lender relating to such tax treatment or tax structure; provided, that with respect to any document or similar item that in either case contains information concerning such tax treatment or tax structure of the transactions contemplated hereby as well as other information, this sentence shall only apply to such portions of the document or similar item that relate to such tax treatment or tax structure. 9.12. Lenders Not Utilizing Plan Assets. Each Lender and Designated Lender represents and warrants that none of the consideration used by such Lender or Designated Lender to make its Loans constitutes for any purpose of ERISA or Section 4975 of the Code assets of any "plan" as defined in Section 3(3) of ERISA or Section 4975 of the Code and the rights and interests of such Lender or Designated Lender in and under the Loan Documents shall not constitute such "plan assets" under ERISA. 9.13. Nonreliance. Each Lender hereby represents that it is not relying on or looking to any margin stock (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for herein. 9.14. Disclosure. The Borrower and each Lender, including each LC Issuer, hereby acknowledge and agree that each Lender and/or its Affiliates from time to time may hold investments in, make other loans to or have other relationships with the Borrower and its Affiliates. 9.15. Performance of Obligations. The Borrower agrees that the Agent may, but shall have no obligation to (i) at any time, pay or discharge taxes, liens, security interests or other encumbrances levied or placed on or threatened against any Collateral and (ii) after the occurrence and during the continuance of a Default make any other payment or perform any act required of the Borrower under any Loan Document or take any other action which the Agent in its discretion deems necessary or desirable to protect or preserve the Collateral, including, without limitation, any action to (x) effect any repairs or obtain any insurance called for by the terms of any of the Loan Documents and to pay all or any part of the premiums therefor and the costs thereof and (y) pay any rents payable by the Borrower which are more than 30 days past due, or as to which the landlord has given notice of termination, under any lease. The Agent shall use its best efforts to give the Borrower notice of any action taken under this Section 9.15 prior to the taking of such action or promptly thereafter provided the failure to give such notice shall not affect the Borrower's obligations in respect thereof. The Borrower agrees to pay the Agent, upon demand, the principal amount of all funds advanced by the Agent under this Section 9.15, together with interest thereon at the rate from time to time applicable to Floating Rate 81 Loans from the date of such advance until the outstanding principal balance thereof is paid in full. If the Borrower fails to make payment in respect of any such advance under this Section 9.15 within one (1) Business Day after the date the Borrower receives written demand therefor from the Agent, the Agent shall promptly notify each Lender and each Lender agrees that it shall thereupon make available to the Agent, in Dollars in immediately available funds, the amount equal to such Lender's Pro Rata Share of such advance. If such funds are not made available to the Agent by such Lender within one (1) Business Day after the Agent's demand therefor, the Agent will be entitled to recover any such amount from such Lender together with interest thereon at the Federal Funds Effective Rate for each day during the period commencing on the date of such demand and ending on the date such amount is received. The failure of any Lender to make available to the Agent its Pro Rata Share of any such unreimbursed advance under this Section 9.15 shall neither relieve any other Lender of its obligation hereunder to make available to the Agent such other Lender's Pro Rata Share of such advance on the date such payment is to be made nor increase the obligation of any other Lender to make such payment to the Agent. All outstanding principal of, and interest on, advances made under this Section 9.15 shall constitute Obligations secured by the Collateral until paid in full by the Borrower. 9.16. Syndication Agent, Co-Documentation Agents, Co-Collateral Agents, etc. Other than as set forth in Section 2.20 and Section 9.6, no Lender identified in this Agreement as the Syndication Agent, a Co-Documentation Agent, a Co-Collateral Agent or any other "co-agent" shall have any right, power, obligation, liability, responsibility, or duty under any Loan Document other than those applicable to any Lender as such. Without limiting the foregoing, no such Lender shall have or be deemed to have a fiduciary relationship with any Lender. 9.17. Subordination of Intercompany Indebtedness. The Borrower agrees that any and all claims of the Borrower against any of its Subsidiaries that is a guarantor with respect to any "Intercompany Indebtedness" (as hereinafter defined), any endorser, obligor or any other guarantor of all or any part of the Secured Obligations, or against any of its properties shall be subordinate and subject in right of payment to the prior payment, in full and in cash, of all Secured Obligations; provided that, and not in contravention of the foregoing, so long as no Default has occurred and is continuing the Borrower may make loans to and receive payments in the ordinary course with respect to such Intercompany Indebtedness from each such guarantor to the extent permitted by the terms of this Agreement and the other Loan Documents. Notwithstanding any right of the Borrower to ask, demand, sue for, take or receive any payment from any guarantor, all rights, liens and security interests of the Borrower, whether now or hereafter arising and howsoever existing, in any assets of any guarantor shall be and are subordinated to the rights of the Holders of Secured Obligations in those assets. The Borrower shall not have any right to possession of any such asset or to foreclose upon any such asset, whether by judicial action or otherwise, unless and until all of the Secured Obligations (other than contingent indemnity obligations) shall have been fully paid and satisfied (in cash) and all financing arrangements pursuant to any Loan Document among the Borrower and the Holders of Secured Obligations (or any affiliate thereof) have been terminated. If all or any part of the assets of any guarantor, or the proceeds thereof, are subject to any distribution, division or application to the creditors of such guarantor, whether partial or complete, voluntary or involuntary, and whether by reason of liquidation, bankruptcy, arrangement, receivership, assignment for the benefit of creditors or any other action or proceeding, or if the business of any such guarantor is dissolved or if substantially all of the assets of any such guarantor are sold, 82 then, and in any such event (such events being herein referred to as an "Insolvency Event"), any payment or distribution of any kind or character, either in cash, securities or other property, which shall be payable or deliverable upon or with respect to any Indebtedness of any guarantor to the Borrower ("Intercompany Indebtedness") shall be paid or delivered directly to the Agent for application on any of the Secured Obligations, due or to become due, until such Secured Obligations (other than contingent indemnity obligations) shall have first been fully paid and satisfied (in cash). Should any payment, distribution, security or instrument or proceeds thereof be received by the Borrower upon or with respect to the Intercompany Indebtedness after an Insolvency Event prior to the satisfaction of all of the Secured Obligations (other than contingent indemnity obligations) and the termination of all financing arrangements pursuant to any Loan Document among the Borrower and the Holders of Secured Obligations (and their Affiliates), the Borrower shall receive and hold the same in trust, as trustee, for the benefit of the Holders of Secured Obligations and shall forthwith deliver the same to the Agent, for the benefit of such Persons, in precisely the form received (except for the endorsement or assignment of the Borrower where necessary), for application to any of the Secured Obligations, due or not due, and, until so delivered, the same shall be held in trust by the Borrower as the property of the Holder of Secured Obligations. If the Borrower fails to make any such endorsement or assignment to the Agent, the Agent or any of its officers or employees are irrevocably authorized to make the same. The Borrower agrees that until the Secured Obligations (other than the contingent indemnity obligations) have been paid in full (in cash) and satisfied and all financing arrangements pursuant to any Loan Document among the Borrower and the Holders of the Secured Obligations (and their Affiliates) have been terminated, the Borrower will not assign or transfer to any Person (other than the Agent) any claim the Borrower has or may have against any guarantor. 9.18. Certifications Regarding Indentures. The Borrower hereby certifies to the Agent and the Lenders that, immediately prior to the effectiveness of the Revolving Loan Commitments, and immediately prior to the initial Credit Extension hereunder, the Borrower's incurrence of Indebtedness under this Agreement and the other Loan Documents does not violate (i) Section 4.09 of the Indenture, dated as of July 2, 1998, as amended or modified from time to time, to which the Borrower and certain of its Subsidiaries are subject and pursuant to which the Borrower issued certain 9% Senior Subordinated Notes Due 2008, (ii) Section 4.09 of the Indenture, dated as of November 6, 2001, as amended or modified from time to time, to which the Borrower and certain of its Subsidiaries are subject and pursuant to which the Borrower issued certain 9-5/8% Senior Subordinated Notes Due 2008, and (iii) Section 4.09 of the Indenture, dated as of April 9, 2002, as amended or modified from time to time, to which the Borrower is subject and pursuant to which the Borrower issued certain 9-5/8% Senior Subordinated Notes Due 2012. The Borrower further certifies to the Agent and the Lenders that both the Revolving Loan Commitment component of this Agreement and the other Loan Documents constitute a "Credit Facility" and a "Senior Credit Facility" under each of the foregoing Indentures, and that the Term Loans do not constitute on the Closing Date or at any other time a "Senior Credit Facility" under the indenture referenced in clause (i) hereof, and shall not constitute such a "Senior Credit Facility" until such indenture is appropriately amended. The Borrower further certifies that the Revolving Loan Commitment, the Term Loans, this Agreement, and the other Loan Documents collectively constitute "Senior Debt" under each of the aforementioned indentures. 83 ARTICLE X THE AGENT 10.1. Appointment; Nature of Relationship. Bank One, NA is hereby appointed by each of the Lenders as its contractual representative (herein referred to as the "Agent") hereunder and under each other Loan Document, and each of the Lenders irrevocably authorizes the Agent to act as the contractual representative of such Lender with the rights and duties expressly set forth herein and in the other Loan Documents, including, without limitation, the Agent's agreement to bind itself and the Lenders to the Intercreditor Agreement and to act on its behalf and on behalf of the Lenders thereunder. The Agent agrees to act as such contractual representative upon the express conditions contained in this Article X. Notwithstanding the use of the defined term "Agent," it is expressly understood and agreed that the Agent shall not have any fiduciary responsibilities to any of the Holders of Secured Obligations by reason of this Agreement or any other Loan Document and that the Agent is merely acting as the contractual representative of the Lenders with only those duties as are expressly set forth in this Agreement and the other Loan Documents. In its capacity as the Lenders' contractual representative, the Agent (i) does not hereby assume any fiduciary duties to any of the Holders of Secured Obligations, (ii) is a "representative" of the Holders of Secured Obligations within the meaning of the term "secured party" as defined in the New York Uniform Commercial Code and (iii) is acting as an independent contractor, the rights and duties of which are limited to those expressly set forth in this Agreement and the other Loan Documents. Each of the Lenders, for itself and on behalf of its Affiliates as Holders of Secured Obligations, hereby agrees to assert no claim against the Agent on any agency theory or any other theory of liability for breach of fiduciary duty, all of which claims each Holder of Secured Obligations hereby waives. 10.2. Powers. The Agent shall have and may exercise such powers under the Loan Documents as are specifically delegated to the Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto. The Agent shall have no implied duties or fiduciary duties to the Lenders, or any obligation to the Lenders to take any action thereunder except any action specifically provided by the Loan Documents to be taken by the Agent. 10.3. General Immunity. Neither the Agent nor any of its directors, officers, agents or employees shall be liable to the Borrower, or any Lender or Holder of Secured Obligations for any action taken or omitted to be taken by it or them hereunder or under any other Loan Document or in connection herewith or therewith except to the extent such action or inaction is determined in a final, non-appealable judgment by a court of competent jurisdiction to have arisen from the gross negligence or willful misconduct of such Person. 10.4. No Responsibility for Loans, Recitals, etc. Neither the Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into, or verify (a) any statement, warranty or representation made in connection with any Loan Document or any borrowing hereunder; (b) the performance or observance of any of the covenants or agreements of any obligor under any Loan Document, including, without limitation, any agreement by an obligor to furnish information directly to each Lender; (c) the satisfaction of any condition specified in Article IV, except receipt of items required to be delivered solely to the Agent; (d) the existence or possible existence of any Default or Unmatured Default; (e) the 84 validity, enforceability, effectiveness, sufficiency or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith; (f) the value, sufficiency, creation, perfection or priority of any Lien in any Collateral; or (g) the financial condition of the Borrower or any guarantor of any of the Obligations or of any of the Borrower's or any such guarantor's respective Subsidiaries. The Agent shall have no duty to disclose to the Lenders information that is not required to be furnished by the Borrower to the Agent at such time, but is voluntarily furnished by the Borrower to the Agent (either in its capacity as Agent or in its individual capacity). 10.5. Action on Instructions of Lenders. The Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and under any other Loan Document in accordance with written instructions signed by the Required Lenders (or all of the Lenders in the event that and to the extent that this Agreement expressly requires such), and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders. The Lenders hereby acknowledge that the Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement or any other Loan Document unless it shall be requested in writing to do so by the Required Lenders (or all of the Lenders in the event that and to the extent that this Agreement expressly requires such). The Agent shall be fully justified in failing or refusing to take any action hereunder and under any other Loan Document unless it shall first be indemnified to its satisfaction by the Lenders pro rata against any and all liability, cost and expense that it may incur by reason of taking or continuing to take any such action. 10.6. Employment of Agents and Counsel. The Agent may execute any of its duties as Agent hereunder and under any other Loan Document by or through employees, agents, and attorneys-in-fact and shall not be answerable to the Lenders, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The Agent shall be entitled to advice of counsel concerning the contractual arrangement between the Agent and the Lenders and all matters pertaining to the Agent's duties hereunder and under any other Loan Document. 10.7. Reliance on Documents; Counsel. The Agent shall be entitled to rely upon any Note, notice, consent, certificate, affidavit, letter, telegram, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and, in respect to legal matters, upon the opinion of counsel selected by the Agent, which counsel may be employees of the Agent. 10.8. Agent's Reimbursement and Indemnification. The Lenders agree to reimburse and indemnify the Agent ratably in proportion to the Lenders' Pro Rata Shares of the Term Loans and the Aggregate Revolving Loan Commitment (or, if the Aggregate Revolving Loan Commitment has been terminated, of the Aggregate Outstanding Credit Exposure) (i) for any amounts not reimbursed by the Borrower for which the Agent is entitled to reimbursement by the Borrower under the Loan Documents, (ii) for any other expenses incurred by the Agent on behalf of the Lenders, in connection with the preparation, execution, delivery, administration and enforcement of the Loan Documents (including, without limitation, for any expenses incurred by the Agent in connection with any dispute between the Agent and any Lender or between two or more of the Lenders) and (iii) for any liabilities, obligations, losses, damages, penalties, actions, 85 judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactions contemplated thereby (including, without limitation, for any such amounts incurred by or asserted against the Agent in connection with any dispute between the Agent and any Lender or between two or more of the Lenders), or the enforcement of any of the terms of the Loan Documents or of any such other documents, provided that (i) no Lender shall be liable for any of the foregoing to the extent any of the foregoing is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the Agent and (ii) any indemnification required pursuant to Section 3.5(vii) shall, notwithstanding the provisions of this Section 10.8, be paid by the relevant Lender in accordance with the provisions thereof. The obligations of the Lenders under this Section 10.8 shall survive payment of the Secured Obligations and termination of this Agreement. 10.9. Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Unmatured Default hereunder unless the Agent has received written notice from a Lender or the Borrower referring to this Agreement describing such Default or Unmatured Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall give prompt notice thereof to the Lenders. 10.10. Rights as a Lender. In the event the Agent is a Lender, the Agent shall have the same rights and powers hereunder and under any other Loan Document with respect to its Revolving Loan Commitment and its Credit Extensions as any Lender and may exercise the same as though it were not the Agent, and the term "Lender" or "Lenders" shall, at any time when the Agent is a Lender, unless the context otherwise indicates, include the Agent in its individual capacity. The Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of trust, debt, equity or other transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Borrower or any of its Subsidiaries in which the Borrower or such Subsidiary is not restricted hereby from engaging with any other Person. The Agent, in its individual capacity, is not obligated to remain a Lender. 10.11. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Agent, the Arranger or any other Lender and based on the financial statements prepared by the Borrower and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the other Loan Documents. Each Lender also acknowledges that it will, independently and without reliance upon the Agent, the Arranger or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents. 10.12. Successor Agent. The Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower, such resignation to be effective upon the appointment of a successor Agent or, if no successor Agent has been appointed, forty-five days after the retiring Agent gives notice of its intention to resign. The Agent may be removed at any time with or without cause by written notice received by the Agent from the Required Lenders, such removal to be effective on the date specified by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint, on behalf of the 86 Borrower and the Lenders, a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders within thirty days after the resigning Agent's giving notice of its intention to resign, then the resigning Agent may appoint, on behalf of the Borrower and the Lenders, a successor Agent. Notwithstanding the previous sentence, the Agent may at any time without the consent of the Borrower or any Lender, appoint any of its Affiliates which is a commercial bank as a successor Agent hereunder. If the Agent has resigned or been removed and no successor Agent has been appointed, the Lenders may perform all the duties of the Agent hereunder and the Borrower shall make all payments in respect of the Obligations to the applicable Lender and for all other purposes shall deal directly with the Lenders. No successor Agent shall be deemed to be appointed hereunder until such successor Agent has accepted the appointment. Any such successor Agent shall be a commercial bank having capital and retained earnings of at least $100,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the resigning or removed Agent. Upon the effectiveness of the resignation or removal of the Agent, the resigning or removed Agent shall be discharged from its duties and obligations hereunder and under the Loan Documents. After the effectiveness of the resignation or removal of an Agent, the provisions of this Article X shall continue in effect for the benefit of such Agent in respect of any actions taken or omitted to be taken by it while it was acting as the Agent hereunder and under the other Loan Documents. In the event that there is a successor to the Agent by merger, or the Agent assigns its duties and obligations to an Affiliate pursuant to this Section 10.12, then the term "Prime Rate" as used in this Agreement shall mean the prime rate, base rate or other analogous rate of the new Agent. 10.13. Agent and Arranger Fees. The Borrower agrees to pay to the Agent and the Arranger, for their respective accounts, the fees agreed to by the Borrower, the Agent and the Arranger pursuant to that certain letter agreement dated on or about April 1, 2003, or as otherwise agreed from time to time. 10.14. Delegation to Affiliates. The Borrower and the Lenders agree that the Agent may delegate any of its duties under this Agreement to any of its Affiliates. Any such Affiliate (and such Affiliate's directors, officers, agents and employees) which performs duties in connection with this Agreement shall be entitled to the same benefits of the indemnification, waiver and other protective provisions to which the Agent is entitled under Articles IX and X. 10.15. Collateral Documents. Each Lender authorizes the Agent to enter into each of the Collateral Documents to which it is a party and to take all action contemplated by such documents. Each Lender agrees that no Holder of Secured Obligations (other than the Agent) shall have the right individually to seek to realize upon the security granted by any Collateral Document, it being understood and agreed that such rights and remedies may be exercised solely by the Agent for the benefit of the Holders of Secured Obligations upon the terms of the Collateral Documents. (a) In the event that any Collateral is hereafter pledged by any Person as collateral security for the Secured Obligations, the Agent is hereby authorized to execute and deliver on behalf of the Holders of Secured Obligations any Loan Documents necessary or appropriate to grant and perfect a Lien on such Collateral in favor of the Agent on behalf of the Holders of Secured Obligations. 87 (b) The Lenders hereby authorize the Agent, at its option and in its discretion, to release any Lien granted to or held by the Agent upon any Collateral (i) upon termination of the Aggregate Revolving Loan Commitment and payment and satisfaction of all of the Obligations (other than contingent indemnity obligations and Rate Management Obligations) at any time arising under or in respect of this Agreement or the Loan Documents or the transactions contemplated hereby or thereby; (ii) as permitted by, but only in accordance with, the terms of the applicable Loan Document; or (iii) if approved, authorized or ratified in writing by the Required Lenders, unless such release is required to be approved by all of the Lenders hereunder. Upon request by the Agent at any time, the Lenders will confirm in writing the Agent's authority to release particular types or items of Collateral pursuant to this Section 10.15. (c) Upon any sale or transfer of assets constituting Collateral which is permitted pursuant to the terms of any Loan Document, or consented to in writing by the Required Lenders or all of the Lenders, as applicable, and upon at least five Business Days' prior written request by the Borrower to the Agent, the Agent shall (and is hereby irrevocably authorized by the Lenders to) execute such documents as may be necessary to evidence the release of the Liens granted to the Agent for the benefit of the Holders of Secured Obligations herein or pursuant hereto upon the Collateral that was sold or transferred; provided, however, that (i) the Agent shall not be required to execute any such document on terms which, in the Agent's opinion, would expose the Agent to liability or create any obligation or entail any consequence other than the release of such Liens without recourse or warranty, and (ii) such release shall not in any manner discharge, affect or impair the Secured Obligations or any Liens upon (or obligations of the Borrower or any Subsidiary Guarantor in respect of) all interests retained by the Borrower or any Subsidiary Guarantor, including, without limitation, the proceeds of the sale, all of which shall continue to constitute part of the Collateral. 10.16. Intercreditor Agreement. 10.16.1 The Intercreditor Agreement sets forth certain relative rights, as holders of Liens, of the Agent on behalf of the Holders of Secured Obligations and the Multiparty Collateral Agent on behalf of the Senior Noteholders and the Senior Term Loan Holders. Each of the Lenders has received a copy of the Intercreditor Agreement attached hereto as Exhibit I and each such Person (including, without limitation, those Persons that become Lenders subject hereto pursuant to an Assignment Agreement) agrees to be bound by the terms and conditions of such attached Intercreditor Agreement. The future consent of the Lenders shall not be required in order for the Agent to enter into any Intercreditor Agreement described in clause (y) of the definition thereof, and the Lenders hereby authorize the Agent to enter into such Intercreditor Agreement. The Lenders authorize the Agent to deliver written notice to the Multiparty Collateral Agent, the Senior Note Trustee, the Senior Term Loan Agreement Agent, the Senior Noteholders and the Senior Term Loan Holders that this Agreement, the other Loan Documents, and the credit facilities evidenced hereby, constitute a "Qualified Credit Facility" as defined on the Closing Date in the Senior Note Indenture and Senior Term Loan Agreement. The Agent shall require the written agreement of the Multiparty Collateral Agent, on behalf of itself, the Senior Note Trustee, the Senior Noteholders, the Senior Term Loan Agreement Agent, and the Senior Term Loan Holders, to be bound by the Intercreditor Agreement. Notwithstanding the foregoing, nothing in the Intercreditor Agreement will: 88 (a) impair, as between (1) the Borrower and the Subsidiary Guarantors, and (2) the Agent, the Lenders and the LC Issuers, the obligations of the Borrower or any Subsidiary Guarantor, which are absolute and unconditional, to pay principal, interest, fees and expenses hereunder in accordance with the terms hereof or to perform any other obligation of the Borrower or such Subsidiary Guarantor under the Loan Documents; (b) affect the relative rights of the Holders of Secured Obligations, the Senior Noteholders or the Senior Term Loan Holders and other creditors of the Borrower or any of its Subsidiaries; (c) restrict the right of any Holder of Secured Obligations, Senior Noteholder or Senior Term Loan Holder to sue for payments that are then due and owing; (d) prevent the Agent, the Holders of Secured Obligations, the Multiparty Collateral Agent, the Senior Note Trustee, the Senior Term Loan Agreement Agent, the Senior Noteholders or the Senior Term Loan Holders, from exercising against the Borrower or any Subsidiary Guarantor any of its other available remedies upon a Default or Unmatured Default or a "default" or "event of default" under the Senior Notes or the Senior Term Loan Agreement (or any comparable event which would permit the acceleration of the repayment of the Indebtedness held by such Persons or which would otherwise allow such Persons to exercise rights and remedies against the Borrower or any Subsidiary Guarantor); or (e) restrict the right of the Agent, the Holders of Secured Obligations, the Multiparty Collateral Agent, the Senior Note Trustee, the Senior Term Loan Agreement Agent, the Senior Noteholders or the Senior Term Loan Holders to file and prosecute a petition seeking an order for relief in an involuntary bankruptcy case as to the Borrower or any Subsidiary Guarantor or otherwise to commence, or seek relief commencing, any insolvency or liquidation proceeding involuntarily against the Borrower or any Subsidiary Guarantor or to assert or enforce any claim, Lien, right or remedy in any voluntary or involuntary bankruptcy case or insolvency or liquidation proceeding. 10.16.2 The Agent and the Lenders agree that, until the Senior Notes and the Senior Term Loans are repaid and the Multiparty Collateral Agent's Lien upon certain of the Borrower's and its Subsidiaries' Property is released as a result of such repayment, the Agent, on behalf of the Lenders, shall be bound by and shall perform each of its obligations set forth in the Intercreditor Agreement. The Agent and the Lenders further agree that neither the Lenders nor the Agent shall accept, enforce, claim or retain any benefit of any guaranty from or by any Pipeline Subsidiary, any Lien upon any Property of any Pipeline Subsidiary as Collateral for the Secured Obligations, or any consensual Lien upon any equities of any Subsidiary of the Borrower. The Multiparty Collateral Agent, the Senior Note Trustee, the Senior Term Loan Agreement Agent, the Senior Term Loan Holders, and the Senior Noteholders shall be deemed to be third party beneficiaries of this Section 10.16.2. 89 ARTICLE XI SETOFF; RATABLE PAYMENTS 11.1. Setoff. In addition to, and without limitation of, any rights of the Lenders under applicable law, if the Borrower becomes insolvent, however evidenced, or any Default occurs, any and all deposits (including all account balances, whether provisional or final and whether or not collected or available) and any other Indebtedness at any time held or owing by any Lender or any Affiliate of any Lender to or for the credit or account of the Borrower may be offset and applied toward the payment of the Secured Obligations owing to such Lender, whether or not the Secured Obligations, or any part thereof, shall then be due. 11.2. Ratable Payments. If any Lender, whether by setoff or otherwise, has payment made to it upon its Outstanding Credit Exposure (other than payments received pursuant to Section 3.1, 3.2, 3.4 or 3.5) in a greater proportion than that received by any other Lender, such Lender agrees, promptly upon demand, to purchase a participation in the Aggregate Outstanding Credit Exposure held by the other Lenders so that after such purchase each Lender will hold its Pro Rata Share of the Aggregate Outstanding Credit Exposure. If any Lender, whether in connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligations or such amounts which may be subject to setoff, such Lender agrees, promptly upon demand, to take such action necessary such that all Lenders share in the benefits of such collateral ratably in proportion to their respective Pro Rata Shares of the Aggregate Outstanding Credit Exposure. In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made. 11.3. Application of Payments. Principal and interest payments shall be apportioned ratably among the Lenders (according to the unpaid principal balance of the Loans to which such payments relate held by each Lender) and payments of the fees shall, as applicable, be apportioned ratably among the Lenders, except for fees payable solely to the Agent and the LC Issuer and except as provided in the fee letter referenced in Section 10.13. Subject to the provisions of Section 2.2 governing the application of mandatory prepayments, all payments shall be remitted to the Agent and all such payments not relating to principal or interest of specific Loans, or not constituting payment of specific fees, and all proceeds of any Collateral received by the Agent following acceleration of the maturity of the Obligations pursuant to Section 8.1, shall be applied, ratably, subject to the provisions of this Agreement, first, to pay any fees, indemnities, or expense reimbursements including amounts then due to the Agent from the Borrower, second, to pay any fees or expense reimbursements then due to the Lenders from the Borrower, third, to pay ratably interest due in respect of the Revolving Loans, including Non-Ratable Loans and Collateral Protection Advances, and the Term Loans, fourth, to pay or prepay ratably the principal amount of the Collateral Protection Advances, fifth, to pay or prepay ratably the principal amount of the Non-Ratable Loans, the Revolving Loans and the Term Loans and unpaid Reimbursement Obligations in respect of Facility LCs, and an amount to the Agent equal to one hundred ten percent (110%) of the aggregate undrawn face amount of all outstanding Facility LCs to be held as cash collateral for such Obligations, sixth, to pay any amounts owing with respect to Bank Products, and seventh, to the payment of any other Secured Obligation due to the Agent or any Lender by the Borrower. 90 Notwithstanding anything to the contrary contained in this Agreement, unless so directed by the Borrower, or unless a Default is in existence, neither the Agent nor any Lender shall apply any payment which it receives to any Eurodollar Loan, except (a) on the expiration date of the Interest Period applicable to any such Eurodollar Loan, or (b) in the event, and only to the extent, that there are no outstanding Floating Rate Loans and, in any event, the Borrower shall pay the breakage losses with respect to Eurodollar Loans in accordance with Section 3.4. The Agent and the Required Lenders shall have the continuing and exclusive right to apply and reverse and reapply any and all such proceeds and payments to any portion of the Secured Obligations. Unless otherwise required by the terms of this Agreement, all principal payments in respect of Loans (other than Non-Ratable Loans and Collateral Protection Advances) shall be applied first to repay outstanding Floating Rate Loans, and then to repay outstanding Eurodollar Loans with those Eurodollar Loans which have earlier expiring Interest Periods being repaid prior to those which have later expiring Interest Periods. ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS 12.1. Successors and Assigns; Designated Lenders. 12.1.1 Successors and Assigns. The terms and provisions of the Loan Documents shall be binding upon and inure to the benefit of the Borrower, the Agent and the Lenders and their respective successors and assigns permitted hereby, except that (i) the Borrower shall not have the right to assign its rights or obligations under the Loan Documents without the prior written consent of each Lender, (ii) any assignment by any Lender must be made in compliance with Section 12.3, and (iii) any transfer by Participants must be made in compliance with Section 12.2. Any attempted assignment or transfer by any party not made in compliance with this Section 12.1 shall be null and void, unless such attempted assignment or transfer is treated as a participation in accordance with Section 12.3.2. The parties to this Agreement acknowledge that clause (ii) of this Section 12.1 relates only to absolute assignments and this Section 12.1 does not prohibit assignments creating security interests, including, without limitation, (x) any pledge or assignment by any Lender of all or any portion of its rights under this Agreement and any Note to a Federal Reserve Bank, (y) in the case of a Lender which is a Fund, any pledge or assignment of all or any portion of its rights under this Agreement and any Note to its trustee in support of its obligations to its trustee or (z) any pledge or assignment by any Lender of all or any portion of its rights under this Agreement and any Note to direct or indirect contractual counterparties in swap agreements relating to the Loans; provided, however, that no such pledge or assignment creating a security interest shall release the transferor Lender from its obligations hereunder unless and until the parties thereto have complied with the provisions of Section 12.3. The Agent may treat the Person which made any Loan or which holds any Note as the owner thereof for all purposes hereof unless and until such Person complies with Section 12.3; provided, however, that the Agent may in its discretion (but shall not be required to) follow instructions from the Person which made any Loan or which holds any Note to direct payments relating to such Loan or Note to another Person. Any assignee of the rights to 91 any Loan or any Note agrees by acceptance of such assignment to be bound by all the terms and provisions of the Loan Documents. Any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the owner of the rights to any Loan (whether or not a Note has been issued in evidence thereof), shall be conclusive and binding on any subsequent holder or assignee of the rights to such Loan. 12.1.2 Designated Lenders. (i) Subject to the terms and conditions set forth in this Section 12.1.2, any Lender may from time to time elect to designate an Eligible Designee to provide all or any part of the Loans to be made by such Lender pursuant to this Agreement; provided that the designation of an Eligible Designee by any Lender for purposes of this Section 12.1.2 shall be subject to the approval of the Agent (which consent shall not be unreasonably withheld or delayed). Upon the execution by the parties to each such designation of an agreement in the form of Exhibit F hereto (a "Designation Agreement") and the acceptance thereof by the Agent, the Eligible Designee shall become a Designated Lender for purposes of this Agreement. The Designating Lender shall thereafter have the right to permit the Designated Lender to provide all or a portion of the Loans to be made by the Designating Lender pursuant to the terms of this Agreement and the making of the Loans or portion thereof shall satisfy the obligations of the Designating Lender to the same extent, and as if, such Loan was made by the Designating Lender. As to any Loan made by it, each Designated Lender shall have all the rights a Lender making such Loan would have under this Agreement and otherwise; provided, (x) that all voting rights under this Agreement shall be exercised solely by the Designating Lender, (y) each Designating Lender shall remain solely responsible to the other parties hereto for its obligations under this Agreement, including the obligations of a Lender in respect of Loans made by its Designated Lender and (z) no Designated Lender shall be entitled to reimbursement under Article III hereof for any amount which would exceed the amount that would have been payable by the Borrower to the Lender from which the Designated Lender obtained any interests hereunder. No additional Notes shall be required with respect to Loans provided by a Designated Lender; provided, however, to the extent any Designated Lender shall advance funds, the Designating Lender shall be deemed to hold the Notes in its possession as an agent for such Designated Lender to the extent of the Loan funded by such Designated Lender. Such Designating Lender shall act as administrative agent for its Designated Lender and give and receive notices and communications hereunder. Any payments for the account of any Designated Lender shall be paid to its Designating Lender as administrative agent for such Designated Lender and neither the Borrower nor the Agent shall be responsible for any Designating Lender's application of such payments. In addition, any Designated Lender may (1) with notice to, but without the consent of the Borrower or the Agent, assign all or portions of its interests in any Loans to its Designating Lender or to any financial institution consented to by the Agent providing liquidity and/or credit facilities to or for the account of such Designated Lender and (2) subject to advising any such Person that such information is to be 92 treated as confidential in accordance with Section 9.11, disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any guarantee, surety or credit or liquidity enhancement to such Designated Lender. (ii) Each party to this Agreement hereby agrees that it shall not institute against, or join any other Person in instituting against, any Designated Lender any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other proceedings under any federal or state bankruptcy or similar law for one year and a day after the payment in full of all outstanding senior indebtedness of any Designated Lender; provided that the Designating Lender for each Designated Lender hereby agrees to indemnify, save and hold harmless each other party hereto for any loss, cost, damage and expense arising out of its inability to institute any such proceeding against such Designated Lender. This Section 12.1.2 shall survive the termination of this Agreement. 12.2. Participations. 12.2.1 Permitted Participants; Effect. Any Lender may at any time sell to one or more banks or other entities ("Participants") participating interests in any Outstanding Credit Exposure of such Lender, any Note held by such Lender, any Revolving Loan Commitment of such Lender or any other interest of such Lender under the Loan Documents. In the event of any such sale by a Lender of participating interests to a Participant, such Lender's obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender shall remain the owner of its Outstanding Credit Exposure and the holder of any Note issued to it in evidence thereof for all purposes under the Loan Documents, all amounts payable by the Borrower under this Agreement shall be determined as if such Lender had not sold such participating interests, and the Borrower and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under the Loan Documents. 12.2.2 Voting Rights. Each Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents other than any amendment, modification or waiver with respect to any Credit Extension or Revolving Loan Commitment in which such Participant has an interest which would require consent of all of the Lenders pursuant to the terms of Section 8.2. 12.2.3 Benefit of Certain Provisions. The Borrower agrees that each Participant shall be deemed to have the right of setoff provided in Section 11.1 in respect of its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents, provided that each Lender shall retain the right of setoff provided in Section 11.1 with respect to the amount of participating interests sold to each Participant. The Lenders agree to share with each Participant, and each Participant, by exercising the 93 right of setoff provided in Section 11.1, agrees to share with each Lender, any amount received pursuant to the exercise of its right of setoff, such amounts to be shared in accordance with Section 11.2 as if each Participant were a Lender. The Borrower further agrees that each Participant shall be entitled to the benefits of Sections 3.1, 3.2, 3.4 and 3.5 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 12.3, provided that (i) a Participant shall not be entitled to receive any greater payment under Section 3.1, 3.2 or 3.5 than the Lender who sold the participating interest to such Participant would have received had it retained such interest for its own account, unless the sale of such interest to such Participant is made with the prior written consent of the Borrower, and (ii) any Participant not incorporated under the laws of the United States of America or any State thereof agrees to comply with the provisions of Section 3.5 to the same extent as if it were a Lender. 12.3. Assignments. 12.3.1 Permitted Assignments. Any Lender may at any time assign to one or more banks or other entities ("Purchasers") all or any part of its rights and obligations under the Loan Documents. Such assignment shall be evidenced by an agreement substantially in the form of Exhibit C or in such other form as may be agreed to by the parties thereto (each such agreement, an "Assignment Agreement"). Each such assignment with respect to a Purchaser which is not a Lender or an Affiliate of a Lender or an Approved Fund shall, unless otherwise consented to in writing by the Borrower and the Agent, either be in an amount equal to the entire applicable Outstanding Credit Exposure of the assigning Lender or (unless each of the Borrower and the Agent otherwise consents) be in an aggregate amount not less than (x) $10,000,000 with respect to Revolving Loans and (y) $1,000,000 with respect to Term Loans. The amount of the assignment shall be based on the Outstanding Credit Exposure subject to the assignment, determined as of the date of such assignment or as of the "Trade Date," if the "Trade Date" is specified in the Assignment Agreement. 12.3.2 Consents. The consent of the Borrower shall be required prior to an assignment becoming effective unless the Purchaser is a Lender, an Affiliate of a Lender or an Approved Fund, provided that the consent of the Borrower shall not be required if (i) a Default has occurred and is continuing or (ii) if such assignment is in connection with the physical settlement of any Lender's obligations to direct or indirect contractual counterparties in swap agreements relating to the Loans; provided, that the assignment without the Borrower's consent pursuant to clause (ii) shall not increase the Borrower's liability under Section 3.5. The consent of the Agent shall be required prior to an assignment becoming effective unless the Purchaser is a Lender, an Affiliate of a Lender or an Approved Fund. Any consent required under this Section 12.3.2 shall not be unreasonably withheld or delayed. 12.3.3 Effect; Effective Date. Upon (i) delivery to the Agent of an Assignment Agreement, together with any consents required by Sections 12.3.1 and 12.3.2, and (ii) payment of a $3,500 fee to the Agent for processing such assignment (unless such fee is waived by the Agent or unless such assignment is made to such assigning Lender's Affiliate or an Approved Fund), such assignment shall become effective on the effective date specified in such 94 assignment. The Assignment Agreement shall contain a representation and warranty by the Purchaser to the effect that the assignment evidenced thereby will not result in a non-exempt "prohibited transaction" under Section 406 ERISA. On and after the effective date of such assignment, such Purchaser shall for all purposes be a Lender party to this Agreement and any other Loan Document executed by or on behalf of the Lenders and shall have all the rights, benefits and obligations of a Lender under the Loan Documents, to the same extent as if it were an original party thereto, and the transferor Lender shall be released with respect to the Outstanding Credit Exposure assigned to such Purchaser without any further consent or action by the Borrower, the Lenders or the Agent. In the case of an assignment covering all of the assigning Lender's rights, benefits and obligations under this Agreement, such Lender shall cease to be a Lender hereunder but shall continue to be entitled to the benefits of, and subject to, those provisions of this Agreement and the other Loan Documents which survive payment of the Obligations and termination of the Loan Documents. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 12.3 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 12.2. Upon the consummation of any assignment to a Purchaser pursuant to this Section 12.3.3, the transferor Lender, the Agent and the Borrower shall, if the transferor Lender or the Purchaser desires that its Loans be evidenced by Notes, make appropriate arrangements so that, upon cancellation and surrender to the Borrower of the Notes (if any) held by the transferor Lender, new Notes or, as appropriate, replacement Notes are issued to such transferor Lender, if applicable, and new Notes or, as appropriate, replacement Notes, are issued to such Purchaser, in each case in principal amounts reflecting their respective Revolving Loan Commitments and Term Loans, as applicable (or, if the Revolving Facility Termination Date has occurred, their respective Outstanding Credit Exposure), as adjusted pursuant to such assignment. 12.3.4 Register. The Agent, acting solely for this purpose as an agent of the Borrower (and the Borrower hereby designates the Agent to act in such capacity), shall maintain at one of its offices in Chicago, Illinois a copy of each Assignment and Assumption delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders, and the Revolving Loan Commitments of, and principal amounts of and interest on the Loans owing to, each Lender pursuant to the terms hereof from time to time and whether such Lender is an original Lender or assignee of another Lender pursuant to an assignment under this Section 13.3. The entries in the Register shall be conclusive, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice. 12.4. Dissemination of Information. The Borrower authorizes each Lender to disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents 95 by operation of law (each a "Transferee") and any prospective Transferee any and all information in such Lender's possession concerning the creditworthiness of the Borrower and its Subsidiaries; provided that each Transferee and prospective Transferee agrees to be bound by Section 9.11 of this Agreement. 12.5. Tax Certifications. If any interest in any Loan Document is transferred to any Transferee which is not incorporated under the laws of the United States or any State thereof, the transferor Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, to comply with the provisions of Section 3.5(iv). ARTICLE XIII NOTICES 13.1. Notices. Except as otherwise permitted by Section 2.13 with respect to borrowing notices, all notices, requests and other communications to any party hereunder shall be in writing (including electronic transmission, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Borrower, the Lenders, the LC Issuers, or the Agent, at its address or facsimile number set forth on the signature pages hereof or, (y) in the case of any party, at such other address or facsimile number as such party may hereafter specify for the purpose by notice to the Agent and the Borrower in accordance with the provisions of this Section 13.1. Each such notice, request or other communication shall be effective (i) if given by facsimile transmission, when transmitted to the facsimile number specified in this Section and confirmation of receipt is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, or (iii) if given by any other means, when delivered (or, in the case of electronic transmission, received) at the address specified in this Section; provided that notices to the Agent under Article II shall not be effective until received. 13.2. Change of Address. The Borrower, the Agent, any LC Issuer, and any Lender may each change the address for service of notice upon it by a notice in writing to the other parties hereto. ARTICLE XIV COUNTERPARTS This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. This Agreement shall be effective when it has been executed by the Borrower, the Agent, the initial LC Issuer and the Lenders and each party has notified the Agent by facsimile transmission or telephone that it has taken such action. 96 ARTICLE XV CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL 15.1 CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATION LAW BUT OTHERWISE WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS) OF THE STATE OF NEW YORK, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. IF ANY COURT, TRIBUNAL OR OTHER ENTITY WITH JURISDICTION OVER THE LOAN DOCUMENTS AND THE TRANSACTIONS EVIDENCED THEREBY REJECTS THE FOREGOING CHOICE OF NEW YORK LAW, THEN THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING 735 ILCS SECTION 105/5-1 ET SEQ. BUT OTHERWISE WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS) OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. 15.2 CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL COURT SITTING IN OR WITH DIRECT JURISDICTION OVER THE SOUTHERN DISTRICT OF NEW YORK OR ANY NEW YORK STATE COURT SITTING IN OR WITH DIRECT JURISDICTION OVER THE BOROUGH OF MANHATTAN IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT, ANY LC ISSUER, ANY LENDER OR ANY HOLDER OF SECURED OBLIGATIONS TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE AGENT, ANY LC ISSUER, ANY LENDER OR ANY HOLDER OF SECURED OBLIGATIONS OR ANY AFFILIATE OF THE AGENT, ANY LC ISSUER, ANY LENDER OR ANY HOLDER OF SECURED OBLIGATIONS INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A UNITED STATES FEDERAL COURT SITTING IN OR WITH DIRECT JURISDICTION OVER THE SOUTHERN DISTRICT OF NEW YORK OR ANY NEW YORK STATE COURT SITTING IN OR WITH DIRECT JURISDICTION OVER THE BOROUGH OF MANHATTAN. 97 15.3 WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT, EACH LC ISSUER, EACH LENDER, AND EACH OTHER HOLDER OF SECURED OBLIGATIONS HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER. ARTICLE XVI PRIOR CREDIT AGREEMENT The Borrower, certain of the Lenders, and the Agent are parties to an Amended and Restated Credit Agreement dated as of May 6, 2003 (the "Prior Credit Agreement"). The Borrower, the Lenders, and the Agent agree that upon (i) the execution and delivery of this Agreement by each of the parties hereto and (ii) satisfaction (or waiver by the aforementioned parties) of the conditions precedent set forth in Section 4.1, the terms and conditions of the Prior Credit Agreement shall be and hereby are amended, superseded, and restated in their entirety by the terms and provisions of this Agreement. All amounts outstanding or otherwise due and payable under the Prior Credit Agreement prior to the Closing Date shall, on and after the Closing Date, be outstanding and due and payable under this Agreement. Notwithstanding the foregoing, the Borrower affirms its rights, duties and obligations under the Security Agreement, including, without limitation, the security interest granted thereunder, and agrees and acknowledges that this Agreement constitutes the "Credit Agreement" referenced therein. The remainder of this page is intentionally blank 98 IN WITNESS WHEREOF, the Borrower, the Lenders, the initial LC Issuer and the Agent have executed this Agreement as of the date first above written. TESORO PETROLEUM CORPORATION, as the Borrower By: /s/ GREGORY A. WRIGHT ------------------------- Print Name: Gregory A. Wright Title: Senior Vice President and Chief Financial Officer 300 Concord Plaza Drive San Antonio, TX 78216 Attention: Finance Department Telephone: (210) 283-2440 FAX: (210) 283-2080 BANK ONE, NA (MAIN OFFICE CHICAGO), individually, as initial LC Issuer, and as Administrative Agent By: /s/ JAMES GURGONE --------------------- Print Name: James Gurgone Title: Director 120 S. LaSalle Chicago, IL 60603 Attention: James Gurgone Telephone: (312) 661-5136 FAX: (312) 661-6929 GOLDMAN SACHS CREDIT PARTNERS L.P., individually and as Syndication Agent By: /s/ ROBERT WAGNER --------------------- Print Name: Robert Wagner Title: Authorized Signatory 85 Broad Street New York, NY 10004 Attention: _______________________________ Telephone: (212) 902-9962 FAX: (212) 357-8060 BANK OF AMERICA, N.A., By: /s/ KEVIN R. KELLY ---------------------- Print Name: Kevin R. Kelly Title: Sr. Vice President 55 S. Lake Avenue, Suite 900 Pasadena, CA 91101 Attention: Todd Essertsen-Urgent Telephone: (626) 397-1224 FAX: (626) 397-1275 FLEET CAPITAL CORPORATION, By: /s/ DENNIS M. HANSEN ------------------------------------ Print Name: Dennis M. Hansen Title: Senior Vice President 5950 Sherry Lane, Suite 300 Dallas, TX 75225 Attention: Loan Administration Manager Telephone: (214) 706-7010 FAX: (214) 706-7066 STATE OF CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM By: /s/ THOMAS MCDONAGH ------------------------------------ Print Name: Thomas McDonagh Title: Portfolio Manager 400 P Street, Suite 3492 Sacramento, CA 95814 Attention: Thomas McDonagh Telephone: (916) 341-2869 FAX: (916) 326-3330 FORTIS CAPITAL CORP. By: /s/ DEIRDRE SANBORN ------------------------------------ Print Name: Deirdre Sanborn Title: Vice President By: /s/ DARRELL W. HOLLEY ------------------------------------ Print Name: Darrell W. Holley Title: Managing Director 100 Crescent Court, Suite 1777 Dallas, TX 75201 Attention: Deirdre Sanborn Telephone: (214) 754-0009 FAX: (214) 754-5982 PNC BANK, NATIONAL ASSOCIATION By: /s/ PETER ZIMMERER ------------------------------------ Print Name: Peter Zimmerer Title: Senior Vice President One South Wacker Drive, Suite 2990 Chicago, IL 60606 Attention: Peter Zimmerer Telephone: (312) 338-5662 FAX: (312) 338-5618 WELLS FARGO FOOTHILL, LLC By: /s/ SANAT AMLADI ------------------------------------ Print Name: Sanat Amladi Title: Vice President 2450 Colorado Avenue, Suite 3000 West Santa Monica, CA 90404 Attention: Eunnie Kim Telephone: (310) 453-7255 FAX: (310) 453-7447 SIEMENS FINANCIAL SERVICES, INC. By: /s/ FRANK AMODIO ------------------------------------ Print Name: Frank Amodio Title: Vice President - Credit 200 Somerset Corporate Blvd Bridgewater, NJ 08807 Attention: Frank Amodio Telephone: (908) 575-4072 FAX: (908) 575-4060 PB CAPITAL CORPORATION By: /s/ MICHAEL J. BEDORE ------------------------------------ Print Name: Michael J. Bedore Title: Vice President By: /s/ TYLER J. MCCARTHY ------------------------------------ Print Name: Tyler J. McCarthy Title: Vice President 590 Madison Avenue, 30th Floor New York, NY 10022-2540 Attention: Michael J. Bedore/Tyler McCarthy Telephone: (212) 756-5500 FAX: (212) 756-5536 GUARANTY BANK By: /s/ JIM R. HAMILTON ------------------------------------ Print Name: Jim R. Hamilton Title: Senior Vice President 1100 NE Loop 410 San Antonio, TX 78209 Attention: Jim R. Hamilton Telephone: (210) 930-2926 FAX: (210) 930-1783 U.S. BANK, NATIONAL ASSOCIATION By: /s/ THOMAS VISCONTI ------------------------------------ Print Name: Thomas Visconti Title: Vice President 7th and Washington, 5th Floor SL-MO-T5BS St. Louis, MO 63101 Attention: Thomas Visconti Telephone: (314) 418-1318 FAX: (314) 418-8555 HIBERNIA NATIONAL BANK By: /s/ NANCY G. MORAGAS ------------------------------------ Print Name: Nancy G. Moragas Title: Vice President P.O. Box 61540 New Orleans, LA 70161 Attention: Nancy G. Moragas Telephone: (504) 533-2863 FAX: (504) 533-5434 THE FROST NATIONAL BANK By: /s/ HOWARD KASUNOFF ------------------------------------ Print Name: Howard Kasunoff Title: Vice President P.O. Box 1600 San Antonio, TX 78296 Attention: Jennifer Slator Telephone: (210) 220-5388 FAX: (210) 220-6816 NATEXIS BANQUES POPULAIRES By: /s/ DANIEL PAYER ------------------------------------ Print Name: Daniel Payer Title: Vice President By: /s/ LOUIS P. LAVILLE, III ------------------------------------ Print Name: Louis P. Laville, III Title: Vice President and Group Manager 333 Clay Street, Suite 4340 Houston, TX 77002 Attention: Louis P. Laville, III Telephone: (713) 759-9401 FAX: (713) 759-9908 COMMITMENT SCHEDULE
PRINCIPAL AMOUNT OF REVOLVING LOAN TERM LOANS ON LENDER COMMITMENT CLOSING DATE ------ -------------- -------------- Bank One, NA (Main Office Chicago) $71,500,000.00 $63,461,539.30 Goldman Sachs Credit Partners L.P. $71,500,000.00 $28,846,153.85 Bank of America, N.A. $71,500,000.00 $28,846,153.85 Fleet Capital Corporation $71,500,000.00 $28,846,153.00 State of California Public Employees' $45,000,000.00 - Retirement System Fortis Capital Corp. $35,000,000.00 - PNC Bank, National Association $25,000,000.00 - Wells Fargo Foothill, LLC $25,000,000.00 - Siemens Financial Services, Inc. $15,000,000.00 - PB Capital Corporation $15,000,000.00 - Guaranty Bank $15,000,000.00 - U.S. Bank, National Association $14,000,000.00 - Hibernia National Bank $10,000,000.00 - The Frost National Bank $ 7,500,000.00 - Natexis Banques Populaires $ 7,500,000.00 -
PRICING SCHEDULE
- -------------------------------------------------------------------------------------------------------------- Applicable Margin for Revolving Loans Level I Status Level II Status Level III Status Level IV Status - -------------------------------------------------------------------------------------------------------------- Eurodollar Rate 2.25% 2.75% 3.00% 3.25% - -------------------------------------------------------------------------------------------------------------- Floating Rate 0.50% 1.00% 1.25% 1.50% - --------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------- Applicable Margin for Term Loans Level I Status Level II Status Level III Status Level IV Status - -------------------------------------------------------------------------------------------------------------- Eurodollar Rate 3.00% 3.25% 3.25% 3.50% - -------------------------------------------------------------------------------------------------------------- Floating Rate 1.25% 1.5% 1.5% 1.75% - --------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------ Applicable Fee Rate Tier I Utilization Tier II Utilization Tier III Utilization - ------------------------------------------------------------------------------------------------------------ Commitment Fee 0.25% 0.50% 0.75% - ------------------------------------------------------------------------------------------------------------
For the purposes of this Schedule, the following terms have the following meanings, subject to the final paragraph of this Schedule: "Level I Status" exists at any date if, as of the last day of the applicable fiscal quarter of the Borrower, average daily Excess Availability for such fiscal quarter was greater than 45% of the average weekly Borrowing Base for such fiscal quarter. "Level II Status" exists at any date if, as of the last day of the applicable fiscal quarter, (i) the Borrower has not qualified for Level I Status and (ii) average daily Excess Availability for such fiscal quarter was less than or equal to 45% of the average weekly Borrowing Base for such fiscal quarter but greater than 30% of the average weekly Borrowing Base for such fiscal quarter. "Level III Status" exists at any date if, as of the last day of the applicable fiscal quarter, (i) the Borrower has not qualified for Level I Status or Level II Status, and (ii) average daily Excess Availability for such fiscal quarter was less than or equal to 30% of the average weekly Borrowing Base for such fiscal quarter but greater than 15% of the average weekly Borrowing Base for such fiscal quarter. "Level IV Status" exists at any date if, as of the last day of the applicable fiscal quarter, (i) the Borrower has not qualified for Level I Status, Level II Status or Level III Status and (ii) average daily Excess Availability for such fiscal quarter was less than or equal to 15% of the average weekly Borrowing Base for such fiscal quarter. "Status" means either Level I Status, Level II Status, Level III Status or Level IV Status. "Tier I Utilization" means, on any date of determination, the average Aggregate Outstanding Revolving Loan Credit Exposure on such date was greater than 66% of the Aggregate Revolving Loan Commitment on such date. "Tier II Utilization" means, on any date of determination, the average Aggregate Outstanding Revolving Loan Credit Exposure on such date was greater than or equal to 33-1/3rd% of the Aggregate Revolving Loan Commitment on such date but less than or equal to 66% of the Aggregate Revolving Loan Commitment on such date. "Tier III Utilization" means, on any date of determination, the average Aggregate Outstanding Revolving Loan Credit Exposure on such date was less than 33-?rd% of the Aggregate Revolving Loan Commitment on such date. The Applicable Margin for Revolving Loans and Term Loans and Applicable Fee Rate shall be determined in accordance with the foregoing table based on the Borrower's Status for the applicable fiscal quarter. Such Status shall be determined based upon the Interim Collateral Reports and Monthly Collateral Reports delivered for such fiscal quarter. Adjustments, if any, to the Applicable Margin for Revolving Loans and Term Loans or Applicable Fee Rate shall be effective five Business Days after the Agent has received all of the applicable Interim Collateral Reports and Monthly Collateral Reports. If the Borrower fails to deliver such Interim Collateral Reports and Monthly Collateral Reports to the Agent at the time required pursuant to Section 6.1, then the Applicable Margin for Revolving Loans and Term Loans and Applicable Fee Rate shall be the highest Applicable Margin for Revolving Loans and Term Loans and Applicable Fee Rate set forth in the foregoing table until the date on which such Interim Collateral Reports and Monthly Collateral Reports are so delivered. Notwithstanding the foregoing, solely with respect to the Applicable Margin for Revolving Loans and the Applicable Fee Rate, for the period beginning on the Closing Date and ending on the fifth Business Day following the date on which the last Interim Collateral Report and the last Monthly Collateral Report are required to be delivered pursuant to Section 6.1 for the fiscal quarter ending June 30, 2003, Level IV Status and Tier III Utilization shall be in effect. EX-10.44 5 h05116a1exv10w44.txt SECURITY AGREEMENT EXHIBIT 10.44 SECURITY AGREEMENT THIS SECURITY AGREEMENT is entered into as of April 17, 2003 by and between Tesoro Petroleum Corporation, a Delaware corporation (the "Borrower"), the Subsidiaries of the Borrower party hereto on the date thereof (together with the Borrower, collectively, the "Initial Grantors," and together with any additional Subsidiaries, whether now existing or hereafter formed, which become parties to this Agreement by executing a Supplement hereto in substantially the form of Annex I, the "Grantors"), and Bank One, NA, a national banking association having its principal office in Chicago, Illinois, in its capacity as agent (the "Agent") for the lenders party to the Credit Agreement referred to below. PRELIMINARY STATEMENT The Borrower, the Agent and the Lenders are entering into a Credit Agreement dated as of April 17, 2003 (as it may be amended or modified from time to time, the "Credit Agreement"). The Grantors are entering into this Security Agreement (as it may be amended or modified from time to time, the "Security Agreement") in order to induce the Lenders to enter into and extend credit to the Borrower under the Credit Agreement. The Grantors (other than the Borrower) are entering into a Subsidiary Guaranty dated as of April 17, 2003 (as it may be amended or modified from time to time, the "Guaranty") pursuant to which such Grantors have guaranteed the "Guaranteed Obligations" (as defined in the Guaranty). ACCORDINGLY, the Grantors and the Agent, on behalf of the Holders of Secured Obligations, hereby agree as follows: ARTICLE 1 DEFINITIONS 1.1. Terms Defined in Credit Agreement. All capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Credit Agreement. 1.2. Terms Defined in New York Uniform Commercial Code. Terms defined in the New York UCC which are not otherwise defined in this Security Agreement are used herein as defined in the New York UCC. 1.3. Definitions of Certain Terms Used Herein. As used in this Security Agreement, in addition to the terms defined in the Preliminary Statement, the following terms shall have the following meanings: "Accounts" shall have the meaning set forth in Article 9 of the New York UCC. "Article" means a numbered article of this Security Agreement, unless another document is specifically referenced. "Asset Sale Proceeds Account" shall have the meaning set forth in the Senior Note Indenture. "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 form 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; (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 "Cash Proceeds" shall have the meaning set forth in Article 9 of the New York UCC. "Chattel Paper" shall have the meaning set forth in Article 9 of the New York UCC. "Collateral" means: (1) all now owned and hereafter acquired Inventory, all Documents 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, 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 (collectively, "Pledged Accounts"); (3) all now owned and hereafter acquired money, Deposit Accounts, Pledged Deposits and deposits therein and Cash Equivalents (whether held directly or in 2 Securities Accounts), 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 Senior Note 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 Proceeds or Noncash 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 Proceeds and Noncash Proceeds of the foregoing. "Control" shall have the meaning set forth in Article 8 or, if applicable, in Section 9-104, 9-105, 9-106 or 9-107 of Article 9 of the New York UCC. "Default" means an event described in Section 5.1. "Deposit Accounts" shall have the meaning set forth in Article 9 of the New York UCC. "Documents" shall have the meaning set forth in Article 9 of the New York UCC. "Exhibit" refers to a specific exhibit to this Security Agreement, unless another document is specifically referenced. "General Intangibles" shall have the meaning set forth in Article 9 of the New York UCC. "Instruments" shall have the meaning set forth in Article 9 of the New York UCC. "Inventory" shall have the meaning set forth in Article 9 of the New York UCC. "New York UCC" means the New York Uniform Commercial Code as in effect from time to time. "Noncash Proceeds" shall have the meaning set forth in Article 9 of the New York UCC. 3 "Payment Intangibles" shall have the meaning set forth in Article 9 of the New York UCC. "Pledged Deposits" means all time deposits of money (other than Deposit Accounts), whether or not evidenced by certificates, which a Grantor may from time to time designate as pledged to the Agent or to any Holder of Secured Obligations as security for any Obligation, and all rights to receive interest on said deposits. "Receivables" means the Pledged Accounts, Pledged Deposits, and any other rights or claims to receive money which are General Intangibles which are otherwise included as Collateral. "Section" means a numbered section of this Security Agreement, unless another document is specifically referenced. "Secured Obligations" means the "Secured Obligations" (as defined in the Credit Agreement) and the "Guaranteed Obligations" (as defined in the Guaranty). "Securities Accounts" has the meaning set forth in Article 8 of the New York UCC. "Security" has the meaning set forth in Article 8 of the New York UCC. "Senior Note Collateral" means the "Collateral" as identified and defined in the Senior Note Indenture. "Specified Intercompany Debt" shall have the meaning set forth the in the Senior Note Indenture. The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms. ARTICLE 2 GRANT OF SECURITY INTEREST Each of the Grantors hereby pledges, assigns and grants to the Agent, on behalf of and for the ratable benefit of the Holders of Secured Obligations and (to the extent specifically provided herein) their Affiliates, a security interest in all of such Grantor's right, title and interest, whether now owned or hereafter acquired, in and to the Collateral to secure the prompt and complete payment and performance of (i) the Secured Obligations in the case of the Borrower and (ii) the "Guaranteed Obligations" (as defined in the Guaranty) in the case of each other Grantor. ARTICLE 3 REPRESENTATIONS AND WARRANTIES Each of the Initial Grantors represents and warrants to the Agent and the Holders of Secured Obligations, and each Grantor that becomes a party to this Security Agreement pursuant 4 to the execution of a Security Agreement Supplement in substantially the form of Annex I represents and warrants (after giving effect to supplements to each of the Exhibits hereto with respect to such subsequent Grantor as attached to such Security Agreement Supplement), that: 3.1. Title, Authorization, Validity and Enforceability. Such Grantor has good and valid rights in or the power to transfer the Collateral owned by it and title to the Collateral with respect to which it has purported to grant a security interest hereunder, free and clear of all Liens except for Liens permitted under Section 4.1.6, and has full power and authority to grant to the Agent the security interest in such Collateral pursuant hereto. The execution and delivery by such Grantor of this Security Agreement has been duly authorized by proper corporate or other proceedings, and this Security Agreement constitutes a legal, valid and binding obligation of such Grantor and creates a security interest which is enforceable against such Grantor in all Collateral it now owns or hereafter acquires, except as enforceability may be limited by (i) bankruptcy, insolvency, fraudulent conveyances, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally, (ii) general equitable principles (whether considered in a proceeding in equity or at law), and (iii) requirements of reasonableness, good faith and fair dealing. When financing statements have been filed in the appropriate offices against such Grantor in the locations listed on Exhibit "B", the Agent will have a fully perfected first priority security interest in the Collateral owned by such Grantor in which a security interest may be perfected by filing, subject only to Liens permitted under Section 6.15 of the Credit Agreement. 3.2. Conflicting Laws and Contracts. Neither the execution and delivery by such Grantor of this Security Agreement, the creation and perfection of the security interest in the Collateral granted hereunder, nor compliance with the terms and provisions hereof will violate (i) any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on such Grantor, or (ii) such Grantor's charter, by laws or similar constitutive documents, or (iii) the provisions of any indenture, instrument or agreement to which such Grantor is a party or is subject, or by which it, or its Property may be bound or affected, or conflict with or constitute a default thereunder, or result in or require the creation or imposition of any Lien in, of or on the Property of such Grantor pursuant to the terms of any such indenture, instrument or agreement (other than any Lien of the Agent on behalf of the Holders of Secured Obligations). 3.3. Type and Jurisdiction of Organization. Each Grantor's exact legal name and jurisdiction of incorporation, organization or formation (as the case may be) are disclosed in Exhibit "A". 3.4. Principal Location. Such Grantor's mailing address and the location of its place of business (if it has only one) or its chief executive office (if it has more than one place of business), is disclosed in Exhibit "A"; such Grantor has no other places of business except those set forth in Exhibit "A". 3.5. Property Locations. The Inventory of each Grantor is located solely at the locations of such Grantor described in Exhibit "A". All of said locations are owned by such Grantor except for locations (i) which are leased by such Grantor as lessee and designated in Part B of Exhibit "A" and (ii) at which Inventory is held by a bailee or an Eligible Carrier or on consignment by such Grantor as designated in Part C of Exhibit "A", with respect to which 5 Inventory such Grantor has delivered bailment agreements, warehouse receipts, bills of lading, financing statements or other documents, as required by Section 4.3.2 hereof and otherwise satisfactory to the Agent to protect the Agent's and the Holders of Secured Obligations' security interest in such Inventory. 3.6. No Other Names. Except as disclosed on Schedule 3.6, such Grantor has not conducted business under any name except the name in which it has executed this Security Agreement, which is the exact name as it appears in such Grantor's organizational documents, as amended, as filed with such Grantor's jurisdiction of organization as of the Closing Date. 3.7. No Default. No Default or Unmatured Default exists. 3.8. Accounts and related Chattel Paper. The names of the obligors, amounts owing, due dates and other information with respect to the Pledged Accounts owned by such Grantor are and will be correctly stated in all records of such Grantor relating thereto and in all invoices and reports with respect thereto furnished to the Agent by such Grantor from time to time. As of the time when each Account or each item of Chattel Paper arises, such Grantor shall be deemed to have represented and warranted that such Account or Chattel Paper, as the case may be, and all records relating thereto, are genuine and in all respects what they purport to be. 3.9. Filing Requirements. None of the Collateral owned by such Grantor is of a type for which security interests or liens may be perfected by filing under any federal statute. 3.10. No Financing Statements. No financing statement describing all or any portion of the Collateral which has not lapsed or been terminated naming such Grantor as debtor has been filed in any jurisdiction except financing statements naming the Agent on behalf of the Holders of Secured Obligations as the secured party. 3.11. Federal Employer Identification Number; State Organization Number. Such Grantor's Federal employer identification number, and if such Grantor is a registered organization, such Grantor's State organization number, are disclosed on Exhibit "A". ARTICLE 4 COVENANTS From the date of this Security Agreement and thereafter until this Security Agreement is terminated, each of the Initial Grantors agrees, and from and after the effective date of any Security Agreement Supplement applicable to any Grantor (and after giving effect to supplements to each of the Exhibits hereto with respect to such subsequent Grantor as attached to such Security Agreement Supplement) and thereafter until this Security Agreement is terminated each such subsequent Grantor agrees: 4.1. General. 4.1.1 Notification of Default. Each Grantor will give prompt notice in writing to the Agent and the Lenders of the occurrence of any Default or Unmatured Default and of 6 any other development, financial or otherwise, which might materially and adversely affect the Collateral. 4.1.2 Financing Statements and Other Actions; Defense of Title. Each Grantor hereby authorizes the Agent to file, and if requested will execute and deliver to the Agent, all financing statements describing the Collateral owned by such Grantor and other documents and take such other actions as may from time to time reasonably be requested by the Agent in order to maintain a first perfected security interest in and, if applicable, Control of, the Collateral owned by such Grantor. Such financing statements may describe the Collateral in the same manner as described herein or may contain an indication or description of collateral that describes such property in any other manner as the Agent may determine, in its sole discretion, is necessary, advisable or prudent to ensure that the perfection of the security interest in the Collateral granted to the Agent herein. Each Grantor will take any and all commercially reasonable actions necessary to defend title to the Collateral owned by such Grantor against all persons and to defend the security interest of the Agent in such Collateral and the priority thereof against any Lien not expressly permitted hereunder. 4.1.3 Change in Corporate Existence, Type or Jurisdiction of Organization, Location, Name. Each Grantor will: (i) preserve its existence and corporate/entity structure as in effect on the Closing Date; and (ii) not change its jurisdiction of organization, unless, in each such case, such Grantor shall have given the Agent not less than 30 days' prior written notice of such event or occurrence and the Agent shall have either (x) determined that such event or occurrence will not adversely affect the validity, perfection or priority of the Agent's security interest in the Collateral, or (y) taken such steps (with the cooperation of such Grantor to the extent necessary or advisable) as are necessary or advisable to properly maintain the validity, perfection and priority of the Agent's security interest in the Collateral owned by such Grantor. 4.1.4 Other Financing Statements. No Grantor will suffer to exist, or sign or authorize the signing on its behalf or the filing of any financing statement naming it as debtor covering all or any portion of the Collateral owned by such Grantor, except any Financing Statement authorized under Section 4.1.2. 4.2. Receivables. 4.2.1 Certain Agreements on Receivables. No Grantor will make or agree to make any discount, credit, rebate or other reduction in the original amount owing on a Receivable or accept in satisfaction of a Receivable less than the original amount thereof, except that, prior to the occurrence of a Default, such Grantor may reduce the amount of Accounts arising from the sale of Inventory or the rendering of services in accordance with its present policies and in the ordinary course of business. 7 4.2.2 Collection of Receivables. Except as otherwise provided in this Security Agreement, each Grantor will collect and enforce, at such Grantor's sole expense, all amounts due or hereafter due to such Grantor under the Receivables owned by such Grantor. 4.2.3 Delivery of Invoices. Each Grantor will deliver to the Agent immediately upon its request after the occurrence and during the continuance of a Default duplicate invoices with respect to each Account owned by such Grantor bearing such language of assignment as the Agent shall specify. 4.2.4 Disclosure of Counterclaims on Receivables. If (i) any discount, credit or agreement to make a rebate or to otherwise reduce the amount owing on a Receivable owned by such Grantor by an amount in excess of $250,000 exists or (ii) if, to the knowledge of such Grantor, any dispute, setoff (other than in the ordinary course of business), claim, counterclaim or defense exists or has been asserted or threatened with respect to a Receivable, such Grantor will promptly disclose such fact to the Agent in writing in connection with the inspection by the Agent of any record of such Grantor relating to such Receivable and in connection with any invoice or report furnished by such Grantor to the Agent relating to such Receivable. 4.3. Inventory. 4.3.1 Maintenance of Goods. Each Grantor will do all things necessary to maintain, preserve, protect and keep the Inventory owned by such Grantor in saleable condition. 4.3.2 Documents; Waivers. Each Grantor shall perform any and all steps reasonably requested by the Agent to perfect, maintain and protect the Agent's security interests in and Liens on and against such Grantor's Collateral composed of Inventory to enable the Agent to exercise its rights and remedies hereunder with respect to any Collateral, including, without limitation: (i) if requested by the Agent, delivering to the Agent documents of title covering that portion of the Collateral, if any, located with third parties which issue documents of title; (ii) using its commercially reasonable best efforts to obtain waivers of Liens and access agreements in substantially the form of Exhibit "C" hereto or Exhibit "D" hereto, as applicable (or such other form as may be agreed to by the Agent), from landlords or Eligible Carriers or other third parties in possession of Inventory of such Grantor as of the date hereof within 90 days after the date hereof; (iii) using its commercially reasonable best efforts to obtain waivers of Liens and access agreements in substantially the form of Exhibit "C" hereto or Exhibit "D" hereto, as applicable (or such other form as may be agreed to by the Agent), from landlords or Eligible Carriers or other third parties in possession of Inventory (in connection with which such Grantor shall be permitted to and hereby is required to update Exhibit "A"); 8 (iv) at the request of the Agent, appearing in and defending any action or proceeding which may affect adversely the Grantor's title to, or the security interest of Agent in, any of such Collateral; and (v) executing and delivering all further instruments and documents, and taking all further action, as the Agent or any Holder of Secured Obligations may reasonably request. 4.3.3 Notification of Bailees. If any Inventory that is part of the Collateral is in the possession or control of any warehouseman or Eligible Carrier or any Grantor's agents or processors, such Grantor shall, upon the Agent's request, notify such warehouseman, agent or processor of the Agent's security interest in such Inventory and, upon the Agent's request, instruct them to hold all such Inventory for the Agent's account and subject to the Agent's instructions. 4.4. Chattel Paper, Documents and Pledged Deposits. Each Grantor will (i) deliver to the Agent immediately upon execution of this Security Agreement the originals of all Chattel Paper constituting Collateral (if any then exist), (ii) hold in trust for the Agent upon receipt and immediately thereafter deliver to the Agent any Chattel Paper constituting Collateral, (iii) upon the designation of any Pledged Deposits (as set forth in the definition thereof), deliver to the Agent such Pledged Deposits which are evidenced by certificates included in the Collateral endorsed in blank, marked with such legends and assigned as the Agent shall specify, and (iv) upon the Agent's request, after the occurrence and during the continuance of a Default, deliver to the Agent (and thereafter hold in trust for the Agent upon receipt and immediately deliver to the Agent) any Document evidencing or constituting Collateral. 4.5. Pledged Deposits. No Grantor will withdraw all or any portion of any Pledged Deposit or fail to rollover said Pledged Deposit without the prior written consent of the Agent. 4.6. Deposit Accounts. Each Grantor will, to the extent required by Section 6.25 of the Credit Agreement, upon the Agent's request, cause each bank or other financial institution in which it maintains (a) a Deposit Account (other than a Deposit Account maintained for collections from retail sales) to enter into a control agreement with the Agent, in form and substance satisfactory to the Agent in order to give the Agent Control of the Deposit Account or (b) other deposits (general or special, time or demand, provisional or final) to be notified of the security interest granted to the Agent hereunder and cause each such bank or other financial institution to acknowledge such notification in writing. In the case of deposits maintained with Lenders, the terms of such letter shall be subject to the provisions of the Credit Agreement regarding setoffs. 4.7. Federal, State or Municipal Claims. Each Grantor will notify the Agent of any Collateral owned by such Grantor which constitutes a claim against the United States government or any state or local government or any instrumentality or agency thereof, the assignment of which claim is restricted by federal, state or municipal law. 9 ARTICLE 5 DEFAULT 5.1. The occurrence of any "Default" under, and as defined in, the Credit Agreement shall constitute a Default. 5.2. Acceleration and Remedies. Upon the acceleration of the Secured Obligations under the Credit Agreement pursuant to Section 8.1 thereof, the Obligations and, to the extent provided for under the Rate Management Transactions evidencing the same, the Rate Management Obligations, shall immediately become due and payable without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, and the Agent may, with the concurrence or at the direction of the Required Lenders, exercise any or all of the following rights and remedies: 5.2.1 Those rights and remedies provided in this Security Agreement, the Credit Agreement, or any other Loan Document, provided that this Section 5.2.1 shall not be understood to limit any rights or remedies available to the Agent and the Holders of Secured Obligations prior to a Default. 5.2.2 Those rights and remedies available to a secured party under the New York UCC (whether or not the New York UCC applies to the affected Collateral) or under any other applicable law (including, without limitation, any law governing the exercise of a bank's right of setoff or bankers' lien) when a debtor is in default under a security agreement. 5.2.3 Without notice except as specifically provided in Section 8.1 or elsewhere herein, sell, lease, assign, grant an option or options to purchase or otherwise dispose of the Collateral or any part thereof in one or more parcels at public or private sale, for cash, on credit or for future delivery, and upon such other terms as the Agent may deem commercially reasonable. The Agent, on behalf of the secured parties, may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral, and such compliance will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral. If, after the Credit Agreement has terminated by its terms and all of the Obligations have been paid in full, there remain Rate Management Obligations outstanding, Lenders party thereto may exercise the remedies provided in this Section 5.2 upon the occurrence of any event which would allow or require the termination or acceleration of any Rate Management Obligations pursuant to the terms of the agreement governing any Rate Management Transaction. 5.3. Grantors' Obligations Upon Default. Upon the request of the Agent after the occurrence and during the continuance of a Default, each Grantor will permit the Agent, by the Agent's representatives and agents, to enter any premises where all or any part of the Collateral, or the books and records relating thereto, or both, are located, to take possession of all or any part of the Collateral and to remove all or any part of the Collateral. 10 5.4. License. The Agent is hereby granted an irrevocable license or other right to use, following the occurrence and during the continuance of a Default, without charge, each Grantor's labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, service marks, customer lists and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral, and, following the occurrence and during the continuance of a Default, such Grantor's rights under all licenses and all franchise agreements shall inure to the Agent's benefit. In addition, each Grantor hereby irrevocably agrees that the Agent may, following the occurrence and during the continuance of a Default, sell any of such Grantor's Inventory directly to any person, including without limitation persons who have previously purchased such Grantor's Inventory from such Grantor and in connection with any such sale or other enforcement of the Agent's rights under this Agreement, may sell Inventory which bears any trademark owned by or licensed to such Grantor and any Inventory that is covered by any copyright owned by or licensed to such Grantor and the Agent may finish any work in process and affix any trademark owned by or licensed to such Grantor and sell such Inventory as provided herein. ARTICLE 6 WAIVERS, AMENDMENTS AND REMEDIES No delay or omission of the Agent or any Holder of Secured Obligations to exercise any right or remedy granted under this Security Agreement shall impair such right or remedy or be construed to be a waiver of any Default or an acquiescence therein, and any single or partial exercise of any such right or remedy shall not preclude any other or further exercise thereof or the exercise of any other right or remedy. No waiver, amendment or other variation of the terms, conditions or provisions of this Security Agreement whatsoever shall be valid unless in writing signed by the Agent with the concurrence or at the direction of the Lenders required under Section 8.2 of the Credit Agreement and each Grantor, and then only to the extent in such writing specifically set forth, provided that the addition of any Domestic Subsidiary as a Grantor hereunder by execution of a Security Agreement Supplement in the form of Annex I (with such modifications as shall be acceptable to the Agent) shall not require receipt of any consent from or execution of any documentation by any other Grantor party hereto. All rights and remedies contained in this Security Agreement or by law afforded shall be cumulative and all shall be available to the Agent and the Holders of Secured Obligations until the Secured Obligations have been paid in full. ARTICLE 7 PROCEEDS; COLLECTION OF RECEIVABLES 7.1. Collection Amount Agreements. Upon request of the Agent, each Grantor shall execute and deliver to the Agent Collection Account Agreements in the form provided by or otherwise acceptable to the Agent, which agreements shall be accompanied by an acknowledgment by the bank where the account is located of the Lien of the Agent granted hereunder and of irrevocable instructions to wire all amounts collected therein to a special collateral account at the Agent. 11 7.2. Collection of Receivables. Each Grantor shall manage its deposits, collections and accounts in accordance with Section 6.25 of the Credit Agreement. The Agent may at any time after the occurrence and during that continuance of a Default, by giving each Grantor written notice, elect to require that the Receivables be paid directly to the Agent for the benefit of the Holders of Secured Obligations. In such event, each Grantor shall, and shall permit the Agent to, promptly notify the account debtors or obligors under the Receivables owned by such Grantor of the Agent's interest therein and direct such account debtors or obligors to make payment of all amounts then or thereafter due under such Receivables directly to the Agent. Upon receipt of any such notice from the Agent, each Grantor shall thereafter hold in trust for the Agent, on behalf of the Holders of Secured Obligations, all amounts and proceeds received by it with respect to the Receivables and immediately and at all times thereafter deliver to the Agent all such amounts and proceeds in the same form as so received, whether by cash, check, draft or otherwise, with any necessary endorsements. ARTICLE 8 GENERAL PROVISIONS 8.1. Notice of Disposition of Collateral; Condition of Collateral. Each Grantor hereby waives notice of the time and place of any public sale or the time after which any private sale or other disposition of all or any part of the Collateral may be made. To the extent such notice may not be waived under applicable law, any notice made shall be deemed reasonable if sent to the Borrower, addressed as set forth in Article IX, at least ten days prior to (i) the date of any such public sale or (ii) the time after which any such private sale or other disposition may be made. Agent shall have no obligation to clean-up or otherwise prepare the Collateral for sale. 8.2. Compromises and Collection of Collateral. Each Grantor and the Agent recognize that setoffs, counterclaims, defenses and other claims may be asserted by obligors with respect to certain of the Receivables, that certain of the Receivables may be or become uncollectible in whole or in part and that the expense and probability of success in litigating a disputed Receivable may exceed the amount that reasonably may be expected to be recovered with respect to a Receivable. In view of the foregoing, each Grantor agrees that the Agent may at any time and from time to time, if a Default has occurred and is continuing, compromise with the obligor on any Receivable, accept in full payment of any Receivable such amount as the Agent in its sole discretion shall determine or abandon any Receivable, and any such action by the Agent shall be commercially reasonable so long as the Agent acts in good faith based on information known to it at the time it takes any such action. 8.3. Secured Party Performance of Grantor's Obligations. Without having any obligation to do so, the Agent may perform or pay any obligation which any Grantor has agreed to perform or pay in this Security Agreement and such Grantor shall reimburse the Agent for any reasonable amounts paid by the Agent pursuant to this Section 8.3. Each Grantor's obligation to reimburse the Agent pursuant to the preceding sentence shall be a Secured Obligation payable on demand. 8.4. Authorization for Secured Party to Take Certain Action. Each Grantor irrevocably authorizes the Agent at any time and from time to time in the sole discretion of the 12 Agent and appoints the Agent as its attorney in fact (i) to indorse and collect any cash proceeds of the Collateral, (ii) to file a carbon, photographic or other reproduction of this Security Agreement or any financing statement with respect to the Collateral as a financing statement and to file any other financing statement or amendment of a financing statement (which does not add new collateral or add a debtor) in such offices as the Agent in its sole discretion deems necessary or desirable to perfect and to maintain the perfection and priority of the Agent's security interest in the Collateral, (iii) to enforce payment of the Accounts and Receivables in the name of the Agent or such Grantor, (iv) to apply the proceeds of any Collateral received by the Agent to the Secured Obligations as provided in the Credit Agreement and (v) to discharge past due taxes, assessments, charges, fees or Liens on the Collateral (except for such Liens as are specifically permitted hereunder or under any other Loan Document), and each Grantor agrees to reimburse the Agent on demand for any reasonable payment made or any reasonable expense incurred by the Agent in connection therewith, provided that this authorization shall not relieve any Grantor of any of its obligations under this Security Agreement or under the Credit Agreement. 8.5. Specific Performance of Certain Covenants. Each Grantor acknowledges and agrees that a breach of any of the covenants contained in Sections 4.4, 5.3, or 8.7 or in Article VII will cause irreparable injury to the Agent and the Holders of Secured Obligations, that the Agent and Holders of Secured Obligations have no adequate remedy at law in respect of such breaches and therefore agrees, without limiting the right of the Agent or the Holders of Secured Obligations to seek and obtain specific performance of other obligations of the Grantors contained in this Security Agreement, that the covenants of the Grantors contained in the Sections referred to in this Section 8.5 shall be specifically enforceable against the Grantors. 8.6. Use and Possession of Certain Premises. Upon the occurrence of a Default, the Agent shall be entitled to occupy and use any premises owned or leased by the Grantors where any of the Collateral without any obligation to pay any Grantor for such use and occupancy to the extent provided in Section 11.04(c) of the Senior Note Indenture and Section 10.04(c) of the Senior Term Loan Agreement. 8.7. Benefit of Agreement. The terms and provisions of this Security Agreement shall be binding upon and inure to the benefit of the Grantors, the Agent and the Holders of Secured Obligations and their respective successors and assigns (including all persons who become bound as a debtor to this Security Agreement), except that the Grantors shall not have the right to assign their rights or delegate their obligations under this Security Agreement or any interest herein, without the prior written consent of the Agent. 8.8. Survival of Representations. All representations and warranties of the Grantors contained in this Security Agreement shall survive the execution and delivery of this Security Agreement. 8.9. Taxes and Expenses. Any taxes payable or ruled payable by Federal or State authority in respect of this Security Agreement shall be paid by the Grantors, together with interest and penalties, if any. The Grantors shall reimburse the Agent for any and all reasonable out-of-pocket expenses and internal charges (including reasonable attorneys', auditors' and accountants' fees and reasonable time charges of attorneys, paralegals, auditors and accountants who may be employees of the Agent) paid or incurred by the Agent in connection with the 13 preparation, execution, delivery, administration, collection and enforcement of this Security Agreement and in the audit, analysis, administration, collection, preservation or sale of the Collateral (including the expenses and charges associated with any periodic or special audit of the Collateral). Any and all costs and expenses incurred by the Grantors in the performance of actions required pursuant to the terms hereof shall be borne solely by the Grantors. 8.10. Headings. The title of and section headings in this Security Agreement are for convenience of reference only, and shall not govern the interpretation of any of the terms and provisions of this Security Agreement. 8.11. Termination. This Security Agreement shall continue in effect (notwithstanding the fact that from time to time there may be no Secured Obligations outstanding) until (i) the Credit Agreement has terminated pursuant to its express terms and (ii) all of the Secured Obligations have been indefeasibly paid and performed in full and no commitments of the Agent or the Holders of Secured Obligations which would give rise to any Secured Obligations are outstanding. 8.12. Entire Agreement. This Security Agreement embodies the entire agreement and understanding between the Grantors and the Agent relating to the Collateral and supersedes all prior agreements and understandings between the Grantors and the Agent relating to the Collateral. 8.13. CHOICE OF LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAWS OF THE STATE OF NEW YORK, BUT OTHERWISE WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES) BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. IF ANY COURT, TRIBUNAL OR OTHER ENTITY WITH JURISDICTION OVER THIS SECURITY AGREEMENT, THE OTHER LOAN DOCUMENTS, AND THE TRANSACTIONS EVIDENCED HEREBY AND THEREBY REJECTS THE FOREGOING CHOICE OF NEW YORK LAW, THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS (INCLUDING 735 ILCS SECTION 105/5-1 ET SEQ., BUT OTHERWISE WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES) BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. 8.14. Indemnity. Each Grantor hereby agrees, jointly with the other Grantors and severally, to indemnify the Agent and the Holders of Secured Obligations, and their respective successors, assigns, agents and employees, from and against any and all liabilities, damages, penalties, suits, costs, and expenses of any kind and nature (including, without limitation, all expenses of litigation or preparation therefor whether or not the Agent or any Holder of Secured Obligations is a party thereto) imposed on, incurred by or asserted against the Agent or the Holders of Secured Obligations, or their respective successors, assigns, agents and employees, in any way relating to or arising out of this Security Agreement, or the manufacture, purchase, acceptance, rejection, ownership, delivery, lease, possession, use, operation, condition, sale, 14 return or other disposition of any Collateral (including, without limitation, latent and other defects, whether or not discoverable by the Agent or the Holders of Secured Obligations or any Grantor, and any claim for patent, trademark or copyright infringement) except for acts or omissions of the Agent or any Holder of Secured Obligations after such Person has taken possession and control of the Collateral. 8.15. Subordination of Intercompany Indebtedness. Each Grantor agrees that any and all claims of such Grantor against any other Grantor (each an "Obligor") with respect to any "Intercompany Indebtedness" (as hereinafter defined), any endorser, obligor or any other guarantor of all or any part of the Secured Obligations, or against any of its properties shall be subordinate and subject in right of payment to the prior payment, in full and in cash, of all Secured Obligations. Notwithstanding any right of any Grantor to ask, demand, sue for, take or receive any payment from any Obligor, all rights, liens and security interests of such Grantor, whether now or hereafter arising and howsoever existing, in any assets of any other Obligor shall be and are subordinated to the rights of the Holders of Secured Obligations and the Agent in those assets. No Grantor shall have any right to possession of any such asset or to foreclose upon any such asset, whether by judicial action or otherwise, unless and until all of the Secured Obligations (other than contingent indemnity obligations) shall have been fully paid and satisfied (in cash) and all Commitments and Facility LCs issued under the Credit Agreement have terminated or expired. If all or any part of the assets of any Obligor, or the proceeds thereof, are subject to any distribution, division or application to the creditors of such Obligor, whether partial or complete, voluntary or involuntary, and whether by reason of liquidation, bankruptcy, arrangement, receivership, assignment for the benefit of creditors or any other action or proceeding, or if the business of any such Obligor is dissolved or if substantially all of the assets of any such Obligor are sold, then, and in any such event (such events being herein referred to as an "Insolvency Event"), any payment or distribution of any kind or character, either in cash, securities or other property, which shall be payable or deliverable upon or with respect to any indebtedness of any Obligor to any Grantor ("Intercompany Indebtedness") shall be paid or delivered directly to the Agent for application on any of the Secured Obligations, due or to become due, until such Secured Obligations (other than contingent indemnity obligations) shall have first been fully paid and satisfied (in cash). Should any payment, distribution, security or instrument or proceeds thereof be received by the applicable Grantor upon or with respect to the Intercompany Indebtedness after any Insolvency Event and prior to the satisfaction of all of the Secured Obligations (other than contingent indemnity obligations) and the termination or expiration of all Commitments of the Lenders and Facility LCs issued pursuant to the Credit Agreement, such Grantor shall receive and hold the same in trust, as trustee, for the benefit of the Holders of Secured Obligations and shall forthwith deliver the same to the Agent, for the benefit of the Holders of Secured Obligations, in precisely the form received (except for the endorsement or assignment of the Grantor where necessary), for application to any of the Secured Obligations, due or not due, and, until so delivered, the same shall be held in trust by the Grantor as the property of the Holders of Secured Obligations. If any such Grantor fails to make any such endorsement or assignment to the Agent, the Agent or any of its officers or employees is irrevocably authorized to make the same. Each Grantor agrees that until the Secured Obligations (other than the contingent indemnity obligations) have been paid in full (in cash) and satisfied and all Commitments and Facility LCs issued under the Credit Agreement have terminated or expired, no Grantor will assign or transfer to any Person (other than the Agent or 15 the Borrower or another Grantor) any claim any such Grantor has or may have against any Obligor. 8.16. Partial Invalidity. If and to the extent that any Grantor's obligations hereunder are terminated or are otherwise deemed to be invalid or unenforceable, such termination, invalidity or unenforceability shall not affect the continued effectiveness, validity or enforceability of this Security Agreement with respect to any one or more of the other Grantors. ARTICLE 9 NOTICES 9.1. Sending Notices. Any notice required or permitted to be given under this Security Agreement shall be sent (and deemed received) in the manner and to the addresses set forth in Article XIII of the Credit Agreement; and any such notice delivered to the Borrower shall be deemed to have been delivered to all of the Grantors. 9.2. Change in Address for Notices. Each of the Grantors, the Agent and the Lenders may change the address for service of notice upon it by a notice in writing to the other parties. ARTICLE 10 THE AGENT Bank One, NA has been appointed Agent for the Holders of Secured Obligations hereunder pursuant to Article X of the Credit Agreement. It is expressly understood and agreed by the parties to this Security Agreement that any authority conferred upon the Agent hereunder is subject to the terms of the delegation of authority made by the Holders of Secured Obligations to the Agent pursuant to the Credit Agreement, and that the Agent has agreed to act (and any successor Agent shall act) as such hereunder only on the express conditions contained in such Article X. Any successor Agent appointed pursuant to Article X of the Credit Agreement shall be entitled to all the rights, interests and benefits of the Agent hereunder. The remainder of this page is intentionally blank. 16 IN WITNESS WHEREOF, each of the Grantors and the Agent have executed this Security Agreement as of the date first above written. TESORO PETROLEUM CORPORATION By: /s/ Gregory A. Wright ---------------------------------------- Name: Gregory A. Wright Title: Senior Vice President and Chief Financial Officer DIGICOMP, INC. TESORO AVIATION COMPANY TESORO ALASKA COMPANY TESORO HAWAII CORPORATION TESORO REFINING AND MARKETING COMPANY SMILEY'S SUPER SERVICE, INC. TESORO MARINE SERVICES HOLDING COMPANY TESORO MARINE SERVICES, LLC TESORO MARITIME COMPANY TESORO NORTHSHORE COMPANY TESORO PETROLEUM COMPANIES, INC. TESORO TECHNOLOGY COMPANY TESORO TRADING COMPANY TESORO VOSTOCK COMPANY TESORO WASATCH, LLC By: /s/ Sharon L. Layman ---------------------------------------- Name: Sharon L. Layman Title: Vice President and Treasurer TESORO FINANCIAL SERVICES HOLDING COMPANY VICTORY FINANCE COMPANY FAR EAST MARITIME COMPANY GOLD STAR MARITIME COMPANY By: /s/ G. Scott Spendlove ---------------------------------------- Name: G. Scott Spendlove Title: Attorney-in-Fact SECURITY AGREEMENT SIGNATURE PAGE TESORO GAS RESOURCES COMPANY, INC. By: /s/ Sharon L. Layman ---------------------------------------- Name: Sharon L. Layman Title: Vice President and Treasurer SECURITY AGREEMENT SIGNATURE PAGE Acknowledged this 17th day of April, 2003 BANK ONE, NA (MAIN OFFICE CHICAGO), as Administrative Agent By: /s/ James Gurgone ------------------------------ Name: James Gurgone Title: Director SECURITY AGREEMENT SIGNATURE PAGE EXHIBIT "A" (See Sections 3.3, 3.4, 3.5 and 4.1.3 of Security Agreement) Exact Legal Name of Grantor: Digicomp, Inc. Chief Executive Officer: 300 Concord Plaza Drive San Antonio, Texas 78216-6999 FEIN: 74-2521015 Jurisdiction of Incorporation/Organization/formation: Delaware Location of Inventory: N/A Exact Legal Name of Grantor: Far East Maritime Company Chief Executive Officer: 300 Concord Plaza Drive San Antonio, Texas 78216-6999 FEIN: 74-2886469 Jurisdiction of Incorporation/Organization/formation: Delaware Location of Inventory: N/A Exact Legal Name of Grantor: Gold Star Maritime Company Chief Executive Officer: 300 Concord Plaza Drive San Antonio, Texas 78216-6999 FEIN: 74-2886462 Jurisdiction of Incorporation/Organization/formation: Delaware Location of Inventory: N/A Exact Legal Name of Grantor: Smiley's Super Service, Inc. 300 Concord Plaza Drive San Antonio, Texas 78216-6999 FEIN: 99-0088611 Jurisdiction of Incorporation/Organization/formation: Hawaii Location of Inventory: N/A Exact Legal Name of Grantor: Tesoro Alaska Company Chief Executive Office: 300 Concord Plaza Drive San Antonio, Texas 78216-6999 FEIN: 74-1646130 Jurisdiction of Incorporation/Organization/formation: Delaware Location of Inventory: Alaska Exact Legal Name of Grantor: Tesoro Aviation Company Chief Executive Office: 300 Concord Plaza Drive San Antonio, Texas 78216-6999 FEIN: 74-2922277 Jurisdiction of Incorporation/Organization/formation: Delaware Location of Inventory: N/A Exact Legal Name of Grantor: Tesoro Financial Services Holding Company Chief Executive Office: 1105 North Market Street Wilmington, DE 19801 FEIN: 51-0377202 Jurisdiction of Incorporation/Organization/formation: Delaware Location of Inventory: N/A Exact Legal Name of Grantor: Tesoro Gas Resources Company, Inc. Chief Executive Office: 1105 North Market Street Wilmington, DE 19801 FEIN: 92-0150083 Jurisdiction of Incorporation/Organization/formation: Delaware Location of Inventory: N/A Exact Legal Name of Grantor: Tesoro Hawaii Corporation Chief Executive Office: 300 Concord Plaza Drive San Antonio, Texas 78216-6999 FEIN: 99-0143882 Jurisdiction of Incorporation/Organization/formation: Hawaii Location of Inventory: Hawaii Exact Legal Name of Grantor: Tesoro Marine Services Holding Company Chief Executive Office: 300 Concord Plaza Drive San Antonio, Texas 78216-6999 FEIN: 74-2807425 Jurisdiction of Incorporation/Organization/formation: Delaware Location of Inventory: N/A Exact Legal Name of Grantor: Tesoro Marine Services, LLC Chief Executive Office: 300 Concord Plaza Drive San Antonio, Texas 78216-6999 FEIN: 74-2766974 Jurisdiction of Incorporation/Organization/formation: Delaware Location of Inventory: Texas, Louisiana Exact Legal Name of Grantor: Tesoro Maritime Company 300 Concord Plaza Drive San Antonio, Texas 78216-6999 FEIN: 74-2886466 Jurisdiction of Incorporation/Organization/formation: Delaware Location of Inventory: N/A Exact Legal Name of Grantor: Tesoro Northstore Company Chief Executive Office 6927 Old Seward Highway Anchorage, Alaska 99518 FEIN: 92-0098209 Jurisdiction of Incorporation/Organization/formation: Alaska Location of Inventory: Alaska Exact Legal Name of Grantor: Tesoro Petroleum Companies, Inc. Chief Executive Office: 300 Concord Plaza Drive San Antonio, Texas 78216-6999 FEIN: 74-2385513 Jurisdiction of Incorporation/Organization/formation: Delaware Location of Inventory: N/A Exact Legal Name of Grantor: Tesoro Refining and Marketing Company Chief Executive Office: 300 Concord Plaza Drive San Antonio, Texas 78216-6999 FEIN: 76-0489496 Jurisdiction of Incorporation/Organization/formation: Delaware Location of Inventory: North Dakota, California, Idaho, Utah, Washington Exact Legal Name of Grantor: Tesoro Technology Company Chief Executive Office: 300 Concord Plaza Drive San Antonio, Texas 78216-6999 FEIN: 74-25210313 Jurisdiction of Incorporation/Organization/formation: Delaware Location of Inventory: N/A Exact Legal Name of Grantor: Tesoro Trading Company Chief Executive Office: 300 Concord Plaza Drive San Antonio, Texas 78216-6999 FEIN: 75-3025497 Jurisdiction of Incorporation/Organization/formation: Delaware Location of Inventory: Delaware Exact Legal Name of Grantor: Tesoro Vostok Company Chief Executive Office: 300 Concord Plaza Drive San Antonio, Texas 78216-6999 FEIN: 74-2257610 Jurisdiction of Incorporation/Organization/formation: Delaware Location of Inventory: N/A Exact Legal Name of Grantor: Tesoro Wasatch, LLC Chief Executive Office: 300 Concord Plaza Drive San Antonio, Texas 78216-6999 FEIN: 74-3009694 Jurisdiction of Incorporation/Organization/formation: Delaware Location of Inventory: N/A Exact Legal Name of Grantor: Victory Finance Company Chief Executive Office: 1105 North Market Street Wilmington, Delaware 19801 FEIN: 51-0377203 Jurisdiction of Incorporation/Organization/formation: Delaware Location of Inventory: N/A 1 EXHIBIT "B" (See Section 3.1 of Security Agreement) OFFICES IN WHICH FINANCING STATEMENTS HAVE BEEN FILED 2 EXHIBIT "C" Form of Landlord Agreement(1) To: BANK ONE, NA, as Agent 1 Bank One Plaza Chicago, IL 60670 Attention: [______] [Name of Entity], a [Type of Entity] ("Grantor"), is the lessee under a lease between Grantor and _________________ (the "Lessor") covering the premises located at ___________________ (the "Premises") as more fully described in the lease attached hereto as Exhibit A and as modified by any amendments, if any, attached thereto (collectively, the "Lease"). The Lessor is the sole owner of the Premises. Grantor has certain of its assets located on the Premises. Grantor has entered into that certain Security Agreement dated as of April 17, 2003 by and among Tesoro Petroleum Corporation (the "Company"), certain subsidiaries of the Company and Bank One, NA, as Agent (the "Agent") (as the same may be amended, restated, supplemented or otherwise modified from time to time, the "Security Agreement") to secure the obligations of the Company under that certain Credit Agreement dated as of April 17, 2003 by and among the Company, the financial institutions from time to time parties thereto as lenders (the "Lenders") and the Agent (as the same may be amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"). Capitalized terms used herein but not defined herein or in the Security Agreement shall have the meanings ascribed thereto in the Credit Agreement. In order to induce the Agent and the Lenders (together with their respective agents, successors and assigns) to continue such financing arrangements, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned hereby certifies and agrees as follows: (i) The Lease is in full force and effect, and in the form attached hereto as Exhibit A, represents the full and complete agreement between the Grantor and the undersigned concerning the Premises and the Lease shall not be amended or modified in any material respect without the Agent's prior written consent, which consent shall not be unreasonably withheld. (ii) Grantor is not in default under the Lease, nor, to the undersigned's knowledge, are there any events or conditions which, by the passage of time or giving of notice or both, would constitute a default thereunder by Grantor. - -------- (1) To be modified to be in recordable form in the applicable jurisdiction. 3 (iii) The undersigned will not assert against any of Grantor's assets any statutory or possessory liens, including, without limitation, rights of levy or distraint for rent. (iv) The undersigned is not aware of any dispute, action, suit, condemnation proceeding, claim, or right of setoff pending or threatened with respect to the Lease or the Premises. (v) None of the Collateral located on the Premises shall be deemed to be fixtures. (vi) The undersigned will notify the Agent if Grantor defaults on its lease obligations to the undersigned and allow the Agent thirty (30) days from the Agent's receipt of notice in which to cure or cause Grantor to cure any such defaults. If such default cannot reasonably be cured within the thirty (30) day period, and provided the Agent is diligently pursuing a cure, then the Agent shall have a reasonable period to cure such default. (vii) The undersigned shall accept performance by the Agent of the Grantor's obligations under the Lease as though the same had been performed by the holder of the Grantor's interest therein at the time of such performance. Upon the cure of any such default, any notice of Landlord advising of any default or any action of the undersigned to terminate the Lease or to interfere with the occupancy, use or enjoyment of the Premises by reason thereof, which action has not been completed, shall be deemed rescinded and the Lease shall continue in full force and effect. The undersigned shall not be required to continue any possession or continue any action to obtain possession upon the cure of any such default. (viii) If, for any reason whatsoever, the undersigned either deems itself entitled to redeem or to take possession of the Premises during the term of Grantor's lease, the undersigned will notify the Agent five (5) days before taking such action. (ix) If Grantor defaults on its obligations to the Agent or any Lender and, as a result, the Agent undertakes to enforce its security interest in the Collateral, the undersigned will permit the Agent to remain on the Premises for one-hundred and twenty (120) days (provided, that the foregoing period shall be tolled from and during the pendency of any bankruptcy or other insolvency proceedings with respect to the Grantor) after the later to occur of (a) the date on which the Agent gives the undersigned notice of the default and (b) the date on which the Agent is given access to the Premises, provided the Agent pays the rental payments due under the Lease for the period of time the Agent occupies the Premises, or, at the Agent's option, to remove the Collateral from the Premises within a reasonable time, not to exceed one-hundred and twenty (120) days (provided, that the foregoing period shall be tolled from and during the pendency of any bankruptcy or other insolvency proceedings with respect to the Grantor) after the later to occur of (i) the date on which the Agent gives the undersigned notice of the default and (ii) the date on which the Agent is given access to the Premises, provided the Agent pays 4 the rental payments due under the Lease for the period of time the Agent occupies the Premises, and will not hinder the Agent's actions in enforcing its liens on the Collateral. (x) In the event that Grantor shall become a debtor under the Federal Bankruptcy Code and, in connection therewith, Grantor shall reject the Lease or Option as an executory contract, then within thirty (30) days following such rejection, upon the written request by the Agent, the undersigned shall enter into a new lease of the Premises with the Agent or its designee (who shall be reasonably acceptable to the undersigned), for the benefit of the Lenders which new lease (1) shall be effective as of the date of the termination of the Lease, (2) shall be for a term expiring as of the last day of the term of the Lease, and (3) shall be on substantially the same terms and conditions as the Lease (including any provisions for renewal or extension of the term of the Lease); provided that the Agent or such designee, as the case may be, shall be required, as a condition to the effectiveness of such new lease, to pay the Lessor any amount equal to any rent remaining unpaid by Grantor under the Lease. Any notice(s) required or desired to be given hereunder shall be directed to the party to be notified at the address stated herein. The agreements contained herein shall continue in force until the earlier of (i) the expiration date of the Lease (provided no provision is made for the extension or renewal of the Lease) or (ii) the date on which all of Grantor's obligations and liabilities to the Agent and the Lenders are paid and satisfied in full and all financing arrangements between Agent and the Lenders and Grantor have been terminated. The Lessor will notify all successor owners, transferees, purchasers and mortgagees of the existence of this waiver. This waiver may not be modified or terminated orally and shall be binding upon the successors, assigns and personal representatives of the Lessor, upon any successor owner or transferee of the Premises, and upon any purchasers, including any mortgagee, from the Lessor. THE LESSOR AGREES THAT NOTHING CONTAINED IN THIS WAIVER SHALL BE CONSTRUED AS AN ASSUMPTION BY THE AGENT OR ANY LENDERS OF ANY OBLIGATIONS OF GRANTOR CONTAINED IN THE LEASE. THIS WAIVER SHALL NOT IMPAIR OR OTHERWISE AFFECT GRANTOR'S OBLIGATIONS TO PAY RENT AND ANY OTHER SUMS PAYABLE BY GRANTOR OR TO OTHERWISE PERFORM ITS OBLIGATIONS TO THE LESSOR PURSUANT TO THE TERMS OF THE LEASE. Executed and delivered this ____ day of ______________, ____, at _______________________, _______________. 5 [Name of Lessor] By: -------------------------------------- Title: Address: AGREED &ACKNOWLEDGED: [GRANTOR] By: ------------------------------- Title: Address: 6 ACKNOWLEDGMENT STATE OF ) ) SS. COUNTY OF ) ---------------------- Before me, a Notary Public in and for said County, personally appeared ______________, a ________________ [type of entity], by the ________________ of such [type of entity], who acknowledged that (s)he did sign the foregoing instrument on behalf of said [type of entity] and that said instrument is the voluntary act and deed of said [type of entity] and his/her voluntary act and deed as such officer of said [type of entity]. IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my official seal this ____ day of _________________________, _____ at __________________, _____________________. -------------------------------- Notary Public My Commission Expires: (Notarial Seal) 7 ACKNOWLEDGMENT STATE OF ) ) SS. COUNTY OF ) ---------------------- Before me, a Notary Public in and for said County, personally appeared _________________________, a ____________________, by the of such _________________, who acknowledged that (s)he did sign the foregoing instrument on behalf of said _________________ and that said instrument is the voluntary act and deed of said ______________ and his/her voluntary act and deed as such officer of said ______________. IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my official seal this ____ day of _____________________, ____ at ______________, _____________________. -------------------------------------- Notary Public My Commission Expires: (Notarial Seal) 8 EX-10.45 6 h05116a1exv10w45.txt AFFIRMATION OF SECURITY AGREEMENT & GUARANTEE Exhibit 10.45 AFFIRMATION OF SECURITY AGREEMENT AND GUARANTY Each of the undersigned hereby acknowledges receipt of a copy of the Second Amended and Restated Credit Agreement (as the same may be amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement") dated as of June 17, 2003 by and among Tesoro Petroleum Corporation (the "Borrower"), the financial institutions from time to time party thereto as Lenders (the "Lenders") and Bank One, NA, as Administrative Agent (the "Administrative Agent"). Capitalized terms used in this Affirmation of Security Agreement and Guaranty and not defined herein shall have the meanings given to them in the Credit Agreement. Each of the undersigned affirms the terms and conditions of the Security Agreement, the Guaranty and any other Loan Document executed by it and acknowledges and agrees that each of the Security Agreement, the Guaranty, and each other applicable Loan Document executed by the it in connection with the Prior Credit Agreement remains in full force and effect and is hereby reaffirmed, ratified and confirmed. Each reference to the "Credit Agreement" contained in the above-referenced documents shall be a reference to the Credit Agreement as the same may from time to time hereafter be amended, modified, supplemented or restated. Dated: June 17, 2003 DIGICOMP, INC. TESORO FINANCIAL SERVICES HOLDING COMPANY TESORO AVIATION COMPANY VICTORY FINANCE COMPANY TESORO ALASKA COMPANY FAR EAST MARITIME COMPANY TESORO REFINING AND MARKETING COMPANY GOLD STAR MARITIME COMPANY TESORO MARINE SERVICES HOLDING COMPANY By: /s/ G. SCOTT SPENDLOVE TESORO MARINE SERVICES, LLC -------------------------- TESORO MARITIME COMPANY Name: G. Scott Spendlove TESORO NORTHSHORE COMPANY Title: Attorney-in-Fact TESORO PETROLEUM COMPANIES, INC. TESORO HAWAII CORPORATION SMILEY'S SUPER SERVICE, INC. By: /s/ GREGORY A. WRIGHT - ------------------------- Name: Gregory A. Wright Title: Senior Vice President and By: /s/ GREGORY A. WRIGHT Chief Financial Officer ------------------------- Name: Gregory A. Wright Title: Senior Vice President, Chief Financial Officer TESORO TECHNOLOGY COMPANY and Treasurer TESORO TRADING COMPANY TESORO VOSTOK COMPANY TESORO WASATCH, LLC TESORO GAS RESOURCES COMPANY, INC. By: /s/ G. SCOTT SPENDLOVE - -------------------------- Name: G. Scott Spendlove Title: Vice President, Finance and Treasurer AFFIRMATION OF SECURITY AGREEMENT AND GUARANTY AS OF JUNE 17, 2003 SIGNATURE PAGE EX-23.1 7 h05116a1exv23w1.txt CONSENT OF DELOITTE & TOUCHE LLP EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Amendment No. 1 to Registration Statement No. 333-105783 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 such Registration Statement. /s/ DELOITTE & TOUCHE LLP San Antonio, Texas June 19, 2003 EX-24.2 8 h05116a1exv24w2.txt CERTIFIED COPIES- RESOLUTIONS OF BOARDS OF DIRS. Exhibit 24.2 TESORO PETROLEUM CORPORATION 300 Concord Plaza Drive San Antonio, Texas 78216-6999 April 17, 2003 SECRETARY'S CERTIFICATE The undersigned, James C. Reed, Jr., does hereby certify on behalf of Tesoro Petroleum Corporation, a Delaware corporation (the "Company"), that he is the duly elected, qualified and acting Secretary of the Company and that: Attached hereto are true and correct copies of resolutions adopted by the Board of Directors of the Company on March 13, 2003, pertaining to (i) the authorization, issuance, execution and delivery of the Notes, which will be issued by the Company pursuant to the Purchase Agreement (the "Notes"); (ii) the execution and delivery of the Indenture relating to the Notes, among the Company, the Guarantors and The Bank of New York, as Trustee (the "Indenture"); (iii) the execution and delivery of the Purchase Agreement, among the Company, the Guarantors and the Purchasers (the "Purchase Agreement"); (iv) the execution and delivery of the Security Documents, as defined in the Purchase Agreement (the "Security Documents"); (v) the execution and delivery of the Registration Rights Agreement, dated as of the date hereof, relating to the Notes, among the Company, the Guarantors and the Purchasers (the "Registration Rights Agreement")and (vi) all other transactions with respect to the Notes contemplated by the Offering Circular, and by the Pricing Committee of the Board of Directors on April 7, 2003 approving the price of the Notes; said resolutions have not been amended, rescinded or modified since their adoption and remain in full force and effect as of the date hereof; said resolutions are the only resolutions adopted by the Board of Directors, or any committee thereof, pertaining to the offering of up to $375,000,000 aggregate principal amount of the Notes by Tesoro Petroleum Corporation; [Signature Page Follows] IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th, day of April, 2003. Tesoro Petroleum Corporation By: /s/ JAMES C. REED, JR. --------------------------------------------- Name: James C. Reed, Jr. Title: Secretary I, Charles S. Parrish, Assistant Secretary of Tesoro Petroleum Corporation, do hereby certify that James C. Reed, Jr. is the duly elected and qualified Secretary of Tesoro Petroleum Corporation, and that the signature of James C. Reed, Jr. set forth above is his true and genuine signature. IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. By: /s/ CHARLES S. PARRISH --------------------------------------------- Name: Charles S. Parrish Title: Assistant Secretary Company Secretary's Certificate OFFERING BY TESORO PETROLEUM CORPORATION OF $375,000,000 PRINCIPAL AMOUNT OF SENIOR SECURED NOTES RESOLVED, that the Purchase Agreement (the "Purchase Agreement") to be entered into by and among TESORO PETROLEUM CORPORATION (the "Company"), the other Guarantors listed on the signature pages thereto (the "Guarantors") and Goldman, Sachs & Co. and Banc One Capital Markets, Inc., as the initial purchasers (collectively, the "Initial Purchasers") providing for the issuance, sale and delivery by Tesoro of Senior Secured Notes (the "Notes") of Tesoro in an aggregate principal amount of $375,000,000, in such form and with such terms and provisions as the Authorized Officer (as defined below) executing same shall approve be, and hereby is, approved in all respects; and FURTHER RESOLVED, that the officers and directors of the Company who are required to execute the Registration Statement be, and they hereby are, and each of them hereby is, authorized to execute and deliver a power-of-attorney appointing Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish each to be the attorneys-in-fact and agents with power of substitution and resubstitution, for each of such directors and officers and in their name, place and stead, in any and all capacities, to sign any amendment(s) to the Registration Statements, including any post-effective amendment(s), to file the same with the Securities Exchange Commission (the "Commission") and to perform all other acts necessary in connection with any matter relating to the Registration Statement and any amendment(s) or post-effective amendment(s) thereto; and April 17, 2003 ASSISTANT SECRETARY'S CERTIFICATE The undersigned, Charles S. Parrish, does hereby certify on behalf of DIGICOMP, INC., a Delaware corporation (the "Company") that he is the duly elected, qualified and acting Assistant Secretary of the Company and that: Attached hereto are true and correct copies of resolutions adopted by the Board of Directors of the Company or the Board of Directors of the Company's sole member on April 15, 2003, pertaining to (i) the authorization, issuance, execution and delivery of the Notation of Guarantee (the "Guarantee"); (ii) the authorization, execution and delivery of the Indenture relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and The Bank of New York, as Trustee (the "Indenture"); (iii) the authorization, execution and delivery of the Purchase Agreement among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Purchase Agreement"); (iv) the authorization, execution and delivery of the Security Documents, as defined in the Purchase Agreement (the "Security Documents"); (v) the authorization, execution and delivery of the Exchange and Registration Rights Agreement, dated as of the date hereof, relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Registration Rights Agreement"); and (vi) all other transactions with respect to the Notes and Guarantee contemplated by the Offering Circular; said resolutions have not been amended, rescinded or modified since their adoption and remain in full force and effect as of the date hereof; said resolutions are the only resolutions adopted by the Board of Directors, or any committee thereof, pertaining to the guarantee by the Company of the offering of the Notes; [Signature Page Follows] IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. DIGICOMP, INC. By: /s/ CHARLES S. PARRISH ---------------------------------- Name: Charles S. Parrish Title: Assistant Secretary I, James C. Reed, Jr., the Executive Vice President, General Counsel and Secretary of Digicomp, Inc., do hereby certify that Charles S. Parrish, is the duly elected and qualified Assistant Secretary of Digicomp, Inc., and that the signature of Charles S. Parrish set forth above is his true and genuine signature. IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. By: /s/ JAMES C. REED, JR. ---------------------------------- Name: James C. Reed, Jr. Title: Executive Vice President, General Counsel and Secretary OFFERING BY TESORO PETROLEUM CORPORATION OF $375,000,000 PRINCIPAL AMOUNT OF SENIOR SECURED NOTES RESOLVED, that the Purchase Agreement (the "Purchase Agreement") to be entered into by and among DIGICOMP, INC. (the "Company"), Tesoro Petroleum Corporation ("Tesoro"), the other Guarantors listed on the signature pages thereto (the "Guarantors") and Goldman, Sachs & Co. and Banc One Capital Markets, Inc., as the initial purchasers (collectively, the "Initial Purchasers") providing for the issuance, sale and delivery by Tesoro of Senior Secured Notes (the "Notes") of Tesoro in an aggregate principal amount of $375,000,000, in such form and with such terms and provisions as the Authorized Officer (as defined below) executing same shall approve be, and hereby is, approved in all respects; and FURTHER RESOLVED, that the officers and directors of the Company who are required to execute the Registration Statement be, and they hereby are, and each of them hereby is, authorized to execute and deliver a power-of-attorney appointing Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish each to be the attorneys-in-fact and agents with power of substitution and resubstitution, for each of such directors and officers and in their name, place and stead, in any and all capacities, to sign any amendment(s) to the Registration Statements, including any post-effective amendment(s), to file the same with the Securities Exchange Commission (the "Commission") and to perform all other acts necessary in connection with any matter relating to the Registration Statement and any amendment(s) or post-effective amendment(s) thereto; and April 17, 2003 SECRETARY'S CERTIFICATE The undersigned, Eric A. Haugstad, does hereby certify on behalf of FAR EAST MARITIME COMPANY, a Delaware corporation (the "Company") that he is the duly elected, qualified and acting Secretary of the Company and that: Attached hereto are true and correct copies of resolutions adopted by the Board of Directors of the Company or the Board of Directors of the Company's sole member on April 15, 2003, pertaining to (i) the authorization, issuance, execution and delivery of the Notation of Guarantee (the "Guarantee"); (ii) the authorization, execution and delivery of the Indenture relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and The Bank of New York, as Trustee (the "Indenture"); (iii) the authorization, execution and delivery of the Purchase Agreement among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Purchase Agreement"); (iv) the authorization, execution and delivery of the Security Documents, as defined in the Purchase Agreement (the "Security Documents"); (v) the authorization, execution and delivery of the Exchange and Registration Rights Agreement, dated as of the date hereof, relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Registration Rights Agreement"); and (vi) all other transactions with respect to the Notes and Guarantee contemplated by the Offering Circular; said resolutions have not been amended, rescinded or modified since their adoption and remain in full force and effect as of the date hereof; said resolutions are the only resolutions adopted by the Board of Directors, or any committee thereof, pertaining to the guarantee by the Company of the offering of the Notes; [Signature Page Follows] IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. FAR EAST MARITIME COMPANY By: /s/ ERIC A. HAUGSTAD ---------------------------------- Name: Eric A. Haugstad Title: Secretary I, Timothy F. Plummer, the Chairman of the Board of Directors and President, do hereby certify that Eric A. Haugstad, is the duly elected and qualified Secretary of Far East Maritime Company, and that the signature of Eric A. Haugstad set forth above is his true and genuine signature. IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. By: /s/ TIMOTHY F. PLUMMER ---------------------------------- Name: Timothy F. Plummer Title: Chairman of the Board of Directors and President OFFERING BY TESORO PETROLEUM CORPORATION OF $375,000,000 PRINCIPAL AMOUNT OF SENIOR SECURED NOTES RESOLVED, that the Purchase Agreement (the "Purchase Agreement") to be entered into by and among FAR EAST MARITIME COMPANY (the "Company"), Tesoro Petroleum Corporation ("Tesoro"), the other Guarantors listed on the signature pages thereto (the "Guarantors") and Goldman, Sachs & Co. and Banc One Capital Markets, Inc., as the initial purchasers (collectively, the "Initial Purchasers") providing for the issuance, sale and delivery by Tesoro of Senior Secured Notes (the "Notes") of Tesoro in an aggregate principal amount of $375,000,000, in such form and with such terms and provisions as the Attorney-in Fact (as defined below) shall approve be, and hereby is, approved in all respects; and FURTHER RESOLVED, that the officers and directors of the Company who are required to execute the Registration Statement be, and they hereby are, and each of them hereby is, authorized to execute and deliver a power-of-attorney appointing Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish each to be the attorneys-in-fact and agents with power of substitution and resubstitution, for each of such directors and officers and in their name, place and stead, in any and all capacities, to sign any amendment(s) to the Registration Statements, including any post-effective amendment(s), to file the same with the Securities Exchange Commission (the "Commission") and to perform all other acts necessary in connection with any matter relating to the Registration Statement and any amendment(s) or post-effective amendment(s) thereto; and April 17, 2003 SECRETARY'S CERTIFICATE The undersigned, Eric A. Haugstad, does hereby certify on behalf of GOLD STAR MARITIME COMPANY, a Delaware corporation (the "Company") that he is the duly elected, qualified and acting Secretary of the Company and that: Attached hereto are true and correct copies of resolutions adopted by the Board of Directors of the Company or the Board of Directors of the Company's sole member on April 15, 2003, pertaining to (i) the authorization, issuance, execution and delivery of the Notation of Guarantee (the "Guarantee"); (ii) the authorization, execution and delivery of the Indenture relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and The Bank of New York, as Trustee (the "Indenture"); (iii) the authorization, execution and delivery of the Purchase Agreement among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Purchase Agreement"); (iv) the authorization, execution and delivery of the Security Documents, as defined in the Purchase Agreement (the "Security Documents"); (v) the authorization, execution and delivery of the Exchange and Registration Rights Agreement, dated as of the date hereof, relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Registration Rights Agreement"); and (vi) all other transactions with respect to the Notes and Guarantee contemplated by the Offering Circular; said resolutions have not been amended, rescinded or modified since their adoption and remain in full force and effect as of the date hereof; said resolutions are the only resolutions adopted by the Board of Directors, or any committee thereof, pertaining to the guarantee by the Company of the offering of the Notes; [Signature Page Follows] IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. GOLD STAR MARITIME COMPANY By: /s/ ERIC A. HAUGSTAD --------------------------------- Name: Eric A. Haugstad Title: Secretary I, Timothy F. Plummer, the Chairman of the Board of Directors and President, do hereby certify that Eric A. Haugstad, is the duly elected and qualified Secretary of Gold Star Maritime Company, and that the signature of Eric A. Haugstad set forth above is his true and genuine signature. IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. By: /s/ TIMOTHY F. PLUMMER --------------------------------- Name: Timothy F. Plummer Title: Chairman of the Board of Directors and President OFFERING BY TESORO PETROLEUM CORPORATION OF $375,000,000 PRINCIPAL AMOUNT OF SENIOR SECURED NOTES RESOLVED, that the Purchase Agreement (the "Purchase Agreement") to be entered into by and among GOLD STAR MARITIME COMPANY (the "Company"), Tesoro Petroleum Corporation ("Tesoro"), the other Guarantors listed on the signature pages thereto (the "Guarantors") and Goldman, Sachs & Co. and Banc One Capital Markets, Inc., as the initial purchasers (collectively, the "Initial Purchasers") providing for the issuance, sale and delivery by Tesoro of Senior Secured Notes (the "Notes") of Tesoro in an aggregate principal amount of $375,000,000, in such form and with such terms and provisions as the Attorney-in Fact (as defined below) shall approve be, and hereby is, approved in all respects; and FURTHER RESOLVED, that the officers and directors of the Company who are required to execute the Registration Statement be, and they hereby are, and each of them hereby is, authorized to execute and deliver a power-of-attorney appointing Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish each to be the attorneys-in-fact and agents with power of substitution and resubstitution, for each of such directors and officers and in their name, place and stead, in any and all capacities, to sign any amendment(s) to the Registration Statements, including any post-effective amendment(s), to file the same with the Securities Exchange Commission (the "Commission") and to perform all other acts necessary in connection with any matter relating to the Registration Statement and any amendment(s) or post-effective amendment(s) thereto; and April 17, 2003 ASSISTANT SECRETARY'S CERTIFICATE The undersigned, Charles S. Parrish, does hereby certify on behalf of KENAI PIPE LINE COMPANY, a Delaware corporation (the "Company") that he is the duly elected, qualified and acting Assistant Secretary of the Company and that: Attached hereto are true and correct copies of resolutions adopted by the Board of Directors of the Company or the Board of Directors of the Company's sole member on April 15, 2003, pertaining to (i) the authorization, issuance, execution and delivery of the Notation of Guarantee (the "Guarantee"); (ii) the authorization, execution and delivery of the Indenture relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and The Bank of New York, as Trustee (the "Indenture"); (iii) the authorization, execution and delivery of the Purchase Agreement among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Purchase Agreement"); (iv) the authorization, execution and delivery of the Security Documents, as defined in the Purchase Agreement (the "Security Documents"); (v) the authorization, execution and delivery of the Exchange and Registration Rights Agreement, dated as of the date hereof, relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Registration Rights Agreement"); and (vi) all other transactions with respect to the Notes and Guarantee contemplated by the Offering Circular; said resolutions have not been amended, rescinded or modified since their adoption and remain in full force and effect as of the date hereof; said resolutions are the only resolutions adopted by the Board of Directors, or any committee thereof, pertaining to the guarantee by the Company of the offering of the Notes; [Signature Page Follows] IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. KENAI PIPE LINE COMPANY By: /s/ CHARLES S. PARRISH --------------------------------- Name: Charles S. Parrish Title: Assistant Secretary I, James C. Reed, Jr., the Executive Vice President and Secretary of Kenai Pipe Line Company, do hereby certify that Charles S. Parrish, is the duly elected and qualified Assistant Secretary of Kenai Pipe Line Company, and that the signature of Charles S. Parrish set forth above is his true and genuine signature. IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. By: /s/ JAMES C. REED, JR. --------------------------------- Name: James C. Reed, Jr. Title: Executive Vice President and Secretary OFFERING BY TESORO PETROLEUM CORPORATION OF $375,000,000 PRINCIPAL AMOUNT OF SENIOR SECURED NOTES RESOLVED, that the Purchase Agreement (the "Purchase Agreement") to be entered into by and among KENAI PIPE LINE COMPANY (the "Company"), Tesoro Petroleum Corporation ("Tesoro"), the other Guarantors listed on the signature pages thereto (the "Guarantors") and Goldman, Sachs & Co. and Banc One Capital Markets, Inc., as the initial purchasers (collectively, the "Initial Purchasers") providing for the issuance, sale and delivery by Tesoro of Senior Secured Notes (the "Notes") of Tesoro in an aggregate principal amount of $375,000,000, in such form and with such terms and provisions as the Authorized Officer (as defined below) executing same shall approve be, and hereby is, approved in all respects; and FURTHER RESOLVED, that the officers and directors of the Company who are required to execute the Registration Statement be, and they hereby are, and each of them hereby is, authorized to execute and deliver a power-of-attorney appointing Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish each to be the attorneys-in-fact and agents with power of substitution and resubstitution, for each of such directors and officers and in their name, place and stead, in any and all capacities, to sign any amendment(s) to the Registration Statements, including any post-effective amendment(s), to file the same with the Securities Exchange Commission (the "Commission") and to perform all other acts necessary in connection with any matter relating to the Registration Statement and any amendment(s) or post-effective amendment(s) thereto; and April 17, 2003 SECRETARY'S CERTIFICATE The undersigned, James C. Reed, Jr., does hereby certify on behalf of SMILEY'S SUPER SERVICE, INC., a Hawaii corporation (the "Company") that he is the duly elected, qualified and acting Executive Vice President and Secretary of the Company and that: Attached hereto are true and correct copies of resolutions adopted by the Board of Directors of the Company or the Board of Directors of the Company's sole member on April 15, 2003, pertaining to (i) the authorization, issuance, execution and delivery of the Notation of Guarantee (the "Guarantee"); (ii) the authorization, execution and delivery of the Indenture relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and The Bank of New York, as Trustee (the "Indenture"); (iii) the authorization, execution and delivery of the Purchase Agreement among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Purchase Agreement"); (iv) the authorization, execution and delivery of the Security Documents, as defined in the Purchase Agreement (the "Security Documents"); (v) the authorization, execution and delivery of the Exchange and Registration Rights Agreement, dated as of the date hereof, relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Registration Rights Agreement"); and (vi) all other transactions with respect to the Notes and Guarantee contemplated by the Offering Circular; said resolutions have not been amended, rescinded or modified since their adoption and remain in full force and effect as of the date hereof; said resolutions are the only resolutions adopted by the Board of Directors, or any committee thereof, pertaining to the guarantee by the Company of the offering of the Notes; [Signature Page Follows] IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. SMILEY'S SUPER SERVICE, INC. By: /s/ JAMES C. REED, JR. --------------------------------- Name: James C. Reed, Jr. Title: Executive Vice President and Secretary I, Sharon L. Layman, the Vice President and Treasurer of Smiley's Super Service, Inc., do hereby certify that James C. Reed, Jr., is the duly elected and qualified Executive Vice President and Secretary of Smiley's Super Service, Inc., and that the signature of James C. Reed, Jr. set forth above is his true and genuine signature. IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. By: /s/ SHARON L. LAYMAN --------------------------------- Name: Sharon L. Layman Title: Vice President and Treasurer OFFERING BY TESORO PETROLEUM CORPORATION OF $375,000,000 PRINCIPAL AMOUNT OF SENIOR SECURED NOTES RESOLVED, that the Purchase Agreement (the "Purchase Agreement") to be entered into by and among SMILEY'S SUPER SERVICE, INC. (the "Company"), Tesoro Petroleum Corporation ("Tesoro"), the other Guarantors listed on the signature pages thereto (the "Guarantors") and Goldman, Sachs & Co. and Banc One Capital Markets, Inc., as the initial purchasers (collectively, the "Initial Purchasers") providing for the issuance, sale and delivery by Tesoro of Senior Secured Notes (the "Notes") of Tesoro in an aggregate principal amount of $375,000,000, in such form and with such terms and provisions as the Authorized Officer (as defined below) executing same shall approve be, and hereby is, approved in all respects; and FURTHER RESOLVED, that the officers and directors of the Company who are required to execute the Registration Statement be, and they hereby are, and each of them hereby is, authorized to execute and deliver a power-of-attorney appointing Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish each to be the attorneys-in-fact and agents with power of substitution and resubstitution, for each of such directors and officers and in their name, place and stead, in any and all capacities, to sign any amendment(s) to the Registration Statements, including any post-effective amendment(s), to file the same with the Securities Exchange Commission (the "Commission") and to perform all other acts necessary in connection with any matter relating to the Registration Statement and any amendment(s) or post-effective amendment(s) thereto; and April 17, 2003 ASSISTANT SECRETARY'S CERTIFICATE The undersigned, Charles S. Parrish, does hereby certify on behalf of TESORO ALASKA COMPANY, a Delaware corporation (the "Company") that he is the duly elected, qualified and acting Assistant Secretary of the Company and that: Attached hereto are true and correct copies of resolutions adopted by the Board of Directors of the Company or the Board of Directors of the Company's sole member on April 15, 2003, pertaining to (i) the authorization, issuance, execution and delivery of the Notation of Guarantee (the "Guarantee"); (ii) the authorization, execution and delivery of the Indenture relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and The Bank of New York, as Trustee (the "Indenture"); (iii) the authorization, execution and delivery of the Purchase Agreement among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Purchase Agreement"); (iv) the authorization, execution and delivery of the Security Documents, as defined in the Purchase Agreement (the "Security Documents"); (v) the authorization, execution and delivery of the Exchange and Registration Rights Agreement, dated as of the date hereof, relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Registration Rights Agreement"); and (vi) all other transactions with respect to the Notes and Guarantee contemplated by the Offering Circular; said resolutions have not been amended, rescinded or modified since their adoption and remain in full force and effect as of the date hereof; said resolutions are the only resolutions adopted by the Board of Directors, or any committee thereof, pertaining to the guarantee by the Company of the offering of the Notes; [Signature Page Follows] IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. TESORO ALASKA COMPANY By: /s/ CHARLES S. PARRISH --------------------------------- Name: Charles S. Parrish Title: Assistant Secretary I, James C. Reed, Jr., the Executive Vice President and Secretary of Tesoro Alaska Company, do hereby certify that Charles S. Parrish, is the duly elected and qualified Assistant Secretary of Tesoro Alaska Company, and that the signature of Charles S. Parrish set forth above is his true and genuine signature. IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. By: /s/ JAMES C. REED, JR. --------------------------------- Name: James C. Reed, Jr. Title: Executive Vice President and Secretary OFFERING BY TESORO PETROLEUM CORPORATION OF $375,000,000 PRINCIPAL AMOUNT OF SENIOR SECURED NOTES RESOLVED, that the Purchase Agreement (the "Purchase Agreement") to be entered into by and among TESORO ALASKA COMPANY (the "Company"), Tesoro Petroleum Corporation ("Tesoro"), the other Guarantors listed on the signature pages thereto (the "Guarantors") and Goldman, Sachs & Co. and Banc One Capital Markets, Inc., as the initial purchasers (collectively, the "Initial Purchasers") providing for the issuance, sale and delivery by Tesoro of Senior Secured Notes (the "Notes") of Tesoro in an aggregate principal amount of $375,000,000, in such form and with such terms and provisions as the Authorized Officer (as defined below) executing same shall approve be, and hereby is, approved in all respects; and FURTHER RESOLVED, that the officers and directors of the Company who are required to execute the Registration Statement be, and they hereby are, and each of them hereby is, authorized to execute and deliver a power-of-attorney appointing Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish each to be the attorneys-in-fact and agents with power of substitution and resubstitution, for each of such directors and officers and in their name, place and stead, in any and all capacities, to sign any amendment(s) to the Registration Statements, including any post-effective amendment(s), to file the same with the Securities Exchange Commission (the "Commission") and to perform all other acts necessary in connection with any matter relating to the Registration Statement and any amendment(s) or post-effective amendment(s) thereto; and April 17, 2003 ASSISTANT SECRETARY'S CERTIFICATE The undersigned, Charles S. Parrish, does hereby certify on behalf of TESORO ALASKA PIPELINE COMPANY, a Delaware corporation (the "Company") that he is the duly elected, qualified and acting Assistant Secretary of the Company and that: Attached hereto are true and correct copies of resolutions adopted by the Board of Directors of the Company or the Board of Directors of the Company's sole member on April 15, 2003, pertaining to (i) the authorization, issuance, execution and delivery of the Notation of Guarantee (the "Guarantee"); (ii) the authorization, execution and delivery of the Indenture relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and The Bank of New York, as Trustee (the "Indenture"); (iii) the authorization, execution and delivery of the Purchase Agreement among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Purchase Agreement"); (iv) the authorization, execution and delivery of the Security Documents, as defined in the Purchase Agreement (the "Security Documents"); (v) the authorization, execution and delivery of the Exchange and Registration Rights Agreement, dated as of the date hereof, relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Registration Rights Agreement"); and (vi) all other transactions with respect to the Notes and Guarantee contemplated by the Offering Circular; said resolutions have not been amended, rescinded or modified since their adoption and remain in full force and effect as of the date hereof; said resolutions are the only resolutions adopted by the Board of Directors, or any committee thereof, pertaining to the guarantee by the Company of the offering of the Notes; [Signature Page Follows] IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. TESORO ALASKA PIPELINE COMPANY By: /s/ CHARLES S. PARRISH ------------------------------------- Name: Charles S. Parrish Title: Assistant Secretary I, James C. Reed, Jr., the Executive Vice President and Secretary of Tesoro Alaska Pipeline Company, do hereby certify that Charles S. Parrish, is the duly elected and qualified Assistant Secretary of Tesoro Alaska Pipeline Company and that the signature of Charles S. Parrish set forth above is his true and genuine signature. IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. By: /s/ JAMES C. REED, JR. ------------------------------------- Name: James C. Reed, Jr. Title: Executive Vice President and Secretary OFFERING BY TESORO PETROLEUM CORPORATION OF $375,000,000 PRINCIPAL AMOUNT OF SENIOR SECURED NOTES RESOLVED, that the Purchase Agreement (the "Purchase Agreement") to be entered into by and among TESORO ALASKA PIPELINE COMPANY (the "Company"), Tesoro Petroleum Corporation ("Tesoro"), the other Guarantors listed on the signature pages thereto (the "Guarantors") and Goldman, Sachs & Co. and Banc One Capital Markets, Inc., as the initial purchasers (collectively, the "Initial Purchasers") providing for the issuance, sale and delivery by Tesoro of Senior Secured Notes (the "Notes") of Tesoro in an aggregate principal amount of $375,000,000, in such form and with such terms and provisions as the Authorized Officer (as defined below) executing same shall approve be, and hereby is, approved in all respects; and FURTHER RESOLVED, that the officers and directors of the Company who are required to execute the Registration Statement be, and they hereby are, and each of them hereby is, authorized to execute and deliver a power-of-attorney appointing Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish each to be the attorneys-in-fact and agents with power of substitution and resubstitution, for each of such directors and officers and in their name, place and stead, in any and all capacities, to sign any amendment(s) to the Registration Statements, including any post-effective amendment(s), to file the same with the Securities Exchange Commission (the "Commission") and to perform all other acts necessary in connection with any matter relating to the Registration Statement and any amendment(s) or post-effective amendment(s) thereto; and April 17, 2003 ASSISTANT SECRETARY'S CERTIFICATE The undersigned, Charles S. Parrish, does hereby certify on behalf of TESORO AVIATION COMPANY, a Delaware corporation (the "Company") that he is the duly elected, qualified and acting Assistant Secretary of the Company and that: Attached hereto are true and correct copies of resolutions adopted by the Board of Directors of the Company or the Board of Directors of the Company's sole member on April 15, 2003, pertaining to (i) the authorization, issuance, execution and delivery of the Notation of Guarantee (the "Guarantee"); (ii) the authorization, execution and delivery of the Indenture relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and The Bank of New York, as Trustee (the "Indenture"); (iii) the authorization, execution and delivery of the Purchase Agreement among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Purchase Agreement"); (iv) the authorization, execution and delivery of the Security Documents, as defined in the Purchase Agreement (the "Security Documents"); (v) the authorization, execution and delivery of the Exchange and Registration Rights Agreement, dated as of the date hereof, relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Registration Rights Agreement"); and (vi) all other transactions with respect to the Notes and Guarantee contemplated by the Offering Circular; said resolutions have not been amended, rescinded or modified since their adoption and remain in full force and effect as of the date hereof; said resolutions are the only resolutions adopted by the Board of Directors, or any committee thereof, pertaining to the guarantee by the Company of the offering of the Notes; [Signature Page Follows] IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. TESORO AVIATION COMPANY By: /s/ CHARLES S. PARRISH ------------------------------------- Name: Charles S. Parrish Title: Assistant Secretary I, James C. Reed, Jr., the Executive Vice President, General Counsel and Secretary of Digicomp, Inc., do hereby certify that Charles S. Parrish, is the duly elected and qualified Assistant Secretary of Tesoro Aviation Company, and that the signature of Charles S. Parrish set forth above is his true and genuine signature. IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. By: /s/ JAMES C. REED, JR. ------------------------------------- Name: James C. Reed, Jr. Title: Executive Vice President, General Counsel and Secretary OFFERING BY TESORO PETROLEUM CORPORATION OF $375,000,000 PRINCIPAL AMOUNT OF SENIOR SECURED NOTES RESOLVED, that the Purchase Agreement (the "Purchase Agreement") to be entered into by and among TESORO AVIATION COMPANY (the "Company"), Tesoro Petroleum Corporation ("Tesoro"), the other Guarantors listed on the signature pages thereto (the "Guarantors") and Goldman, Sachs & Co. and Banc One Capital Markets, Inc., as the initial purchasers (collectively, the "Initial Purchasers") providing for the issuance, sale and delivery by Tesoro of Senior Secured Notes (the "Notes") of Tesoro in an aggregate principal amount of $375,000,000, in such form and with such terms and provisions as the Authorized Officer (as defined below) executing same shall approve be, and hereby is, approved in all respects; and FURTHER RESOLVED, that the officers and directors of the Company who are required to execute the Registration Statement be, and they hereby are, and each of them hereby is, authorized to execute and deliver a power-of-attorney appointing Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish each to be the attorneys-in-fact and agents with power of substitution and resubstitution, for each of such directors and officers and in their name, place and stead, in any and all capacities, to sign any amendment(s) to the Registration Statements, including any post-effective amendment(s), to file the same with the Securities Exchange Commission (the "Commission") and to perform all other acts necessary in connection with any matter relating to the Registration Statement and any amendment(s) or post-effective amendment(s) thereto; and April 17, 2003 ASSISTANT SECRETARY'S CERTIFICATE The undersigned, Charles S. Parrish, does hereby certify on behalf of TESORO GAS RESOURCES COMPANY, INC., a Delaware corporation (the "Company") that he is the duly elected, qualified and acting Assistant Secretary of the Company and that: Attached hereto are true and correct copies of resolutions adopted by the Board of Directors of the Company or the Board of Directors of the Company's sole member on April 15, 2003, pertaining to (i) the authorization, issuance, execution and delivery of the Notation of Guarantee (the "Guarantee"); (ii) the authorization, execution and delivery of the Indenture relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and The Bank of New York, as Trustee (the "Indenture"); (iii) the authorization, execution and delivery of the Purchase Agreement among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Purchase Agreement"); (iv) the authorization, execution and delivery of the Security Documents, as defined in the Purchase Agreement (the "Security Documents"); (v) the authorization, execution and delivery of the Exchange and Registration Rights Agreement, dated as of the date hereof, relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Registration Rights Agreement"); and (vi) all other transactions with respect to the Notes and Guarantee contemplated by the Offering Circular; said resolutions have not been amended, rescinded or modified since their adoption and remain in full force and effect as of the date hereof; said resolutions are the only resolutions adopted by the Board of Directors, or any committee thereof, pertaining to the guarantee by the Company of the offering of the Notes; [Signature Page Follows] IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. TESORO GAS RESOURCES COMPANY, INC. By: /s/ CHARLES S. PARRISH ------------------------------------- Name: Charles S. Parrish Title: Assistant Secretary I, James C. Reed, Jr., the Executive Vice President, General Counsel and Secretary of Tesoro Gas Resources Company, Inc., do hereby certify that Charles S. Parrish, is the duly elected and qualified Assistant Secretary of Tesoro Gas Resources Company, Inc., and that the signature of Charles S. Parrish set forth above is his true and genuine signature. IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. By: /s/ JAMES C. REED, JR. ------------------------------------- Name: James C. Reed, Jr. Title: Executive Vice President, General Counsel and Secretary OFFERING BY TESORO PETROLEUM CORPORATION OF $375,000,000 PRINCIPAL AMOUNT OF SENIOR SECURED NOTES RESOLVED, that the Purchase Agreement (the "Purchase Agreement") to be entered into by and among TESORO GAS RESOURCES COMPANY, INC. (the "Company"), Tesoro Petroleum Corporation ("Tesoro"), the other Guarantors listed on the signature pages thereto (the "Guarantors") and Goldman, Sachs & Co. and Banc One Capital Markets, Inc., as the initial purchasers (collectively, the "Initial Purchasers") providing for the issuance, sale and delivery by Tesoro of Senior Secured Notes (the "Notes") of Tesoro in an aggregate principal amount of $375,000,000, in such form and with such terms and provisions as the Authorized Officer (as defined below) executing same shall approve be, and hereby is, approved in all respects; and FURTHER RESOLVED, that the officers and directors of the Company who are required to execute the Registration Statement be, and they hereby are, and each of them hereby is, authorized to execute and deliver a power-of-attorney appointing Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish each to be the attorneys-in-fact and agents with power of substitution and resubstitution, for each of such directors and officers and in their name, place and stead, in any and all capacities, to sign any amendment(s) to the Registration Statements, including any post-effective amendment(s), to file the same with the Securities Exchange Commission (the "Commission") and to perform all other acts necessary in connection with any matter relating to the Registration Statement and any amendment(s) or post-effective amendment(s) thereto; and April 17, 2003 SECRETARY'S CERTIFICATE The undersigned, James C. Reed, Jr., does hereby certify on behalf of TESORO HAWAII CORPORATION, a Hawaii corporation (the "Company") that he is the duly elected, qualified and acting Secretary of the Company and that: Attached hereto are true and correct copies of resolutions adopted by the Board of Directors of the Company or the Board of Directors of the Company's sole member on April 15, 2003, pertaining to (i) the authorization, issuance, execution and delivery of the Notation of Guarantee (the "Guarantee"); (ii) the authorization, execution and delivery of the Indenture relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and The Bank of New York, as Trustee (the "Indenture"); (iii) the authorization, execution and delivery of the Purchase Agreement among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Purchase Agreement"); (iv) the authorization, execution and delivery of the Security Documents, as defined in the Purchase Agreement (the "Security Documents"); (v) the authorization, execution and delivery of the Exchange and Registration Rights Agreement, dated as of the date hereof, relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Registration Rights Agreement"); and (vi) all other transactions with respect to the Notes and Guarantee contemplated by the Offering Circular; said resolutions have not been amended, rescinded or modified since their adoption and remain in full force and effect as of the date hereof; said resolutions are the only resolutions adopted by the Board of Directors, or any committee thereof, pertaining to the guarantee by the Company of the offering of the Notes; [Signature Page Follows] IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. TESORO HAWAII CORPORATION By: /s/ JAMES C. REED, JR. ------------------------------------- Name: James C. Reed, Jr. Title: Executive Vice President and Secretary I, Sharon L. Layman, the Vice President and Treasurer of Tesoro Hawaii Corporation, do hereby certify that James C. Reed, Jr., is the duly elected and qualified Executive Vice President and Secretary of Tesoro Hawaii Corporation, and that the signature of James C. Reed, Jr. set forth above is his true and genuine signature. IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. By: /s/ SHARON L. LAYMAN ------------------------------------- Name: Sharon L. Layman Title: Vice President and Treasurer OFFERING BY TESORO PETROLEUM CORPORATION OF $375,000,000 PRINCIPAL AMOUNT OF SENIOR SECURED NOTES RESOLVED, that the Purchase Agreement (the "Purchase Agreement") to be entered into by and among TESORO HAWAII CORPORATION (the "Company"), Tesoro Petroleum Corporation ("Tesoro"), the other Guarantors listed on the signature pages thereto (the "Guarantors") and Goldman, Sachs & Co. and Banc One Capital Markets, Inc., as the initial purchasers (collectively, the "Initial Purchasers") providing for the issuance, sale and delivery by Tesoro of Senior Secured Notes (the "Notes") of Tesoro in an aggregate principal amount of $375,000,000, in such form and with such terms and provisions as the Authorized Officer (as defined below) executing same shall approve be, and hereby is, approved in all respects; and FURTHER RESOLVED, that the officers and directors of the Company who are required to execute the Registration Statement be, and they hereby are, and each of them hereby is, authorized to execute and deliver a power-of-attorney appointing Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish each to be the attorneys-in-fact and agents with power of substitution and resubstitution, for each of such directors and officers and in their name, place and stead, in any and all capacities, to sign any amendment(s) to the Registration Statements, including any post-effective amendment(s), to file the same with the Securities Exchange Commission (the "Commission") and to perform all other acts necessary in connection with any matter relating to the Registration Statement and any amendment(s) or post-effective amendment(s) thereto; and April 17, 2003 ASSISTANT SECRETARY'S CERTIFICATE The undersigned, Charles S. Parrish, does hereby certify on behalf of TESORO HIGH PLAINS PIPELINE COMPANY, a Delaware corporation (the "Company") that he is the duly elected, qualified and acting Assistant Secretary of the Company and that: Attached hereto are true and correct copies of resolutions adopted by the Board of Directors of the Company or the Board of Directors of the Company's sole member on April 15, 2003, pertaining to (i) the authorization, issuance, execution and delivery of the Notation of Guarantee (the "Guarantee"); (ii) the authorization, execution and delivery of the Indenture relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and The Bank of New York, as Trustee (the "Indenture"); (iii) the authorization, execution and delivery of the Purchase Agreement among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Purchase Agreement"); (iv) the authorization, execution and delivery of the Security Documents, as defined in the Purchase Agreement (the "Security Documents"); (v) the authorization, execution and delivery of the Exchange and Registration Rights Agreement, dated as of the date hereof, relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Registration Rights Agreement"); and (vi) all other transactions with respect to the Notes and Guarantee contemplated by the Offering Circular; said resolutions have not been amended, rescinded or modified since their adoption and remain in full force and effect as of the date hereof; said resolutions are the only resolutions adopted by the Board of Directors, or any committee thereof, pertaining to the guarantee by the Company of the offering of the Notes; [Signature Page Follows] IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. TESORO HIGH PLAINS PIPELINE COMPANY By: /s/ CHARLES S. PARRISH ------------------------------------- Name: Charles S. Parrish Title: Assistant Secretary I, James C. Reed, Jr., the Executive Vice President, General Counsel and Secretary of Tesoro High Plains Pipeline Company, do hereby certify that Charles S. Parrish, is the duly elected and qualified Assistant Secretary of Tesoro High Plains Pipeline Company, and that the signature of Charles S. Parrish set forth above is his true and genuine signature. IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. By: /s/ JAMES C. REED, JR. ------------------------------------- Name: James C. Reed, Jr. Title: Executive Vice President, General Counsel and Secretary OFFERING BY TESORO PETROLEUM CORPORATION OF $375,000,000 PRINCIPAL AMOUNT OF SENIOR SECURED NOTES RESOLVED, that the Purchase Agreement (the "Purchase Agreement") to be entered into by and among TESORO HIGH PLAINS PIPELINE COMPANY (the "Company"), Tesoro Petroleum Corporation ("Tesoro"), the other Guarantors listed on the signature pages thereto (the "Guarantors") and Goldman, Sachs & Co. and Banc One Capital Markets, Inc., as the initial purchasers (collectively, the "Initial Purchasers") providing for the issuance, sale and delivery by Tesoro of Senior Secured Notes (the "Notes") of Tesoro in an aggregate principal amount of $375,000,000, in such form and with such terms and provisions as the Authorized Officer (as defined below) executing same shall approve be, and hereby is, approved in all respects; and FURTHER RESOLVED, that the officers and directors of the Company who are required to execute the Registration Statement be, and they hereby are, and each of them hereby is, authorized to execute and deliver a power-of-attorney appointing Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish each to be the attorneys-in-fact and agents with power of substitution and resubstitution, for each of such directors and officers and in their name, place and stead, in any and all capacities, to sign any amendment(s) to the Registration Statements, including any post-effective amendment(s), to file the same with the Securities Exchange Commission (the "Commission") and to perform all other acts necessary in connection with any matter relating to the Registration Statement and any amendment(s) or post-effective amendment(s) thereto; and April 17, 2003 ASSISTANT SECRETARY'S CERTIFICATE The undersigned, Charles S. Parrish, does hereby certify on behalf of TESORO MARINE SERVICES, LLC, a Delaware limited liability company (the "Company") that he is the duly elected, qualified and acting Assistant Secretary of the Company and that: Attached hereto are true and correct copies of resolutions adopted by the Board of Directors of the Company or the Board of Directors of the Company's sole member on April 15, 2003, pertaining to (i) the authorization, issuance, execution and delivery of the Notation of Guarantee (the "Guarantee"); (ii) the authorization, execution and delivery of the Indenture relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and The Bank of New York, as Trustee (the "Indenture"); (iii) the authorization, execution and delivery of the Purchase Agreement among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Purchase Agreement"); (iv) the authorization, execution and delivery of the Security Documents, as defined in the Purchase Agreement (the "Security Documents"); (v) the authorization, execution and delivery of the Exchange and Registration Rights Agreement, dated as of the date hereof, relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Registration Rights Agreement"); and (vi) all other transactions with respect to the Notes and Guarantee contemplated by the Offering Circular; said resolutions have not been amended, rescinded or modified since their adoption and remain in full force and effect as of the date hereof; said resolutions are the only resolutions adopted by the Board of Directors, or any committee thereof, pertaining to the guarantee by the Company of the offering of the Notes; [Signature Page Follows] IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. TESORO MARINE SERVICES, LLC By: /s/ CHARLES S. PARRISH ------------------------------------- Name: Charles S. Parrish Title: Assistant Secretary I, James C. Reed, Jr., the Executive Vice President, General Counsel and Secretary of Tesoro Marine Services, LLC, do hereby certify that Charles S. Parrish, is the duly elected and qualified Assistant Secretary of Tesoro Marine Services, LLC, and that the signature of Charles S. Parrish set forth above is his true and genuine signature. IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. By: /s/ JAMES C. REED, JR. ------------------------------------- Name: James C. Reed, Jr. Title: Executive Vice President, General Counsel and Secretary OFFERING BY TESORO PETROLEUM CORPORATION OF $375,000,000 PRINCIPAL AMOUNT OF SENIOR SECURED NOTES RESOLVED, that the Purchase Agreement (the "Purchase Agreement") to be entered into by and among TESORO MARINE SERVICES, LLC (the "Company"), Tesoro Petroleum Corporation ("Tesoro"), the other Guarantors listed on the signature pages thereto (the "Guarantors") and Goldman, Sachs & Co. and Banc One Capital Markets, Inc., as the initial purchasers (collectively, the "Initial Purchasers") providing for the issuance, sale and delivery by Tesoro of Senior Secured Notes (the "Notes") of Tesoro in an aggregate principal amount of $375,000,000, in such form and with such terms and provisions as the Authorized Officer (as defined below) executing same shall approve be, and hereby is, approved in all respects; and FURTHER RESOLVED, that the officers and directors of the Company who are required to execute the Registration Statement be, and they hereby are, and each of them hereby is, authorized to execute and deliver a power-of-attorney appointing Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish each to be the attorneys-in-fact and agents with power of substitution and resubstitution, for each of such directors and officers and in their name, place and stead, in any and all capacities, to sign any amendment(s) to the Registration Statements, including any post-effective amendment(s), to file the same with the Securities Exchange Commission (the "Commission") and to perform all other acts necessary in connection with any matter relating to the Registration Statement and any amendment(s) or post-effective amendment(s) thereto; and April 17, 2003 ASSISTANT SECRETARY'S CERTIFICATE The undersigned, Charles S. Parrish, does hereby certify on behalf of TESORO MARITIME COMPANY, a Delaware corporation (the "Company") that he is the duly elected, qualified and acting Assistant Secretary of the Company and that: Attached hereto are true and correct copies of resolutions adopted by the Board of Directors of the Company or the Board of Directors of the Company's sole member on April 15, 2003, pertaining to (i) the authorization, issuance, execution and delivery of the Notation of Guarantee (the "Guarantee"); (ii) the authorization, execution and delivery of the Indenture relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and The Bank of New York, as Trustee (the "Indenture"); (iii) the authorization, execution and delivery of the Purchase Agreement among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Purchase Agreement"); (iv) the authorization, execution and delivery of the Security Documents, as defined in the Purchase Agreement (the "Security Documents"); (v) the authorization, execution and delivery of the Exchange and Registration Rights Agreement, dated as of the date hereof, relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Registration Rights Agreement"); and (vi) all other transactions with respect to the Notes and Guarantee contemplated by the Offering Circular; said resolutions have not been amended, rescinded or modified since their adoption and remain in full force and effect as of the date hereof; said resolutions are the only resolutions adopted by the Board of Directors, or any committee thereof, pertaining to the guarantee by the Company of the offering of the Notes; [Signature Page Follows] IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. TESORO MARITIME COMPANY By: /s/ CHARLES S. PARRISH ------------------------------------- Name: Charles S. Parrish Title: Assistant Secretary I, James C. Reed, Jr., the Executive Vice President, General Counsel and Secretary of Tesoro Maritime Company, do hereby certify that Charles S. Parrish, is the duly elected and qualified Assistant Secretary of Tesoro Maritime Company, and that the signature of Charles S. Parrish set forth above is his true and genuine signature. IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. By: /s/ JAMES C. REED, JR. ------------------------------------- Name: James C. Reed, Jr. Title: Executive Vice President, General Counsel and Secretary OFFERING BY TESORO PETROLEUM CORPORATION OF $375,000,000 PRINCIPAL AMOUNT OF SENIOR SECURED NOTES RESOLVED, that the Purchase Agreement (the "Purchase Agreement") to be entered into by and among TESORO MARITIME COMPANY (the "Company"), Tesoro Petroleum Corporation ("Tesoro"), the other Guarantors listed on the signature pages thereto (the "Guarantors") and Goldman, Sachs & Co. and Banc One Capital Markets, Inc., as the initial purchasers (collectively, the "Initial Purchasers") providing for the issuance, sale and delivery by Tesoro of Senior Secured Notes (the "Notes") of Tesoro in an aggregate principal amount of $375,000,000, in such form and with such terms and provisions as the Authorized Officer (as defined below) executing same shall approve be, and hereby is, approved in all respects; and FURTHER RESOLVED, that the officers and directors of the Company who are required to execute the Registration Statement be, and they hereby are, and each of them hereby is, authorized to execute and deliver a power-of-attorney appointing Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish each to be the attorneys-in-fact and agents with power of substitution and resubstitution, for each of such directors and officers and in their name, place and stead, in any and all capacities, to sign any amendment(s) to the Registration Statements, including any post-effective amendment(s), to file the same with the Securities Exchange Commission (the "Commission") and to perform all other acts necessary in connection with any matter relating to the Registration Statement and any amendment(s) or post-effective amendment(s) thereto; and April 17, 2003 ASSISTANT SECRETARY'S CERTIFICATE The undersigned, Charles S. Parrish, does hereby certify on behalf of TESORO NORTHSTORE COMPANY, an Alaska corporation (the "Company") that he is the duly elected, qualified and acting Assistant Secretary of the Company and that: Attached hereto are true and correct copies of resolutions adopted by the Board of Directors of the Company or the Board of Directors of the Company's sole member on April 15, 2003, pertaining to (i) the authorization, issuance, execution and delivery of the Notation of Guarantee (the "Guarantee"); (ii) the authorization, execution and delivery of the Indenture relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and The Bank of New York, as Trustee (the "Indenture"); (iii) the authorization, execution and delivery of the Purchase Agreement among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Purchase Agreement"); (iv) the authorization, execution and delivery of the Security Documents, as defined in the Purchase Agreement (the "Security Documents"); (v) the authorization, execution and delivery of the Exchange and Registration Rights Agreement, dated as of the date hereof, relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Registration Rights Agreement"); and (vi) all other transactions with respect to the Notes and Guarantee contemplated by the Offering Circular; said resolutions have not been amended, rescinded or modified since their adoption and remain in full force and effect as of the date hereof; said resolutions are the only resolutions adopted by the Board of Directors, or any committee thereof, pertaining to the guarantee by the Company of the offering of the Notes; Latham & Watkins LLP and Fulbright & Jaworski L.L.P. are entitled to rely on this certificate in connection with the opinions that such firms are rendering pursuant to clauses (a) and (b), respectively, of Section 7 of the Purchase Agreement. [Signature Page Follows] IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. TESORO NORTHSTORE COMPANY By: /s/ CHARLES S. PARRISH -------------------------------------- Name: Charles S. Parrish Title: Assistant Secretary I, James C. Reed, Jr., the Executive Vice President and Secretary of Tesoro Northstore Company, do hereby certify that Charles S. Parrish, is the duly elected and qualified Assistant Secretary of Tesoro Northstore Company, and that the signature of Charles S. Parrish set forth above is his true and genuine signature. IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. By: /s/ JAMES C. REED, JR. ------------------------------------------ Name: James C. Reed, Jr. Title: Executive Vice President and Secretary OFFERING BY TESORO PETROLEUM CORPORATION OF $375,000,000 PRINCIPAL AMOUNT OF SENIOR SECURED NOTES RESOLVED, that the Purchase Agreement (the "Purchase Agreement") to be entered into by and among TESORO NORTHSTORE COMPANY (the "Company"), Tesoro Petroleum Corporation ("Tesoro"), the other Guarantors listed on the signature pages thereto (the "Guarantors") and Goldman, Sachs & Co. and Banc One Capital Markets, Inc., as the initial purchasers (collectively, the "Initial Purchasers") providing for the issuance, sale and delivery by Tesoro of Senior Secured Notes (the "Notes") of Tesoro in an aggregate principal amount of $375,000,000, in such form and with such terms and provisions as the Authorized Officer (as defined below) executing same shall approve be, and hereby is, approved in all respects; and FURTHER RESOLVED, that the officers and directors of the Company who are required to execute the Registration Statement be, and they hereby are, and each of them hereby is, authorized to execute and deliver a power-of-attorney appointing Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish each to be the attorneys-in-fact and agents with power of substitution and resubstitution, for each of such directors and officers and in their name, place and stead, in any and all capacities, to sign any amendment(s) to the Registration Statements, including any post-effective amendment(s), to file the same with the Securities Exchange Commission (the "Commission") and to perform all other acts necessary in connection with any matter relating to the Registration Statement and any amendment(s) or post-effective amendment(s) thereto; and April 17, 2003 ASSISTANT SECRETARY'S CERTIFICATE The undersigned, Charles S. Parrish, does hereby certify on behalf of TESORO PETROLEUM COMPANIES, INC., a Delaware corporation (the "Company") that he is the duly elected, qualified and acting Assistant Secretary of the Company and that: Attached hereto are true and correct copies of resolutions adopted by the Board of Directors of the Company or the Board of Directors of the Company's sole member on April 15, 2003, pertaining to (i) the authorization, issuance, execution and delivery of the Notation of Guarantee (the "Guarantee"); (ii) the authorization, execution and delivery of the Indenture relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and The Bank of New York, as Trustee (the "Indenture"); (iii) the authorization, execution and delivery of the Purchase Agreement among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Purchase Agreement"); (iv) the authorization, execution and delivery of the Security Documents, as defined in the Purchase Agreement (the "Security Documents"); (v) the authorization, execution and delivery of the Exchange and Registration Rights Agreement, dated as of the date hereof, relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Registration Rights Agreement"); and (vi) all other transactions with respect to the Notes and Guarantee contemplated by the Offering Circular; said resolutions have not been amended, rescinded or modified since their adoption and remain in full force and effect as of the date hereof; said resolutions are the only resolutions adopted by the Board of Directors, or any committee thereof, pertaining to the guarantee by the Company of the offering of the Notes; [Signature Page Follows] IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. TESORO PETROLEUM COMPANIES, INC. By: /s/ CHARLES S. PARRISH --------------------------------------- Name: Charles S. Parrish Title: Assistant Secretary I, James C. Reed, Jr., the Executive Vice President, General Counsel and Secretary of Tesoro Petroleum Companies, Inc., do hereby certify that Charles S. Parrish, is the duly elected and qualified Assistant Secretary of Tesoro Petroleum Companies, Inc., and that the signature of Charles S. Parrish set forth above is his true and genuine signature. IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. By: /s/ JAMES C. REED, JR. --------------------------------------- Name: James C. Reed, Jr. Title: Executive Vice President, General Counsel and Secretary OFFERING BY TESORO PETROLEUM CORPORATION OF $375,000,000 PRINCIPAL AMOUNT OF SENIOR SECURED NOTES RESOLVED, that the Purchase Agreement (the "Purchase Agreement") to be entered into by and among TESORO PETROLEUM COMPANIES, INC. (the "Company"), Tesoro Petroleum Corporation ("Tesoro"), the other Guarantors listed on the signature pages thereto (the "Guarantors") and Goldman, Sachs & Co. and Banc One Capital Markets, Inc., as the initial purchasers (collectively, the "Initial Purchasers") providing for the issuance, sale and delivery by Tesoro of Senior Secured Notes (the "Notes") of Tesoro in an aggregate principal amount of $375,000,000, in such form and with such terms and provisions as the Authorized Officer (as defined below) executing same shall approve be, and hereby is, approved in all respects; and FURTHER RESOLVED, that the officers and directors of the Company who are required to execute the Registration Statement be, and they hereby are, and each of them hereby is, authorized to execute and deliver a power-of-attorney appointing Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish each to be the attorneys-in-fact and agents with power of substitution and resubstitution, for each of such directors and officers and in their name, place and stead, in any and all capacities, to sign any amendment(s) to the Registration Statements, including any post-effective amendment(s), to file the same with the Securities Exchange Commission (the "Commission") and to perform all other acts necessary in connection with any matter relating to the Registration Statement and any amendment(s) or post-effective amendment(s) thereto; and April 17, 2003 ASSISTANT SECRETARY'S CERTIFICATE The undersigned, Charles S. Parrish, does hereby certify on behalf of TESORO REFINING AND MARKETING COMPANY, a Delaware corporation (the "Company") that he is the duly elected, qualified and acting Assistant Secretary of the Company and that: Attached hereto are true and correct copies of resolutions adopted by the Board of Directors of the Company or the Board of Directors of the Company's sole member on April 15, 2003, pertaining to (i) the authorization, issuance, execution and delivery of the Notation of Guarantee (the "Guarantee"); (ii) the authorization, execution and delivery of the Indenture relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and The Bank of New York, as Trustee (the "Indenture"); (iii) the authorization, execution and delivery of the Purchase Agreement among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Purchase Agreement"); (iv) the authorization, execution and delivery of the Security Documents, as defined in the Purchase Agreement (the "Security Documents"); (v) the authorization, execution and delivery of the Exchange and Registration Rights Agreement, dated as of the date hereof, relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Registration Rights Agreement"); and (vi) all other transactions with respect to the Notes and Guarantee contemplated by the Offering Circular; said resolutions have not been amended, rescinded or modified since their adoption and remain in full force and effect as of the date hereof; said resolutions are the only resolutions adopted by the Board of Directors, or any committee thereof, pertaining to the guarantee by the Company of the offering of the Notes; [Signature Page Follows] IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. TESORO REFINING AND MARKETING COMPANY By: /s/ CHARLES S. PARRISH --------------------------------------- Name: Charles S. Parrish Title: Assistant Secretary I, James C. Reed, Jr., the Executive Vice President and Secretary of Tesoro Refining and Marketing Company, do hereby certify that Charles S. Parrish, is the duly elected and qualified Assistant Secretary of Tesoro Refining and Marketing Company, and that the signature of Charles S. Parrish set forth above is his true and genuine signature. IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. By: /s/ JAMES C. REED, JR. --------------------------------------- Name: James C. Reed, Jr. Title: Executive Vice President and Secretary OFFERING BY TESORO PETROLEUM CORPORATION OF $375,000,000 PRINCIPAL AMOUNT OF SENIOR SECURED NOTES RESOLVED, that the Purchase Agreement (the "Purchase Agreement") to be entered into by and among TESORO REFINING AND MARKETING COMPANY (the "Company"), Tesoro Petroleum Corporation ("Tesoro"), the other Guarantors listed on the signature pages thereto (the "Guarantors") and Goldman, Sachs & Co. and Banc One Capital Markets, Inc., as the initial purchasers (collectively, the "Initial Purchasers") providing for the issuance, sale and delivery by Tesoro of Senior Secured Notes (the "Notes") of Tesoro in an aggregate principal amount of $375,000,000, in such form and with such terms and provisions as the Authorized Officer (as defined below) executing same shall approve be, and hereby is, approved in all respects; and FURTHER RESOLVED, that the officers and directors of the Company who are required to execute the Registration Statement be, and they hereby are, and each of them hereby is, authorized to execute and deliver a power-of-attorney appointing Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish each to be the attorneys-in-fact and agents with power of substitution and resubstitution, for each of such directors and officers and in their name, place and stead, in any and all capacities, to sign any amendment(s) to the Registration Statements, including any post-effective amendment(s), to file the same with the Securities Exchange Commission (the "Commission") and to perform all other acts necessary in connection with any matter relating to the Registration Statement and any amendment(s) or post-effective amendment(s) thereto; and April 17, 2003 ASSISTANT SECRETARY'S CERTIFICATE The undersigned, Charles S. Parrish, does hereby certify on behalf of TESORO TECHNOLOGY COMPANY, a Delaware corporation (the "Company") that he is the duly elected, qualified and acting Assistant Secretary of the Company and that: Attached hereto are true and correct copies of resolutions adopted by the Board of Directors of the Company or the Board of Directors of the Company's sole member on April 15, 2003, pertaining to (i) the authorization, issuance, execution and delivery of the Notation of Guarantee (the "Guarantee"); (ii) the authorization, execution and delivery of the Indenture relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and The Bank of New York, as Trustee (the "Indenture"); (iii) the authorization, execution and delivery of the Purchase Agreement among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Purchase Agreement"); (iv) the authorization, execution and delivery of the Security Documents, as defined in the Purchase Agreement (the "Security Documents"); (v) the authorization, execution and delivery of the Exchange and Registration Rights Agreement, dated as of the date hereof, relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Registration Rights Agreement"); and (vi) all other transactions with respect to the Notes and Guarantee contemplated by the Offering Circular; said resolutions have not been amended, rescinded or modified since their adoption and remain in full force and effect as of the date hereof; said resolutions are the only resolutions adopted by the Board of Directors, or any committee thereof, pertaining to the guarantee by the Company of the offering of the Notes; [Signature Page Follows] IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. TESORO TECHNOLOGY COMPANY By: /s/ CHARLES S. PARRISH --------------------------------------- Name: Charles S. Parrish Title: Assistant Secretary I, James C. Reed, Jr., the Executive Vice President, General Counsel and Secretary of Tesoro Technology Company, do hereby certify that Charles S. Parrish, is the duly elected and qualified Assistant Secretary of Tesoro Technology Company, and that the signature of Charles S. Parrish set forth above is his true and genuine signature. IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. By: /s/ JAMES C. REED, JR. --------------------------------------- Name: James C. Reed, Jr. Title: Executive Vice President, General Counsel and Secretary OFFERING BY TESORO PETROLEUM CORPORATION OF $375,000,000 PRINCIPAL AMOUNT OF SENIOR SECURED NOTES RESOLVED, that the Purchase Agreement (the "Purchase Agreement") to be entered into by and among TESORO TECHNOLOGY COMPANY (the "Company"), Tesoro Petroleum Corporation ("Tesoro"), the other Guarantors listed on the signature pages thereto (the "Guarantors") and Goldman, Sachs & Co. and Banc One Capital Markets, Inc., as the initial purchasers (collectively, the "Initial Purchasers") providing for the issuance, sale and delivery by Tesoro of Senior Secured Notes (the "Notes") of Tesoro in an aggregate principal amount of $375,000,000, in such form and with such terms and provisions as the Authorized Officer (as defined below) executing same shall approve be, and hereby is, approved in all respects; and FURTHER RESOLVED, that the officers and directors of the Company who are required to execute the Registration Statement be, and they hereby are, and each of them hereby is, authorized to execute and deliver a power-of-attorney appointing Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish each to be the attorneys-in-fact and agents with power of substitution and resubstitution, for each of such directors and officers and in their name, place and stead, in any and all capacities, to sign any amendment(s) to the Registration Statements, including any post-effective amendment(s), to file the same with the Securities Exchange Commission (the "Commission") and to perform all other acts necessary in connection with any matter relating to the Registration Statement and any amendment(s) or post-effective amendment(s) thereto; and April 17, 2003 ASSISTANT SECRETARY'S CERTIFICATE The undersigned, Charles S. Parrish, does hereby certify on behalf of TESORO TRADING COMPANY, a Delaware corporation (the "Company") that he is the duly elected, qualified and acting Assistant Secretary of the Company and that: Attached hereto are true and correct copies of resolutions adopted by the Board of Directors of the Company or the Board of Directors of the Company's sole member on April 15, 2003, pertaining to (i) the authorization, issuance, execution and delivery of the Notation of Guarantee (the "Guarantee"); (ii) the authorization, execution and delivery of the Indenture relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and The Bank of New York, as Trustee (the "Indenture"); (iii) the authorization, execution and delivery of the Purchase Agreement among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Purchase Agreement"); (iv) the authorization, execution and delivery of the Security Documents, as defined in the Purchase Agreement (the "Security Documents"); (v) the authorization, execution and delivery of the Exchange and Registration Rights Agreement, dated as of the date hereof, relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Registration Rights Agreement"); and (vi) all other transactions with respect to the Notes and Guarantee contemplated by the Offering Circular; said resolutions have not been amended, rescinded or modified since their adoption and remain in full force and effect as of the date hereof; said resolutions are the only resolutions adopted by the Board of Directors, or any committee thereof, pertaining to the guarantee by the Company of the offering of the Notes; [Signature Page Follows] IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. TESORO TRADING COMPANY By: /s/ CHARLES S. PARRISH ---------------------------------- Name: Charles S. Parrish Title: Assistant Secretary I, James C. Reed, Jr., the Executive Vice President, General Counsel and Secretary of Tesoro Trading Company, do hereby certify that Charles S. Parrish, is the duly elected and qualified Assistant Secretary of Tesoro Trading Company, and that the signature of Charles S. Parrish set forth above is his true and genuine signature. IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. By: /s/ JAMES C. REED, JR. ---------------------------------- Name: James C. Reed, Jr. Title: Executive Vice President, General Counsel and Secretary OFFERING BY TESORO PETROLEUM CORPORATION OF $375,000,000 PRINCIPAL AMOUNT OF SENIOR SECURED NOTES RESOLVED, that the Purchase Agreement (the "Purchase Agreement") to be entered into by and among TESORO TRADING COMPANY (the "Company"), Tesoro Petroleum Corporation ("Tesoro"), the other Guarantors listed on the signature pages thereto (the "Guarantors") and Goldman, Sachs & Co. and Banc One Capital Markets, Inc., as the initial purchasers (collectively, the "Initial Purchasers") providing for the issuance, sale and delivery by Tesoro of Senior Secured Notes (the "Notes") of Tesoro in an aggregate principal amount of $375,000,000, in such form and with such terms and provisions as the Authorized Officer (as defined below) executing same shall approve be, and hereby is, approved in all respects; and FURTHER RESOLVED, that the officers and directors of the Company who are required to execute the Registration Statement be, and they hereby are, and each of them hereby is, authorized to execute and deliver a power-of-attorney appointing Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish each to be the attorneys-in-fact and agents with power of substitution and resubstitution, for each of such directors and officers and in their name, place and stead, in any and all capacities, to sign any amendment(s) to the Registration Statements, including any post-effective amendment(s), to file the same with the Securities Exchange Commission (the "Commission") and to perform all other acts necessary in connection with any matter relating to the Registration Statement and any amendment(s) or post-effective amendment(s) thereto; and April 17, 2003 ASSISTANT SECRETARY'S CERTIFICATE The undersigned, Charles S. Parrish, does hereby certify on behalf of TESORO VOSTOK COMPANY, a Delaware corporation (the "Company") that he is the duly elected, qualified and acting Assistant Secretary of the Company and that: Attached hereto are true and correct copies of resolutions adopted by the Board of Directors of the Company or the Board of Directors of the Company's sole member on April 15, 2003, pertaining to (i) the authorization, issuance, execution and delivery of the Notation of Guarantee (the "Guarantee"); (ii) the authorization, execution and delivery of the Indenture relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and The Bank of New York, as Trustee (the "Indenture"); (iii) the authorization, execution and delivery of the Purchase Agreement among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Purchase Agreement"); (iv) the authorization, execution and delivery of the Security Documents, as defined in the Purchase Agreement (the "Security Documents"); (v) the authorization, execution and delivery of the Exchange and Registration Rights Agreement, dated as of the date hereof, relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Registration Rights Agreement"); and (vi) all other transactions with respect to the Notes and Guarantee contemplated by the Offering Circular; said resolutions have not been amended, rescinded or modified since their adoption and remain in full force and effect as of the date hereof; said resolutions are the only resolutions adopted by the Board of Directors, or any committee thereof, pertaining to the guarantee by the Company of the offering of the Notes; [Signature Page Follows] IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. TESORO VOSTOK COMPANY By: /s/ CHARLES S. PARRISH ---------------------------------- Name: Charles S. Parrish Title: Assistant Secretary I, James C. Reed, Jr., the Executive Vice President and Secretary of Tesoro Vostok Company, do hereby certify that Charles S. Parrish, is the duly elected and qualified Assistant Secretary of Tesoro Vostok Company, and that the signature of Charles S. Parrish set forth above is his true and genuine signature. IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. By: /s/ JAMES C. REED, JR. ---------------------------------- Name: James C. Reed, Jr. Title: Executive Vice President and Secretary OFFERING BY TESORO PETROLEUM CORPORATION OF $375,000,000 PRINCIPAL AMOUNT OF SENIOR SECURED NOTES RESOLVED, that the Purchase Agreement (the "Purchase Agreement") to be entered into by and among TESORO VOSTOK COMPANY (the "Company"), Tesoro Petroleum Corporation ("Tesoro"), the other Guarantors listed on the signature pages thereto (the "Guarantors") and Goldman, Sachs & Co. and Banc One Capital Markets, Inc., as the initial purchasers (collectively, the "Initial Purchasers") providing for the issuance, sale and delivery by Tesoro of Senior Secured Notes (the "Notes") of Tesoro in an aggregate principal amount of $375,000,000, in such form and with such terms and provisions as the Authorized Officer (as defined below) executing same shall approve be, and hereby is, approved in all respects; and FURTHER RESOLVED, that the officers and directors of the Company who are required to execute the Registration Statement be, and they hereby are, and each of them hereby is, authorized to execute and deliver a power-of-attorney appointing Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish each to be the attorneys-in-fact and agents with power of substitution and resubstitution, for each of such directors and officers and in their name, place and stead, in any and all capacities, to sign any amendment(s) to the Registration Statements, including any post-effective amendment(s), to file the same with the Securities Exchange Commission (the "Commission") and to perform all other acts necessary in connection with any matter relating to the Registration Statement and any amendment(s) or post-effective amendment(s) thereto; and April 17, 2003 SECRETARY'S CERTIFICATE The undersigned, Sean A. Breiner, does hereby certify on behalf of TESORO FINANCIAL SERVICES HOLDING COMPANY, a Delaware corporation (the "Company") that he is the duly elected, qualified and acting Secretary of the Company and that: Attached hereto are true and correct copies of resolutions adopted by the Board of Directors of the Company or the Board of Directors of the Company's sole member on April 15, 2003, pertaining to (i) the authorization, issuance, execution and delivery of the Notation of Guarantee (the "Guarantee"); (ii) the authorization, execution and delivery of the Indenture relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and The Bank of New York, as Trustee (the "Indenture"); (iii) the authorization, execution and delivery of the Purchase Agreement among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Purchase Agreement"); (iv) the authorization, execution and delivery of the Security Documents, as defined in the Purchase Agreement (the "Security Documents"); (v) the authorization, execution and delivery of the Exchange and Registration Rights Agreement, dated as of the date hereof, relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Registration Rights Agreement"); and (vi) all other transactions with respect to the Notes and Guarantee contemplated by the Offering Circular; said resolutions have not been amended, rescinded or modified since their adoption and remain in full force and effect as of the date hereof; said resolutions are the only resolutions adopted by the Board of Directors, or any committee thereof, pertaining to the guarantee by the Company of the offering of the Notes; [Signature Page Follows] IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. TESORO FINANCIAL SERVICES HOLDING COMPANY By: /s/ SEAN A. BREINER ---------------------------------- Name: Sean A. Breiner Title: Secretary I, Heather R. Hill, a Director of Tesoro Financial Services Holding Company, do hereby certify that Sean A. Breiner, is the duly elected and qualified Secretary of Tesoro Financial Services Holding Company, and that the signature of Sean A. Breiner set forth above is his true and genuine signature. IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. By: /s/ HEATHER R. HILL ---------------------------------- Name: Heather R. Hill Title: Director OFFERING BY TESORO PETROLEUM CORPORATION OF $375,000,000 PRINCIPAL AMOUNT OF SENIOR SECURED NOTES RESOLVED, that the Purchase Agreement (the "Purchase Agreement") to be entered into by and among TESORO FINANCIAL SERVICES HOLDING COMPANY (the "Company"), Tesoro Petroleum Corporation ("Tesoro"), the other Guarantors listed on the signature pages thereto (the "Guarantors") and Goldman, Sachs & Co. and Banc One Capital Markets, Inc., as the initial purchasers (collectively, the "Initial Purchasers") providing for the issuance, sale and delivery by Tesoro of Senior Secured Notes (the "Notes") of Tesoro in an aggregate principal amount of $375,000,000, in such form and with such terms and provisions as the Attorney-in Fact (as defined below) shall approve be, and hereby is, approved in all respects; and FURTHER RESOLVED, that the officers and directors of the Company who are required to execute the Registration Statement be, and they hereby are, and each of them hereby is, authorized to execute and deliver a power-of-attorney appointing Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish each to be the attorneys-in-fact and agents with power of substitution and resubstitution, for each of such directors and officers and in their name, place and stead, in any and all capacities, to sign any amendment(s) to the Registration Statements, including any post-effective amendment(s), to file the same with the Securities Exchange Commission (the "Commission") and to perform all other acts necessary in connection with any matter relating to the Registration Statement and any amendment(s) or post-effective amendment(s) thereto; and April 17, 2003 ASSISTANT SECRETARY'S CERTIFICATE The undersigned, Charles S. Parrish, does hereby certify on behalf of TESORO MARINE SERVICES HOLDING COMPANY, a Delaware corporation (the "Company") that he is the duly elected, qualified and acting Assistant Secretary of the Company and that: Attached hereto are true and correct copies of resolutions adopted by the Board of Directors of the Company or the Board of Directors of the Company's sole member on April 15, 2003, pertaining to (i) the authorization, issuance, execution and delivery of the Notation of Guarantee (the "Guarantee"); (ii) the authorization, execution and delivery of the Indenture relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and The Bank of New York, as Trustee (the "Indenture"); (iii) the authorization, execution and delivery of the Purchase Agreement among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Purchase Agreement"); (iv) the authorization, execution and delivery of the Security Documents, as defined in the Purchase Agreement (the "Security Documents"); (v) the authorization, execution and delivery of the Exchange and Registration Rights Agreement, dated as of the date hereof, relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Registration Rights Agreement"); and (vi) all other transactions with respect to the Notes and Guarantee contemplated by the Offering Circular; said resolutions have not been amended, rescinded or modified since their adoption and remain in full force and effect as of the date hereof; said resolutions are the only resolutions adopted by the Board of Directors, or any committee thereof, pertaining to the guarantee by the Company of the offering of the Notes; [Signature Page Follows] IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. TESORO MARINE SERVICES HOLDING COMPANY By: /s/ CHARLES S. PARRISH ---------------------------------- Name: Charles S. Parrish Title: Assistant Secretary I, James C. Reed, Jr., the Executive Vice President, General Counsel and Secretary of Tesoro Marine Services Holding Company, do hereby certify that Charles S. Parrish, is the duly elected and qualified Assistant Secretary of Tesoro Marine Services Holding Company, and that the signature of Charles S. Parrish set forth above is his true and genuine signature. IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. By: /s/ JAMES C. REED, JR. ---------------------------------- Name: James C. Reed, Jr. Title: Executive Vice President, General Counsel and Secretary OFFERING BY TESORO PETROLEUM CORPORATION OF $375,000,000 PRINCIPAL AMOUNT OF SENIOR SECURED NOTES RESOLVED, that the Purchase Agreement (the "Purchase Agreement") to be entered into by and among TESORO MARINE SERVICES HOLDING COMPANY (the "Company"), Tesoro Petroleum Corporation ("Tesoro"), the other Guarantors listed on the signature pages thereto (the "Guarantors") and Goldman, Sachs & Co. and Banc One Capital Markets, Inc., as the initial purchasers (collectively, the "Initial Purchasers") providing for the issuance, sale and delivery by Tesoro of Senior Secured Notes (the "Notes") of Tesoro in an aggregate principal amount of $375,000,000, in such form and with such terms and provisions as the Authorized Officer (as defined below) executing same shall approve be, and hereby is, approved in all respects; and FURTHER RESOLVED, that the Authorized Officers who are required to execute the Registration Statement be, and they hereby are, and each of them hereby is, authorized to execute and deliver a power-of-attorney appointing Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish each to be the attorneys-in-fact and agents with power of substitution and resubstitution, for each of such directors and officers and in their name, place and stead, in any and all capacities, to sign any amendment(s) to the Registration Statements, including any post-effective amendment(s), to file the same with the Securities Exchange Commission (the "Commission") and to perform all other acts necessary in connection with any matter relating to the Registration Statement and any amendment(s) or post-effective amendment(s) thereto; and April 17, 2003 ASSISTANT SECRETARY'S CERTIFICATE The undersigned, Charles S. Parrish, does hereby certify on behalf of TESORO WASATCH, LLC, a Delaware corporation (the "Company") that he is the duly elected, qualified and acting Assistant Secretary of the Company and that: Attached hereto are true and correct copies of resolutions adopted by the Board of Directors of the Company or the Board of Directors of the Company's sole member on April 15, 2003, pertaining to (i) the authorization, issuance, execution and delivery of the Notation of Guarantee (the "Guarantee"); (ii) the authorization, execution and delivery of the Indenture relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and The Bank of New York, as Trustee (the "Indenture"); (iii) the authorization, execution and delivery of the Purchase Agreement among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Purchase Agreement"); (iv) the authorization, execution and delivery of the Security Documents, as defined in the Purchase Agreement (the "Security Documents"); (v) the authorization, execution and delivery of the Exchange and Registration Rights Agreement, dated as of the date hereof, relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Registration Rights Agreement"); and (vi) all other transactions with respect to the Notes and Guarantee contemplated by the Offering Circular; said resolutions have not been amended, rescinded or modified since their adoption and remain in full force and effect as of the date hereof; said resolutions are the only resolutions adopted by the Board of Directors, or any committee thereof, pertaining to the guarantee by the Company of the offering of the Notes; [Signature Page Follows] IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. TESORO WASATCH, LLC By: /s/ CHARLES S. PARRISH ---------------------------------- Name: Charles S. Parrish Title: Assistant Secretary I, James C. Reed, Jr., the Executive Vice President, General Counsel and Secretary of Tesoro Wasatch, LLC, do hereby certify that Charles S. Parrish, is the duly elected and qualified Assistant Secretary of Tesoro Wasatch, LLC, and that the signature of Charles S. Parrish set forth above is his true and genuine signature. IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. By: /s/ JAMES C. REED, JR. ---------------------------------- Name: James C. Reed, Jr. Title: Executive Vice President, General Counsel and Secretary OFFERING BY TESORO PETROLEUM CORPORATION OF $375,000,000 PRINCIPAL AMOUNT OF SENIOR SECURED NOTES RESOLVED, that the Purchase Agreement (the "Purchase Agreement") to be entered into by and among TESORO WASATCH, LLC (the "Company"), Tesoro Petroleum Corporation ("Tesoro"), the other Guarantors listed on the signature pages thereto (the "Guarantors") and Goldman, Sachs & Co. and Banc One Capital Markets, Inc., as the initial purchasers (collectively, the "Initial Purchasers") providing for the issuance, sale and delivery by Tesoro of Senior Secured Notes (the "Notes") of Tesoro in an aggregate principal amount of $375,000,000, in such form and with such terms and provisions as the Authorized Officer (as defined below) executing same shall approve be, and hereby is, approved in all respects; and FURTHER RESOLVED, that the Authorized Officers who are required to execute the Registration Statement be, and they hereby are, and each of them hereby is, authorized to execute and deliver a power-of-attorney appointing Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish each to be the attorneys-in-fact and agents with power of substitution and resubstitution, for each of such directors and officers and in their name, place and stead, in any and all capacities, to sign any amendment(s) to the Registration Statements, including any post-effective amendment(s), to file the same with the Securities Exchange Commission (the "Commission") and to perform all other acts necessary in connection with any matter relating to the Registration Statement and any amendment(s) or post-effective amendment(s) thereto; and April 17, 2003 SECRETARY'S CERTIFICATE The undersigned, Heather R. Hill, does hereby certify on behalf of VICTORY FINANCE COMPANY, a Delaware corporation (the "Company") that she is the duly elected, qualified and acting Secretary of the Company and that: Attached hereto are true and correct copies of resolutions adopted by the Board of Directors of the Company or the Board of Directors of the Company's sole member on April 15, 2003, pertaining to (i) the authorization, issuance, execution and delivery of the Notation of Guarantee (the "Guarantee"); (ii) the authorization, execution and delivery of the Indenture relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and The Bank of New York, as Trustee (the "Indenture"); (iii) the authorization, execution and delivery of the Purchase Agreement among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Purchase Agreement"); (iv) the authorization, execution and delivery of the Security Documents, as defined in the Purchase Agreement (the "Security Documents"); (v) the authorization, execution and delivery of the Exchange and Registration Rights Agreement, dated as of the date hereof, relating to the Notes and Guarantee, among Tesoro Petroleum Corporation, the Guarantors and the Purchasers (the "Registration Rights Agreement"); and (vi) all other transactions with respect to the Notes and Guarantee contemplated by the Offering Circular; said resolutions have not been amended, rescinded or modified since their adoption and remain in full force and effect as of the date hereof; said resolutions are the only resolutions adopted by the Board of Directors, or any committee thereof, pertaining to the guarantee by the Company of the offering of the Notes; [Signature Page Follows] IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. VICTORY FINANCE COMPANY By: /s/ HEATHER R. HILL ---------------------------------- Name: Heather R. Hill Title: Secretary I, Charles L. Magee, President of Victory Finance Company, do hereby certify that Heather R. Hill, is the duly elected and qualified Secretary of Victory Finance Company. IN WITNESS WHEREOF, I have hereunto signed my name as of the 17th day of April, 2003. By: /s/ CHARLES L. MAGEE ---------------------------------- Name: Charles L. Magee Title: President OFFERING BY TESORO PETROLEUM CORPORATION OF $375,000,000 PRINCIPAL AMOUNT OF SENIOR SECURED NOTES RESOLVED, that the Purchase Agreement (the "Purchase Agreement") to be entered into by and among VICTORY FINANCE COMPANY (the "Company"), Tesoro Petroleum Corporation ("Tesoro"), the other Guarantors listed on the signature pages thereto (the "Guarantors") and Goldman, Sachs & Co. and Banc One Capital Markets, Inc., as the initial purchasers (collectively, the "Initial Purchasers") providing for the issuance, sale and delivery by Tesoro of Senior Secured Notes (the "Notes") of Tesoro in an aggregate principal amount of $375,000,000, in such form and with such terms and provisions as the Attorney-in Fact (as defined below) shall approve be, and hereby is, approved in all respects; and FURTHER RESOLVED, that the officers and directors of the Company who are required to execute the Registration Statement be, and they hereby are, and each of them hereby is, authorized to execute and deliver a power-of-attorney appointing Bruce A. Smith, James C. Reed, Jr. and Charles S. Parrish each to be the attorneys-in-fact and agents with power of substitution and resubstitution, for each of such directors and officers and in their name, place and stead, in any and all capacities, to sign any amendment(s) to the Registration Statements, including any post-effective amendment(s), to file the same with the Securities Exchange Commission (the "Commission") and to perform all other acts necessary in connection with any matter relating to the Registration Statement and any amendment(s) or post-effective amendment(s) thereto; and -----END PRIVACY-ENHANCED MESSAGE-----