UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) July 1, 2014

 

 

TESORO CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   1-3473
  95-0862768

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

19100 Ridgewood Pkwy

San Antonio, Texas

  78259-1828
(Address of principal executive offices)   (Zip Code)

(210) 626-6000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 1.01 Entry into a Material Definitive Agreement.

On June 23, 2014, Tesoro Corporation (“Tesoro” or the “Company”) entered into a Contribution, Conveyance and Assumption Agreement (the “Contribution Agreement”) with Tesoro Refining & Marketing Company LLC (“TRMC”), Tesoro Alaska Company LLC (“TAC”), Tesoro Logistics GP, LLC (the “General Partner”), Tesoro Logistics LP (the “Partnership”), Tesoro Logistics Operations LLC (the “Operating Company”) and Tesoro Logistics Pipelines LLC (“TLP”). Pursuant to the Contribution Agreement, Tesoro, TRMC and TAC agreed to contribute, through the General Partner and the Partnership to the Operating Company or TLP, as applicable, the assets described below (the “Assets”):

 

    TAC’s two-lane truck terminal, and six storage tanks with approximately 213,000 barrels of storage capacity, located in Nikiski, Alaska (collectively, the “Nikiski Assets”);

 

    all of Tesoro’s membership interests (the “TAPC Equity”) in Tesoro Alaska Pipeline Company LLC, a wholly-owned subsidiary of Tesoro, which owns the 69-mile common carrier refined products pipeline running outbound from TAC’s Nikiski Terminal;

 

    TRMC’s two-lane, clean products truck terminal, two-lane light ends truck terminal, a light ends rail loading and unloading facility, and four crude and black oil storage tanks with a shell capacity of approximately 1,500,000 barrels, all located at TRMC’s refinery in Anacortes, Washington (collectively, the “Anacortes Assets”);

 

    TRMC’s three-lane, clean products truck terminal, two-lane, light ends truck terminal and a light ends rail loading and unloading facility, all located at TRMC’s refinery in Martinez, California (collectively, the “Martinez Assets”); and

 

    certain related assets used in connection with the foregoing assets.

The consideration for the Assets will total approximately $270 million. The contribution pursuant to the Contribution Agreement will be made in two stages.

In the first stage that was completed on July 1, 2014, TRMC and TAC contributed the Nikiski Assets, the Anacortes Assets and the Martinez Assets to the General Partner in exchange for additional membership interests in the General Partner. The General Partner contributed such assets to the Partnership in consideration of the receipt by the General Partner of $214.4 million from the Partnership in cash, partly financed with borrowings under the Partnership’s revolving credit facility, and the issuance of equity securities of the Partnership with a combined fair value of $27 million. The equity was comprised of a sufficient number of general partner units to maintain the General Partner’s 2% general partner interest in the Partnership and the remainder in common units. The Partnership then contributed such assets to the Operating Company.

In the second stage, upon receiving the required regulatory approval from the Regulatory Commission of Alaska to contribute the TAPC Equity, Tesoro will contribute the TAPC Equity to the General Partner in exchange for additional membership interests in the General Partner. The General Partner will contribute such assets to the Partnership in consideration of the receipt by the General Partner of $28.6 million in cash, which may be partly financed with borrowings under the Partnership’s revolving credit facility. The Partnership will then contribute the TAPC Equity to the Operating Company and the Operating Company will contribute the TAPC Equity to TLP, each as a capital contribution.

On July 1, 2014, in connection with the consummation of the transactions contemplated by the Contribution Agreement, TAC, TRMC, the General Partner, the Partnership and the Operating Company, as applicable, entered into the certain commercial and real estate agreements, and for the agreements to which the General Partner and the Partnership are parties (other than the Omnibus Agreement, as defined and discussed below), the General Partner and the Partnership are parties to such agreements solely to facilitate the contribution of commercial rights to the Operating Company.

The foregoing description is not complete and is qualified in its entirety by reference to the Contribution Agreement, which is incorporated by reference as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.

Terminalling Services Agreement—Nikiski

The Operating Company entered into a ten-year master terminalling services agreement (the “Nikiski TSA”) with TAC, the General Partner and the Partnership for terminalling services at the Nikiski Assets. TAC has the option to extend the term for up to two renewal terms of five years each. Pursuant to the Nikiski TSA, the Operating Company will provide TAC with certain terminalling and ancillary services in return for TAC’s commitment to throughput or store, as the case may be, a certain amount of petroleum products, ethanol and biofuels, crude oil, Transmix, intermediate products and fuel oil at the Nikiski Assets. The monthly fees and cost reimbursements payable to the Operating Company for such services will be set forth on service orders for the terminal executed by both the Operating Company and TAC. If TAC throughputs aggregate volumes less than its minimum throughput commitment for any month, TAC shall pay the Operating Company a shortfall payment. All fees under the Nikiski TSA that are to be set forth on service orders will be indexed for inflation.

 

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During the term of the Nikiski TSA, TAC has a right of first refusal on any additional throughput that the Operating Company offers to third parties. Any time after the termination of the Nikiski TSA, and provided that the termination was not due to TAC’s default, TAC can require the Operating Company to enter into a new terminalling services agreement with TAC, provided the term of such new agreement shall not extend beyond June 30, 2034. For up to two years after the termination of the Nikiski TSA, and provided that the termination was not due to TAC’s default, TAC may exercise a right of first refusal on any terminalling services agreement the Operating Company offers to a third party.

The foregoing description is not complete and is qualified in its entirety by reference to the Nikiski TSA, which is filed as Exhibit 10.2 to this Current Report on Form 8-K and incorporated herein by reference.

Terminalling Services Agreement—Anacortes

The Operating Company entered into a ten-year master terminalling services agreement (the “Anacortes TSA”) with TRMC, the General Partner and the Partnership for terminalling services at the Anacortes Assets. TRMC has the option to extend the term for up to two renewal terms of five years each. Pursuant to the Anacortes TSA, the Operating Company will provide TRMC with certain terminalling and ancillary services in return for TRMC’s commitment to throughput or store, as the case may be, a certain amount of propanes, butanes, pentanes, gasoline, diesel, biodiesel, ethanol and jet fuels at the Anacortes Assets. The monthly fees and cost reimbursements payable to the Operating Company for such services will be set forth on service orders for the terminal executed by both the Operating Company and TRMC. If TRMC throughputs aggregate volumes less than its minimum throughput commitment for any month, TRMC shall pay the Operating Company a shortfall payment. All fees under the Anacortes TSA that are to be set forth on service orders will be indexed for inflation.

During the term of the Anacortes TSA, TRMC has a right of first refusal on any additional throughput that the Operating Company offers to third parties. Any time after the termination of the Anacortes TSA, and provided that the termination was not due to TRMC’s default, TRMC can require the Operating Company to enter into a new terminalling services agreement with TRMC, provided the term of such new agreement shall not extend beyond June 30, 2034. For up to two years after the termination of the Anacortes TSA, and provided that the termination was not due to TRMC’s default, TRMC may exercise a right of first refusal on any terminalling services agreement the Operating Company offers to a third party.

The foregoing description is not complete and is qualified in its entirety by reference to the Anacortes TSA, which is filed as Exhibit 10.3 to this Current Report on Form 8-K and incorporated herein by reference.

Amendment of Anacortes Track Use and Throughput Agreement

In connection with the entry into the Anacortes TSA, the Operating Company entered into an amendment (the “ATUTA Amendment”) to the Anacortes Track Use and Throughput Agreement dated November 15, 2012, with TRMC to clarify that such agreement applies only to the throughput of crude and other black oils through the applicable assets.

The foregoing description is not complete and is qualified in its entirety by reference to the ATUTA Amendment, which is filed as Exhibit 10.4 to this Current Report on Form 8-K and incorporated herein by reference.

Terminalling Services Agreement—Martinez

The Operating Company entered into a ten-year master terminalling services agreement (the “Martinez TSA”) with TRMC, the General Partner and the Partnership for terminalling services at the Martinez Assets. TRMC has the option to extend the term for up to two renewal terms of five years each. Pursuant to the Martinez TSA, the Operating Company will provide TRMC with certain terminalling and ancillary services in return for TRMC’s commitment to throughput or store, as the case may be, a certain amount of propanes, butanes, pentanes, gasoline, diesel, biodiesel, ethanol and jet fuels at the Martinez Assets. The monthly fees and cost reimbursements payable to the Operating Company for such services will be set forth on service orders for the terminal executed by both the Operating Company and TRMC. If TRMC throughputs aggregate volumes less than its minimum throughput commitment for any month, TRMC shall pay the Operating Company a shortfall payment. Under the Martinez TSA, TRMC shall pay a monthly storage fee throughout the term of the Martinez TSA to reserve, on a firm basis, all of the existing aggregate shell capacity of certain tanks as specified on a terminal service order. All fees under the Martinez TSA that are to be set forth on service orders will be indexed for inflation.

 

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During the term of the Martinez TSA, TRMC has a right of first refusal on any additional throughput that the Operating Company offers to third parties. Any time after the termination of the Martinez TSA, and provided that the termination was not due to TRMC’s default, TRMC can require the Operating Company to enter into a new terminalling services agreement with TRMC, provided the term of such new agreement shall not extend beyond June 30, 2034. For up to two years after the termination of the Anacortes TSA, and provided that the termination was not due to TRMC’s default, TRMC may exercise a right of first refusal on any terminalling services agreement the Operating Company offers to a third party.

The foregoing description is not complete and is qualified in its entirety by reference to the Martinez TSA, which is filed as Exhibit 10.5 to this Current Report on Form 8-K and incorporated herein by reference.

Storage Services Agreement—Anacortes

The Operating Company entered into the Storage Services Agreement – Anacortes, with TRMC, the General Partner and the Partnership (the “SSA”) to govern the provision of storage services by the Operating Company to TRMC with respect to crude and black oil storage tanks being contributed as part of the Anacortes Assets. The initial term of the SSA is for ten years. TRMC has the option to extend the term for up to two renewal terms of five years each. Under the SSA, the Operating Company will provide storage and handling services for crude and black oils owned by TRMC and stored in one or more of the Operating Company’s tanks. TRMC shall pay the fees specified in an applicable terminal service order to be executed by the Operating Company and TRMC related to the dedication of such tanks and any ancillary services. All fees under the SSA that are to be set forth on terminal service orders will be indexed for inflation. For up to two years after the termination of the SSA, and provided the termination was not due to TRMC’s default, TRMC may exercise a right of first refusal on any new storage agreement the Operating Company offers to a third party.

The foregoing description is not complete and is qualified in its entirety by reference to the SSA, which is filed as Exhibit 10.6 to this Current Report on Form 8-K and incorporated herein by reference.

Third Amended and Restated Omnibus Agreement

Tesoro, TRMC, TAC, Tesoro Companies, Inc. (“TCI”), the General Partner, and the Partnership entered into a Third Amended and Restated Omnibus Agreement (the “Omnibus Agreement”) to amend and restate the Second Amended and Restated Omnibus Agreement dated November 15, 2012, by and among the same parties. The Omnibus Agreement clarifies the reimbursements to be made by the Partnership to Tesoro, and from Tesoro to the Partnership. The Omnibus Agreement incorporates the Assets to its provisions and increases the annual administrative fee to be paid by the Partnership to Tesoro from $5.5 million to $5.7 million. It further adds specific operational indemnities related to the Assets.

 

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So long as Tesoro controls the General Partner, the Omnibus Agreement will remain in full force and effect unless terminated by the parties. If Tesoro ceases to control the General Partner, either Tesoro or the General Partner may terminate the Omnibus Agreement, provided that the indemnification obligations of the parties made under the Omnibus Agreement will remain in full force and effect in accordance with their terms.

The foregoing description is not complete and is qualified in its entirety by reference to the Omnibus Agreement, which is filed as Exhibit 10.7 to this Current Report on Form 8-K and incorporated herein by reference.

Secondment and Logistics Services Agreement

TRMC, TCI, TAC, the General Partner, the Partnership and its direct and indirect subsidiaries entered into a Secondment and Logistics Services Agreement (the “Secondment Agreement”) to govern the provision of seconded employees to or from TRMC, TCI, TAC, the Partnership, and its subsidiaries, as applicable. The Secondment Agreement also governs the use of certain facilities of the parties by the various entities. The services to be provided by such seconded employees, along with the fees for such services, will be provided on the service schedules to be attached to the Secondment Agreement. Specialized services and the use of various facilities, along with the fees for such services, will be provided for in service orders to be executed by parties requesting and receiving the service. All fees to be paid pursuant to the Secondment Agreement are indexed for inflation.

The foregoing description is not complete and is qualified in its entirety by reference to the Secondment Agreement, which is filed as Exhibit 10.8 to this Current Report on Form 8-K and incorporated herein by reference.

Martinez Rescission Rights

The Contribution Agreement provides that the Operating Company has the option, but not the obligation, to rescind the contribution contemplated with respect to the Martinez Assets if TRMC does not receive approval to subdivide the real property under the Martinez assets by the fifth anniversary of the closing date, or if TRMC is required to agree to commercially unreasonable conditions at any time as a condition of receiving such approval.

If the contribution of the Martinez Assets is rescinded, the cash consideration previously paid for such assets will be reimbursed, (i) less the share of the amount that is attributable to the term before the rescission, amortized on a ten year straight-line basis calculated from the date of the closing of the Contribution Agreement through the date of the occurrence of the rescission and (ii) less any amounts received by the Operating Company from any person or entity as a result of casualty or condemnation of the applicable asset. In the event of a rescission, any commercial agreements entered into between TRMC and the Operating Company with respect to Martinez Assets shall be terminated.

Relationships

Each of the Partnership, the General Partner, TRMC, TAC, TCI and the Operating Company is a direct or indirect subsidiary of Tesoro. As a result, certain individuals, including officers and directors of Tesoro and the General Partner, serve as officers and/or directors of more than one of such other entities. After the acquisition, the General Partner, as the general partner of the Partnership, holds 1,119,138 general partner units of the Partnership, which represents a 2% general partner interest, and 3,921,777 common units of the Partnership, which represents slightly more than a 7% limited partner interest in the Partnership. Tesoro, together with TRMC, TAC and the General Partner, holds 19,481,557 common units of the Partnership, which represent an approximate 35% limited partner interest, in addition to the 2% general partner interest in the Partnership discussed above.

Item 2.01 Completion of Acquisition or Disposition of Assets.

Contribution, Conveyance and Assumption Agreement

The parties to the Contribution Agreement consummated the first stage of the transactions contemplated thereby on July 1, 2014. Pursuant to the Contribution Agreement:

 

    the General Partner acquired the Nikiski Assets, the Anacortes Assets and the Martinez Assets from TRMC and TAC in exchange for additional membership interests in the General Partner;

 

    the Partnership acquired the Nikiski Assets, the Anacortes Assets and the Martinez Assets from the General Partner in exchange for $241.4 million, comprised of $214.4 million in cash partly financed with borrowings under the Partnership’s revolving credit facility and the issuance of equity with a combined fair value of $27.0 million; the equity is comprised of 8,856 general partner units to restore and maintain the General Partner’s 2% general partner interest in the Partnership and 370,843 common units; and

 

    the Operating Company acquired the Nikiski Assets, the Anacortes Assets and the Martinez Assets from the Partnership as a contribution to capital.

The foregoing description is not complete and is qualified in its entirety by reference to the Contribution Agreement, which is incorporated by reference as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.

Item 7.01 Regulation FD Disclosure

On July 1, 2014, the Company issued a press release announcing the acquisition of the Nikiski Assets, the Anacortes Assets and the Martinez Assets by the Partnership. A copy of the press release is filed as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.

 

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The information above is being furnished, not filed, pursuant to Item 7.01 of Form 8-K. Accordingly, the information in Item 7.01 of this Current Report, including Exhibit 99.1, will not be subject to liability under Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and will not be incorporated by reference into any registration statement or other document filed by the Company under the Securities Act or the Exchange Act, unless specifically identified therein as being incorporated by reference.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

 

10.1    Contribution, Conveyance and Assumption Agreement, dated as of June 23, 2014, among Tesoro Corporation, Tesoro Refining & Marketing Company LLC, Tesoro Alaska Company LLC, Tesoro Logistics GP, LLC, Tesoro Logistics LP, Tesoro Logistics Operations LLC and Tesoro Logistics Pipelines LLC (incorporated by reference herein from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 23, 2014, File No. 1-3473).
10.2    Terminalling Services Agreement – Nikiski, dated as of July 1, 2014, among Tesoro Alaska Company LLC, Tesoro Logistics GP, LLC, Tesoro Logistics LP, and Tesoro Logistics Operations LLC.
10.3    Terminalling Services Agreement – Anacortes, dated as of July 1, 2014, among Tesoro Refining & Marketing Company LLC, Tesoro Logistics GP, LLC, Tesoro Logistics LP and Tesoro Logistics Operations LLC.
10.4    Amendment No. 1 to Anacortes Track Use and Throughput Agreement, dated as of July 1, 2014, between Tesoro Refining & Marketing Company LLC and Tesoro Logistics Operations LLC.
10.5    Terminalling Services Agreement – Martinez, dated as of July 1, 2014, among Tesoro Refining & Marketing Company LLC, Tesoro Logistics GP, LLC, Tesoro Logistics LP, and Tesoro Logistics Operations LLC.
10.6    Storage Services Agreement—Anacortes, dated as of July 1, 2014, among Tesoro Refining & Marketing Company LLC, Tesoro Logistics GP, LLC, Tesoro Logistics LP and Tesoro Logistics Operations LLC.
10.7    Third Amended and Restated Omnibus Agreement, dated as of July 1, 2014, among Tesoro Corporation, Tesoro Refining & Marketing Company LLC, Tesoro Companies, Inc., Tesoro Alaska Company LLC, Tesoro Logistics LP and Tesoro Logistics GP, LLC.
10.8    Secondment and Logistics Services Agreement, dated as of July 1, 2014, among Tesoro Refining & Marketing Company LLC, Tesoro Companies, Inc., Tesoro Alaska Company LLC, Tesoro Logistics GP, LLC, Tesoro Logistics Operations, LLC, Tesoro Logistics Pipelines LLC, Tesoro High Plains Pipeline Company LLC, Tesoro Logistics Northwest Pipeline LLC and Tesoro Alaska Pipeline Company LLC.
99.1    Press release of the Company issued on July 1, 2014.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: July 1, 2014

 

TESORO CORPORATION
By:  

/s/ G. SCOTT SPENDLOVE

  G. Scott Spendlove
  Senior Vice President and Chief Financial Officer

 

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Index to Exhibits

 

Exhibit
Number
   Description of the Exhibit
10.1    Contribution, Conveyance and Assumption Agreement, dated as of June 23, 2014, among Tesoro Corporation, Tesoro Refining & Marketing Company LLC, Tesoro Alaska Company LLC, Tesoro Logistics GP, LLC, Tesoro Logistics LP, Tesoro Logistics Operations LLC and Tesoro Logistics Pipelines LLC (incorporated by reference herein from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 23, 2014, File No. 1-3473).
10.2    Terminalling Services Agreement – Nikiski, dated as of July 1, 2014, among Tesoro Alaska Company LLC, Tesoro Logistics GP, LLC, Tesoro Logistics LP, and Tesoro Logistics Operations LLC.
10.3    Terminalling Services Agreement – Anacortes, dated as of July 1, 2014, among Tesoro Refining & Marketing Company LLC, Tesoro Logistics GP, LLC, Tesoro Logistics LP and Tesoro Logistics Operations LLC.
10.4    Amendment No. 1 to Anacortes Track Use and Throughput Agreement, dated as of July 1, 2014, between Tesoro Refining & Marketing Company LLC and Tesoro Logistics Operations LLC.
10.5    Terminalling Services Agreement – Martinez, dated as of July 1, 2014, among Tesoro Refining & Marketing Company LLC, Tesoro Logistics GP, LLC, Tesoro Logistics LP, and Tesoro Logistics Operations LLC.
10.6    Storage Services Agreement—Anacortes, dated as of July 1, 2014, among Tesoro Refining & Marketing Company LLC, Tesoro Logistics GP, LLC, Tesoro Logistics LP and Tesoro Logistics Operations LLC.
10.7    Third Amended and Restated Omnibus Agreement, dated as of July 1, 2014, among Tesoro Corporation, Tesoro Refining & Marketing Company LLC, Tesoro Companies, Inc., Tesoro Alaska Company LLC, Tesoro Logistics LP and Tesoro Logistics GP, LLC.
10.8    Secondment and Logistics Services Agreement, dated as of July 1, 2014, among Tesoro Refining & Marketing Company LLC, Tesoro Companies, Inc., Tesoro Alaska Company LLC, Tesoro Logistics GP, LLC, Tesoro Logistics Operations, LLC, Tesoro Logistics Pipelines LLC, Tesoro High Plains Pipeline Company LLC, Tesoro Logistics Northwest Pipeline LLC and Tesoro Alaska Pipeline Company LLC.
99.1    Press release of the Company issued on July 1, 2014.

 

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Exhibit 10.2

TERMINALLING SERVICES AGREEMENT – NIKISKI

This Terminalling Services Agreement – Nikiski (the “ Agreement ”) is dated as of July 1, 2014, by and between Tesoro Alaska Company LLC, a Delaware limited liability company (“ Customer ”), and Tesoro Logistics Operations LLC, a Delaware limited liability company (“ TLO ”), and for purposes of Section 33(a) only, Tesoro Logistics GP, LLC, a Delaware limited liability company (“ General Partner ”), and Tesoro Logistics LP, a Delaware limited partnership (“ Partnership ”).

RECITALS

WHEREAS , on the date hereof, Tesoro Corporation, a Delaware corporation (“ Tesoro ”), Customer and Tesoro Refining & Marketing Company LLC, a Delaware limited liability company (“ TRMC ”), will contribute certain assets to the General Partner, the General Partner will contribute those assets to the Partnership, and the Partnership will contribute those assets to TLO, all on the terms and conditions set forth in that certain Contribution, Conveyance and Assumption Agreement dated June 23, 2014 by and among Tesoro, Customer, TRMC, the Partnership, the General Partner, TLO (the “ Contribution Agreement ”);

WHEREAS , by virtue of its indirect ownership interests in the Partnership, Customer has an economic interest in the financial and commercial success of the Partnership and its operating subsidiary, TLO; and

WHEREAS , Customer and TLO desire to enter into this Agreement to memorialize the terms of their commercial relationship related to the subject matter hereof.

NOW, THEREFORE , in consideration of the covenants and obligations contained herein, the Parties (as defined below) to this Agreement hereby agree as follows:

1. DEFINITIONS

Capitalized terms used throughout this Agreement shall have the meanings set forth below, unless otherwise specifically defined herein.

Additized Gasoline ” has the meaning set forth in Section 7(b) .

Agreement ” has the meaning set forth in the Preamble.

Ancillary Services ” has the meaning set forth in Section 3(c) .

API ” means American Petroleum Institute.

Applicable Law ” means any applicable statute, law, regulation, ordinance, rule, determination, judgment, rule of law, order, decree, permit, approval, concession, grant, franchise, license, requirement, or any similar form of decision of, or any provision or condition of any permit, license or other operating authorization issued by any Governmental Authority having or asserting jurisdiction over the matter or matters in question, whether now or hereafter in effect.


ASTM ” means ASTM International, formerly known as the American Society for Testing and Materials.

Barrel ” means a volume equal to 42 U.S. gallons of 231 cubic inches each, at 60 degrees Fahrenheit under one atmosphere of pressure.

Base Gasoline ” has the meaning set forth in Section 7(b) .

Biodiesel ” has the meaning set forth in Section 8(a) .

Biodiesel Facilities ” has the meaning set forth in Section 8(a) .

Blending Instructions ” has the meaning set forth in Section 9(c) .

bpd ” means Barrels per day.

Business Day ” means a day, other than a Saturday or Sunday, on which banks in New York, New York are open for the general transaction of business.

Capacity Resolution ” has the meaning set forth in Section 28(c) .

Carrier ” means a third-party agent or contractor hired by Customer, who is in the business of transporting Products via tank trucks.

Commencement Date ” has the meaning set forth in Section 2 .

Confidential Information ” means all confidential, proprietary or non-public information of a Party, whether set forth in writing, orally or in any other manner, including all non-public information and material of such Party (and of companies with which such Party has entered into confidentiality agreements) that another Party obtains knowledge of or access to, including non-public information regarding products, processes, business strategies and plans, customer lists, research and development programs, computer programs, hardware configuration information, technical drawings, algorithms, know-how, formulas, processes, ideas, inventions (whether patentable or not), trade secrets, schematics and other technical, business, marketing and product development plans, revenues, expenses, earnings projections, forecasts, strategies, and other non-public business, technological, and financial information.

Contribution Agreement ” has the meaning set forth in the Recitals.

Customer ” has the meaning set forth in the Preamble.

Customer Group ” has the meaning set forth in Section 23(a) .

Customer Termination Notice ” has the meaning set forth in Section 27(b) .

DCA ” has the meaning set forth in Section 7(b) .

Dedicated Tanks ” has the meaning set forth in Section 5(a) .

 

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Diesel Additive Facilities ” has the meaning set forth in Section 7(c) .

EPA ” has the meaning set forth in Section 7(b) .

Ethanol Services ” has the meaning set forth in Section 9(a) .

Excess Amount ” has the meaning set forth in Section 4(b) .

Extension Period ” has the meaning set forth in Section 2 .

Force Majeure ” means events or circumstances, whether foreseeable or not, not reasonably within the control of TLO and which, by the exercise of due diligence, TLO is unable to prevent or overcome, that prevent performance of TLO’s obligations, including: acts of God, strikes, lockouts or other industrial disturbances, wars, riots, fires, floods, storms, orders of Governmental Authorities, explosions, terrorist acts, breakage, accident to machinery, equipment, storage tanks or lines of pipe, and inability to obtain or unavoidable delays in obtaining material or equipment and similar events.

Force Majeure Notice ” has the meaning set forth in Section 27(a) .

Force Majeure Period ” has the meaning set forth in Section 27(a) .

General Partner ” has the meaning set forth in the Preamble.

Governmental Authority ” means any federal, state, local or foreign government or any provincial, departmental or other political subdivision thereof, or any entity, body or authority exercising executive, legislative, judicial, regulatory, administrative or other governmental functions or any court, department, commission, board, bureau, agency, instrumentality or administrative body of any of the foregoing.

Initial Term ” has the meaning set forth in Section 2 .

LAC ” has the meaning set forth in Section 7(b) .

Minimum Throughput Commitment ” means an aggregate volume of 91,250 Barrels of Products per Month; provided however, that the Minimum Throughput Commitment during the Month in which the Commencement Date occurs shall be prorated in accordance with the ratio of the number of days including and following the Commencement Date in such Month to the total number of days in such Month.

Month ” means a calendar month.

Operating Capacity ” means the effective storage capacity of a tank, taking into account accepted engineering principles, industry standards, API guidelines and Applicable Law, only as to Products that each tank is capable of storing, within the requirements of applicable permit requirements and under actual conditions as they may exist at any time. The Operating Capacity of each tank is listed on the applicable Terminal Service Order as of the date of such Terminal Service Order.

 

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Partnership ” has the meaning set forth in the Preamble.

Partnership Change of Control ” means Tesoro ceases to possess, directly or indirectly, the power to direct or cause the direction of the management and policies of the General Partner of the Partnership, whether through ownership of voting securities, by contract, or otherwise.

Partnership Group ” has the meaning set forth in Section 23(b) .

Party ” or “ Parties ” means that each of Customer and TLO is a “Party” and collectively are the “Parties” to this Agreement.

Person ” means any individual, partnership, limited partnership, joint venture, corporation, limited liability company, limited liability partnership, trust, unincorporated organization or Governmental Authority or any department or agency thereof.

Product ” or “ Products ” means the petroleum products, ethanol or biofuels, crude oil, Transmix, intermediate products and fuel oil described herein as being handled under this Agreement.

Receiving Party Personnel ” has the meaning set forth in Section 35(d) .

Red Dye ” has the meaning set forth in Section 7(d) .

Refinery ” means Customer’s refining facilities located in Kenai, Alaska.

Replacement Customer ” has the meaning set forth in Section 32 .

Reserved Capacity ” means an aggregate volume of 107,219 Barrels of Products per Month; provided however, that the Reserved Capacity during the Month in which the Commencement Date occurs shall be prorated in accordance with the ratio of the number of days including and following the Commencement Date in such Month to the total number of days in such Month.

Restoration ” has the meaning set forth in Section 28(b) .

Shell Capacity ” means the gross storage capacity of a tank for each respective Product, based upon its dimensions, as set forth in an applicable Terminal Service Order.

Shortfall Payment ” has the meaning set forth in Section 4(d) .

Storage First Offer Period ” has the meaning set forth in Section 31 .

Storage Right of First Refusal ” has the meaning set forth in Section 31 .

Storage Services Fee ” has the meaning set forth in Section 5(a) .

Surcharge ” has the meaning set forth in Section 11(a) .

 

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Tank Heels ” consist of the minimum quantity of Product which either (a) must remain in a tank during all periods when the tank is available for service to keep the tank in regulatory compliance or (b) is necessary for physical operation of the tank.

Term ” has the meaning set forth in Section 2 .

Terminal ” means TLO’s Nikiski Terminal, consisting of a two-lane truck terminal, and six storage tanks with approximately 213,000 Barrels of storage capacity.

Terminal Service Order ” has the meaning set forth in Section 13(a) .

Terminalling Equipment ” has the meaning set forth in Section 4(c) .

Terminalling First Offer Period ” has the meaning set forth in Section 30(b) .

Terminalling Right of First Refusal ” has the meaning set forth in Section 30(b) .

Terminalling Service Fee ” means for any Month during the Term, the total fee per Barrel of throughput paid by Customer during that Month for terminalling and Ancillary Services at the Terminal, but excluding the Storage Services Fee, as set forth on a Terminal Service Order.

Termination Notice ” has the meaning set forth in Section 27(a) .

Tesoro ” has the meaning set forth in the Recitals.

Third Amended and Restated Omnibus Agreement ” means that certain Third Amended and Restated Omnibus Agreement, entered into concurrently herewith, among Tesoro, Customer, Tesoro Companies, Inc., TRMC, the General Partner and the Partnership, as such agreement may be amended, supplemented or restated from time to time.

Throughput Right of First Refusal ” has the meaning set forth in Section 28(e) .

TLO ” has the meaning set forth in the Preamble.

Transmix ” has the meaning set forth in Section 6 .

TRMC ” has the meaning set forth in the Recitals.

ULSD ” means ultra-low sulfur diesel.

2. TERM

The initial term of this Agreement shall commence on the date hereof (the “ Commencement Date ”) and shall continue through July 1, 2024 (the “ Initial Term ”); provided, however, that Customer may, at its option, extend the Initial Term for up to two (2) renewal terms of five (5) years each (each, an “ Extension Period ”) by providing written notice of its intent to TLO no less than three hundred sixty-five (365) calendar days prior to the end of the Initial Term or the then-current Extension Period. The Initial Term, and any Extension Period, shall be referred to herein as the “ Term .”

 

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3. SERVICES

During the Term and subject to the terms and conditions of this Agreement and any Terminal Service Order, TLO shall make available to Customer the following services:

(a) Commingled storage and throughput capacity pursuant to Section 4 below;

(b) Dedicated storage pursuant to Section 5 below; and

(c) The services pursuant to Sections 6-9 below, other additization services as set forth on a Terminal Service Order and any and other services pursuant to a Terminal Service Order (collectively, the “ Ancillary Services ”).

4. THROUGHPUT

(a) Throughput Commitment and Terminalling Service Fee . Customer shall deliver and/or pay for the Minimum Throughput Commitment at the Terminal, and TLO shall make available to Customer at all times commingled storage and throughput capacity at the Terminal sufficient to allow Customer to throughput the Reserved Capacity. Customer shall pay the Terminalling Service Fee for such service as set forth in a Terminal Service Order. Allocation of storage and throughput capacity for separate Products at the Terminal shall be set forth in a Terminal Service Order, if applicable. TLO shall not make any commitments to third parties that would interfere with the ability of Customer to throughput the Reserved Capacity. Customer commits to deliver and/or pay for the Minimum Throughput Commitment on a Monthly basis during the Term.

(b) Excess Capacity . Customer may throughput volumes in excess of the Minimum Throughput Commitment, up to the then-available capacity of the Terminal, net of any third-party commitments, as determined by TLO at any time, which allocation of any excess capacity shall be in accordance with current practices, or as otherwise may be set forth in a Terminal Service Order. If during any Month during the Term, Customer throughputs aggregate volumes greater than the Minimum Throughput Commitment, then Customer shall pay TLO an amount equal to the fee determined by multiplying the actual volumes throughput by Customer in excess of the Minimum Throughput Commitment by the Terminalling Service Fee (the “ Excess Amount ”).

(c) Removal of Equipment from Service . If at any time during the Term, any tank, rack or other equipment or facility of TLO that is dedicated to Customer or otherwise being used to provide services hereunder (“ Terminalling Equipment ”), is removed from service, and if removal of such Terminalling Equipment restricts Customer from being able to throughput the Reserved Capacity or receive associated Ancillary Services, then until such Terminalling Equipment is restored to service, Customer’s Minimum Throughput Commitment shall be reduced by the difference between the Minimum Throughput Commitment and the amount that Customer can effectively throughput at such location without restriction until such Terminalling Equipment is restored to service.

 

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(d) Shortfall Payments . If, during any Month during the Term, Customer throughputs aggregate volumes less than the Minimum Throughput Commitment for such Month, then Customer shall pay TLO an amount (a “ Shortfall Payment ”) for any shortfall. Shortfall Payments shall be equal to the amount determined by taking the difference between (i) the Minimum Throughput Commitment multiplied by the Terminal Service Fee and (ii) the actual volumes throughput by Customer multiplied by the Terminal Service Fee. The dollar amount of any Shortfall Payment paid by Customer shall be posted as a credit to Customer’s account and may be applied against any Excess Amounts owed by Customer during any of the succeeding three (3) Months. Credits will be applied in the order in which such credits accrue and any remaining portion of the credit that is not used by Customer during the succeeding three (3) Months shall expire ( e.g ., a credit that accrues in January will be available in February, March and April, will expire at the end of April, and must be applied prior to applying any credit which accrues in February).

(e) Third Party Throughput Credit . If TLO throughputs volumes from third parties (other than Replacement Customers) at the Terminal during any Month, such volumes shall be applied as a credit to reduce the Minimum Throughput Commitment, up to a maximum amount equal to the Minimum Throughput Commitment. All volumes throughput by Replacement Customers shall be applied as a credit to reduce the Minimum Throughput Commitment.

5. DEDICATED STORAGE

(a) Storage Services Fee . Customer shall pay a Monthly fee (the “ Storage Services Fee ”) to reserve, on a firm basis, all of the existing aggregate Shell Capacity of certain tanks (the “ Dedicated Tanks ”) as specified on a Terminal Service Order. Such fee shall be payable by Customer on a Monthly basis throughout the Term of the Agreement, regardless of the actual volumes of Products stored by TLO on behalf of Customer; provided, however, that the Parties shall from time to time negotiate an appropriate adjustment to such fee if the following conditions are met: (i) Customer requires the full Operating Capacity of the Dedicated Tanks, (ii) the full Operating Capacity of the Tanks is not available to Customer for any reason (other than any reason resulting from or relating to actions or inactions by Customer), and (iii) TLO is unable to otherwise accommodate the actual volumes of Products required to be stored by Customer pursuant to the terms of this Agreement or any Terminal Service Order. Unless otherwise agreed, such adjustment shall be made in proportion to the reduction in Operating Capacity for any time period compared with the Operating Capacity then in effect for the affected Dedicated Tanks pursuant to the mutually agreed Terminal Service Orders. The Parties recognize that the existing Operating Capacity of certain tanks may be less than the Shell Capacity of such Dedicated Tanks, but the Parties acknowledge and agree that the Storage Services Fee shall be set in terms of a dollar-per-Barrel per Month rate based on Shell Capacity in the applicable Terminal Service Order. Such Storage Services Fee shall include all storage, pumping, and transshipment between and among the Dedicated Tanks.

(b) Calculation of Storage Services Fee . The Storage Services Fee shall be calculated using the per Barrel rate set forth on the initial Terminal Service Order executed effective as of the Commencement Date for the then-existing aggregate Shell Capacity of the tanks specified in such initial Terminal Service Order. The Storage Services Fee owed during the Month in which the Commencement Date occurs, if less than a full calendar month, shall be prorated in accordance with the ratio of (i) the number of days in such Month during which this Agreement is effective to (ii) the total number of days in such Month.

 

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6. PRODUCT DOWNGRADE AND INTERFACE

TLO shall account for the volume of Product downgraded, and Customer’s inventory of Products and/or interface shall be adjusted, provided that, interface volume (“ Transmix ”) received shall be allocated (a) in the case of dedicated storage, entirely to Customer and (b) in the case of commingled storage, among Customer and other customers receiving Products generating such Transmix in the same shipment or stored in commingled storage in proportion to each customer’s volume of Products in such shipment or storage. Customer shall remove its Transmix upon notice from TLO and shall be subject to applicable Transmix handling fees upon its removal, as provided in a Terminal Service Order. If Transmix is not removed within fifteen (15) Business Days after notification (such time period to be extended to the extent of any delay or hindrance by TLO, its agents or contractors for any reason), TLO shall have the right to sell such Transmix at market rates and return any proceeds to Customer, less applicable Transmix handling fees in effect at the time of such sale. Product downgraded as a result of ordinary Terminal or pipeline operations including line flushing, rack meter provings or other necessary Terminal operations shall not constitute losses for which TLO is liable to Customer.

7. ADDITIZATION OPTIONS

(a) Additive Injection Service . If available at the Terminal, TLO shall provide equipment for the injection of additives, as provided below. Customer shall designate pursuant to a Terminal Service Order which additive injection service shall be provided.

(b) DCA Additization . All gasoline Product leaving the Terminal shall be additized (“ Additized Gasoline ”). As an exception, TLO shall accommodate a request from Customer to lift base gasoline from the Terminal. In that case, the bill of lading issued by TLO shall label all such Product as base gasoline (“ Base Gasoline ”). TLO shall provide a generic Deposit Control Additive (“ DCA ”) injection service, including all required reporting and record keeping prescribed by Applicable Law. The additive supplied shall be an Environmental Protection Agency (“ EPA ”) certified DCA. Subject to the other provisions hereof, Customer may request TLO to instead inject a different proprietary DCA into certain gasoline delivered hereunder, instead of the generic DCA provided by TLO, and TLO shall accommodate such requests pursuant to a Terminal Service Order specifying the specific additization required and fees to be charged for its injection, subject to Customer providing a suitable Additized Gasoline system for such proprietary additive. TLO shall ensure that such additive is injected into all appropriate gasoline Product delivered to Customer at a rate no lower than the Lowest Allowable Concentration (“ LAC ”) at which such additive was certified. The gasoline additization rate shall be determined by Customer, but shall not be less than 1.1 times the LAC specified by the respective additive manufacturer or supplier. Notwithstanding the above, Customer shall be solely responsible for registering with the EPA or any other government agency its use of generic or proprietary additive in its fuels, as required by Applicable Law. Customer shall submit evidence of registration in compliance with 40 C.F.R. Part 80. Customer shall also be responsible for full compliance with any quarterly or other regulatory reporting, and any other requirements under Applicable Law related to use of generic or proprietary additive in Customer’s Product.

 

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(c) Lubricity and Conductivity Additization . TLO shall maintain and operate diesel lubricity and conductivity additive injection facilities (the “ Diesel Additive Facilities ”) at the Terminal in accordance with customary industry standards during the Term, including all required reporting and record keeping prescribed by Applicable Law. TLO shall arrange for purchase and delivery of any and all required lubricity and conductivity additive for injection through the Diesel Additive Facilities at the Terminal. TLO shall inject into all ULSD delivered to Customer at the Terminal an amount of lubricity and conductivity additive that TLO determines to be sufficient to comply with current ASTM diesel lubricity and conductivity specifications. TLO shall, upon request, provide Customer with documentation of additive specifications and additive injection, which TLO shall keep on file at the Terminal.

(d) Red Dye Additization . TLO shall provide a generic red dye additive (“ Red Dye ”) injection service for diesel, including all required reporting and record keeping prescribed by Applicable Law. TLO shall be responsible for determining the injection rates, Red Dye inventory levels, meter readings, and calculations of actual treat rates, in compliance with the minimum levels prescribed by the Internal Revenue Service. Customer is responsible for designating which of its accounts shall be authorized to use Red Dye diesel injection services. TLO equipment shall enable designated Carriers and accounts to inject Red Dye upon request prior to loading diesel Product at the Terminal. Customer’s Carrier shall be solely responsible for designating that a load of diesel Product be injected with Red Dye, and TLO shall have no liability with regard to whether a load of Product is additized with Red Dye. TLO shall not be responsible for any loss, damage or liability that arises from Carrier injecting or failing to inject Red Dye into Customer’s Product, unless caused by TLO’s equipment failure or negligence.

(e) Responsibility for Provision of Additive . For any additization services provided pursuant to this Section 7 , TLO shall be responsible for providing generic additives, and Customer shall be responsible for providing any special or proprietary additives requested by Customer.

(f) Special Additive Equipment . As set forth in a Terminal Service Order, and subject to the other provisions set forth herein and the availability of suitable space at the Terminal, Customer shall have the option of having TLO install and maintain at the Terminal, at Customer’s sole risk, cost and expense, such special additive equipment as may be desirable for Products to be delivered to Customer’s account hereunder. The engineering and installation of any fixture, equipment or appurtenance placed on the Terminal in respect thereof shall be subject to TLO’s prior approval and supervision. During the Term, TLO shall operate the special additive equipment with any fees therefor to be set forth in a Terminal Service Order. Upon the expiration of the Term, TLO will have the option to purchase the special additive equipment for a price to be set forth in a Terminal Service Order.

 

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8. BIODIESEL SERVICES

(a) Biodiesel Facilities . If available at the Terminal, TLO shall operate B99/B100 (“ Biodiesel ”) truck rack, tank and inbound manifold blending facilities (the “ Biodiesel Facilities ”) as provided in a Terminal Service Order. The Biodiesel Facilities are intended to provide a means to blend Biodiesel with ULSD. Customer shall be required to keep a Tank Heel inventory in the Biodiesel tanks in proportion with the number of active inventory holders in the tanks.

(b) Payment . Customer shall pay TLO for the Biodiesel blending and throughput provided by TLO as set forth in a Terminal Service Order.

(c) Biodiesel Services Provided . TLO shall (i) coordinate with Customer the scheduling of Biodiesel trucks from Customer to the Terminal; (ii) provide necessary services to convey Customer’s Biodiesel from trucks to appropriate Biodiesel storage tanks where it shall be stored until blended with ULSD and delivered to Customer; and (iii) blend and inject Customer’s Biodiesel into Customer’s ULSD in accordance with Customer’s instructions and Applicable Law. The provision of any new equipment necessary for the services in this Section 8(c) , and which Party shall own and operate such equipment during and after the Term, shall be set forth on a Terminal Service Order.

9. ETHANOL BLENDING SERVICES

(a) Services and Equipment . Where ethanol receiving, storage and blending facilities are available at the Terminal, upon Customer’s request, the Parties shall execute a Terminal Service Order pursuant to which TLO shall receive, store and blend ethanol into Customer’s gasoline at the Terminal (“ Ethanol Services ”). TLO shall provide and operate all equipment required for the Ethanol Services. The equipment shall consist of truck and/or rail unloading racks, tanks, pumps, motors, injectors, computer control, and any other ancillary equipment necessary for the providing of the Ethanol Services.

(b) Ethanol Inventories . Customer shall be solely responsible for supplying inventories of ethanol at its own expense, including the scheduling and transporting of ethanol into the Terminal, subject to notice and scheduling procedures mutually agreeable to the Parties. TLO shall receive Customer’s ethanol into fungible ethanol storage at the Terminal, unless otherwise specified in a Terminal Service Order.

(c) Blending Instructions . Upon a request from Customer for Ethanol Services, a Terminal Service Order shall provide the desired blending ratio of ethanol to gasoline at the Terminal (“ Blending Instructions ”), including the minimum Octane (R+M/2) rating for each grade of Customer’s gasoline Product, prior to blending. A change to the blending ratios shall require a Terminal Service Order.

(d) Records . TLO shall maintain for a minimum of five (5) years written or electronic records of the type and volume of oxygenate blended into Customer’s gasoline.

(e) Quality Assurance . TLO shall maintain an industry standard quality assurance oversight program of the ethanol blending process. TLO shall provide Customer with an annual report within fifteen (15) Business Days after the end of each calendar year that, at a minimum, summarizes the volume of Customer’s gasoline received by TLO, the volume of oxygenate added to Customer’s gasoline and total volume of blended gasoline.

 

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(f) Monitoring . TLO shall allow Customer or its agents to monitor the oxygenate blending operation by periodic audit, sampling, testing and/or records review to ensure the overall volumes and type of oxygenate blended into gasoline is consistent with the oxygenate claimed by Customer as required by 40 C.F.R. 80.101(d)(4)(ii)(B)(2). The scope and type of such audits will be negotiated in good faith by the Parties in advance and memorialized in writing.

(g) Customer Liability . TLO shall rely on Blending Instructions and data provided by Customer in performing its obligations under this Agreement or any Terminal Service Order. Customer agrees to be solely responsible for all claims arising from TLO’s use of or reliance on these Blending Instructions and data.

(h) Condition . When performing the Ethanol Services as per Customer’s Blending Instructions, TLO shall not certify to Customer or any third-party that blended gasoline does or shall meet ASTM D 4814 or any federal, state, or local regulatory specifications. Customer agrees that it is receiving from TLO the Blended Gasoline in an “AS IS, WHERE IS” condition without warranties of any kind, including any warranties of merchantability or fitness for a particular purpose, or its ability to meet ASTM or regulatory specifications.

10. REIMBURSEMENT FOR NEWLY IMPOSED TAXES AND REGULATORY FEES; EXCISE TAXES

(a) Prompt Reimbursement . Customer shall promptly pay or reimburse TLO for any newly imposed taxes, levies, royalties, assessments, licenses, fees, charges, surcharges and sums due of any nature whatsoever (other than income taxes, gross receipt taxes and similar taxes) by any federal, state or local government or agency that TLO incurs on Customer’s behalf for the services provided by TLO under this Agreement or any Terminal Service Order. If TLO is required to pay any of the foregoing, Customer shall promptly reimburse TLO in accordance with the payment terms set forth in this Agreement. Any such newly imposed taxes or regulatory fees as provided for in this Section 10(a) shall be specified in an applicable Terminal Service Order.

(b) Excise Tax Certification . Upon written request by TLO, Customer shall supply TLO with a completed signed original notification certificate of gasoline and diesel fuel registrant as required by the Internal Revenue Service’s excise tax regulation. Customer further agrees to comply with all Applicable Law with respect to such taxes.

(c) Exemption Certification . If Customer is exempt from the payment of any taxes allocated to Customer under the foregoing provisions, Customer shall furnish TLO with the proper exemption certificates.

11. EXPENDITURE REQUIRED BY NEW LAWS AND REGULATIONS

(a) Surcharge . If, during the Term, any existing laws or regulations are changed or any new laws or regulations are enacted that require TLO to make substantial and unanticipated expenditures (whether capitalized or otherwise) with respect to the Terminal, TLO may, subject to the terms of this Section 11 , impose a surcharge to increase the applicable service fee (“ Surcharge ”), to cover Customer’s pro rata share of the cost of complying with these laws or regulations, based upon the percentage of Customer’s use of the services or facilities impacted by such new laws or regulations.

 

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(b) Notification and Mitigation . TLO shall notify Customer of any proposed Surcharge to be imposed pursuant to Section 11(a) sufficient to cover the cost of any required capital projects and any ongoing increased operating costs. TLO and Customer then shall negotiate in good faith for up to thirty (30) days to mutually determine the effect of the change in law or regulation or new law or regulation, the cost thereof, and how such cost shall be amortized at an interest rate of no more than nine percent (9%) as a Surcharge, with the understanding that TLO and Customer shall use their reasonable commercial efforts to mitigate the impact of, and comply with, these laws and regulations. Without limiting the foregoing, if expenditures requiring a Surcharge may be avoided or reduced through changes in operations, then the Parties shall negotiate in good faith to set forth the appropriate changes in a Terminal Service Order to evidence the reduction of the amount of a Surcharge while leaving the Parties in the same relative economic position they held before the laws or regulations were changed or enacted.

(c) Less Than 15% Surcharge . In the event any Surcharge results in less than a fifteen percent (15%) increase in the applicable service fee, Customer will be assessed such Surcharge on all future invoices during the period in which such Surcharge is in effect for the applicable amortization period, and TLO shall not terminate the affected service from this Agreement.

(d) 15% or More Surcharge . In the event any Surcharge results in a fifteen percent (15%) or more increase in the applicable service fee, TLO shall notify Customer of the amount of the Surcharge required to reimburse TLO for its costs, plus carrying costs, together with reasonable supporting detail for the nature and amount of any such Surcharge.

(i) If within thirty (30) days of such notification provided in this Section 11(d) , Customer does not agree to pay such Surcharge or to reimburse TLO up front for its costs, TLO may elect to either:

a. require Customer to pay such Surcharge, up to a fifteen percent (15%) increase in the applicable service fee; or

b. terminate the service under this Agreement to which the Surcharge applies, upon notice to Customer.

(ii) TLO’s performance obligations under this Agreement shall be suspended or reduced during the above thirty (30) day period to the extent that TLO would be obligated to make such expenditures to continue performance during such period.

(e) Resolution of Surcharge . Following a resolution with respect to the amount and manner of payment of a Surcharge pursuant to this Section 11 , the Parties shall execute an appropriate Terminal Service Order memorializing the terms of such resolution.

 

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(f) Payment of Surcharge . In lieu of paying the Surcharge in connection with any required capital project, Customer may, at its option, elect to pay the full cost of the substantial and unanticipated expenditures upon completion of a project.

12. REIMBURSEMENT FOR TANK CLEANING AND CONVERSION

(a) Reimbursement for Tank Cleaning . If any Dedicated Tanks are removed from service or cleaning of any tanks is performed by TLO at the specific request of Customer, Customer shall bear (or reimburse TLO) for all costs to clean, degas or otherwise prepare the tank(s) including, without limitation, the cost of removal, processing, transportation, disposal, of all waste and the cost of any taxes or charges TLO may be required to pay in regard to such waste. For any tanks that are dedicated to Customer for segregated storage of Customer’s Products as set forth in any Terminal Service Order, Customer agrees to reimburse TLO for the reasonable cost of changes necessary to return the dedicated storage tanks to TLO on termination of their dedication for segregated storage under this Agreement, in the same condition as originally received less normal wear and tear, unless otherwise mutually agreed by the Parties.

(b) Reimbursement for Tank Conversion . If Customer requests that any dedicated tank be changed for storage of a different grade or type of Product, TLO shall agree to a change in such service, if the same can be accomplished in accordance with reasonable commercial standards, accepted industry and engineering guidelines, permit requirements and Applicable Law. If any such modifications, improvements, vapor recovery, cleaning, degassing, or other preparation of the tanks is performed by TLO at the request of Customer, Customer shall bear all direct costs attributable thereto, including, without limitation, the cost of removal, processing, transportation, and disposal of all waste and the cost of any taxes or mutually agreed charges TLO may be required to pay in regard to such waste, which costs shall be set forth on the applicable Terminal Service Order.

13. TERMINAL SERVICE ORDERS; PAYMENT

(a) Description . TLO and Customer shall enter into one or more terminal service orders for the Terminal substantially in the form attached hereto as Exhibit 1 (each, a “ Terminal Service Order ”). Upon a request by Customer pursuant to this Agreement or as deemed necessary or appropriate by TLO in connection with the services to be delivered pursuant hereto, TLO shall generate a Terminal Service Order to set forth the specific terms and conditions for providing the applicable services described therein and the applicable fees to be charged for such services. No Terminal Service Order shall be effective until fully executed by both TLO and Customer.

(b) Included Items . Items available for inclusion on a Terminal Service Order include, but are not limited to, the following:

(i) allocation of throughput capacity by Product, and the rates by Product for determining the Terminalling Service Fee pursuant to Section 4 ;

(ii) identification of tanks to be utilized for dedicated storage tanks and the Storage Services Fee pursuant to Section 5 ;

 

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(iii) Transmix handling fees pursuant to Section 6 ;

(iv) additization pursuant to Section 7 ;

(v) special or proprietary additive injection services, including any installation and maintenance of special additive equipment, pursuant to Section 7(f) , and the fees related thereto;

(vi) biodiesel services and new equipment pursuant to Section 8(c) and the fees related thereto;

(vii) ethanol blending services pursuant to Section 9 and the fees related thereto;

(viii) reimbursement related to newly imposed taxes pursuant to Section 10 ;

(ix) Surcharges related to expenditures as a result of newly imposed laws and regulations pursuant to Section 11 ;

(x) tank cleaning or conversion pursuant to Section 12 ; and

(xi) any other services as may be agreed.

(c) Invoices . TLO shall invoice Customer on a monthly basis and Customer shall pay all amounts due under this Agreement and any Terminal Service Order no later than ten (10) calendar days after Customer’s receipt of TLO’s invoices. Any past due payments owed by Customer shall accrue interest, payable on demand, at the lesser of (i) the rate of interest announced publicly by JPMorgan Chase Bank, in New York, New York, as JPMorgan Chase Bank’s prime rate (which Parties acknowledge and agree is announced by such bank and used by the Parties for reference purposes only and may not represent the lowest or best rate available to any of the customers of such bank or the Parties), plus four percent (4%), and (ii) the highest rate of interest (if any) permitted by Applicable Law, from the due date of the payment through the actual date of payment.

(d) Fee Increases . Any fees of a fixed amount set forth in this Agreement and any Terminal Service Order shall be increased on July 1 of each year of the Term, commencing on July 1, 2015, by a percentage equal to the greater of zero or the positive change, if any, in the CPI-U (All Urban Consumers) for the prior calendar year, as reported by the Bureau of Labor Statistics, and rounded to the nearest one-tenth (1/10) of one percent (1%).

(e) Conflict between Agreement and Terminal Service Order . In case of any conflict between the terms of this Agreement and the terms of any Terminal Service Order, the terms of the applicable Terminal Service Order shall govern.

14. CUSTODY TRANSFER AND TITLE

(a) Custody of Pipeline Receipts and Deliveries . For Product received into the Terminal by pipeline, custody of the Product shall pass to TLO at the flange where it enters the Terminal’s receiving line. For Product delivered by the Terminal into a pipeline, custody of the Product shall pass to Customer at the flange where it exits the Terminal’s delivery line.

 

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(b) Custody of Truck Receipts and Deliveries . For receipts and deliveries to or from trucks, custody shall pass at the flange where the hoses at TLO’s facility interconnect with the truck.

(c) Custody of Rail Receipts and Deliveries . For Product received by rail, custody shall pass to TLO when the switching locomotive used to transfer Customer’s rail cars to the Terminal is uncoupled from such rail cars at the Terminal.

(d) Custody of Marine Receipts and Deliveries . For receipts and deliveries to or from marine vessels, custody shall pass at the flange where the Terminal interconnects with the hoses connected to the marine vessel.

(e) In-Tank . Deliveries by book transfer shall be reflected in the books of TLO.

(f) Title Transfer . Upon re-delivery of any Product to Customer’s account, Customer shall become solely responsible for any loss, damage or injury to Person or property or the environment, arising out of transportation, possession or use of such Product after transfer of custody and the loss allowance provisions hereof shall apply to Product while in TLO’s custody. Title to all of Customer’s Product received in the Terminal shall remain with Customer at all times. Both Parties acknowledge that this Agreement represents a bailment of Products by Customer to TLO and not a consignment of Products, it being understood that TLO has no authority hereunder to sell or seek purchasers for the Products of Customer, except for Transmix as provided in Section 6 above. Customer hereby warrants that it shall, at all times, have good title to and the right to deliver, throughput, store and receive Products pursuant to the terms of this Agreement and any Terminal Service Order.

15. PRODUCT QUALITY

(a) Product Specifications of Delivered Products . Customer warrants that all Products delivered under this Agreement and any Terminal Service Order shall meet the latest applicable pipeline specifications or mutually agreed upon specifications for that Product upon receipt at the Terminal and contain no deleterious substances or concentrations of any contaminants that may make it or its components commercially unacceptable in general industry application. Customer shall not deliver to the Terminal any Products which: (i) would in any way be injurious to the Terminal; (ii) would render the Terminal unfit for the proper storage of similar Products; (iii) would contaminate or otherwise downgrade the quality of the Products stored in commingled storage; (iv) may not be lawfully stored at the Terminal; or (v) otherwise do not meet applicable Product specifications for such Product that are customary in the location of the Terminal. If, however, there are Products that do not have such applicable specifications, the specifications shall be mutually agreed upon by the Parties. Should Customer’s commingled Products not comply with the minimum quality standards set forth in this Agreement or any Terminal Service Order, Customer shall be liable for all loss, damage and cost incurred thereby, including damage to Products of third parties commingled with Customer’s unfit Products.

 

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(b) Product Specifications of Commingled Storage . TLO shall have the right to store compatible Products received for Customer’s account with Products belonging to TLO or third parties in TLO’s commingled storage tanks. TLO shall handle Customer’s fungible Products in accordance with TLO’s prevailing practices and procedures for handling such Products. The quality of all Products tendered into commingled storage for Customer’s account shall be verified either by Customer’s refinery analysis or supplier’s certification, such that Products so tendered shall meet TLO’s Product specifications. All costs for such analysis shall be borne solely by Customer. TLO shall have the right to sample any Product tendered to the Terminal hereunder. The cost of such sampling shall be borne solely by TLO. All Products returned to Customer shall comply with Product specifications in effect on the date the Products are delivered to Customer. Notwithstanding any other provision herein, any and all Products that leave the Terminal shall meet all relevant ASTM, EPA, federal and state specifications.

(c) Liability for Commingled Storage . TLO shall exercise reasonable care to ensure that all Products delivered by third parties into commingled storage with Customer’s Products meet applicable Product specifications for such Product that are customary in the location of the Terminal. In the event that Customer’s Products are commingled with third-party Products that do not comply with the minimum quality standards set forth in this Agreement or any Terminal Service Order, TLO shall be liable for all loss, damage and cost incurred thereby.

16. MEASUREMENT AND VOLUME LOSSES

(a) Methods of Measurement .

(i) All quantities of Products received or delivered by or into trucks or marine vessels shall be measured and determined based upon the meter readings at the Terminal, as reflected by delivery tickets or bills of lading, or if such meters are unavailable, by applicable calibration tables, as set forth on a Terminal Service Order or pursuant to mutual agreement of the Parties.

(ii) All quantities of Products received or delivered by or into railcars shall be measured and determined based upon the meter readings at the Terminal, or if such meters are unavailable, by applicable calibration tables, as set forth on a Terminal Service Order or pursuant to mutual agreement of the Parties.

(iii) All quantities of Products received and delivered by pipeline shall be measured and determined based upon the meter readings of the pipeline operator, as reflected by delivery tickets, or if such meters are unavailable, by applicable calibration tables, as set forth on a Terminal Service Order or pursuant to mutual agreement of the Parties.

(iv) Deliveries by book transfer shall be reflected by entries in the books of TLO.

(v) All quantities shall be adjusted to net gallons at 60° F in accordance with ASTM D-1250 Petroleum Measurement Tables, or latest revisions thereof. Meters and temperature probes shall be calibrated according to applicable API standards. Customer shall have the right, at its sole expense, and in accordance with rack location procedure,

 

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to independently certify such calibration. Storage tank gauging shall be performed by TLO’s personnel. TLO’s gauging shall be deemed accurate unless challenged by an independent certified gauger. Customer may perform joint gauging at its sole expense with TLO’s personnel at the time of delivery or receipt of Product, to verify the amount involved. If Customer should request an independent gauger, such gauger must be acceptable to TLO and such gauging shall be at Customer’s sole expense.

(b) Measurement and Volume Loss Control Practices .

(i) TLO shall have no obligation to measure volume gains and losses. In the event third-party Products are terminalled at the Terminal, the Parties shall mutually determine the measurement and volume loss control practices for the Terminal.

(ii) TLO shall be responsible to Customer only for Product losses and/or shortages resulting from the negligent or wrongful acts and omissions of TLO; provided that TLO shall not be responsible to Customer for any Product losses and/or shortages for which Customer is compensated by its cargo/inventory insurance carrier, including through the cargo/inventory insurance coverage required by Section 24 . If Customer fails to maintain the cargo/inventory insurance coverage required by Section 24 , then TLO shall also not be responsible to Customer for any Product losses and/or shortages to the extent Customer would have been compensated by its insurance carrier had Customer maintained the cargo/inventory insurance coverage required by Section 24 .

(iii) Customer shall be responsible for all Product losses and/or shortages it may suffer other than those covered by Section 16(b)(ii) .

17. PRODUCT DELIVERIES, RECEIPTS AND WITHDRAWALS

(a) Product Deliveries . All supervised deliveries, receipts and withdrawals hereunder shall be made at such times as may be required by Customer upon prior notice and approval by TLO, all in accordance with the agreed-upon scheduling. Unsupervised deliveries, receipts and withdrawals shall be made only with TLO’s prior approval and in strict accordance with TLO’s current operating procedures for the Terminal. Customer warrants that all vehicles permitted to enter the Terminal on behalf of Customer shall meet all requirements and standards promulgated by applicable regulatory authority including the Department of Transportation, the Occupational Safety and Health Administration, and the EPA. Customer further warrants that it shall only send to the Terminal those employees, agents and other representatives acting on behalf of and at Customer’s direction who have been properly instructed as to the characteristics and safe hauling methods associated with the Products to be loaded and hauled. Customer further agrees to be responsible to TLO for the performance under this Agreement by its agents and/or representatives receiving or delivering Products at the Terminal.

(b) Loading Devices . Customer shall withdraw from the Terminal only those Products that it is authorized to withdraw hereunder. Customer shall neither duplicate nor permit the duplication of any loading device (i.e., card lock access), provided hereunder. Customer shall be fully and solely responsible for all Products loaded through the use of the loading devices issued to Customer in accordance with this Agreement; provided however, that Customer shall

 

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not have any responsibility or liability hereunder in the event that the load authorization system provided hereunder fails or malfunctions in any way unless a credit department override is provided, which authorizes Customer to load the Products.

(c) Legal Compliance . Both Parties shall abide by all federal, state and local statutes, laws and ordinances and all rules and regulations which are promulgated by TLO and which are either furnished to Customer or posted at the Terminal, with respect to the use of the Terminal as herein provided. It is understood and agreed by Customer that these rules and regulations may be changed, amended or modified by TLO at any time. All changes, amendments and modifications shall become binding upon Customer ten (10) days following the posting of a copy at the Terminal or the receipt by Customer of a copy, whichever occurs sooner.

(d) Customer Representatives . For all purposes hereunder, Customer’s jobbers, distributors, Carriers, haulers and other customers designated in writing or otherwise by Customer to have loading privileges under this Agreement or having possession of any loading device furnished to Customer pursuant to this Agreement, together with their respective officers, servants and employees, shall, when they access the Terminal, be deemed to be representatives of Customer.

18. DELIVERIES INTO TRANSPORT TRUCKS

Prior to transporting any Products loaded into transport trucks at the Terminal, TLO shall make or cause to be made, the following certifications on the delivery receipt or bill of lading covering the Products received:

“If required by 49 C.F.R. 172.204, this is to certify that the above-named materials are properly classified, described, packaged, marked and labeled, and are in proper condition for transportation according to the applicable regulations of the Department of Transportation. Carrier hereby certifies that the cargo tank used for this shipment is a proper container for the commodity loaded therein and complies with Department of Transportation specifications and certifies that cargo tank is properly placarded and marked to comply with regulations pertaining to hazardous materials.”

TLO shall require each Carrier coming into the Terminal to expressly agree in writing to be bound by the provisions of a carrier access agreement with respect to withdrawals and loading of Products hereunder, to conduct its operations at the Terminal in a safe manner, in accordance with all Applicable Law.

19. ACCOUNTING PROVISIONS AND DOCUMENTATION

(a) Required Reports . TLO shall furnish Customer with the following reports covering services hereunder involving Customer’s Products:

(i) within ten (10) Business Days following the end of the Month, a statement showing, by Product: (A) Customer’s monthly aggregate deliveries into the Terminal; (B) Customer’s monthly receipts from the Terminal; (C) calculation of all Customer’s monthly storage and handling fees; (D) Customer’s opening inventory for the preceding Month; (E) appropriate volume loss adjustments (as applicable in accordance with Section 16 ); (F) Customer’s closing inventory for the preceding

 

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Month; and (G) the actual volumes of TLO third party throughput handled at the Terminal during a Month up to the Minimum Throughput Commitment, pursuant to Section 4(e) ;

(ii) a copy of any meter calibration report, to be available for inspection upon reasonable request by Customer at the Terminal following any calibration;

(iii) upon delivery from the Terminal, a hard copy bill of lading to the Carrier for each delivery; upon reasonable request only, a hard copy bill of lading shall be provided to Customer’s accounting group; upon each delivery from the Terminal, bill of lading information shall be sent electronically through a mutually agreeable system; and

(iv) transfer documents for each in-tank transfer.

(b) Required Maintenance of Truck Loading Capabilities . TLO shall be required to maintain the capabilities to support truck load authorization technologies at the Terminal.

20. AUDIT AND CLAIMS PERIOD

Each Party and its duly authorized agents and/or representatives shall have reasonable access to the accounting records and other documents maintained by the other Party which relate to this Agreement, and shall have the right to audit such records at any reasonable time or times during the Term and for a period of up to three (3) years after termination of this Agreement. Claims as to shortage in quantity or defects in quality shall be made by written notice within ninety (90) days after the delivery in question or shall be deemed to have been waived.

21. LIEN WAIVERS

TLO hereby waives, relinquishes and releases any and all liens, including without limitation, any and all warehouseman’s liens, custodian’s liens, rights of retention and/or similar rights under all applicable laws, which TLO would or might otherwise have under or with respect to the Products throughput, stored or handled hereunder. TLO further agrees to furnish documents reasonably acceptable to Customer and its lender(s) (if applicable), and to cooperate with Customer in assuring and demonstrating that Products titled in Customer’s name shall not be subject to any lien on the Terminal or TLO’s Products throughput or stored there.

22. LIMITATION ON LIABILITY

(a) No Special Damages . Notwithstanding anything to the contrary contained herein, neither Party shall be liable or responsible to the other Party or such other Party’s affiliated Persons for any consequential, incidental, or punitive damages, or for loss of profits or revenues (collectively referred to as “special damages”) incurred by such Party or its affiliated Persons that arise out of or relate to this Agreement, REGARDLESS OF WHETHER ANY SUCH CLAIM ARISES UNDER OR RESULTS FROM CONTRACT, NEGLIGENCE, OR STRICT LIABILITY OF THE PARTY WHOSE LIABILITY IS BEING WAIVED HEREBY; provided that the foregoing limitation is not intended and shall not affect special damages actually awarded to a third party or assessed by a governmental authority and for which a Party is properly entitled to indemnification from the other Party pursuant to the express provisions of this Agreement.

 

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(b) Claims and Liability for Lost Product . TLO shall not be liable to Customer for lost or damaged Product unless Customer notifies TLO in writing within ninety (90) days of the report of any incident or the date Customer learns of any such loss or damage to the Product. TLO’s maximum liability to Customer for any lost or damaged Product shall be limited to (i) the lesser of (1) the replacement value of the Product at the time of the incident based upon the price as posted by Platts or similar publication for similar Product in the same locality, and if no other similar Product is in the locality, then in the state, or (2) the actual cost paid for the Product by Customer (copies of Customer’s invoices of cost paid must be provided), less (ii) the salvage value, if any, of the damaged Product.

(c) No Guarantees or Warranties . Except as expressly provided in the Agreement, neither Customer nor TLO makes any guarantees or warranties of any kind, expressed or implied. TLO specifically disclaims all implied warranties of any kind or nature, including any implied warranty of merchantability and/or any implied warranty of fitness for a particular purpose.

23. INDEMNITIES

(a) TLO Indemnities . Notwithstanding anything else contained in this Agreement or any Terminal Service Order, TLO shall release, defend, protect, indemnify, and hold harmless Customer, its carriers, and each of its and their respective affiliates, officers, directors, employees, agents, contractors, successors, and assigns (excluding any member of the Partnership Group) (collectively the “ Customer Group ”), from and against any and all demands, claims (including third-party claims), losses, costs, suits, or causes of action (including, but not limited to, any judgments, losses, liabilities, fines, penalties, expenses, interest, reasonable legal fees, costs of suit, and damages, whether in law or equity and whether in contract, tort, or otherwise) for or relating to (i) personal or bodily injury to, or death of the employees of Customer, TLO or the General Partner, and, as applicable, their carriers, customers, representatives, and agents, (ii) loss of or damage to any property, products, material, and/or equipment belonging to Customer, TLO and, as applicable, their carriers, customers, representatives, and agents, and each of their respective affiliates, contractors, and subcontractors (except for those volume losses of Products provided for herein), (iii) loss of or damage to any other property, products, material, and/or equipment of any other description (except for those volume losses of Products provided for herein), and/or personal or bodily injury to, or death of any other Person or Persons; and with respect to clauses (i) through (iii) above, which is caused by or resulting in whole or in part from the negligent or wrongful acts or omissions of TLO or the General Partner in connection with the ownership or operation of the Terminal and the services provided hereunder, and, as applicable, their carriers, customers (other than Customer), representatives, and agents, or those of their respective employees with respect to such matters, and (iv) any losses incurred by Customer due to violations of this Agreement or any Terminal Service Order by TLO, or, as applicable, its customers (other than Customer), representatives, and agents; PROVIDED THAT TLO SHALL NOT BE OBLIGATED TO RELEASE, INDEMNIFY OR HOLD HARMLESS CUSTOMER OR ANY MEMBER OF THE CUSTOMER GROUP FROM AND AGAINST ANY CLAIMS TO THE EXTENT THEY

 

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RESULT FROM THE BREACH OF CONTRACT, STRICT LIABILITY OR THE NEGLIGENT ACTS, ERRORS OR OMISSIONS OR WILLFUL MISCONDUCT OF CUSTOMER OR ANY MEMBER OF THE CUSTOMER GROUP.

(b) Customer Indemnities . Notwithstanding anything else contained in this Agreement or any Terminal Service Order, Customer shall release, defend, protect, indemnify, and hold harmless TLO, General Partner, the Partnership, their subsidiaries and their respective officers, directors, members, managers, employees, agents, contractors, successors, and assigns (collectively the “ Partnership Group ”) from and against any and all demands, claims (including third-party claims), losses, costs, suits, or causes of action (including, but not limited to, any judgments, losses, liabilities, fines, penalties, expenses, interest, reasonable legal fees, costs of suit, and damages, whether in law or equity and whether in contract, tort, or otherwise) for or relating to (i) personal or bodily injury to, or death of the employees of TLO, the General Partner, Customer, and, as applicable, their carriers, customers, representatives, and agents; (ii) loss of or damage to any property, products, material, and/or equipment belonging to TLO, Customer, and, as applicable, their carriers, customers, representatives, and agents, and each of their respective affiliates, contractors, and subcontractors (except for those volume losses of Products provided for herein); (iii) loss of or damage to any other property, products, material, and/or equipment of any other description (except for those volume losses of Products provided for herein), and/or personal or bodily injury to, or death of any other Person or Persons; and with respect to clauses (i) through (iii) above, which is caused by or resulting in whole or in part from the negligent or wrongful acts or omissions of Customer, in connection with Customer’s use of the Terminal and the services provided hereunder and Customer’s Products stored hereunder, and, as applicable, its Carriers, customers, representatives, and agents, or those of their respective employees with respect to such matters; and (iv) any losses incurred by TLO due to violations of this Agreement or any Terminal Service Order by Customer, or, as applicable, its carriers, customers, representatives, and agents; PROVIDED THAT CUSTOMER SHALL NOT BE OBLIGATED TO RELEASE, INDEMNIFY OR HOLD HARMLESS TLO OR ANY MEMBER OF THE PARTNERSHIP GROUP FROM AND AGAINST ANY CLAIMS TO THE EXTENT THEY RESULT FROM THE BREACH OF CONTRACT, STRICT LIABILITY OR THE NEGLIGENT ACTS, ERRORS OR OMISSIONS OR WILLFUL MISCONDUCT OF TLO OR ANY MEMBER OF THE PARTNERSHIP GROUP.

(c) Written Claim . Neither Party shall be obligated to indemnify the other Party or be liable to the other Party unless a written claim for indemnity is delivered to the other Party within ninety (90) days after the date that a claim is reported or discovered, whichever is earlier.

(d) No Limitation . Except as expressly provided otherwise in this Agreement, the scope of these indemnity provisions may not be altered, restricted, limited, or changed by any other provision of this Agreement. The indemnity obligations of the Parties as set out in this Section 23 are independent of any insurance requirements as set out in Section 24 , and such indemnity obligations shall not be lessened or extinguished by reason of a Party’s failure to obtain the required insurance coverages or by any defenses asserted by a Party’s insurers.

(e) Survival . These indemnity obligations shall survive the termination of this Agreement until all applicable statutes of limitation have run regarding any claims that could be made with respect to the activities contemplated by this Agreement.

 

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(f) Mutual and Express Acknowledgement . THE INDEMNIFICATION PROVISIONS PROVIDED FOR IN THIS AGREEMENT HAVE BEEN EXPRESSLY NEGOTIATED IN EVERY DETAIL, ARE INTENDED TO BE GIVEN FULL AND LITERAL EFFECT, AND SHALL BE APPLICABLE WHETHER OR NOT THE LIABILITIES, OBLIGATIONS, CLAIMS, JUDGMENTS, LOSSES, COSTS, EXPENSES OR DAMAGES IN QUESTION ARISE OR AROSE SOLELY OR IN PART FROM THE GROSS, ACTIVE, PASSIVE OR CONCURRENT NEGLIGENCE, STRICT LIABILITY, OR OTHER FAULT OF ANY INDEMNIFIED PARTY. EACH PARTY ACKNOWLEDGES THAT THIS STATEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND CONSTITUTES CONSPICUOUS NOTICE. NOTICE IN THIS CONSPICUOUS NOTICE IS NOT INTENDED TO PROVIDE OR ALTER THE RIGHTS AND OBLIGATIONS OF THE PARTIES, ALL OF WHICH ARE SPECIFIED ELSEWHERE IN THIS AGREEMENT.

(g) Third Party Indemnification . If any Party has the rights to indemnification from a third party, the indemnifying party under this Agreement shall have the right of subrogation with respect to any amounts received from such third-party indemnification claim.

24. INSURANCE

(a) Minimum Limits . At all times during the Term and for a period of two (2) years after termination of this Agreement for any coverage maintained on a “claims-made” or “occurrence” basis, Customer and/or its Carrier (if applicable) shall maintain at their expense the below listed insurance in the amounts specified below, or self-insurance in such amounts as may be agreed pursuant to a Terminal Service Order. Customer shall require that Carrier cause all of its contractors providing authorized drivers or authorized vehicles, to carry such insurance, and Customer shall be liable to TLO for their failure to do so. Such insurance shall provide coverage to TLO and such policies, other than Worker’s Compensation Insurance, shall include TLO as an Additional Insured. Each policy shall provide that it is primary to and not contributory with any other insurance, including any self-insured retention, maintained by TLO (which shall be excess) and each policy shall provide the full coverage required by this Agreement. All such insurance shall be written with carriers and underwriters acceptable to TLO, and eligible to do business in the state where the Terminal is located and having and maintaining an A.M. Best financial strength rating of no less than “A-” and financial size rating no less than “VII”; provided that Customer and/or the Carrier may procure worker’s compensation insurance from the state fund of the state where the Terminal is located. All limits listed below are required MINIMUM LIMITS:

(i) Workers Compensation and Occupational Disease Insurance which fully complies with Applicable Law of the state where the Terminal is located, in limits not less than statutory requirements;

(ii) Employers Liability Insurance with a minimum limit of $1,000,000 for each accident, covering injury or death to any employee which may be outside the scope of the worker’s compensation statute of the jurisdiction in which the worker’s service is performed, and in the aggregate as respects occupational disease;

 

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(iii) Commercial General Liability Insurance, including contractual liability insurance covering Carrier’s indemnity obligations under this Agreement, with minimum limits of $1,000,000 combined single limit per occurrence for bodily injury and property damage liability, or such higher limits as may be required by TLO or by Applicable Law from time to time. This policy shall include Broad Form Contractual Liability insurance coverage which shall specifically apply to the obligations assumed in this Agreement by Customer;

(iv) Automobile Liability Insurance covering all owned, non-owned and hired vehicles, with minimum limits of $1,000,000 combined single limit per occurrence for bodily injury and property damage liability, or such higher limit(s) as may be required by Customer or by Applicable Law from time to time. Coverage must assure compliance with Sections 29 and 30 of the Motor Carrier Act of 1980 and all applicable rules and regulations of the Federal Highway Administration’s Bureau of Motor Carrier Safety and Interstate Commerce Commissioner (Form MCS 90 Endorsement). Limits of liability for this insurance must be in accordance with the financial responsibility requirement of the Motor Carrier Act, but not less than $1,000,000 per occurrence;

(v) Excess (Umbrella) Liability Insurance with limits not less than $4,000,000 per occurrence. Additional excess limits may be utilized to supplement inadequate limits in the primary policies required in items (ii), (iii), and (iv) above;

(vi) Pollution Legal Liability with limits not less than $25,000,000 per loss with an annual aggregate of $25,000,000. Coverage shall apply to bodily injury and property damage including loss of use of damaged property and property that has not been physically injured; cleanup costs, defense, including costs and expenses incurred in the investigation, defense or settlement of claim; and

(vii) Cargo/Inventory Insurance, with a limit of no less than $1,000,000, which property insurance shall be first-party insurance to adequately cover all Products owned by Customer located at the Terminal.

(b) Waiver of Subrogation . All such policies must be endorsed with a Waiver of Subrogation endorsement, effectively waiving rights of recovery under subrogation or otherwise, against TLO, and shall contain where applicable, a severability of interest clause and a standard cross liability clause.

(c) Copies of Insurance Certificates or Policies . Upon execution of this Agreement and prior to the operation of any equipment by Customer, Carrier or its authorized drivers at the Terminal, Customer and/or Carrier will furnish to TLO, and at least annually thereafter (or at any other times upon request by TLO) during the Term (and for any coverage maintained on a “claims-made” basis, for two (2) years after the termination of this Agreement), insurance certificates and/or certified copies of the original policies to evidence the insurance required herein, including on behalf of Carrier’s contractors providing authorized vehicles or authorized drivers. Such certificates shall be in the form of the “Accord” Certificate of Insurance, and reflect that they are for the benefit of TLO and shall provide that there will be no material change in or cancellation of the policies unless TLO is given at least thirty (30) days prior written notice. Certificates providing evidence of renewal of coverage shall be furnished to TLO prior to policy expiration.

 

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(d) Responsibility for Deductibles . Customer and/or Carrier shall be solely responsible for any deductibles or self-insured retention.

25. GOVERNMENT REGULATIONS

(a) Party Certification . Each Party certifies that none of the Products covered by this Agreement or any Terminal Service Order were derived from crude petroleum, petrochemical, or gas which was produced or withdrawn from storage in violation of any federal, state or other governmental law, nor in violation of any rule, regulation or promulgated by any governmental agency having jurisdiction in the premises.

(b) Licenses and Permits . TLO shall maintain all necessary licenses and permits for the storage of Products at the Terminal.

(c) Compliance with Applicable Law . The Parties are entering into this Agreement and any Terminal Service Order in reliance upon and shall comply in all material respects with all Applicable Law which directly or indirectly affects the Products throughput hereunder, or any receipt, throughput delivery, transportation, handling or storage of Products hereunder or the ownership, operation or condition of the Terminal. Each Party shall be responsible for compliance with all Applicable Law associated with such Party’s respective performance hereunder and the operation of such Party’s facilities. In the event any action or obligation imposed upon a Party under this Agreement and any Terminal Service Order shall at any time be in conflict with any requirement of Applicable Law, then this Agreement and any Terminal Service Order shall immediately be modified to conform the action or obligation so adversely affected to the requirements of the Applicable Law, and all other provisions of this Agreement and any Terminal Service Order shall remain effective.

(d) Material Change in Applicable Law . If during the Term, any new Applicable Law becomes effective or any existing Applicable Law or its interpretation is materially changed, which change is not addressed by another provision of this Agreement or any Terminal Service Order and which has a material adverse economic impact upon a Party, either Party, acting in good faith, shall have the option to request renegotiation of the relevant provisions of this Agreement or a Terminal Service Order with respect to future performance. The Parties shall then meet to negotiate in good faith amendments to this Agreement or to an applicable Terminal Service Order that will conform to the new Applicable Law while preserving the Parties’ economic, operational, commercial and competitive arrangements in accordance with the understandings set forth herein.

26. SUSPENSION OF REFINERY OPERATIONS

(a) No Termination . This Agreement shall continue in full force and effect regardless of whether Customer decides to permanently or indefinitely suspend refining operations at the Refinery for any period.

 

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(b) Continued Liability for Shortfall Payments . If refining operations at the Refinery is suspended for any reason (including Refinery turnarounds and other scheduled maintenance), then Customer shall remain liable for Shortfall Payments under this Agreement for the duration of the suspension.

27. FORCE MAJEURE

(a) Definitions and Notice . As soon as possible upon the occurrence of a Force Majeure, TLO shall provide Customer with written notice of the occurrence of such Force Majeure (a “ Force Majeure Notice ”). TLO shall identify in such Force Majeure Notice the approximate length of time that TLO reasonably believes in good faith such Force Majeure shall continue (the “ Force Majeure Period ”). For the duration of the Force Majeure Period, Customer shall be permitted to reduce its Minimum Throughput Commitment as provided in Section 28(b) . If TLO advises in any Force Majeure Notice that it reasonably believes in good faith that the Force Majeure Period shall continue for more than twelve (12) consecutive Months, then, subject to Section 28 below, at any time after TLO delivers such Force Majeure Notice, either Party may terminate this Agreement, but only upon delivery to the other Party of a notice (a “ Termination Notice ”) at least twelve (12) Months prior to the expiration of the Force Majeure Period; provided, however, that such Termination Notice shall be deemed cancelled and of no effect if the Force Majeure Period ends prior to the expiration of such twelve (12)-Month period. For the avoidance of doubt, neither Party may exercise its right under this Section 27(a) to terminate this Agreement as a result of a Force Majeure if the Terminal has been restored to working order since the applicable Force Majeure, including pursuant to a Restoration.

(b) Revocation of Customer Termination Notice . Notwithstanding the foregoing, if Customer delivers a Termination Notice to TLO (the “ Customer Termination Notice ”) and, within thirty (30) days after receiving such Customer Termination Notice, TLO notifies Customer that TLO reasonably believes in good faith that it shall be capable of fully performing its obligations under this Agreement within a reasonable period of time and Customer mutually agrees (which agreement shall not be unreasonably withheld), then the Customer Termination Notice shall be deemed revoked and the applicable portion of this Agreement shall continue in full force and effect as if such Customer Termination Notice had never been given.

28. CAPABILITIES OF FACILITIES

(a) Service Interruption . Subject to Force Majeure and interruptions for routine repair and maintenance, consistent with customary terminal industry standards, TLO shall use reasonable commercial efforts to minimize the interruption of service at the Terminal and any portion thereof. TLO shall promptly inform Customer operational personnel of any anticipated partial or complete interruption of service at the Terminal, including relevant information about the nature, extent, cause and expected duration of the interruption and the actions TLO is taking to resume full operations, provided that TLO shall not have any liability for any failure to notify, or delay in notifying, Customer of any such matters except to the extent Customer has been materially prejudiced or damaged by such failure or delay.

 

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(b) Restoration of Capacity . Subject to Force Majeure and interruptions for routine repair and maintenance, consistent with customary terminal industry standards, TLO shall maintain the Terminal in a condition and with a capacity sufficient to throughput a volume of Customer’s Products at least equal to the Reserved Capacity. TLO’s obligations may be temporarily suspended during the occurrence of, and for the entire duration of, a Force Majeure or any interruption of service that prevents TLO from terminalling the Reserved Capacity. To the extent TLO is prevented from terminalling volumes equal to the Reserved Capacity for reasons of Force Majeure or other interruption of service, then Customer’s obligation to throughput the Minimum Throughput Commitment and pay any Shortfall Payment shall be reduced proportionately. At such time as TLO is capable of terminalling volumes equal to the Reserved Capacity, Customer’s obligation to throughput the full Minimum Throughput Commitment shall be restored. If for any reason, including, without limitation, a Force Majeure event, the throughput capacity of the Terminal should fall below the Reserved Capacity, then within a reasonable period of time after the commencement of such reduction, TLO shall make repairs to the Terminal to restore the capacity of the Terminal to that required for throughput of the Reserved Capacity (“ Restoration ”). Except as provided below in Section 28(c) , all of such Restoration shall be at TLO’s cost and expense, unless the damage creating the need for such repairs was caused by the negligence or willful misconduct of Customer, its employees, agents or customers or the failure of Customer’s Products to meet the specifications as provided for in Section 15(a) .

(c) Capacity Resolution . In the event of the failure of TLO to maintain the Terminal in a condition and with a capacity sufficient to throughput a volume of Customer’s Products equal to the Reserved Capacity, then either Party shall have the right to call a meeting between executives of both Parties by providing at least two (2) Business Days’ advance written notice. Any such meeting shall be held at a mutually agreeable location and will be attended by executives of both Parties each having sufficient authority to commit his or her respective Party to a Capacity Resolution (hereinafter defined). At the meeting, the Parties will negotiate in good faith with the objective of reaching a joint resolution for the Restoration of capacity on the Terminal which will, among other things, specify steps to be taken by TLO to fully accomplish Restoration and the deadlines by which the Restoration must be completed (the “ Capacity Resolution ”). Without limiting the generality of the foregoing, the Capacity Resolution shall set forth an agreed upon time schedule for the Restoration activities. Such time schedule shall be reasonable under the circumstances, consistent with customary terminal industry standards and shall take into consideration TLO’s economic considerations relating to costs of the repairs and Customer’s requirements concerning its refining and marketing operations. TLO shall use commercially reasonable efforts to continue to provide storage and throughput of Customer’s Products at the Terminal, to the extent the Terminal has capability of doing so, during the period before Restoration is completed. In the event that Customer’s economic considerations justify incurring additional costs to restore the Terminal in a more expedited manner than the time schedule determined in accordance with the preceding sentence, Customer may require TLO to expedite the Restoration to the extent reasonably possible, subject to Customer’s payment, in advance, of the estimated incremental costs to be incurred as a result of the expedited time schedule. In the event the Parties agree to an expedited Restoration plan in which Customer agrees to fund a portion of the Restoration cost, then neither Party shall have the right to terminate this Agreement in connection with a Force Majeure, so long as such Restoration is completed with due diligence, and Customer shall pay its portion of the Restoration costs to TLO in advance based on an estimate based on reasonable engineering standards promulgated by the Association for Facilities Engineering. Upon completion, Customer shall pay the difference

 

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between the actual portion of Restoration costs to be paid by Customer pursuant to this Section 28(c) and the estimated amount paid under the preceding sentence within thirty (30) days after receipt of TLO’s invoice therefor, or, if appropriate, TLO shall pay Customer the excess of the estimate paid by Customer over TLO’s actual costs as previously described within thirty (30) days after completion of the Restoration.

(d) Restoration . If at any time after the occurrence of (x) a Partnership Change of Control or (y) a sale of the Refinery, TLO either (i) refuses or fails to meet with Customer within the period set forth in Section 28(c) , (ii) fails to agree to perform a Capacity Resolution in accordance with the standards set forth in Section 28(c) , or (iii) fails to perform its obligations in compliance with the terms of a Capacity Resolution, Customer may, as its sole remedy for any breach by TLO of any of its obligations under Section 28(c) , require TLO to complete a Restoration of the Terminal, subject to and to the extent permitted under the terms, conditions and/or restrictions of applicable leases, permits and/or Applicable Law. Any such Restoration required under this Section 28(d) shall be completed by TLO at Customer’s cost. TLO shall use commercially reasonable efforts to continue to provide storage and throughput of Customer’s Products at the Terminal, during the period while such Restoration is being completed. Any work performed by TLO pursuant to this Section 28(d) shall be performed and completed in a good and workmanlike manner consistent with applicable industry standards and in accordance with all Applicable Law. Additionally, during such period after the occurrence of (x) a Partnership Change of Control or (y) a sale of the Refinery, Customer may exercise any remedies available to it under this Agreement (other than termination), including the right to immediately seek temporary and permanent injunctive relief for specific performance by TLO of the applicable provisions of this Agreement, including, without limitation, the obligation to make Restorations as described herein.

(e) Throughput Right of First Refusal . Unless otherwise specified in a Terminal Service Order, all throughput of Customer’s volumes, along with storage related to such throughput, shall be on a fungible commingled basis, and TLO may commingle such Products with Products of third parties of like grade and kind. TLO shall have the right to enter into arrangements with third parties to throughput Products at the Terminal and provide storage related to such throughput; provided however, that (i) TLO shall not enter into any third party arrangements that would restrict or limit the ability of Customer to throughput the Reserved Capacity at the Terminal each Month without Customer’s consent, and (ii) TLO shall give Customer ninety (90) days prior written notice of any proposed throughput agreement with a third party, and if Customer makes an offer on terms no less favorable to TLO than the third-party offer, TLO shall be obligated to enter into a terminalling agreement with Customer on the terms set forth in its proposed offer (“ Throughput Right of First Refusal ”). If Customer does not exercise its Throughput Right of First Refusal in the manner set forth above, TLO may, for the next ninety (90) days, proceed with the negotiation of the third-party terminalling agreement. If no third-party terminalling agreement is consummated during such ninety-day period, the terms and conditions of this Section 28(e) shall again become effective.

(f) Storage Tank Heels . All Tank Heels shall be allocated among storage users on a pro rata basis. Tank Heels cannot be withdrawn from any tank without prior approval of TLO. For storage tanks and capacities identified on a Terminal Service Order as dedicated to and used exclusively for the storage and throughput of Customer’s Product, Customer shall be responsible for providing all Tank Heels required for operation of such tanks.

 

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29. TERMINATION

(a) Default . A Party shall be in default under this Agreement if:

(i) the Party breaches any provision of this Agreement or a Terminal Service Order, which breach has a material adverse effect on the other Party (with such material adverse effect being determined based on this Agreement and all Terminal Service Orders considered as a whole), and such breach is not excused by Force Majeure or cured within fifteen (15) Business Days after notice thereof (which notice shall describe such breach in reasonable detail) is received by such Party (unless such failure is not commercially reasonably capable of being cured in such fifteen (15) Business Day period in which case such Party shall have commenced remedial action to cure such breach and shall continue to diligently and timely pursue the completion of such remedial action after such notice); or

(ii) the Party (A) files a petition or otherwise commences, authorizes or acquiesces in the commencement of a proceeding or cause of action under any bankruptcy, insolvency, reorganization or similar Applicable Law, or has any such petition filed or commenced against it, (B) makes an assignment or any general arrangement for the benefit of creditors, (C) otherwise becomes bankrupt or insolvent (however evidenced) or (D) has a liquidator, administrator, receiver, trustee, conservator or similar official appointed with respect to it or any substantial portion of its property or assets.

(b) Rights upon Default . If either of the Parties is in default as described above, then (A) if Customer is in default, TLO may or (B) if TLO is in default, Customer may: (1) terminate this Agreement upon notice to the defaulting Party; (2) withhold any payments due to the defaulting Party under this Agreement; and/or (3) pursue any other remedy at law or in equity.

(c) Obligation to Cure Breach . If a Party breaches any provision of this Agreement or a Terminal Service Order, which breach does not have a material adverse effect on the other Party, the breaching Party shall still have the obligation to cure such breach.

(d) Product Removal . Customer shall, upon expiration or termination of this Agreement, promptly remove all of its Products including any downgraded and interface Product and Transmix from the Terminal, and TLO shall remove the remaining Tank Heels and tank bottoms and deliver them to Customer or Customer’s designee, within thirty (30) days of such termination or expiration. In the event all of the Product is not removed within such thirty (30) day period, Customer shall be assessed a storage fee to all Products held in storage more than thirty (30) days beyond the termination or expiration of this Agreement until such time Customer’s entire Product is removed from the Terminal; provided however, that Customer shall not be assessed any storage fees associated with the removal of Product if Customer’s ability to remove such Product is delayed or hindered by TLO, its agents or contractors for any reason.

 

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(e) Equipment Removal . Customer shall, upon expiration or termination of this Agreement, promptly remove any and all of its owned equipment (except those purchased by TLO pursuant to Section 7(f) above), and restore the Terminal to their condition prior to the installation of such equipment.

30. RIGHT TO ENTER INTO A NEW TERMINALLING AGREEMENT

(a) New Terminalling Services Agreement . Upon termination of this Agreement or a Terminal Service Order for reasons other than (x) a default by Customer and (y) any other termination of this Agreement or a Terminal Service Order initiated by TLO pursuant to Section 29 , Customer shall have the right to require TLO to enter into a new terminalling services agreement with Customer that (i) is consistent with the terms set forth in this Agreement, (ii) relates to the Terminal, and (iii) has commercial terms that are, in the aggregate, equal to or more favorable to TLO than fair market value terms as would be agreed by similarly-situated parties negotiating at arm’s length; provided, however; that the term of any such new terminalling services agreement shall not extend beyond July 1, 2034.

(b) Terminalling Right of First Refusal . In the event that TLO proposes to enter into a terminalling services agreement with a third party within two (2) years after the termination of this Agreement for reasons other than (x) by default by Customer and (y) any other termination of this Agreement initiated by TLO pursuant to Section 29 , TLO shall give Customer ninety (90) days’ prior written notice of any proposed new terminalling services agreement with a third party, including (i) details of all of the material terms and conditions thereof and (ii) a thirty (30)-day period (beginning upon Customer’s receipt of such written notice) (the “ Terminalling First Offer Period ”) in which Customer may make a good faith offer to enter into a new terminalling agreement with TLO (the “ Terminalling Right of First Refusal ”). If Customer makes an offer on terms no less favorable to TLO than the third-party offer with respect to such terminalling services agreement during the Terminalling First Offer Period, then TLO shall be obligated to enter into a terminalling services agreement with Customer on the terms set forth in Customer’s offer to TLO. If Customer does not exercise its Terminalling Right of First Refusal in the manner set forth above, TLO may, for the next ninety (90) days, proceed with the negotiation of the third-party terminalling services agreement. If no third party agreement is consummated during such ninety-day period, the terms and conditions of this Section 30(b) shall again become effective.

31. STORAGE RIGHT OF FIRST REFUSAL

In the event that TLO proposes to enter into a storage agreement with a third party upon opening up any new storage opportunity at the Terminal during the Term, TLO shall give Customer ninety (90) days’ prior written notice of any proposed new storage agreement with a third party, including (i) details of all of the material terms and conditions thereof and (ii) a thirty (30)-day period (beginning upon Customer’s receipt of such written notice) (the “ Storage First Offer Period ”) in which Customer may make a good faith offer to enter into a new storage agreement with TLO (the “ Storage Right of First Refusal ”). If Customer makes an offer on terms no less favorable to TLO than the third-party offer with respect to such storage agreement during the Storage First Offer Period, then TLO shall be obligated to enter into a storage agreement with Customer on the terms set forth in its proposed offer. If Customer does not

 

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exercise its Storage Right of First Refusal in the manner set forth above, TLO may, for the next ninety (90) days, proceed with the negotiation of the third-party storage agreement. If no third party agreement is consummated during such ninety-day period, the terms and conditions of this Section 31 shall again become effective.

32. SUBCONTRACT

Should Customer desire to subcontract to a third party (“ Replacement Customer ”) any dedicated or commingled storage subject to a Terminal Service Order, Customer must notify TLO in writing prior to the proposed start of the subcontract. TLO has the right to approve any Replacement Customer, which approval shall not be unreasonably withheld, conditioned or delayed. Unless otherwise agreed in writing between Customer and TLO, and between Replacement Customer and TLO, Customer will continue to be liable for all terms and conditions of this Agreement related to any subcontracted storage tank, including but not limited to, remittance of any fees set forth in a Terminal Service Order applicable to the subcontracted storage tank. Customer shall be responsible for collection of any fees due to Customer from the Replacement Customer. Customer and TLO may mutually agree that operational notices concerning scheduling and similar matters can be directly provided between TLO and any Replacement Customer.

33. ASSIGNMENT; PARTNERSHIP CHANGE OF CONTROL

(a) Assignment to TLO . On the Commencement Date, the General Partner shall assign all of its rights and obligations under this Agreement to the Partnership. The Partnership shall immediately assign its rights and obligations hereunder to TLO. Upon such assignment to TLO, TLO shall have all of the respective rights and obligations set forth herein during the Term.

(b) Customer Assignment to Third Party . Customer shall not assign all of its obligations hereunder or under a Terminal Service Order without TLO’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however; that Customer may assign this Agreement, without TLO’s consent, in connection with a sale by Customer of the Refinery so long as the transferee: (i) agrees to assume all of Customer’s obligations under this Agreement; and (ii) is financially and operationally capable of fulfilling the terms of this Agreement, which determination shall be made by Customer in its reasonable judgment.

(c) TLO Assignment to Third Party . TLO shall not assign its rights or obligations under this Agreement without Customer’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that (i) TLO may assign this Agreement without Customer’s consent in connection with a sale by TLO of the Terminal so long as the transferee: (A) agrees to assume all of TLO’s obligations under this Agreement; (B) is financially and operationally capable of fulfilling the terms of this Agreement, which determination shall be made by TLO in its reasonable judgment; and (C) is not a competitor of Customer; and (ii) TLO shall be permitted to make a collateral assignment of this Agreement solely to secure working capital financing for TLO.

 

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(d) Notification of Assignment . Any assignment that is not undertaken in accordance with the provisions set forth above shall be null and void ab initio . A Party making any assignment shall promptly notify the other Party of such assignment, regardless of whether consent is required. This Agreement and any Terminal Service Orders shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns.

(e) Partnership Change of Control . Customer’s obligations hereunder shall not terminate in connection with a Partnership Change of Control, provided however, that in the case of a Partnership Change of Control, Customer shall have the option to extend the Term as provided in Section 2 . TLO shall provide Customer with notice of any Partnership Change of Control at least sixty (60) days prior to the effective date thereof.

34. NOTICE

All notices, requests, demands, and other communications hereunder will be in writing and will be deemed to have been duly given: (a) if by transmission by hand delivery, when delivered; (b) if mailed via the official governmental mail system, five (5) Business Days after mailing, provided said notice is sent first class, postage pre-paid, via certified or registered mail, with a return receipt requested; (c) if mailed by an internationally recognized overnight express mail service such as Federal Express, UPS, or DHL Worldwide, one (1) Business Day after deposit therewith prepaid; or (d) if by e-mail, one Business Day after delivery with receipt confirmed. All notices will be addressed to the Parties at the respective addresses as follows:

If to Customer, to:

Tesoro Alaska Company LLC

19100 Ridgewood Parkway

San Antonio, Texas 78259

For legal notices :

Attention: Charles A. Cavallo III, Managing Attorney - Commercial

phone: (210) 626-4045

email: Charles.A.Cavallo@tsocorp.com

all other notices and communications :

Attention: Dennis C. Bak

phone: 310-847-3846

email: Dennis.C.Bak@tsocorp.com

If to TLO, to:

Tesoro Logistics Operations LLC

19100 Ridgewood Parkway

San Antonio, Texas 78259

 

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For legal notices :

Attention: Charles S. Parrish, General Counsel

phone: (210) 626-4280

email: Charles.S.Parrish@tsocorp.com

For all other notices and communications :

Attention: Rick D. Weyen, Vice President, Logistics

phone: (210) 626-4379

email: Rick.D.Weyen@tsocorp.com

or to such other address or to such other Person as either Party will have last designated by notice to the other Party.

35. CONFIDENTIAL INFORMATION

(a) Confidential Information and Exceptions Thereto . Each Party shall use reasonable efforts to retain the other Parties’ Confidential Information in confidence and not disclose the same to any third party nor use the same, except as authorized by the disclosing Party in writing or as expressly permitted in this Section 35 . Each Party further agrees to take the same care with the other Party’s Confidential Information as it does with its own, but in no event less than a reasonable degree of care. Excepted from these obligations of confidence and non-use is that information which:

(i) is available, or becomes available, to the general public without fault of the receiving Party;

(ii) was in the possession of the receiving Party on a non-confidential basis prior to receipt of the same from the disclosing Party (it being understood, for the avoidance of doubt, that this exception shall not apply to information of TLO that was in the possession of Customer or any of its affiliates as a result of their ownership or operation of the Terminal prior to the Commencement Date);

(iii) is obtained by the receiving Party without an obligation of confidence from a third party who is rightfully in possession of such information and, to the receiving Party’s knowledge, is under no obligation of confidentiality to the disclosing Party; or

(iv) is independently developed by the receiving Party without reference to or use of the disclosing Party’s Confidential Information.

For the purpose of this Section 35 , a specific item of Confidential Information shall not be deemed to be within the foregoing exceptions merely because it is embraced by, or underlies, more general information in the public domain or in the possession of the receiving Party.

(b) Required Disclosure . Notwithstanding Section 35(a) above, if the receiving Party becomes legally compelled to disclose the Confidential Information by a court, Governmental Authority or Applicable Law, or is required to disclose by the listing standards of any applicable securities exchange, any of the disclosing Party’s Confidential Information, the receiving Party

 

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shall promptly advise the disclosing Party of such requirement to disclose Confidential Information as soon as the receiving Party becomes aware that such a requirement to disclose might become effective, in order that, where possible, the disclosing Party may seek a protective order or such other remedy as the disclosing Party may consider appropriate in the circumstances. The receiving Party shall disclose only that portion of the disclosing Party’s Confidential Information that it is required to disclose and shall cooperate with the disclosing Party in allowing the disclosing Party to obtain such protective order or other relief.

(c) Return of Confidential Information . Upon written request by the disclosing Party, all of the disclosing Party’s Confidential Information in whatever form shall be returned to the disclosing Party upon termination of this Agreement or destroyed with destruction certified by the receiving Party, without the receiving Party retaining copies thereof except that one copy of all such Confidential Information may be retained by a Party’s legal department solely to the extent that such Party is required to keep a copy of such Confidential Information pursuant to Applicable Law, and the receiving Party shall be entitled to retain any Confidential Information in the electronic form or stored on automatic computer back-up archiving systems during the period such backup or archived materials are retained under such Party’s customary procedures and policies; provided, however, that any Confidential Information retained by the receiving Party shall be maintained subject to confidentiality pursuant to the terms of this Section 35 , and such archived or back-up Confidential Information shall not be accessed except as required by Applicable Law.

(d) Receiving Party Personnel . The receiving Party will limit access to the Confidential Information of the disclosing Party to those of its employees, attorneys and contractors that have a need to know such information in order for the receiving Party to exercise or perform its rights and obligations under this Agreement (the “ Receiving Party Personnel ”). The Receiving Party Personnel who have access to any Confidential Information of the disclosing Party will be made aware of the confidentiality provision of this Agreement, and will be required to abide by the terms thereof. Any third party contractors that are given access to Confidential Information of a disclosing Party pursuant to the terms hereof shall be required to sign a written agreement pursuant to which such Receiving Party Personnel agree to be bound by the provisions of this Agreement, which written agreement will expressly state that it is enforceable against such Receiving Party Personnel by the disclosing Party.

(e) Survival . The obligation of confidentiality under this Section 35 shall survive the termination of this Agreement for a period of two (2) years.

36. MISCELLANEOUS

(a) Amendment or Modification . This Agreement and any Terminal Service Orders may be amended or modified only by a written instrument executed by the Parties. Any of the terms and conditions of this Agreement or a Terminal Service Order may be waived in writing at any time by the Party entitled to the benefits thereof. No waiver of any of the terms and conditions of this Agreement, a Terminal Service Order or any breach thereof, will be effective unless in writing signed by a duly authorized individual on behalf of the Party against which the waiver is sought to be enforced. No waiver of any term or condition or of any breach of this Agreement or a Terminal Service Order will be deemed or will constitute a waiver of any other term or condition or of any later breach (whether or not similar), nor will such waiver constitute a continuing waiver unless otherwise expressly provided.

 

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(b) Integration . This Agreement, together with the Schedules and Terminal Service Orders and the other agreements executed on the date hereof in connection with the transactions contemplated by the Contribution Agreement, constitutes the entire agreement among the Parties pertaining to the subject matter hereof and supersedes all prior agreements and understandings of the Parties in connection therewith. In the event of a conflict of provisions of this Agreement and the Third Amended and Restated Omnibus Agreement, the provisions of the Third Amended and Restated Omnibus Agreement shall prevail with respect to issues related to the contribution of the assets described therein, but not with respect to the ordinary operations of such assets as set forth in this Agreement.

(c) Construction and Interpretation . In interpreting this Agreement, unless the context expressly requires otherwise, all of the following apply to the interpretation of this Agreement:

(i) Preparation of this Agreement has been a joint effort of the Parties and the resulting Agreement against one of the Parties as the drafting Party.

(ii) Plural and singular words each include the other.

(iii) Masculine, feminine and neutral genders each include the others.

(iv) The word “or” is not exclusive and includes “and/or.”

(v) The words “includes” and “including” are not limiting.

(vi) References to the Parties include their respective successors and permitted assignees.

(vii) The headings in this Agreement are included for convenience and do not affect the construction or interpretation of any provision of, or the rights or obligations of a Party under, this Agreement.

(d) Applicable Law; Forum, Venue and Jurisdiction . This Agreement and any Terminal Service Orders shall be governed by the laws of the State of Texas without giving effect to its conflict of laws principles. Each Party hereby irrevocably submits to the exclusive jurisdiction of any federal court of competent jurisdiction situated in the United States District Court for the Western District of Texas, San Antonio Division, or if such federal court declines to exercise or does not have jurisdiction, in the district court of Bexar County, Texas. The Parties expressly and irrevocably submit to the jurisdiction of said Courts and irrevocably waive any objection which they may now or hereafter have to the laying of venue of any action, suit or proceeding arising out of or relating to this Agreement or any Terminal Service Order brought in such Courts, irrevocably waive any claim that any such action, suit or proceeding brought in any such Court has been brought in an inconvenient forum and further irrevocably waive the right to object, with respect to such claim, action, suit or proceeding brought in any such Court, that such Court does not have jurisdiction over such Party. The Parties hereby irrevocably consent to the service of process by registered mail, postage prepaid, or by personal service within or without the State of Texas. Nothing contained herein shall affect the right to serve process in any manner permitted by law.

 

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(e) Counterparts . This Agreement and any Terminal Service Order hereunder may be executed in one or more counterparts (including by facsimile or portable document format (.pdf)) for the convenience of the Parties hereto, each of which counterparts will be deemed an original, but all of which counterparts together will constitute one and the same agreement.

(f) Severability . Whenever possible, each provision of this Agreement and any Terminal Service Order will be interpreted in such manner as to be valid and effective under Applicable Law, but if any provision of this Agreement, a Terminal Service Order or the application of any such provision to any Person or circumstance will be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision hereof, and the Parties will negotiate in good faith with a view to substitute for such provision a suitable and equitable solution in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid, illegal or unenforceable provision.

(g) No Third Party Rights . Except as specifically provided in Section 23 herein, it is expressly understood that the provisions of this Agreement or any Terminal Service Order do not impart enforceable rights in anyone who is not a Party or successor or permitted assignee of a Party.

(h) Jury Waiver . EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY PROCEEDINGS RELATING TO THIS AGREEMENT OR ANY PERFORMANCE OR FAILURE TO PERFORM OF ANY OBLIGATION HEREUNDER.

[Signature Page Follows]

 

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

 

TESORO LOGISTICS OPERATIONS LLC     TESORO ALASKA COMPANY LLC
By:  

/s/ Phillip M. Anderson

    By:  

/s/ G. Scott Spendlove

  Phillip M. Anderson       G. Scott Spendlove
  President       Senior Vice President and Chief Financial Officer
Solely with respect to Section 33(a) :     Solely with respect to Section 33(a) :
TESORO LOGISTICS GP, LLC     TESORO LOGISTICS LP
By:  

/s/ Phillip M. Anderson

    By:   Tesoro Logistics GP, LLC, its
  Phillip M. Anderson       general partner
  President      
      By:  

/s/ Phillip M. Anderson

        Phillip M. Anderson
        President

 

Signature Page to Terminalling Services Agreement - Nikiski


EXHIBIT 1

FORM OF TERMINAL SERVICE ORDER

(NIKISKI [    ]-         , 20    )

This Terminal Service Order is entered as of         , 20    , by and between Tesoro Alaska Company LLC, a Delaware limited liability company, and Tesoro Logistics Operations LLC, a Delaware limited liability company, pursuant to and in accordance with the terms of the Terminalling Services Agreement – Nikiski, dated as of July 1, 2014, by and among such parties and Tesoro Logistics GP, LLC, a Delaware limited liability company, and Tesoro Logistics LP, a Delaware limited partnership (as amended, supplemented, or otherwise modified from time to time, the “ Agreement ”).

Capitalized terms not otherwise defined herein shall have the meaning set forth in the Agreement.

Pursuant to Section 13 of the Agreement, the parties hereto agree to the following provisions:

[Insert applicable provisions:

(i) allocation of throughput capacity by Product, and the rates by Product for determining the Terminalling Service Fee pursuant to Section 4 ;

(ii) identification of tanks to be utilized for dedicated storage tanks and the Storage Services Fee pursuant to Section 5 ;

(iii) Transmix handling fees pursuant to Section 6 ;

(iv) additization pursuant to Section 7 ;

(v) special or proprietary additive injection services, including any installation and maintenance of special additive equipment, pursuant to Section 7(f) , and the fees related thereto;

(vi) biodiesel services and new equipment pursuant to Section 8(c) and the fees related thereto;

(vii) ethanol blending services pursuant to Section 9 and the fees related thereto;

(viii) reimbursement related to newly imposed taxes pursuant to Section 10 ;

(ix) Surcharges related to expenditures as a result of newly imposed laws and regulations pursuant to Section 11 ;

(x) tank cleaning or conversion pursuant to Section 12 ; and

(xi) any other services as may be agreed.]

 

Exhibit 1 –

Terminalling Services Agreement - Nikiski


Except as set forth in this Terminal Service Order, the other terms of the Agreement shall continue in full force and effect and shall apply to the terms of this Terminal Service Order.

[Signature Page Follows]

 

Exhibit 1 –

Terminalling Services Agreement - Nikiski


IN WITNESS WHEREOF , the parties hereto have duly executed this Terminal Service Order as of the date first written above.

 

TESORO LOGISTICS OPERATIONS LLC       TESORO ALASKA COMPANY LLC
By:  

 

      By:  

 

Name:         Name:  
Title:         Title:  

 

Exhibit 1 –

Terminalling Services Agreement - Nikiski

Exhibit 10.3

TERMINALLING SERVICES AGREEMENT – ANACORTES

This Terminalling Services Agreement – Anacortes (the “ Agreement ”) is dated as of July 1, 2014, by and between Tesoro Refining & Marketing Company LLC, a Delaware limited liability company (“ Customer ”), and Tesoro Logistics Operations LLC, a Delaware limited liability company (“ TLO ”), and for purposes of Section 33(a) only, Tesoro Logistics GP, LLC, a Delaware limited liability company (“ General Partner ”), and Tesoro Logistics LP, a Delaware limited partnership (“ Partnership ”).

RECITALS

WHEREAS , on the date hereof, Tesoro Corporation, a Delaware corporation (“ Tesoro ”), Customer and Tesoro Alaska Company LLC, a Delaware limited liability company (“ TAC ”), will contribute certain assets to the General Partner, the General Partner will contribute those assets to the Partnership, and the Partnership will contribute those assets to TLO, all on the terms and conditions set forth in that certain Contribution, Conveyance and Assumption Agreement dated June 23, 2014 by and among Tesoro, Customer, TAC, the Partnership, the General Partner, TLO (the “ Contribution Agreement ”);

WHEREAS , by virtue of its indirect ownership interests in the Partnership, Customer has an economic interest in the financial and commercial success of the Partnership and its operating subsidiary, TLO; and

WHEREAS , Customer and TLO desire to enter into this Agreement to memorialize the terms of their commercial relationship related to the subject matter hereof.

NOW, THEREFORE , in consideration of the covenants and obligations contained herein, the Parties (as defined below) to this Agreement hereby agree as follows:

 

1. DEFINITIONS

Capitalized terms used throughout this Agreement shall have the meanings set forth below, unless otherwise specifically defined herein.

Additized Gasoline ” has the meaning set forth in Section 7(b) .

Agreement ” has the meaning set forth in the Preamble.

Ancillary Services ” has the meaning set forth in Section 3(c) .

API ” means American Petroleum Institute.

Applicable Law ” means any applicable statute, law, regulation, ordinance, rule, determination, judgment, rule of law, order, decree, permit, approval, concession, grant, franchise, license, requirement, or any similar form of decision of, or any provision or condition of any permit, license or other operating authorization issued by any Governmental Authority having or asserting jurisdiction over the matter or matters in question, whether now or hereafter in effect.


ASTM ” means ASTM International, formerly known as the American Society for Testing and Materials.

Barrel ” means a volume equal to 42 U.S. gallons of 231 cubic inches each, at 60 degrees Fahrenheit under one atmosphere of pressure.

Base Gasoline ” has the meaning set forth in Section 7(b) .

Biodiesel ” has the meaning set forth in Section 8(a) .

Biodiesel Facilities ” has the meaning set forth in Section 8(a) .

Blending Instructions ” has the meaning set forth in Section 9(c) .

bpd ” means Barrels per day.

Business Day ” means a day, other than a Saturday or Sunday, on which banks in New York, New York are open for the general transaction of business.

Capacity Resolution ” has the meaning set forth in Section 28(c) .

Carrier ” means a third-party agent or contractor hired by Customer, who is in the business of transporting Products via tank trucks.

Clean Products ” means gasoline, diesel, biodiesel, ethanol and jet fuels.

Clean Products Reserved Capacity ” means an aggregate volume of Barrels of Clean Products per Month throughput across the Terminal through truck rack, as set forth on Exhibit 2 hereto; provided however, that the Clean Products Reserved Capacity during the Month in which the Commencement Date occurs shall be prorated in accordance with the ratio of the number of days including and following the Commencement Date in such Month to the total number of days in such Month.

Commencement Date ” has the meaning set forth in Section 2 .

Confidential Information ” means all confidential, proprietary or non-public information of a Party, whether set forth in writing, orally or in any other manner, including all non-public information and material of such Party (and of companies with which such Party has entered into confidentiality agreements) that another Party obtains knowledge of or access to, including non-public information regarding products, processes, business strategies and plans, customer lists, research and development programs, computer programs, hardware configuration information, technical drawings, algorithms, know-how, formulas, processes, ideas, inventions (whether patentable or not), trade secrets, schematics and other technical, business, marketing and product development plans, revenues, expenses, earnings projections, forecasts, strategies, and other non-public business, technological, and financial information.

Contribution Agreement ” has the meaning set forth in the Recitals.

 

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Customer ” has the meaning set forth in the Preamble.

Customer Group ” has the meaning set forth in Section 23(a) .

Customer Termination Notice ” has the meaning set forth in Section 27(b) .

DCA ” has the meaning set forth in Section 7(b) .

Dedicated Tanks ” has the meaning set forth in Section 5(a) .

Diesel Additive Facilities ” has the meaning set forth in Section 7(c) .

EPA ” has the meaning set forth in Section 7(b) .

Ethanol Services ” has the meaning set forth in Section 9(a) .

Excess Amount ” has the meaning set forth in Section 4(b) .

Extension Period ” has the meaning set forth in Section 2 .

Force Majeure ” means events or circumstances, whether foreseeable or not, not reasonably within the control of TLO and which, by the exercise of due diligence, TLO is unable to prevent or overcome, that prevent performance of TLO’s obligations, including: acts of God, strikes, lockouts or other industrial disturbances, wars, riots, fires, floods, storms, orders of Governmental Authorities, explosions, terrorist acts, breakage, accident to machinery, equipment, storage tanks or lines of pipe, and inability to obtain or unavoidable delays in obtaining material or equipment and similar events.

Force Majeure Notice ” has the meaning set forth in Section 27(a) .

Force Majeure Period ” has the meaning set forth in Section 27(a) .

General Partner ” has the meaning set forth in the Preamble.

Governmental Authority ” means any federal, state, local or foreign government or any provincial, departmental or other political subdivision thereof, or any entity, body or authority exercising executive, legislative, judicial, regulatory, administrative or other governmental functions or any court, department, commission, board, bureau, agency, instrumentality or administrative body of any of the foregoing.

Initial Term ” has the meaning set forth in Section 2 .

LAC ” has the meaning set forth in Section 7(b) .

Light Ends ” means propanes, butanes and pentanes.

Light Ends Reserved Capacity ” means an aggregate volume of Barrels of Light Ends per Month throughput across the Terminal through truck rack, as set forth on Exhibit 2 hereto; provided however, that the Light Ends Reserved Capacity during the Month in which the

 

3


Commencement Date occurs shall be prorated in accordance with the ratio of the number of days including and following the Commencement Date in such Month to the total number of days in such Month.

Minimum Clean Products Commitment ” means an aggregate volume of Barrels of Clean Products per Month throughput across the Terminal through truck rack, as set forth on Exhibit 2 hereto; provided however, that the Minimum Products Commitment during the Month in which the Commencement Date occurs shall be prorated in accordance with the ratio of the number of days including and following the Commencement Date in such Month to the total number of days in such Month.

Minimum Light Ends Commitment ” means an aggregate volume of Barrels of Light Ends per Month throughput across the Terminal through truck rack, as set forth on Exhibit 2 hereto; provided however, that the Minimum Light Ends Commitment during the Month in which the Commencement Date occurs shall be prorated in accordance with the ratio of the number of days including and following the Commencement Date in such Month to the total number of days in such Month.

Minimum Rail Commitment ” means an aggregate volume of Barrels of Light Ends per Month throughput across the Terminal by loading and unloading railcars, as set forth on Exhibit 2 hereto; provided however, that the Minimum Rail Commitment during the Month in which the Commencement Date occurs shall be prorated in accordance with the ratio of the number of days including and following the Commencement Date in such Month to the total number of days in such Month.

“Minimum Throughput Commitments ” means the Minimum Rail Commitment, the Minimum Clean Products Commitment and the Minimum Light Ends Commitment, and “ Minimum Throughput Commitment ” means any one of them.

Month ” means a calendar month.

Operating Capacity ” means the effective storage capacity of a tank, taking into account accepted engineering principles, industry standards, API guidelines and Applicable Law, only as to Products that each tank is capable of storing, within the requirements of applicable permit requirements and under actual conditions as they may exist at any time. The Operating Capacity of each tank is listed on the applicable Terminal Service Order as of the date of such Terminal Service Order.

Partnership ” has the meaning set forth in the Preamble.

Partnership Change of Control ” means Tesoro ceases to possess, directly or indirectly, the power to direct or cause the direction of the management and policies of the General Partner of the Partnership, whether through ownership of voting securities, by contract, or otherwise.

Partnership Group ” has the meaning set forth in Section 23(b) .

Party ” or “ Parties ” means that each of Customer and TLO is a “Party” and collectively are the “Parties” to this Agreement.

 

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Person ” means any individual, partnership, limited partnership, joint venture, corporation, limited liability company, limited liability partnership, trust, unincorporated organization or Governmental Authority or any department or agency thereof.

Product ” or “ Products ” means the Light Ends and Clean Products described herein as being handled under this Agreement.

Rail Reserved Capacity ” means an aggregate volume of Barrels of Light Ends per Month throughput across the Terminal by loading and unloading railcars, as set forth on Exhibit 2 hereto; provided however, that the Rail Reserved Capacity during the Month in which the Commencement Date occurs shall be prorated in accordance with the ratio of the number of days including and following the Commencement Date in such Month to the total number of days in such Month.

Receiving Party Personnel ” has the meaning set forth in Section 35(d) .

Red Dye ” has the meaning set forth in Section 7(d) .

Refinery ” means Customer’s refining facilities located at Anacortes, Washington.

Replacement Customer ” has the meaning set forth in Section 32 .

Reserved Capacities ” means the Rail Reserved Capacity, the Light Ends Reserved Capacity and the Clean Products Reserved Capacity, and “ Reserved Capacity ” means any one of them.

Restoration ” has the meaning set forth in Section 28(b) .

Shell Capacity ” means the gross storage capacity of a tank for each respective Product, based upon its dimensions, as set forth in an applicable Terminal Service Order.

Shortfall Payment ” has the meaning set forth in Section 4(d) .

Storage First Offer Period ” has the meaning set forth in Section 31 .

Storage Right of First Refusal ” has the meaning set forth in Section 31 .

Storage Services Fee ” has the meaning set forth in Section 5(a) .

Surcharge ” has the meaning set forth in Section 11(a) .

TAC ” has the meaning set forth in the Recitals.

Tank Heels ” consist of the minimum quantity of Product which either (a) must remain in a tank during all periods when the tank is available for service to keep the tank in regulatory compliance or (b) is necessary for physical operation of the tank.

Term ” has the meaning set forth in Section 2 .

 

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Terminal ” means TLO’s Anacortes Terminal adjacent to the Refinery, consisting of a two-lane Clean Product truck terminal, a two-lane Light Ends truck terminal, a Light Ends rail loading and unloading facility and a two-lane Clean Products truck terminal under construction.

Terminal Service Order ” has the meaning set forth in Section 13(a) .

Terminalling Equipment ” has the meaning set forth in Section 4(c) .

Terminalling First Offer Period ” has the meaning set forth in Section 30(b) .

Terminalling Right of First Refusal ” has the meaning set forth in Section 30(b) .

Terminalling Service Fee ” means for any Month during the Term, the total fee per Barrel of throughput paid by Customer during that Month for terminalling and Ancillary Services at the Terminal, but excluding the Storage Services Fee, as set forth on a Terminal Service Order.

Termination Notice ” has the meaning set forth in Section 27(a) .

Tesoro ” has the meaning set forth in the Recitals.

Third Amended and Restated Omnibus Agreement ” means that certain Third Amended and Restated Omnibus Agreement, entered into concurrently herewith, among Tesoro, Customer, Tesoro Companies, Inc., TAC, the General Partner and the Partnership, as such agreement may be amended, supplemented or restated from time to time.

Throughput Right of First Refusal ” has the meaning set forth in Section 28(e) .

TLO ” has the meaning set forth in the Preamble.

Transmix ” has the meaning set forth in Section 6 .

ULSD ” means ultra-low sulfur diesel.

 

2. TERM

The initial term of this Agreement shall commence on the date hereof (the “ Commencement Date ”) and shall continue through July 1, 2024 (the “ Initial Term ”); provided, however, that Customer may, at its option, extend the Initial Term for up to two (2) renewal terms of five (5) years each (each, an “ Extension Period ”) by providing written notice of its intent to TLO no less than three hundred sixty-five (365) calendar days prior to the end of the Initial Term or the then-current Extension Period. The Initial Term, and any Extension Period, shall be referred to herein as the “ Term .”

 

3. SERVICES

During the Term and subject to the terms and conditions of this Agreement and any Terminal Service Order, TLO shall make available to Customer the following services:

(a) Commingled storage and throughput capacity pursuant to Section 4 below;

 

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(b) Dedicated storage pursuant to Section 5 below;

(c) Railcar loading, unloading and switching services as set forth on a Terminal Service Order; and

(d) The services pursuant to Sections 6-9 below, other additization services as set forth on a Terminal Service Order and any and other services pursuant to a Terminal Service Order (collectively, the “ Ancillary Services ”).

 

4. THROUGHPUT

(a) Throughput Commitment and Terminalling Service Fee . Customer shall deliver and/or pay for the Minimum Throughput Commitments at the Terminal, and TLO shall make available to Customer at all times commingled storage and throughput capacity at the Terminal sufficient to allow Customer to throughput the Reserved Capacities. Customer shall pay the Terminalling Service Fee for such service as set forth in a Terminal Service Order. Allocation of storage and throughput capacity for separate Products at the Terminal shall be set forth in a Terminal Service Order, if applicable. TLO shall not make any commitments to third parties that would interfere with the ability of Customer to throughput the Reserved Capacities. Customer commits to deliver and/or pay for the Minimum Throughput Commitments on a Monthly basis during the Term.

(b) Excess Capacity . Customer may throughput volumes in excess of a Minimum Throughput Commitment, up to the then-available capacity of the Terminal, net of any third-party commitments, as determined by TLO at any time, which allocation of any excess capacity shall be in accordance with current practices, or as otherwise may be set forth in a Terminal Service Order. If during any Month during the Term, Customer throughputs aggregate volumes greater than a Minimum Throughput Commitment, then Customer shall pay TLO an amount equal to the fee determined by multiplying the actual volumes throughput by Customer in excess of the applicable Minimum Throughput Commitment by the Terminalling Service Fee (the “ Excess Amount ”).

(c) Removal of Equipment from Service . If at any time during the Term, any tank, rack or other equipment or facility of TLO that is dedicated to Customer or otherwise being used to provide services hereunder (“ Terminalling Equipment ”), is removed from service, and if removal of such Terminalling Equipment restricts Customer from being able to throughput a Reserved Capacity or receive associated Ancillary Services, then until such Terminalling Equipment is restored to service, Customer’s applicable Minimum Throughput Commitment shall be reduced by the difference between the applicable Minimum Throughput Commitment and the amount that Customer can effectively throughput at such location without restriction until such Terminalling Equipment is restored to service.

(d) Shortfall Payments . If, during any Month during the Term, Customer throughputs aggregate volumes less than a Minimum Throughput Commitment for such Month, then Customer shall pay TLO an amount (a “ Shortfall Payment ”) for any shortfall. Shortfall Payments shall be equal to the amount determined by taking the difference between (i) the applicable

 

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Minimum Throughput Commitment multiplied by the Terminal Service Fee and (ii) the applicable actual volumes throughput by Customer multiplied by the Terminal Service Fee. The dollar amount of any Shortfall Payment paid by Customer shall be posted as a credit to Customer’s account and may be applied against any Excess Amounts owed by Customer during any of the succeeding three (3) Months. Credits will be applied in the order in which such credits accrue and any remaining portion of the credit that is not used by Customer during the succeeding three (3) Months shall expire ( e.g ., a credit that accrues in January will be available in February, March and April, will expire at the end of April, and must be applied prior to applying any credit which accrues in February).

(e) Third Party Throughput Credit . If TLO throughputs volumes from third parties (other than Replacement Customers) at the Terminal during any Month, such volumes shall be applied as a credit to reduce the applicable Minimum Throughput Commitment, up to a maximum amount equal to such Minimum Throughput Commitment. All volumes throughput by Replacement Customers shall be applied as a credit to reduce the applicable Minimum Throughput Commitment.

 

5. DEDICATED STORAGE

(a) Storage Services Fee . Customer shall pay a Monthly fee (the “ Storage Services Fee ”) to reserve, on a firm basis, all of the existing aggregate Shell Capacity of certain tanks (the “ Dedicated Tanks ”) as specified on a Terminal Service Order. Such fee shall be payable by Customer on a Monthly basis throughout the Term of the Agreement, regardless of the actual volumes of Products stored by TLO on behalf of Customer; provided, however, that the Parties shall from time to time negotiate an appropriate adjustment to such fee if the following conditions are met: (i) Customer requires the full Operating Capacity of the Dedicated Tanks, (ii) the full Operating Capacity of the Tanks is not available to Customer for any reason (other than any reason resulting from or relating to actions or inactions by Customer), and (iii) TLO is unable to otherwise accommodate the actual volumes of Products required to be stored by Customer pursuant to the terms of this Agreement or any Terminal Service Order. Unless otherwise agreed, such adjustment shall be made in proportion to the reduction in Operating Capacity for any time period compared with the Operating Capacity then in effect for the affected Dedicated Tanks pursuant to the mutually agreed Terminal Service Orders. The Parties recognize that the existing Operating Capacity of certain tanks may be less than the Shell Capacity of such Dedicated Tanks, but the Parties acknowledge and agree that the Storage Services Fee shall be set in terms of a dollar-per-Barrel per Month rate based on Shell Capacity in the applicable Terminal Service Order. Such Storage Services Fee shall include all storage, pumping, and transshipment between and among the Dedicated Tanks.

(b) Calculation of Storage Services Fee . The Storage Services Fee shall be calculated using the per Barrel rate set forth on the initial Terminal Service Order executed effective as of the Commencement Date for the then-existing aggregate Shell Capacity of the tanks specified in such initial Terminal Service Order. The Storage Services Fee owed during the Month in which the Commencement Date occurs, if less than a full calendar month, shall be prorated in accordance with the ratio of (i) the number of days in such Month during which this Agreement is effective to (ii) the total number of days in such Month.

 

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6. PRODUCT DOWNGRADE AND INTERFACE

TLO shall account for the volume of Product downgraded, and Customer’s inventory of Products and/or interface shall be adjusted, provided that, interface volume (“ Transmix ”) received shall be allocated (a) in the case of dedicated storage, entirely to Customer and (b) in the case of commingled storage, among Customer and other customers receiving Products generating such Transmix in the same shipment or stored in commingled storage in proportion to each customer’s volume of Products in such shipment or storage. Customer shall remove its Transmix upon notice from TLO and shall be subject to applicable Transmix handling fees upon its removal, as provided in a Terminal Service Order. If Transmix is not removed within fifteen (15) Business Days after notification (such time period to be extended to the extent of any delay or hindrance by TLO, its agents or contractors for any reason), TLO shall have the right to sell such Transmix at market rates and return any proceeds to Customer, less applicable Transmix handling fees in effect at the time of such sale. Product downgraded as a result of ordinary Terminal or pipeline operations including line flushing, rack meter provings or other necessary Terminal operations shall not constitute losses for which TLO is liable to Customer.

 

7. ADDITIZATION OPTIONS

(a) Additive Injection Service . If available at the Terminal, TLO shall provide equipment for the injection of additives, as provided below. Customer shall designate pursuant to a Terminal Service Order which additive injection service shall be provided.

(b) DCA Additization . All gasoline Product leaving the Terminal shall be additized (“ Additized Gasoline ”). As an exception, TLO shall accommodate a request from Customer to lift base gasoline from the Terminal. In that case, the bill of lading issued by TLO shall label all such Product as base gasoline (“ Base Gasoline ”). TLO shall provide a generic Deposit Control Additive (“ DCA ”) injection service, including all required reporting and record keeping prescribed by Applicable Law. The additive supplied shall be an Environmental Protection Agency (“ EPA ”) certified DCA. Subject to the other provisions hereof, Customer may request TLO to instead inject a different proprietary DCA into certain gasoline delivered hereunder, instead of the generic DCA provided by TLO, and TLO shall accommodate such requests pursuant to a Terminal Service Order specifying the specific additization required and fees to be charged for its injection, subject to Customer providing a suitable Additized Gasoline system for such proprietary additive. TLO shall ensure that such additive is injected into all appropriate gasoline Product delivered to Customer at a rate no lower than the Lowest Allowable Concentration (“ LAC ”) at which such additive was certified. The gasoline additization rate shall be determined by Customer, but shall not be less than 1.1 times the LAC specified by the respective additive manufacturer or supplier. Notwithstanding the above, Customer shall be solely responsible for registering with the EPA or any other government agency its use of generic or proprietary additive in its fuels, as required by Applicable Law. Customer shall submit evidence of registration in compliance with 40 C.F.R. Part 80. Customer shall also be responsible for full compliance with any quarterly or other regulatory reporting, and any other requirements under Applicable Law related to use of generic or proprietary additive in Customer’s Product.

 

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(c) Lubricity and Conductivity Additization . TLO shall maintain and operate diesel lubricity and conductivity additive injection facilities (the “ Diesel Additive Facilities ”) at the Terminal in accordance with customary industry standards during the Term, including all required reporting and record keeping prescribed by Applicable Law. TLO shall arrange for purchase and delivery of any and all required lubricity and conductivity additive for injection through the Diesel Additive Facilities at the Terminal. TLO shall inject into all ULSD delivered to Customer at the Terminal an amount of lubricity and conductivity additive that TLO determines to be sufficient to comply with current ASTM diesel lubricity and conductivity specifications. TLO shall, upon request, provide Customer with documentation of additive specifications and additive injection, which TLO shall keep on file at the Terminal.

(d) Red Dye Additization . TLO shall provide a generic red dye additive (“ Red Dye ”) injection service for diesel, including all required reporting and record keeping prescribed by Applicable Law. TLO shall be responsible for determining the injection rates, Red Dye inventory levels, meter readings, and calculations of actual treat rates, in compliance with the minimum levels prescribed by the Internal Revenue Service. Customer is responsible for designating which of its accounts shall be authorized to use Red Dye diesel injection services. TLO equipment shall enable designated Carriers and accounts to inject Red Dye upon request prior to loading diesel Product at the Terminal. Customer’s Carrier shall be solely responsible for designating that a load of diesel Product be injected with Red Dye, and TLO shall have no liability with regard to whether a load of Product is additized with Red Dye. TLO shall not be responsible for any loss, damage or liability that arises from Carrier injecting or failing to inject Red Dye into Customer’s Product, unless caused by TLO’s equipment failure or negligence.

(e) Responsibility for Provision of Additive . For any additization services provided pursuant to this Section 7 , TLO shall be responsible for providing generic additives, and Customer shall be responsible for providing any special or proprietary additives requested by Customer.

(f) Special Additive Equipment . As set forth in a Terminal Service Order, and subject to the other provisions set forth herein and the availability of suitable space at the Terminal, Customer shall have the option of having TLO install and maintain at the Terminal, at Customer’s sole risk, cost and expense, such special additive equipment as may be desirable for Products to be delivered to Customer’s account hereunder. The engineering and installation of any fixture, equipment or appurtenance placed on the Terminal in respect thereof shall be subject to TLO’s prior approval and supervision. During the Term, TLO shall operate the special additive equipment with any fees therefor to be set forth in a Terminal Service Order. Upon the expiration of the Term, TLO will have the option to purchase the special additive equipment for a price to be set forth in a Terminal Service Order.

 

8. BIODIESEL SERVICES

(a) Biodiesel Facilities . If available at the Terminal, TLO shall operate B99/B100 (“ Biodiesel ”) truck rack, tank and inbound manifold blending facilities (the “ Biodiesel Facilities ”) as provided in a Terminal Service Order. The Biodiesel Facilities are intended to provide a means to blend Biodiesel with ULSD. Customer shall be required to keep a Tank Heel inventory in the Biodiesel tanks in proportion with the number of active inventory holders in the tanks.

 

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(b) Payment . Customer shall pay TLO for the Biodiesel blending and throughput provided by TLO as set forth in a Terminal Service Order.

(c) Biodiesel Services Provided . TLO shall (i) coordinate with Customer the scheduling of Biodiesel trucks from Customer to the Terminal; (ii) provide necessary services to convey Customer’s Biodiesel from trucks to appropriate Biodiesel storage tanks where it shall be stored until blended with ULSD and delivered to Customer; and (iii) blend and inject Customer’s Biodiesel into Customer’s ULSD in accordance with Customer’s instructions and Applicable Law. The provision of any new equipment necessary for the services in this Section 8(c) , and which Party shall own and operate such equipment during and after the Term, shall be set forth on a Terminal Service Order.

 

9. ETHANOL BLENDING SERVICES

(a) Services and Equipment . Where ethanol receiving, storage and blending facilities are available at the Terminal, upon Customer’s request, the Parties shall execute a Terminal Service Order pursuant to which TLO shall receive, store and blend ethanol into Customer’s gasoline at the Terminal (“ Ethanol Services ”). TLO shall provide and operate all equipment required for the Ethanol Services. The equipment shall consist of truck and/or rail unloading racks, tanks, pumps, motors, injectors, computer control, and any other ancillary equipment necessary for the providing of the Ethanol Services.

(b) Ethanol Inventories . Customer shall be solely responsible for supplying inventories of ethanol at its own expense, including the scheduling and transporting of ethanol into the Terminal, subject to notice and scheduling procedures mutually agreeable to the Parties. TLO shall receive Customer’s ethanol into fungible ethanol storage at the Terminal, unless otherwise specified in a Terminal Service Order.

(c) Blending Instructions . Upon a request from Customer for Ethanol Services, a Terminal Service Order shall provide the desired blending ratio of ethanol to gasoline at the Terminal (“ Blending Instructions ”), including the minimum Octane (R+M/2) rating for each grade of Customer’s gasoline Product, prior to blending. A change to the blending ratios shall require a Terminal Service Order.

(d) Records . TLO shall maintain for a minimum of five (5) years written or electronic records of the type and volume of oxygenate blended into Customer’s gasoline.

(e) Quality Assurance . TLO shall maintain an industry standard quality assurance oversight program of the ethanol blending process. TLO shall provide Customer with an annual report within fifteen (15) Business Days after the end of each calendar year that, at a minimum, summarizes the volume of Customer’s gasoline received by TLO, the volume of oxygenate added to Customer’s gasoline and total volume of blended gasoline.

 

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(f) Monitoring . TLO shall allow Customer or its agents to monitor the oxygenate blending operation by periodic audit, sampling, testing and/or records review to ensure the overall volumes and type of oxygenate blended into gasoline is consistent with the oxygenate claimed by Customer as required by 40 C.F.R. 80.101(d)(4)(ii)(B)(2). The scope and type of such audits will be negotiated in good faith by the Parties in advance and memorialized in writing.

(g) Customer Liability . TLO shall rely on Blending Instructions and data provided by Customer in performing its obligations under this Agreement or any Terminal Service Order. Customer agrees to be solely responsible for all claims arising from TLO’s use of or reliance on these Blending Instructions and data.

(h) Condition . When performing the Ethanol Services as per Customer’s Blending Instructions, TLO shall not certify to Customer or any third-party that blended gasoline does or shall meet ASTM D 4814 or any federal, state, or local regulatory specifications. Customer agrees that it is receiving from TLO the Blended Gasoline in an “AS IS, WHERE IS” condition without warranties of any kind, including any warranties of merchantability or fitness for a particular purpose, or its ability to meet ASTM or regulatory specifications.

 

10. REIMBURSEMENT FOR NEWLY IMPOSED TAXES AND REGULATORY FEES; EXCISE TAXES

(a) Prompt Reimbursement . Customer shall promptly pay or reimburse TLO for any newly imposed taxes, levies, royalties, assessments, licenses, fees, charges, surcharges and sums due of any nature whatsoever (other than income taxes, gross receipt taxes and similar taxes) by any federal, state or local government or agency that TLO incurs on Customer’s behalf for the services provided by TLO under this Agreement or any Terminal Service Order. If TLO is required to pay any of the foregoing, Customer shall promptly reimburse TLO in accordance with the payment terms set forth in this Agreement. Any such newly imposed taxes or regulatory fees as provided for in this Section 10(a) shall be specified in an applicable Terminal Service Order.

(b) Excise Tax Certification . Upon written request by TLO, Customer shall supply TLO with a completed signed original notification certificate of gasoline and diesel fuel registrant as required by the Internal Revenue Service’s excise tax regulation. Customer further agrees to comply with all Applicable Law with respect to such taxes.

(c) Exemption Certification . If Customer is exempt from the payment of any taxes allocated to Customer under the foregoing provisions, Customer shall furnish TLO with the proper exemption certificates.

 

11. EXPENDITURE REQUIRED BY NEW LAWS AND REGULATIONS

(a) Surcharge . If, during the Term, any existing laws or regulations are changed or any new laws or regulations are enacted that require TLO to make substantial and unanticipated expenditures (whether capitalized or otherwise) with respect to the Terminal, TLO may, subject to the terms of this Section 11 , impose a surcharge to increase the applicable service fee (“ Surcharge ”), to cover Customer’s pro rata share of the cost of complying with these laws or regulations, based upon the percentage of Customer’s use of the services or facilities impacted by such new laws or regulations.

 

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(b) Notification and Mitigation . TLO shall notify Customer of any proposed Surcharge to be imposed pursuant to Section 11(a) sufficient to cover the cost of any required capital projects and any ongoing increased operating costs. TLO and Customer then shall negotiate in good faith for up to thirty (30) days to mutually determine the effect of the change in law or regulation or new law or regulation, the cost thereof, and how such cost shall be amortized at an interest rate of no more than nine percent (9%) as a Surcharge, with the understanding that TLO and Customer shall use their reasonable commercial efforts to mitigate the impact of, and comply with, these laws and regulations. Without limiting the foregoing, if expenditures requiring a Surcharge may be avoided or reduced through changes in operations, then the Parties shall negotiate in good faith to set forth the appropriate changes in a Terminal Service Order to evidence the reduction of the amount of a Surcharge while leaving the Parties in the same relative economic position they held before the laws or regulations were changed or enacted.

(c) Less Than 15% Surcharge . In the event any Surcharge results in less than a fifteen percent (15%) increase in the applicable service fee, Customer will be assessed such Surcharge on all future invoices during the period in which such Surcharge is in effect for the applicable amortization period, and TLO shall not terminate the affected service from this Agreement.

(d) 15% or More Surcharge . In the event any Surcharge results in a fifteen percent (15%) or more increase in the applicable service fee, TLO shall notify Customer of the amount of the Surcharge required to reimburse TLO for its costs, plus carrying costs, together with reasonable supporting detail for the nature and amount of any such Surcharge.

(i) If within thirty (30) days of such notification provided in this Section 11(d) , Customer does not agree to pay such Surcharge or to reimburse TLO up front for its costs, TLO may elect to either:

 

  a. require Customer to pay such Surcharge, up to a fifteen percent (15%) increase in the applicable service fee; or

 

  b. terminate the service under this Agreement to which the Surcharge applies, upon notice to Customer.

(ii) TLO’s performance obligations under this Agreement shall be suspended or reduced during the above thirty (30) day period to the extent that TLO would be obligated to make such expenditures to continue performance during such period.

(e) Resolution of Surcharge . Following a resolution with respect to the amount and manner of payment of a Surcharge pursuant to this Section 11 , the Parties shall execute an appropriate Terminal Service Order memorializing the terms of such resolution.

(f) Payment of Surcharge . In lieu of paying the Surcharge in connection with any required capital project, Customer may, at its option, elect to pay the full cost of the substantial and unanticipated expenditures upon completion of a project.

 

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12. REIMBURSEMENT FOR TANK CLEANING AND CONVERSION

(a) Reimbursement for Tank Cleaning . If any Dedicated Tanks are removed from service or cleaning of any tanks is performed by TLO at the specific request of Customer, Customer shall bear (or reimburse TLO) for all costs to clean, degas or otherwise prepare the tank(s) including, without limitation, the cost of removal, processing, transportation, disposal, of all waste and the cost of any taxes or charges TLO may be required to pay in regard to such waste. For any tanks that are dedicated to Customer for segregated storage of Customer’s Products as set forth in any Terminal Service Order, Customer agrees to reimburse TLO for the reasonable cost of changes necessary to return the dedicated storage tanks to TLO on termination of their dedication for segregated storage under this Agreement, in the same condition as originally received less normal wear and tear, unless otherwise mutually agreed by the Parties.

(b) Reimbursement for Tank Conversion . If Customer requests that any dedicated tank be changed for storage of a different grade or type of Product, TLO shall agree to a change in such service, if the same can be accomplished in accordance with reasonable commercial standards, accepted industry and engineering guidelines, permit requirements and Applicable Law. If any such modifications, improvements, vapor recovery, cleaning, degassing, or other preparation of the tanks is performed by TLO at the request of Customer, Customer shall bear all direct costs attributable thereto, including, without limitation, the cost of removal, processing, transportation, and disposal of all waste and the cost of any taxes or mutually agreed charges TLO may be required to pay in regard to such waste, which costs shall be set forth on the applicable Terminal Service Order.

 

13. TERMINAL SERVICE ORDERS; PAYMENT

(a) Description . TLO and Customer shall enter into one or more terminal service orders for the Terminal substantially in the form attached hereto as Exhibit 1 (each, a “ Terminal Service Order ”). Upon a request by Customer pursuant to this Agreement or as deemed necessary or appropriate by TLO in connection with the services to be delivered pursuant hereto, TLO shall generate a Terminal Service Order to set forth the specific terms and conditions for providing the applicable services described therein and the applicable fees to be charged for such services. No Terminal Service Order shall be effective until fully executed by both TLO and Customer.

(b) Included Items . Items available for inclusion on a Terminal Service Order include, but are not limited to, the following:

(i) allocation of throughput capacity by Product, and the rates by Product for determining the Terminalling Service Fee pursuant to Section 4 ;

(ii) identification of tanks to be utilized for dedicated storage tanks and the Storage Services Fee pursuant to Section 5 ;

(iii) Transmix handling fees pursuant to Section 6 ;

(iv) additization pursuant to Section 7 ;

 

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(v) special or proprietary additive injection services, including any installation and maintenance of special additive equipment, pursuant to Section 7(f) , and the fees related thereto;

(vi) biodiesel services and new equipment pursuant to Section 8(c) and the fees related thereto;

(vii) ethanol blending services pursuant to Section 9 and the fees related thereto;

(viii) reimbursement related to newly imposed taxes pursuant to Section 10 ;

(ix) Surcharges related to expenditures as a result of newly imposed laws and regulations pursuant to Section 11 ;

(x) tank cleaning or conversion pursuant to Section 12 ;

(xi) terms and conditions for the provision of railcar loading, unloading and switching services; and

(xii) any other services as may be agreed.

(c) Invoices . TLO shall invoice Customer on a monthly basis and Customer shall pay all amounts due under this Agreement and any Terminal Service Order no later than ten (10) calendar days after Customer’s receipt of TLO’s invoices. Any past due payments owed by Customer shall accrue interest, payable on demand, at the lesser of (i) the rate of interest announced publicly by JPMorgan Chase Bank, in New York, New York, as JPMorgan Chase Bank’s prime rate (which Parties acknowledge and agree is announced by such bank and used by the Parties for reference purposes only and may not represent the lowest or best rate available to any of the customers of such bank or the Parties), plus four percent (4%), and (ii) the highest rate of interest (if any) permitted by Applicable Law, from the due date of the payment through the actual date of payment.

(d) Fee Increases . Any fees of a fixed amount set forth in this Agreement and any Terminal Service Order shall be increased on July 1 of each year of the Term, commencing on July 1, 2015, by a percentage equal to the greater of zero or the positive change, if any, in the CPI-U (All Urban Consumers) for the prior calendar year, as reported by the Bureau of Labor Statistics, and rounded to the nearest one-tenth (1/10) of one percent (1%).

(e) Conflict between Agreement and Terminal Service Order . In case of any conflict between the terms of this Agreement and the terms of any Terminal Service Order, the terms of the applicable Terminal Service Order shall govern.

 

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14. CUSTODY TRANSFER AND TITLE

(a) Custody of Pipeline Receipts and Deliveries . For Product received into the Terminal by pipeline, custody of the Product shall pass to TLO at the flange where it enters the Terminal’s receiving line. For Product delivered by the Terminal into a pipeline, custody of the Product shall pass to Customer at the flange where it exits the Terminal’s delivery line.

(b) Custody of Truck Receipts and Deliveries . For receipts and deliveries to or from trucks, custody shall pass at the flange where the hoses at TLO’s facility interconnect with the truck.

(c) Custody of Rail Receipts and Deliveries . For Product received by rail, custody shall pass to TLO when the switching locomotive used to transfer Customer’s rail cars to the Terminal is uncoupled from such rail cars at the Terminal.

(d) Custody of Marine Receipts and Deliveries . For receipts and deliveries to or from marine vessels, custody shall pass at the flange where the Terminal interconnects with the hoses connected to the marine vessel.

(e) In-Tank . Deliveries by book transfer shall be reflected in the books of TLO.

(f) Title Transfer . Upon re-delivery of any Product to Customer’s account, Customer shall become solely responsible for any loss, damage or injury to Person or property or the environment, arising out of transportation, possession or use of such Product after transfer of custody and the loss allowance provisions hereof shall apply to Product while in TLO’s custody. Title to all of Customer’s Product received in the Terminal shall remain with Customer at all times. Both Parties acknowledge that this Agreement represents a bailment of Products by Customer to TLO and not a consignment of Products, it being understood that TLO has no authority hereunder to sell or seek purchasers for the Products of Customer, except for Transmix as provided in Section 6 above. Customer hereby warrants that it shall, at all times, have good title to and the right to deliver, throughput, store and receive Products pursuant to the terms of this Agreement and any Terminal Service Order.

 

15. PRODUCT QUALITY

(a) Product Specifications of Delivered Products . Customer warrants that all Products delivered under this Agreement and any Terminal Service Order shall meet the latest applicable pipeline specifications or mutually agreed upon specifications for that Product upon receipt at the Terminal and contain no deleterious substances or concentrations of any contaminants that may make it or its components commercially unacceptable in general industry application. Customer shall not deliver to the Terminal any Products which: (i) would in any way be injurious to the Terminal; (ii) would render the Terminal unfit for the proper storage of similar Products; (iii) would contaminate or otherwise downgrade the quality of the Products stored in commingled storage; (iv) may not be lawfully stored at the Terminal; or (v) otherwise do not meet applicable Product specifications for such Product that are customary in the location of the Terminal. If, however, there are Products that do not have such applicable specifications, the specifications shall be mutually agreed upon by the Parties. Should Customer’s commingled Products not comply with the minimum quality standards set forth in this Agreement or any Terminal Service Order, Customer shall be liable for all loss, damage and cost incurred thereby, including damage to Products of third parties commingled with Customer’s unfit Products.

 

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(b) Product Specifications of Commingled Storage . TLO shall have the right to store compatible Products received for Customer’s account with Products belonging to TLO or third parties in TLO’s commingled storage tanks. TLO shall handle Customer’s fungible Products in accordance with TLO’s prevailing practices and procedures for handling such Products. The quality of all Products tendered into commingled storage for Customer’s account shall be verified either by Customer’s refinery analysis or supplier’s certification, such that Products so tendered shall meet TLO’s Product specifications. All costs for such analysis shall be borne solely by Customer. TLO shall have the right to sample any Product tendered to the Terminal hereunder. The cost of such sampling shall be borne solely by TLO. All Products returned to Customer shall comply with Product specifications in effect on the date the Products are delivered to Customer. Notwithstanding any other provision herein, any and all Products that leave the Terminal shall meet all relevant ASTM, EPA, federal and state specifications.

(c) Liability for Commingled Storage . TLO shall exercise reasonable care to ensure that all Products delivered by third parties into commingled storage with Customer’s Products meet applicable Product specifications for such Product that are customary in the location of the Terminal. In the event that Customer’s Products are commingled with third-party Products that do not comply with the minimum quality standards set forth in this Agreement or any Terminal Service Order, TLO shall be liable for all loss, damage and cost incurred thereby.

 

16. MEASUREMENT AND VOLUME LOSSES

(a) Methods of Measurement .

(i) All quantities of Products received or delivered by or into trucks or marine vessels shall be measured and determined based upon the meter readings at the Terminal, as reflected by delivery tickets or bills of lading, or if such meters are unavailable, by applicable calibration tables, as set forth on a Terminal Service Order or pursuant to mutual agreement of the Parties.

(ii) All quantities of Products received or delivered by or into railcars shall be measured and determined based upon the meter readings at the Terminal, or if such meters are unavailable, by applicable calibration tables, as set forth on a Terminal Service Order or pursuant to mutual agreement of the Parties.

(iii) All quantities of Products received and delivered by pipeline shall be measured and determined based upon the meter readings of the pipeline operator, as reflected by delivery tickets, or if such meters are unavailable, by applicable calibration tables, as set forth on a Terminal Service Order or pursuant to mutual agreement of the Parties.

(iv) Deliveries by book transfer shall be reflected by entries in the books of TLO.

(v) All quantities shall be adjusted to net gallons at 60° F in accordance with ASTM D-1250 Petroleum Measurement Tables, or latest revisions thereof. Meters and temperature probes shall be calibrated according to applicable API standards. Customer shall have the right, at its sole expense, and in accordance with rack location procedure,

 

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to independently certify such calibration. Storage tank gauging shall be performed by TLO’s personnel. TLO’s gauging shall be deemed accurate unless challenged by an independent certified gauger. Customer may perform joint gauging at its sole expense with TLO’s personnel at the time of delivery or receipt of Product, to verify the amount involved. If Customer should request an independent gauger, such gauger must be acceptable to TLO and such gauging shall be at Customer’s sole expense.

(b) Measurement and Volume Loss Control Practices .

(i) TLO shall have no obligation to measure volume gains and losses. In the event third-party Products are terminalled at the Terminal, the Parties shall mutually determine the measurement and volume loss control practices for the Terminal.

(ii) TLO shall be responsible to Customer only for Product losses and/or shortages resulting from the negligent or wrongful acts and omissions of TLO; provided that TLO shall not be responsible to Customer for any Product losses and/or shortages for which Customer is compensated by its cargo/inventory insurance carrier, including through the cargo/inventory insurance coverage required by Section 24 . If Customer fails to maintain the cargo/inventory insurance coverage required by Section 24 , then TLO shall also not be responsible to Customer for any Product losses and/or shortages to the extent Customer would have been compensated by its insurance carrier had Customer maintained the cargo/inventory insurance coverage required by Section 24 .

(iii) Customer shall be responsible for all Product losses and/or shortages it may suffer other than those covered by Section 16(b)(ii) .

 

17. PRODUCT DELIVERIES, RECEIPTS AND WITHDRAWALS

(a) Product Deliveries . All supervised deliveries, receipts and withdrawals hereunder shall be made at such times as may be required by Customer upon prior notice and approval by TLO, all in accordance with the agreed-upon scheduling. Unsupervised deliveries, receipts and withdrawals shall be made only with TLO’s prior approval and in strict accordance with TLO’s current operating procedures for the Terminal. Customer warrants that all vehicles permitted to enter the Terminal on behalf of Customer shall meet all requirements and standards promulgated by applicable regulatory authority including the Department of Transportation, the Occupational Safety and Health Administration, and the EPA. Customer further warrants that it shall only send to the Terminal those employees, agents and other representatives acting on behalf of and at Customer’s direction who have been properly instructed as to the characteristics and safe hauling methods associated with the Products to be loaded and hauled. Customer further agrees to be responsible to TLO for the performance under this Agreement by its agents and/or representatives receiving or delivering Products at the Terminal.

(b) Loading Devices . Customer shall withdraw from the Terminal only those Products that it is authorized to withdraw hereunder. Customer shall neither duplicate nor permit the duplication of any loading device (i.e., card lock access), provided hereunder. Customer shall be fully and solely responsible for all Products loaded through the use of the loading devices issued to Customer in accordance with this Agreement; provided however, that Customer shall

 

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not have any responsibility or liability hereunder in the event that the load authorization system provided hereunder fails or malfunctions in any way unless a credit department override is provided, which authorizes Customer to load the Products.

(c) Legal Compliance . Both Parties shall abide by all federal, state and local statutes, laws and ordinances and all rules and regulations which are promulgated by TLO and which are either furnished to Customer or posted at the Terminal, with respect to the use of the Terminal as herein provided. It is understood and agreed by Customer that these rules and regulations may be changed, amended or modified by TLO at any time. All changes, amendments and modifications shall become binding upon Customer ten (10) days following the posting of a copy at the Terminal or the receipt by Customer of a copy, whichever occurs sooner.

(d) Customer Representatives . For all purposes hereunder, Customer’s jobbers, distributors, Carriers, haulers and other customers designated in writing or otherwise by Customer to have loading privileges under this Agreement or having possession of any loading device furnished to Customer pursuant to this Agreement, together with their respective officers, servants and employees, shall, when they access the Terminal, be deemed to be representatives of Customer.

 

18. DELIVERIES INTO TRANSPORT TRUCKS

Prior to transporting any Products loaded into transport trucks at the Terminal, TLO shall make or cause to be made, the following certifications on the delivery receipt or bill of lading covering the Products received:

“If required by 49 C.F.R. 172.204, this is to certify that the above-named materials are properly classified, described, packaged, marked and labeled, and are in proper condition for transportation according to the applicable regulations of the Department of Transportation. Carrier hereby certifies that the cargo tank used for this shipment is a proper container for the commodity loaded therein and complies with Department of Transportation specifications and certifies that cargo tank is properly placarded and marked to comply with regulations pertaining to hazardous materials.”

TLO shall require each Carrier coming into the Terminal to expressly agree in writing to be bound by the provisions of a carrier access agreement with respect to withdrawals and loading of Products hereunder, to conduct its operations at the Terminal in a safe manner, in accordance with all Applicable Law.

 

19. ACCOUNTING PROVISIONS AND DOCUMENTATION

(a) Required Reports . TLO shall furnish Customer with the following reports covering services hereunder involving Customer’s Products:

(i) within ten (10) Business Days following the end of the Month, a statement showing, by Product: (A) Customer’s monthly aggregate deliveries into the Terminal; (B) Customer’s monthly receipts from the Terminal; (C) calculation of all Customer’s monthly storage and handling fees; (D) Customer’s opening inventory for the preceding

 

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Month; (E) appropriate volume loss adjustments (as applicable in accordance with Section 16 ); (F) Customer’s closing inventory for the preceding Month; and (G) the actual volumes of TLO third party throughput handled at the Terminal during a Month up to the applicable Minimum Throughput Commitment, pursuant to Section 4(e) ;

(ii) a copy of any meter calibration report, to be available for inspection upon reasonable request by Customer at the Terminal following any calibration;

(iii) upon delivery from the Terminal, a hard copy bill of lading to the Carrier for each delivery; upon reasonable request only, a hard copy bill of lading shall be provided to Customer’s accounting group; upon each delivery from the Terminal, bill of lading information shall be sent electronically through a mutually agreeable system; and

(iv) transfer documents for each in-tank transfer.

(b) Required Maintenance of Truck Loading Capabilities . TLO shall be required to maintain the capabilities to support truck load authorization technologies at the Terminal.

 

20. AUDIT AND CLAIMS PERIOD

Each Party and its duly authorized agents and/or representatives shall have reasonable access to the accounting records and other documents maintained by the other Party which relate to this Agreement, and shall have the right to audit such records at any reasonable time or times during the Term and for a period of up to three (3) years after termination of this Agreement. Claims as to shortage in quantity or defects in quality shall be made by written notice within ninety (90) days after the delivery in question or shall be deemed to have been waived.

 

21. LIEN WAIVERS

TLO hereby waives, relinquishes and releases any and all liens, including without limitation, any and all warehouseman’s liens, custodian’s liens, rights of retention and/or similar rights under all applicable laws, which TLO would or might otherwise have under or with respect to the Products throughput, stored or handled hereunder. TLO further agrees to furnish documents reasonably acceptable to Customer and its lender(s) (if applicable), and to cooperate with Customer in assuring and demonstrating that Products titled in Customer’s name shall not be subject to any lien on the Terminal or TLO’s Products throughput or stored there.

 

22. LIMITATION ON LIABILITY

(a) No Special Damages . Notwithstanding anything to the contrary contained herein, neither Party shall be liable or responsible to the other Party or such other Party’s affiliated Persons for any consequential, incidental, or punitive damages, or for loss of profits or revenues (collectively referred to as “special damages”) incurred by such Party or its affiliated Persons that arise out of or relate to this Agreement, REGARDLESS OF WHETHER ANY SUCH CLAIM ARISES UNDER OR RESULTS FROM CONTRACT, NEGLIGENCE, OR STRICT LIABILITY OF THE PARTY WHOSE LIABILITY IS BEING WAIVED HEREBY; provided that the foregoing limitation is not intended and shall not affect special damages actually awarded to a third party or assessed by a governmental authority and for which a Party is properly entitled to indemnification from the other Party pursuant to the express provisions of this Agreement.

 

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(b) Claims and Liability for Lost Product . TLO shall not be liable to Customer for lost or damaged Product unless Customer notifies TLO in writing within ninety (90) days of the report of any incident or the date Customer learns of any such loss or damage to the Product. TLO’s maximum liability to Customer for any lost or damaged Product shall be limited to (i) the lesser of (1) the replacement value of the Product at the time of the incident based upon the price as posted by Platts or similar publication for similar Product in the same locality, and if no other similar Product is in the locality, then in the state, or (2) the actual cost paid for the Product by Customer (copies of Customer’s invoices of cost paid must be provided), less (ii) the salvage value, if any, of the damaged Product.

(c) No Guarantees or Warranties . Except as expressly provided in the Agreement, neither Customer nor TLO makes any guarantees or warranties of any kind, expressed or implied. TLO specifically disclaims all implied warranties of any kind or nature, including any implied warranty of merchantability and/or any implied warranty of fitness for a particular purpose.

 

23. INDEMNITIES

(a) TLO Indemnities . Notwithstanding anything else contained in this Agreement or any Terminal Service Order, TLO shall release, defend, protect, indemnify, and hold harmless Customer, its carriers, and each of its and their respective affiliates, officers, directors, employees, agents, contractors, successors, and assigns (excluding any member of the Partnership Group) (collectively the “ Customer Group ”), from and against any and all demands, claims (including third-party claims), losses, costs, suits, or causes of action (including, but not limited to, any judgments, losses, liabilities, fines, penalties, expenses, interest, reasonable legal fees, costs of suit, and damages, whether in law or equity and whether in contract, tort, or otherwise) for or relating to (i) personal or bodily injury to, or death of the employees of Customer, TLO or the General Partner, and, as applicable, their carriers, customers, representatives, and agents, (ii) loss of or damage to any property, products, material, and/or equipment belonging to Customer, TLO and, as applicable, their carriers, customers, representatives, and agents, and each of their respective affiliates, contractors, and subcontractors (except for those volume losses of Products provided for herein), (iii) loss of or damage to any other property, products, material, and/or equipment of any other description (except for those volume losses of Products provided for herein), and/or personal or bodily injury to, or death of any other Person or Persons; and with respect to clauses (i) through (iii) above, which is caused by or resulting in whole or in part from the negligent or wrongful acts or omissions of TLO or the General Partner in connection with the ownership or operation of the Terminal and the services provided hereunder, and, as applicable, their carriers, customers (other than Customer), representatives, and agents, or those of their respective employees with respect to such matters, and (iv) any losses incurred by Customer due to violations of this Agreement or any Terminal Service Order by TLO, or, as applicable, its customers (other than Customer), representatives, and agents; PROVIDED THAT TLO SHALL NOT BE OBLIGATED TO RELEASE, INDEMNIFY OR HOLD HARMLESS CUSTOMER OR ANY MEMBER OF THE CUSTOMER GROUP FROM AND AGAINST ANY CLAIMS TO THE EXTENT THEY

 

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RESULT FROM THE BREACH OF CONTRACT, STRICT LIABILITY OR THE NEGLIGENT ACTS, ERRORS OR OMISSIONS OR WILLFUL MISCONDUCT OF CUSTOMER OR ANY MEMBER OF THE CUSTOMER GROUP.

(b) Customer Indemnities . Notwithstanding anything else contained in this Agreement or any Terminal Service Order, Customer shall release, defend, protect, indemnify, and hold harmless TLO, General Partner, the Partnership, their subsidiaries and their respective officers, directors, members, managers, employees, agents, contractors, successors, and assigns (collectively the “ Partnership Group ”) from and against any and all demands, claims (including third-party claims), losses, costs, suits, or causes of action (including, but not limited to, any judgments, losses, liabilities, fines, penalties, expenses, interest, reasonable legal fees, costs of suit, and damages, whether in law or equity and whether in contract, tort, or otherwise) for or relating to (i) personal or bodily injury to, or death of the employees of TLO, the General Partner, Customer, and, as applicable, their carriers, customers, representatives, and agents; (ii) loss of or damage to any property, products, material, and/or equipment belonging to TLO, Customer, and, as applicable, their carriers, customers, representatives, and agents, and each of their respective affiliates, contractors, and subcontractors (except for those volume losses of Products provided for herein); (iii) loss of or damage to any other property, products, material, and/or equipment of any other description (except for those volume losses of Products provided for herein), and/or personal or bodily injury to, or death of any other Person or Persons; and with respect to clauses (i) through (iii) above, which is caused by or resulting in whole or in part from the negligent or wrongful acts or omissions of Customer, in connection with Customer’s use of the Terminal and the services provided hereunder and Customer’s Products stored hereunder, and, as applicable, its Carriers, customers, representatives, and agents, or those of their respective employees with respect to such matters; and (iv) any losses incurred by TLO due to violations of this Agreement or any Terminal Service Order by Customer, or, as applicable, its carriers, customers, representatives, and agents; PROVIDED THAT CUSTOMER SHALL NOT BE OBLIGATED TO RELEASE, INDEMNIFY OR HOLD HARMLESS TLO OR ANY MEMBER OF THE PARTNERSHIP GROUP FROM AND AGAINST ANY CLAIMS TO THE EXTENT THEY RESULT FROM THE BREACH OF CONTRACT, STRICT LIABILITY OR THE NEGLIGENT ACTS, ERRORS OR OMISSIONS OR WILLFUL MISCONDUCT OF TLO OR ANY MEMBER OF THE PARTNERSHIP GROUP.

(c) Written Claim . Neither Party shall be obligated to indemnify the other Party or be liable to the other Party unless a written claim for indemnity is delivered to the other Party within ninety (90) days after the date that a claim is reported or discovered, whichever is earlier.

(d) No Limitation . Except as expressly provided otherwise in this Agreement, the scope of these indemnity provisions may not be altered, restricted, limited, or changed by any other provision of this Agreement. The indemnity obligations of the Parties as set out in this Section 23 are independent of any insurance requirements as set out in Section 24 , and such indemnity obligations shall not be lessened or extinguished by reason of a Party’s failure to obtain the required insurance coverages or by any defenses asserted by a Party’s insurers.

(e) Survival . These indemnity obligations shall survive the termination of this Agreement until all applicable statutes of limitation have run regarding any claims that could be made with respect to the activities contemplated by this Agreement.

 

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(f) Mutual and Express Acknowledgement . THE INDEMNIFICATION PROVISIONS PROVIDED FOR IN THIS AGREEMENT HAVE BEEN EXPRESSLY NEGOTIATED IN EVERY DETAIL, ARE INTENDED TO BE GIVEN FULL AND LITERAL EFFECT, AND SHALL BE APPLICABLE WHETHER OR NOT THE LIABILITIES, OBLIGATIONS, CLAIMS, JUDGMENTS, LOSSES, COSTS, EXPENSES OR DAMAGES IN QUESTION ARISE OR AROSE SOLELY OR IN PART FROM THE GROSS, ACTIVE, PASSIVE OR CONCURRENT NEGLIGENCE, STRICT LIABILITY, OR OTHER FAULT OF ANY INDEMNIFIED PARTY. EACH PARTY ACKNOWLEDGES THAT THIS STATEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND CONSTITUTES CONSPICUOUS NOTICE. NOTICE IN THIS CONSPICUOUS NOTICE IS NOT INTENDED TO PROVIDE OR ALTER THE RIGHTS AND OBLIGATIONS OF THE PARTIES, ALL OF WHICH ARE SPECIFIED ELSEWHERE IN THIS AGREEMENT.

(g) Third Party Indemnification . If any Party has the rights to indemnification from a third party, the indemnifying party under this Agreement shall have the right of subrogation with respect to any amounts received from such third-party indemnification claim.

 

24. INSURANCE

(a) Minimum Limits . At all times during the Term and for a period of two (2) years after termination of this Agreement for any coverage maintained on a “claims-made” or “occurrence” basis, Customer and/or its Carrier (if applicable) shall maintain at their expense the below listed insurance in the amounts specified below, or self-insurance in such amounts as may be agreed pursuant to a Terminal Service Order. Customer shall require that Carrier cause all of its contractors providing authorized drivers or authorized vehicles, to carry such insurance, and Customer shall be liable to TLO for their failure to do so. Such insurance shall provide coverage to TLO and such policies, other than Worker’s Compensation Insurance, shall include TLO as an Additional Insured. Each policy shall provide that it is primary to and not contributory with any other insurance, including any self-insured retention, maintained by TLO (which shall be excess) and each policy shall provide the full coverage required by this Agreement. All such insurance shall be written with carriers and underwriters acceptable to TLO, and eligible to do business in the state where the Terminal is located and having and maintaining an A.M. Best financial strength rating of no less than “A-” and financial size rating no less than “VII”; provided that Customer and/or the Carrier may procure worker’s compensation insurance from the state fund of the state where the Terminal is located. All limits listed below are required MINIMUM LIMITS:

(i) Workers Compensation and Occupational Disease Insurance which fully complies with Applicable Law of the state where the Terminal is located, in limits not less than statutory requirements;

(ii) Employers Liability Insurance with a minimum limit of $1,000,000 for each accident, covering injury or death to any employee which may be outside the scope of the worker’s compensation statute of the jurisdiction in which the worker’s service is performed, and in the aggregate as respects occupational disease;

 

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(iii) Commercial General Liability Insurance, including contractual liability insurance covering Carrier’s indemnity obligations under this Agreement, with minimum limits of $1,000,000 combined single limit per occurrence for bodily injury and property damage liability, or such higher limits as may be required by TLO or by Applicable Law from time to time. This policy shall include Broad Form Contractual Liability insurance coverage which shall specifically apply to the obligations assumed in this Agreement by Customer;

(iv) Automobile Liability Insurance covering all owned, non-owned and hired vehicles, with minimum limits of $1,000,000 combined single limit per occurrence for bodily injury and property damage liability, or such higher limit(s) as may be required by Customer or by Applicable Law from time to time. Coverage must assure compliance with Sections 29 and 30 of the Motor Carrier Act of 1980 and all applicable rules and regulations of the Federal Highway Administration’s Bureau of Motor Carrier Safety and Interstate Commerce Commissioner (Form MCS 90 Endorsement). Limits of liability for this insurance must be in accordance with the financial responsibility requirement of the Motor Carrier Act, but not less than $1,000,000 per occurrence;

(v) Excess (Umbrella) Liability Insurance with limits not less than $4,000,000 per occurrence. Additional excess limits may be utilized to supplement inadequate limits in the primary policies required in items (ii), (iii), and (iv) above;

(vi) Pollution Legal Liability with limits not less than $25,000,000 per loss with an annual aggregate of $25,000,000. Coverage shall apply to bodily injury and property damage including loss of use of damaged property and property that has not been physically injured; cleanup costs, defense, including costs and expenses incurred in the investigation, defense or settlement of claim; and

(vii) Cargo/Inventory Insurance, with a limit of no less than $1,000,000, which property insurance shall be first-party insurance to adequately cover all Products owned by Customer located at the Terminal.

(b) Waiver of Subrogation . All such policies must be endorsed with a Waiver of Subrogation endorsement, effectively waiving rights of recovery under subrogation or otherwise, against TLO, and shall contain where applicable, a severability of interest clause and a standard cross liability clause.

(c) Copies of Insurance Certificates or Policies . Upon execution of this Agreement and prior to the operation of any equipment by Customer, Carrier or its authorized drivers at the Terminal, Customer and/or Carrier will furnish to TLO, and at least annually thereafter (or at any other times upon request by TLO) during the Term (and for any coverage maintained on a “claims-made” basis, for two (2) years after the termination of this Agreement), insurance certificates and/or certified copies of the original policies to evidence the insurance required herein, including on behalf of Carrier’s contractors providing authorized vehicles or authorized drivers. Such certificates shall be in the form of the “Accord” Certificate of Insurance, and reflect that they are for the benefit of TLO and shall provide that there will be no material change in or cancellation of the policies unless TLO is given at least thirty (30) days prior written notice. Certificates providing evidence of renewal of coverage shall be furnished to TLO prior to policy expiration.

 

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(d) Responsibility for Deductibles . Customer and/or Carrier shall be solely responsible for any deductibles or self-insured retention.

 

25. GOVERNMENT REGULATIONS

(a) Party Certification . Each Party certifies that none of the Products covered by this Agreement or any Terminal Service Order were derived from crude petroleum, petrochemical, or gas which was produced or withdrawn from storage in violation of any federal, state or other governmental law, nor in violation of any rule, regulation or promulgated by any governmental agency having jurisdiction in the premises.

(b) Licenses and Permits . If applicable, TLO shall maintain all necessary licenses and permits for the storage of Products at the Terminal.

(c) Compliance with Applicable Law . The Parties are entering into this Agreement and any Terminal Service Order in reliance upon and shall comply in all material respects with all Applicable Law which directly or indirectly affects the Products throughput hereunder, or any receipt, throughput delivery, transportation, handling or storage of Products hereunder or the ownership, operation or condition of the Terminal. Each Party shall be responsible for compliance with all Applicable Law associated with such Party’s respective performance hereunder and the operation of such Party’s facilities. In the event any action or obligation imposed upon a Party under this Agreement and any Terminal Service Order shall at any time be in conflict with any requirement of Applicable Law, then this Agreement and any Terminal Service Order shall immediately be modified to conform the action or obligation so adversely affected to the requirements of the Applicable Law, and all other provisions of this Agreement and any Terminal Service Order shall remain effective.

(d) Material Change in Applicable Law . If during the Term, any new Applicable Law becomes effective or any existing Applicable Law or its interpretation is materially changed, which change is not addressed by another provision of this Agreement or any Terminal Service Order and which has a material adverse economic impact upon a Party, either Party, acting in good faith, shall have the option to request renegotiation of the relevant provisions of this Agreement or a Terminal Service Order with respect to future performance. The Parties shall then meet to negotiate in good faith amendments to this Agreement or to an applicable Terminal Service Order that will conform to the new Applicable Law while preserving the Parties’ economic, operational, commercial and competitive arrangements in accordance with the understandings set forth herein.

 

26. SUSPENSION OF REFINERY OPERATIONS

(a) No Termination . This Agreement shall continue in full force and effect regardless of whether Customer decides to permanently or indefinitely suspend refining operations at the Refinery for any period.

 

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(b) Continued Liability for Shortfall Payments . If refining operations at the Refinery are suspended for any reason (including Refinery turnarounds and other scheduled maintenance), then Customer shall remain liable for Shortfall Payments under this Agreement for the duration of the suspension.

 

27. FORCE MAJEURE

(a) Definitions and Notice . As soon as possible upon the occurrence of a Force Majeure, TLO shall provide Customer with written notice of the occurrence of such Force Majeure (a “ Force Majeure Notice ”). TLO shall identify in such Force Majeure Notice the approximate length of time that TLO reasonably believes in good faith such Force Majeure shall continue (the “ Force Majeure Period ”). For the duration of the Force Majeure Period, Customer shall be permitted to reduce the applicable Minimum Throughput Commitment as provided in Section 28(b) . If TLO advises in any Force Majeure Notice that it reasonably believes in good faith that the Force Majeure Period shall continue for more than twelve (12) consecutive Months, then, subject to Section 28 below, at any time after TLO delivers such Force Majeure Notice, either Party may terminate this Agreement with respect to the terminalling service to which the Force Majeure applies, but only upon delivery to the other Party of a notice (a “ Termination Notice ”) at least twelve (12) Months prior to the expiration of the Force Majeure Period; provided, however, that such Termination Notice shall be deemed cancelled and of no effect if the Force Majeure Period ends prior to the expiration of such twelve (12)-Month period. For the avoidance of doubt, neither Party may exercise its right under this Section 27(a) to terminate this Agreement as a result of a Force Majeure if the Terminal has been restored to working order since the applicable Force Majeure, including pursuant to a Restoration.

(b) Revocation of Customer Termination Notice . Notwithstanding the foregoing, if Customer delivers a Termination Notice to TLO (the “ Customer Termination Notice ”) and, within thirty (30) days after receiving such Customer Termination Notice, TLO notifies Customer that TLO reasonably believes in good faith that it shall be capable of fully performing its obligations under this Agreement within a reasonable period of time and Customer mutually agrees (which agreement shall not be unreasonably withheld), then the Customer Termination Notice shall be deemed revoked and the applicable portion of this Agreement shall continue in full force and effect as if such Customer Termination Notice had never been given.

 

28. CAPABILITIES OF FACILITIES

(a) Service Interruption . Subject to Force Majeure and interruptions for routine repair and maintenance, consistent with customary terminal industry standards, TLO shall use reasonable commercial efforts to minimize the interruption of service at the Terminal and any portion thereof. TLO shall promptly inform Customer operational personnel of any anticipated partial or complete interruption of service at the Terminal, including relevant information about the nature, extent, cause and expected duration of the interruption and the actions TLO is taking to resume full operations, provided that TLO shall not have any liability for any failure to notify, or delay in notifying, Customer of any such matters except to the extent Customer has been materially prejudiced or damaged by such failure or delay.

 

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(b) Restoration of Capacity . Subject to Force Majeure and interruptions for routine repair and maintenance, consistent with customary terminal industry standards, TLO shall maintain the Terminal in a condition and with a capacity sufficient to throughput a volume of Customer’s Products at least equal to the applicable Reserved Capacity. TLO’s obligations may be temporarily suspended during the occurrence of, and for the entire duration of, a Force Majeure or any interruption of service that prevents TLO from terminalling the applicable Reserved Capacity. To the extent TLO is prevented from terminalling volumes equal to the applicable Reserved Capacity for reasons of Force Majeure or other interruption of service, then Customer’s obligation to throughput the applicable Minimum Throughput Commitment and pay any Shortfall Payment shall be reduced proportionately. At such time as TLO is capable of terminalling volumes equal to the applicable Reserved Capacity, Customer’s obligation to throughput the full, applicable Minimum Throughput Commitment shall be restored. If for any reason, including, without limitation, a Force Majeure event, the throughput capacity of the Terminal should fall below the applicable Reserved Capacity, then within a reasonable period of time after the commencement of such reduction, TLO shall make repairs to the Terminal to restore the capacity of the Terminal to that required for throughput of the applicable Reserved Capacity (“ Restoration ”). Except as provided below in Section 28(c) , all of such Restoration shall be at TLO’s cost and expense, unless the damage creating the need for such repairs was caused by the negligence or willful misconduct of Customer, its employees, agents or customers or the failure of Customer’s Products to meet the specifications as provided for in Section 15(a) .

(c) Capacity Resolution . In the event of the failure of TLO to maintain the Terminal in a condition and with a capacity sufficient to throughput a volume of Customer’s Products equal to a Reserved Capacity, then either Party shall have the right to call a meeting between executives of both Parties by providing at least two (2) Business Days’ advance written notice. Any such meeting shall be held at a mutually agreeable location and will be attended by executives of both Parties each having sufficient authority to commit his or her respective Party to a Capacity Resolution (hereinafter defined). At the meeting, the Parties will negotiate in good faith with the objective of reaching a joint resolution for the Restoration of capacity on the Terminal which will, among other things, specify steps to be taken by TLO to fully accomplish Restoration and the deadlines by which the Restoration must be completed (the “ Capacity Resolution ”). Without limiting the generality of the foregoing, the Capacity Resolution shall set forth an agreed upon time schedule for the Restoration activities. Such time schedule shall be reasonable under the circumstances, consistent with customary terminal industry standards and shall take into consideration TLO’s economic considerations relating to costs of the repairs and Customer’s requirements concerning its refining and marketing operations. TLO shall use commercially reasonable efforts to continue to provide storage and throughput of Customer’s Products at the Terminal, to the extent the Terminal has capability of doing so, during the period before Restoration is completed. In the event that Customer’s economic considerations justify incurring additional costs to restore the Terminal in a more expedited manner than the time schedule determined in accordance with the preceding sentence, Customer may require TLO to expedite the Restoration to the extent reasonably possible, subject to Customer’s payment, in advance, of the estimated incremental costs to be incurred as a result of the expedited time schedule. In the event the Parties agree to an expedited Restoration plan in which Customer agrees to fund a portion of the Restoration cost, then neither Party shall have the right to terminate this Agreement in connection with a Force Majeure, so long as such Restoration is completed with due diligence, and Customer shall pay its portion of the Restoration costs to TLO

 

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in advance based on an estimate based on reasonable engineering standards promulgated by the Association for Facilities Engineering. Upon completion, Customer shall pay the difference between the actual portion of Restoration costs to be paid by Customer pursuant to this Section 28(c) and the estimated amount paid under the preceding sentence within thirty (30) days after receipt of TLO’s invoice therefor, or, if appropriate, TLO shall pay Customer the excess of the estimate paid by Customer over TLO’s actual costs as previously described within thirty (30) days after completion of the Restoration.

(d) Restoration . If at any time after the occurrence of (x) a Partnership Change of Control or (y) a sale of the Refinery, TLO either (i) refuses or fails to meet with Customer within the period set forth in Section 28(c) , (ii) fails to agree to perform a Capacity Resolution in accordance with the standards set forth in Section 28(c) , or (iii) fails to perform its obligations in compliance with the terms of a Capacity Resolution, Customer may, as its sole remedy for any breach by TLO of any of its obligations under Section 28(c) , require TLO to complete a Restoration of the Terminal, subject to and to the extent permitted under the terms, conditions and/or restrictions of applicable leases, permits and/or Applicable Law. Any such Restoration required under this Section 28(d) shall be completed by TLO at Customer’s cost. TLO shall use commercially reasonable efforts to continue to provide storage and throughput of Customer’s Products at the Terminal, during the period while such Restoration is being completed. Any work performed by TLO pursuant to this Section 28(d) shall be performed and completed in a good and workmanlike manner consistent with applicable industry standards and in accordance with all Applicable Law. Additionally, during such period after the occurrence of (x) a Partnership Change of Control or (y) a sale of the Refinery, Customer may exercise any remedies available to it under this Agreement (other than termination), including the right to immediately seek temporary and permanent injunctive relief for specific performance by TLO of the applicable provisions of this Agreement, including, without limitation, the obligation to make Restorations as described herein.

(e) Throughput Right of First Refusal . Unless otherwise specified in a Terminal Service Order, all throughput of Customer’s volumes, along with storage related to such throughput, shall be on a fungible commingled basis, and TLO may commingle such Products with Products of third parties of like grade and kind. TLO shall have the right to enter into arrangements with third parties to throughput Products at the Terminal and provide storage related to such throughput; provided however, that (i) TLO shall not enter into any third party arrangements that would restrict or limit the ability of Customer to throughput the Reserved Capacities at the Terminal each Month without Customer’s consent, and (ii) TLO shall give Customer ninety (90) days prior written notice of any proposed throughput agreement with a third party, and if Customer makes an offer on terms no less favorable to TLO than the third-party offer, TLO shall be obligated to enter into a terminalling agreement with Customer on the terms set forth in its proposed offer (“ Throughput Right of First Refusal ”). If Customer does not exercise its Throughput Right of First Refusal in the manner set forth above, TLO may, for the next ninety (90) days, proceed with the negotiation of the third-party terminalling agreement. If no third-party terminalling agreement is consummated during such ninety-day period, the terms and conditions of this Section 28(e) shall again become effective.

 

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(f) Storage Tank Heels . All Tank Heels shall be allocated among storage users on a pro rata basis. Tank Heels cannot be withdrawn from any tank without prior approval of TLO. For storage tanks and capacities identified on a Terminal Service Order as dedicated to and used exclusively for the storage and throughput of Customer’s Product, Customer shall be responsible for providing all Tank Heels required for operation of such tanks.

 

29. TERMINATION

(a) Default . A Party shall be in default under this Agreement if:

(i) the Party breaches any provision of this Agreement or a Terminal Service Order, which breach has a material adverse effect on the other Party (with such material adverse effect being determined based on this Agreement and all Terminal Service Orders considered as a whole), and such breach is not excused by Force Majeure or cured within fifteen (15) Business Days after notice thereof (which notice shall describe such breach in reasonable detail) is received by such Party (unless such failure is not commercially reasonably capable of being cured in such fifteen (15) Business Day period in which case such Party shall have commenced remedial action to cure such breach and shall continue to diligently and timely pursue the completion of such remedial action after such notice); or

(ii) the Party (A) files a petition or otherwise commences, authorizes or acquiesces in the commencement of a proceeding or cause of action under any bankruptcy, insolvency, reorganization or similar Applicable Law, or has any such petition filed or commenced against it, (B) makes an assignment or any general arrangement for the benefit of creditors, (C) otherwise becomes bankrupt or insolvent (however evidenced) or (D) has a liquidator, administrator, receiver, trustee, conservator or similar official appointed with respect to it or any substantial portion of its property or assets.

(b) Rights upon Default . If either of the Parties is in default as described above, then (A) if Customer is in default, TLO may or (B) if TLO is in default, Customer may: (1) terminate this Agreement upon notice to the defaulting Party; (2) withhold any payments due to the defaulting Party under this Agreement; and/or (3) pursue any other remedy at law or in equity.

(c) Obligation to Cure Breach . If a Party breaches any provision of this Agreement or a Terminal Service Order, which breach does not have a material adverse effect on the other Party, the breaching Party shall still have the obligation to cure such breach.

(d) Product Removal . Customer shall, upon expiration or termination of this Agreement, promptly remove all of its Products including any downgraded and interface Product and Transmix from the Terminal, and TLO shall remove the remaining Tank Heels and tank bottoms and deliver them to Customer or Customer’s designee, within thirty (30) days of such termination or expiration. In the event all of the Product is not removed within such thirty (30) day period, Customer shall be assessed a storage fee to all Products held in storage more than thirty (30) days beyond the termination or expiration of this Agreement until such time Customer’s entire Product is removed from the Terminal; provided however, that Customer shall not be assessed any storage fees associated with the removal of Product if Customer’s ability to remove such Product is delayed or hindered by TLO, its agents or contractors for any reason.

 

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(e) Equipment Removal . Customer shall, upon expiration or termination of this Agreement, promptly remove any and all of its owned equipment (except those purchased by TLO pursuant to Section 7(f) above), and restore the Terminal to their condition prior to the installation of such equipment.

 

30. RIGHT TO ENTER INTO A NEW TERMINALLING AGREEMENT

(a) New Terminalling Services Agreement . Upon termination of this Agreement or a Terminal Service Order for reasons other than (x) a default by Customer and (y) any other termination of this Agreement or a Terminal Service Order initiated by TLO pursuant to Section 29 , Customer shall have the right to require TLO to enter into a new terminalling services agreement with Customer that (i) is consistent with the terms set forth in this Agreement, (ii) relates to the Terminal, and (iii) has commercial terms that are, in the aggregate, equal to or more favorable to TLO than fair market value terms as would be agreed by similarly-situated parties negotiating at arm’s length; provided, however; that the term of any such new terminalling services agreement shall not extend beyond July 1, 2034.

(b) Terminalling Right of First Refusal . In the event that TLO proposes to enter into a terminalling services agreement with a third party within two (2) years after the termination of this Agreement for reasons other than (x) by default by Customer and (y) any other termination of this Agreement initiated by TLO pursuant to Section 29 , TLO shall give Customer ninety (90) days’ prior written notice of any proposed new terminalling services agreement with a third party, including (i) details of all of the material terms and conditions thereof and (ii) a thirty (30)-day period (beginning upon Customer’s receipt of such written notice) (the “ Terminalling First Offer Period ”) in which Customer may make a good faith offer to enter into a new terminalling agreement with TLO (the “ Terminalling Right of First Refusal ”). If Customer makes an offer on terms no less favorable to TLO than the third-party offer with respect to such terminalling services agreement during the Terminalling First Offer Period, then TLO shall be obligated to enter into a terminalling services agreement with Customer on the terms set forth in Customer’s offer to TLO. If Customer does not exercise its Terminalling Right of First Refusal in the manner set forth above, TLO may, for the next ninety (90) days, proceed with the negotiation of the third-party terminalling services agreement. If no third party agreement is consummated during such ninety-day period, the terms and conditions of this Section 30(b) shall again become effective.

 

31. STORAGE RIGHT OF FIRST REFUSAL

In the event that TLO proposes to enter into a storage agreement with a third party upon opening up any new storage opportunity at the Terminal during the Term, TLO shall give Customer ninety (90) days’ prior written notice of any proposed new storage agreement with a third party, including (i) details of all of the material terms and conditions thereof and (ii) a thirty (30)-day period (beginning upon Customer’s receipt of such written notice) (the “ Storage First Offer Period ”) in which Customer may make a good faith offer to enter into a new storage agreement with TLO (the “ Storage Right of First Refusal ”). If Customer makes an offer on terms no less favorable to TLO than the third-party offer with respect to such storage agreement during the Storage First Offer Period, then TLO shall be obligated to enter into a storage agreement with Customer on the terms set forth in its proposed offer. If Customer does not

 

30


exercise its Storage Right of First Refusal in the manner set forth above, TLO may, for the next ninety (90) days, proceed with the negotiation of the third-party storage agreement. If no third party agreement is consummated during such ninety-day period, the terms and conditions of this Section 31 shall again become effective.

 

32. SUBCONTRACT

Should Customer desire to subcontract to a third party (“ Replacement Customer ”) any dedicated or commingled storage subject to a Terminal Service Order, Customer must notify TLO in writing prior to the proposed start of the subcontract. TLO has the right to approve any Replacement Customer, which approval shall not be unreasonably withheld, conditioned or delayed. Unless otherwise agreed in writing between Customer and TLO, and between Replacement Customer and TLO, Customer will continue to be liable for all terms and conditions of this Agreement related to any subcontracted storage tank, including but not limited to, remittance of any fees set forth in a Terminal Service Order applicable to the subcontracted storage tank. Customer shall be responsible for collection of any fees due to Customer from the Replacement Customer. Customer and TLO may mutually agree that operational notices concerning scheduling and similar matters can be directly provided between TLO and any Replacement Customer.

 

33. ASSIGNMENT; PARTNERSHIP CHANGE OF CONTROL

(a) Assignment to TLO . On the Commencement Date, the General Partner shall assign all of its rights and obligations under this Agreement to the Partnership. The Partnership shall immediately assign its rights and obligations hereunder to TLO. Upon such assignment to TLO, TLO shall have all of the respective rights and obligations set forth herein during the Term.

(b) Customer Assignment to Third Party . Customer shall not assign all of its obligations hereunder or under a Terminal Service Order without TLO’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however; that Customer may assign this Agreement, without TLO’s consent, in connection with a sale by Customer of the Refinery so long as the transferee: (i) agrees to assume all of Customer’s obligations under this Agreement; and (ii) is financially and operationally capable of fulfilling the terms of this Agreement, which determination shall be made by Customer in its reasonable judgment.

(c) TLO Assignment to Third Party . TLO shall not assign its rights or obligations under this Agreement without Customer’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that (i) TLO may assign this Agreement without Customer’s consent in connection with a sale by TLO of the Terminal so long as the transferee: (A) agrees to assume all of TLO’s obligations under this Agreement; (B) is financially and operationally capable of fulfilling the terms of this Agreement, which determination shall be made by TLO in its reasonable judgment; and (C) is not a competitor of Customer; and (ii) TLO shall be permitted to make a collateral assignment of this Agreement solely to secure working capital financing for TLO.

 

31


(d) Notification of Assignment . Any assignment that is not undertaken in accordance with the provisions set forth above shall be null and void ab initio . A Party making any assignment shall promptly notify the other Party of such assignment, regardless of whether consent is required. This Agreement and any Terminal Service Orders shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns.

(e) Partnership Change of Control . Customer’s obligations hereunder shall not terminate in connection with a Partnership Change of Control, provided however, that in the case of a Partnership Change of Control, Customer shall have the option to extend the Term as provided in Section 2 . TLO shall provide Customer with notice of any Partnership Change of Control at least sixty (60) days prior to the effective date thereof.

 

34. NOTICE

All notices, requests, demands, and other communications hereunder will be in writing and will be deemed to have been duly given: (a) if by transmission by hand delivery, when delivered; (b) if mailed via the official governmental mail system, five (5) Business Days after mailing, provided said notice is sent first class, postage pre-paid, via certified or registered mail, with a return receipt requested; (c) if mailed by an internationally recognized overnight express mail service such as Federal Express, UPS, or DHL Worldwide, one (1) Business Day after deposit therewith prepaid; or (d) if by e-mail, one Business Day after delivery with receipt confirmed. All notices will be addressed to the Parties at the respective addresses as follows:

If to Customer, to:

Tesoro Refining & Marketing Company LLC

19100 Ridgewood Parkway

San Antonio, Texas 78259

For legal notices :

Attention: Charles A. Cavallo III, Managing Attorney - Commercial

phone: (210) 626-4045

email: Charles.A.Cavallo@tsocorp.com

all other notices and communications :

Attention: Dennis C. Bak

phone: 310-847-3846

email: Dennis.C.Bak@tsocorp.com

If to TLO, to:

Tesoro Logistics Operations LLC

19100 Ridgewood Parkway

San Antonio, Texas 78259

 

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For legal notices :

Attention: Charles S. Parrish, General Counsel

phone: (210) 626-4280

email: Charles.S.Parrish@tsocorp.com

For all other notices and communications :

Attention: Rick D. Weyen, Vice President, Logistics

phone: (210) 626-4379

email: Rick.D.Weyen@tsocorp.com

or to such other address or to such other Person as either Party will have last designated by notice to the other Party.

 

35. CONFIDENTIAL INFORMATION

(a) Confidential Information and Exceptions Thereto . Each Party shall use reasonable efforts to retain the other Parties’ Confidential Information in confidence and not disclose the same to any third party nor use the same, except as authorized by the disclosing Party in writing or as expressly permitted in this Section 35 . Each Party further agrees to take the same care with the other Party’s Confidential Information as it does with its own, but in no event less than a reasonable degree of care. Excepted from these obligations of confidence and non-use is that information which:

(i) is available, or becomes available, to the general public without fault of the receiving Party;

(ii) was in the possession of the receiving Party on a non-confidential basis prior to receipt of the same from the disclosing Party (it being understood, for the avoidance of doubt, that this exception shall not apply to information of TLO that was in the possession of Customer or any of its affiliates as a result of their ownership or operation of the Terminal prior to the Commencement Date);

(iii) is obtained by the receiving Party without an obligation of confidence from a third party who is rightfully in possession of such information and, to the receiving Party’s knowledge, is under no obligation of confidentiality to the disclosing Party; or

(iv) is independently developed by the receiving Party without reference to or use of the disclosing Party’s Confidential Information.

For the purpose of this Section 35 , a specific item of Confidential Information shall not be deemed to be within the foregoing exceptions merely because it is embraced by, or underlies, more general information in the public domain or in the possession of the receiving Party.

(b) Required Disclosure . Notwithstanding Section 35(a) above, if the receiving Party becomes legally compelled to disclose the Confidential Information by a court, Governmental Authority or Applicable Law, or is required to disclose by the listing standards of any applicable securities exchange, any of the disclosing Party’s Confidential Information, the receiving Party

 

33


shall promptly advise the disclosing Party of such requirement to disclose Confidential Information as soon as the receiving Party becomes aware that such a requirement to disclose might become effective, in order that, where possible, the disclosing Party may seek a protective order or such other remedy as the disclosing Party may consider appropriate in the circumstances. The receiving Party shall disclose only that portion of the disclosing Party’s Confidential Information that it is required to disclose and shall cooperate with the disclosing Party in allowing the disclosing Party to obtain such protective order or other relief.

(c) Return of Confidential Information . Upon written request by the disclosing Party, all of the disclosing Party’s Confidential Information in whatever form shall be returned to the disclosing Party upon termination of this Agreement or destroyed with destruction certified by the receiving Party, without the receiving Party retaining copies thereof except that one copy of all such Confidential Information may be retained by a Party’s legal department solely to the extent that such Party is required to keep a copy of such Confidential Information pursuant to Applicable Law, and the receiving Party shall be entitled to retain any Confidential Information in the electronic form or stored on automatic computer back-up archiving systems during the period such backup or archived materials are retained under such Party’s customary procedures and policies; provided, however, that any Confidential Information retained by the receiving Party shall be maintained subject to confidentiality pursuant to the terms of this Section 35 , and such archived or back-up Confidential Information shall not be accessed except as required by Applicable Law.

(d) Receiving Party Personnel . The receiving Party will limit access to the Confidential Information of the disclosing Party to those of its employees, attorneys and contractors that have a need to know such information in order for the receiving Party to exercise or perform its rights and obligations under this Agreement (the “ Receiving Party Personnel ”). The Receiving Party Personnel who have access to any Confidential Information of the disclosing Party will be made aware of the confidentiality provision of this Agreement, and will be required to abide by the terms thereof. Any third party contractors that are given access to Confidential Information of a disclosing Party pursuant to the terms hereof shall be required to sign a written agreement pursuant to which such Receiving Party Personnel agree to be bound by the provisions of this Agreement, which written agreement will expressly state that it is enforceable against such Receiving Party Personnel by the disclosing Party.

(e) Survival . The obligation of confidentiality under this Section 35 shall survive the termination of this Agreement for a period of two (2) years.

 

36. MISCELLANEOUS

(a) Amendment or Modification . This Agreement and any Terminal Service Orders may be amended or modified only by a written instrument executed by the Parties. Any of the terms and conditions of this Agreement or a Terminal Service Order may be waived in writing at any time by the Party entitled to the benefits thereof. No waiver of any of the terms and conditions of this Agreement, a Terminal Service Order or any breach thereof, will be effective unless in writing signed by a duly authorized individual on behalf of the Party against which the waiver is sought to be enforced. No waiver of any term or condition or of any breach of this Agreement or a Terminal Service Order will be deemed or will constitute a waiver of any other term or condition or of any later breach (whether or not similar), nor will such waiver constitute a continuing waiver unless otherwise expressly provided.

 

34


(b) Integration . This Agreement, together with the Schedules and Terminal Service Orders and the other agreements executed on the date hereof in connection with the transactions contemplated by the Contribution Agreement, constitutes the entire agreement among the Parties pertaining to the subject matter hereof and supersedes all prior agreements and understandings of the Parties in connection therewith. In the event of a conflict of provisions of this Agreement and the Third Amended and Restated Omnibus Agreement, the provisions of the Third Amended and Restated Omnibus Agreement shall prevail with respect to issues related to the contribution of the assets described therein, but not with respect to the ordinary operations of such assets as set forth in this Agreement.

(c) Construction and Interpretation . In interpreting this Agreement, unless the context expressly requires otherwise, all of the following apply to the interpretation of this Agreement:

(i) Preparation of this Agreement has been a joint effort of the Parties and the resulting Agreement against one of the Parties as the drafting Party.

(ii) Plural and singular words each include the other.

(iii) Masculine, feminine and neutral genders each include the others.

(iv) The word “or” is not exclusive and includes “and/or.”

(v) The words “includes” and “including” are not limiting.

(vi) References to the Parties include their respective successors and permitted assignees.

(vii) The headings in this Agreement are included for convenience and do not affect the construction or interpretation of any provision of, or the rights or obligations of a Party under, this Agreement.

(d) Applicable Law; Forum, Venue and Jurisdiction . This Agreement and any Terminal Service Orders shall be governed by the laws of the State of Texas without giving effect to its conflict of laws principles. Each Party hereby irrevocably submits to the exclusive jurisdiction of any federal court of competent jurisdiction situated in the United States District Court for the Western District of Texas, San Antonio Division, or if such federal court declines to exercise or does not have jurisdiction, in the district court of Bexar County, Texas. The Parties expressly and irrevocably submit to the jurisdiction of said Courts and irrevocably waive any objection which they may now or hereafter have to the laying of venue of any action, suit or proceeding arising out of or relating to this Agreement or any Terminal Service Order brought in such Courts, irrevocably waive any claim that any such action, suit or proceeding brought in any such Court has been brought in an inconvenient forum and further irrevocably waive the right to object, with respect to such claim, action, suit or proceeding brought in any such Court, that such Court does not have jurisdiction over such Party. The Parties hereby irrevocably consent to the service of process by registered mail, postage prepaid, or by personal service within or without the State of Texas. Nothing contained herein shall affect the right to serve process in any manner permitted by law.

 

35


(e) Counterparts . This Agreement and any Terminal Service Order hereunder may be executed in one or more counterparts (including by facsimile or portable document format (.pdf)) for the convenience of the Parties hereto, each of which counterparts will be deemed an original, but all of which counterparts together will constitute one and the same agreement.

(f) Severability . Whenever possible, each provision of this Agreement and any Terminal Service Order will be interpreted in such manner as to be valid and effective under Applicable Law, but if any provision of this Agreement, a Terminal Service Order or the application of any such provision to any Person or circumstance will be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision hereof, and the Parties will negotiate in good faith with a view to substitute for such provision a suitable and equitable solution in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid, illegal or unenforceable provision.

(g) No Third Party Rights . Except as specifically provided in Section 23 herein, it is expressly understood that the provisions of this Agreement or any Terminal Service Order do not impart enforceable rights in anyone who is not a Party or successor or permitted assignee of a Party.

(h) Jury Waiver . EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY PROCEEDINGS RELATING TO THIS AGREEMENT OR ANY PERFORMANCE OR FAILURE TO PERFORM OF ANY OBLIGATION HEREUNDER.

[Signature Page Follows]

 

36


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

 

TESORO LOGISTICS OPERATIONS LLC     TESORO REFINING & MARKETING COMPANY LLC
By:  

/s/ Phillip M. Anderson

    By:  

/s/ G. Scott Spendlove

  Phillip M. Anderson       G. Scott Spendlove
  President       Senior Vice President and Chief Financial
        Officer

Solely with respect to Section 33(a) :

TESORO LOGISTICS GP, LLC

   

Solely with respect to Section 33(a) :

TESORO LOGISTICS LP

By:  

/s/ Phillip M. Anderson

    By:   Tesoro Logistics GP, LLC, its
  Phillip M. Anderson       general partner
  President      
      By:  

/s/ Phillip M. Anderson

        Phillip M. Anderson
        President

 

Signature Page to Terminalling Services Agreement - Anacortes


EXHIBIT 1

FORM OF TERMINAL SERVICE ORDER

(ANACORTES [    ]-             , 20    )

This Terminal Service Order is entered as of             , 20    , by and between Tesoro Refining & Marketing Company LLC, a Delaware limited liability company, and Tesoro Logistics Operations LLC, a Delaware limited liability company, pursuant to and in accordance with the terms of the Terminalling Services Agreement – Anacortes, dated as of July 1, 2014, by and among such parties and Tesoro Logistics GP, LLC, a Delaware limited liability company, and Tesoro Logistics LP, a Delaware limited partnership (as amended, supplemented, or otherwise modified from time to time, the “ Agreement ”).

Capitalized terms not otherwise defined herein shall have the meaning set forth in the Agreement.

Pursuant to Section 13 of the Agreement, the parties hereto agree to the following provisions:

[Insert applicable provisions:

(i) allocation of throughput capacity by Product, and the rates by Product for determining the Terminalling Service Fee pursuant to Section 4 ;

(ii) identification of tanks to be utilized for dedicated storage tanks and the Storage Services Fee pursuant to Section 5 ;

(iii) Transmix handling fees pursuant to Section 6 ;

(iv) additization pursuant to Section 7 ;

(v) special or proprietary additive injection services, including any installation and maintenance of special additive equipment, pursuant to Section 7(f) , and the fees related thereto;

(vi) biodiesel services and new equipment pursuant to Section 8(c) and the fees related thereto;

(vii) ethanol blending services pursuant to Section 9 and the fees related thereto;

(viii) reimbursement related to newly imposed taxes pursuant to Section 10 ;

(ix) Surcharges related to expenditures as a result of newly imposed laws and regulations pursuant to Section 11 ;

(x) tank cleaning or conversion pursuant to Section 12 ;

(xi) terms and conditions for the provision of railcar loading, unloading and switching services; and

 

Exhibit 1 –

Terminalling Services Agreement - Anacortes


(xii) any other services as may be agreed.]

Except as set forth in this Terminal Service Order, the other terms of the Agreement shall continue in full force and effect and shall apply to the terms of this Terminal Service Order.

[Signature Page Follows]

 

Exhibit 1 –

Terminalling Services Agreement - Anacortes


IN WITNESS WHEREOF , the parties hereto have duly executed this Terminal Service Order as of the date first written above.

 

TESORO LOGISTICS OPERATIONS LLC     TESORO REFINING & MARKETING COMPANY LLC
By:  

 

    By:  

 

Name:       Name:  
Title:       Title:  

 

Exhibit 1 –

Terminalling Services Agreement - Anacortes


EXHIBIT 2

MINIMUM COMMITMENTS AND RESERVED CAPACITIES

 

Product

  

Minimum Commitment

  

Reserved Capacity

Light Ends via truck rack

   69,959 Barrels per Month    82,125 Barrels per Month

Light Ends via rail

   128,359 Barrels per Month    151,019 Barrels per Month

Clean Products via truck rack

   51,709 Barrels per Month    60,834 Barrels per month

 

Exhibit 2 –

Terminalling Services Agreement - Anacortes

Exhibit 10.4

AMENDMENT NO. 1 TO

ANACORTES TRACK USE AND THROUGHPUT AGREEMENT

This Amendment No. 1 to the Anacortes Track Use and Throughput Agreement (the “ Amendment No. 1 ”), dated and effective as of July 1, 2014, is by and among Tesoro Refining & Marketing Company LLC, a Delaware limited liability company and formerly known as Tesoro Refining and Marketing Company (“ TRMC ”), and Tesoro Logistics Operations LLC, a Delaware limited liability company (the “ Operating Company ”) The above-named entities are sometimes referred to in this Amendment No. 1 individually as a “ Party ” and collectively as the “ Parties .”

RECITALS

WHEREAS , the Parties entered into that certain Anacortes Track Use and Throughput Agreement, dated November 15, 2012 (the “ Agreement ”), pursuant to which the Operating Company provides TRMC with throughput services for crude and black oils at the Operating Company’s rail facility in Anacortes, Washington;

WHEREAS , the Parties entered into that certain Terminalling Services Agreement – Anacortes, dated as of the date hereof (the “ TSA ”), pursuant to which the Operating Company will provide throughput services for certain other petroleum products adjacent to the same facility; and

WHEREAS , in connection with the execution of the TSA, the Parties desire to enter into this Amendment No. 1 to amend the Agreement to clarify the products that will be subject to throughput services under the Agreement.

NOW, THEREFORE , in consideration of the premises, and the covenants, conditions and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

1. The definition of “Product” or “Products” in Section I ( Definitions ) of the Agreement is amended in its entirety to read as follows: “ “ Product ” or “ Products ” means Crude Oil and other black oils.”

2. Other than as set forth above, the Agreement shall remain in full force and effect as written.

3. This Amendment No. 1 shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns.

4. The provisions of this Amendment No. 1 are intended to bind the Parties as to each other and are not intended to and do not create rights in any other person or confer upon any other person any benefits, rights or remedies, and no person is or is intended to be a third party beneficiary of any of the provisions of this Amendment No. 1.


5. This Amendment No. 1 shall be construed in accordance with and governed by the laws of the State of Texas, without regard to the principles of conflicts of law. Each of the Parties (a) irrevocably agrees that any claims, suits, actions or proceedings arising out of or relating in any way to this Amendment No. 1 shall be exclusively brought in any federal court of competent jurisdiction situated in the United States District Court for the Western District of Texas, San Antonio Division, or if such federal court declines to exercise or does not have jurisdiction, in the district court of Bexar County, Texas, in each case regardless of whether such claims, suits, actions or proceedings sound in contract, tort, fraud or otherwise, are based on common law, statutory, equitable, legal or other grounds, or are derivative or direct claims, (b) irrevocably submits to the exclusive jurisdiction of the United States District Court for the Western District of Texas, San Antonio Division, or if such federal court declines to exercise or does not have jurisdiction, of the district court of Bexar County, Texas in connection with any such claim, suit, action or proceeding, (c) agrees not to, and waives any right to, assert in any such claim, suit, action or proceeding that (i) it is not personally subject to the jurisdiction of the United States District Court for the Western District of Texas, San Antonio Division, or the district court of Bexar County, Texas, or of any other court to which proceedings in such courts may be appealed, (ii) such claim, suit, action or proceeding is brought in an inconvenient forum, or (iii) the venue of such claim, suit, action or proceeding is improper, (d) expressly waives any requirement for the posting of a bond by a party bringing such claim, suit, action or proceeding and (e) consents to process being served in any such claim, suit, action or proceeding by mailing, certified mail, return receipt requested, a copy thereof to such party at the address in effect for notices hereunder or by personal service within or without the State of Texas, and agrees that service in such forms shall constitute good and sufficient service of process and notice thereof; provided, however, that nothing in clause (e) hereof shall affect or limit any right to serve process in any other manner permitted by law.

6. If any of the provisions of this Amendment No. 1 are held by any court of competent jurisdiction to contravene, or to be invalid under, the laws of any political body having jurisdiction over the subject matter hereof, such contravention or invalidity shall not invalidate the entire Amendment No. 1. Instead, this Amendment No. 1 shall be construed as if it did not contain the particular provision or provisions held to be invalid and an equitable adjustment shall be made and necessary provision added so as to give effect to the intention of the Parties as expressed in this Amendment No. 1 at the time of execution of this Amendment No. 1.

7. This Amendment No. 1 constitutes the entire agreement among the Parties pertaining to the subject matter hereof and supersedes all prior agreements and understandings of the Parties in connection therewith.

8. This Amendment No. 1 may be executed in any number of counterparts with the same effect as if all signatory parties had signed the same document. All counterparts shall be construed together and shall constitute one and the same instrument. Delivery of an executed signature page of this Amendment No. 1 by facsimile transmission or in portable document format (.pdf) shall be effective as delivery of a manually executed counterpart hereof.

[ Signature Page Follows ]

 

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IN WITNESS WHEREOF , the Parties have executed and delivered this Amendment No. 1 effective as of the date first written above.

 

TESORO REFINING & MARKETING COMPANY LLC
By:  

/s/ G. Scott Spendlove

  G. Scott Spendlove
  Senior Vice President and Chief Financial Officer
TESORO LOGISTICS OPERATIONS LLC
By:  

/s/ Phillip M. Anderson

  Phillip M. Anderson
  President

 

Signature Page to Amendment No. 1 to

Anacortes Track Use and Throughput Agreement

Exhibit 10.5

TERMINALLING SERVICES AGREEMENT – MARTINEZ

This Terminalling Services Agreement – Martinez (the “ Agreement ”) is dated as of July 1, 2014, by and between Tesoro Refining & Marketing Company LLC, a Delaware limited liability company (“ Customer ”), and Tesoro Logistics Operations LLC, a Delaware limited liability company (“ TLO ”), and for purposes of Section 33(a) only, Tesoro Logistics GP, LLC, a Delaware limited liability company (“ General Partner ”), and Tesoro Logistics LP, a Delaware limited partnership (“ Partnership ”).

RECITALS

WHEREAS , on the date hereof, Tesoro Corporation, a Delaware corporation (“Tesoro”), Customer and Tesoro Alaska Company LLC, a Delaware limited liability company (“ TAC ”), will contribute certain assets to the General Partner, the General Partner will contribute those assets to the Partnership, and the Partnership will contribute those assets to TLO, all on the terms and conditions set forth in that certain Contribution, Conveyance and Assumption Agreement dated June 23, 2014 by and among Tesoro, Customer, TAC, the Partnership, the General Partner, TLO (the “ Contribution Agreement ”);

WHEREAS , by virtue of its indirect ownership interests in the Partnership, Customer has an economic interest in the financial and commercial success of the Partnership and its operating subsidiary, TLO; and

WHEREAS , Customer and TLO desire to enter into this Agreement to memorialize the terms of their commercial relationship related to the subject matter hereof.

NOW, THEREFORE , in consideration of the covenants and obligations contained herein, the Parties (as defined below) to this Agreement hereby agree as follows:

 

1. DEFINITIONS

Capitalized terms used throughout this Agreement shall have the meanings set forth below, unless otherwise specifically defined herein.

Additized Gasoline ” has the meaning set forth in Section 7(b) .

Agreement ” has the meaning set forth in the Preamble.

Ancillary Services ” has the meaning set forth in Section 3(c) .

API ” means American Petroleum Institute.

Applicable Law ” means any applicable statute, law, regulation, ordinance, rule, determination, judgment, rule of law, order, decree, permit, approval, concession, grant, franchise, license, requirement, or any similar form of decision of, or any provision or condition of any permit, license or other operating authorization issued by any Governmental Authority having or asserting jurisdiction over the matter or matters in question, whether now or hereafter in effect.


ASTM ” means ASTM International, formerly known as the American Society for Testing and Materials.

Barrel ” means a volume equal to 42 U.S. gallons of 231 cubic inches each, at 60 degrees Fahrenheit under one atmosphere of pressure.

Base Gasoline ” has the meaning set forth in Section 7(b) .

Biodiesel ” has the meaning set forth in Section 8(a) .

Biodiesel Facilities ” has the meaning set forth in Section 8(a) .

Blending Instructions ” has the meaning set forth in Section 9(c) .

bpd ” means Barrels per day.

Business Day ” means a day, other than a Saturday or Sunday, on which banks in New York, New York are open for the general transaction of business.

Capacity Resolution ” has the meaning set forth in Section 28(c) .

Carrier ” means a third-party agent or contractor hired by Customer, who is in the business of transporting Products via tank trucks.

Clean Products ” means gasoline, diesel, biodiesel, ethanol and jet fuels.

Clean Products Reserved Capacity ” means an aggregate volume of Barrels of Clean Products per Month throughput across the Terminal through truck rack, as set forth on Exhibit 2 hereto; provided however, that the Clean Products Reserved Capacity during the Month in which the Commencement Date occurs shall be prorated in accordance with the ratio of the number of days including and following the Commencement Date in such Month to the total number of days in such Month.

Commencement Date ” has the meaning set forth in Section 2 .

Confidential Information ” means all confidential, proprietary or non-public information of a Party, whether set forth in writing, orally or in any other manner, including all non-public information and material of such Party (and of companies with which such Party has entered into confidentiality agreements) that another Party obtains knowledge of or access to, including non-public information regarding products, processes, business strategies and plans, customer lists, research and development programs, computer programs, hardware configuration information, technical drawings, algorithms, know-how, formulas, processes, ideas, inventions (whether patentable or not), trade secrets, schematics and other technical, business, marketing and product development plans, revenues, expenses, earnings projections, forecasts, strategies, and other non-public business, technological, and financial information.

Contribution Agreement ” has the meaning set forth in the Recitals.

 

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Customer ” has the meaning set forth in the Preamble.

Customer Group ” has the meaning set forth in Section 23(a) .

Customer Termination Notice ” has the meaning set forth in Section 27(b) .

DCA ” has the meaning set forth in Section 7(b) .

Dedicated Tanks ” has the meaning set forth in Section 5(a) .

Diesel Additive Facilities ” has the meaning set forth in Section 7(c) .

EPA ” has the meaning set forth in Section 7(b) .

Ethanol Services ” has the meaning set forth in Section 9(a) .

Excess Amount ” has the meaning set forth in Section 4(b) .

Extension Period ” has the meaning set forth in Section 2 .

Force Majeure ” means events or circumstances, whether foreseeable or not, not reasonably within the control of TLO and which, by the exercise of due diligence, TLO is unable to prevent or overcome, that prevent performance of TLO’s obligations, including: acts of God, strikes, lockouts or other industrial disturbances, wars, riots, fires, floods, storms, orders of Governmental Authorities, explosions, terrorist acts, breakage, accident to machinery, equipment, storage tanks or lines of pipe, and inability to obtain or unavoidable delays in obtaining material or equipment and similar events.

Force Majeure Notice ” has the meaning set forth in Section 27(a) .

Force Majeure Period ” has the meaning set forth in Section 27(a) .

General Partner ” has the meaning set forth in the Preamble.

Governmental Authority ” means any federal, state, local or foreign government or any provincial, departmental or other political subdivision thereof, or any entity, body or authority exercising executive, legislative, judicial, regulatory, administrative or other governmental functions or any court, department, commission, board, bureau, agency, instrumentality or administrative body of any of the foregoing.

Initial Term ” has the meaning set forth in Section 2 .

LAC ” has the meaning set forth in Section 7(b) .

Light Ends ” means propanes, butanes and pentanes.

Light Ends Reserved Capacity ” means an aggregate volume of Barrels of Light Ends per Month throughput across the Terminal through truck rack, as set forth on Exhibit 2 hereto; provided however, that the Light Ends Reserved Capacity during the Month in which the

 

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Commencement Date occurs shall be prorated in accordance with the ratio of the number of days including and following the Commencement Date in such Month to the total number of days in such Month.

Minimum Clean Products Commitment ” means an aggregate volume of Barrels of Clean Products per Month throughput across the Terminal through truck rack, as set forth on Exhibit 2 hereto; provided however, that the Minimum Products Commitment during the Month in which the Commencement Date occurs shall be prorated in accordance with the ratio of the number of days including and following the Commencement Date in such Month to the total number of days in such Month.

Minimum Light Ends Commitment ” means an aggregate volume of Barrels of Light Ends per Month throughput across the Terminal through truck rack, as set forth on Exhibit 2 hereto; provided however, that the Minimum Light Ends Commitment during the Month in which the Commencement Date occurs shall be prorated in accordance with the ratio of the number of days including and following the Commencement Date in such Month to the total number of days in such Month.

Minimum Rail Commitment ” means an aggregate volume of Barrels of Light Ends per Month throughput across the Terminal by loading and unloading railcars, as set forth on Exhibit 2 hereto; provided however, that the Minimum Rail Commitment during the Month in which the Commencement Date occurs shall be prorated in accordance with the ratio of the number of days including and following the Commencement Date in such Month to the total number of days in such Month.

Minimum Throughput Commitments ” means the Minimum Rail Commitment, the Minimum Clean Products Commitment and the Minimum Light Ends Commitment, and “ Minimum Throughput Commitment ” means any one of them.

Month ” means a calendar month.

Operating Capacity ” means the effective storage capacity of a tank, taking into account accepted engineering principles, industry standards, API guidelines and Applicable Law, only as to Products that each tank is capable of storing, within the requirements of applicable permit requirements and under actual conditions as they may exist at any time. The Operating Capacity of each tank is listed on the applicable Terminal Service Order as of the date of such Terminal Service Order.

Partnership ” has the meaning set forth in the Preamble.

Partnership Change of Control ” means Tesoro ceases to possess, directly or indirectly, the power to direct or cause the direction of the management and policies of the General Partner of the Partnership, whether through ownership of voting securities, by contract, or otherwise.

Partnership Group ” has the meaning set forth in Section 23(b) .

Party ” or “ Parties ” means that each of Customer and TLO is a “Party” and collectively are the “Parties” to this Agreement.

 

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Person ” means any individual, partnership, limited partnership, joint venture, corporation, limited liability company, limited liability partnership, trust, unincorporated organization or Governmental Authority or any department or agency thereof.

Product ” or “ Products ” means the Light Ends and Clean Products described herein as being handled under this Agreement.

Rail Reserved Capacity ” means an aggregate volume of Barrels of Light Ends per Month throughput across the Terminal by loading and unloading railcars, as set forth on Exhibit 2 hereto; provided however, that the Rail Reserved Capacity during the Month in which the Commencement Date occurs shall be prorated in accordance with the ratio of the number of days including and following the Commencement Date in such Month to the total number of days in such Month.

Receiving Party Personnel ” has the meaning set forth in Section 35(d) .

Red Dye ” has the meaning set forth in Section 7(d) .

Refinery ” means Customer’s refining facilities located at Martinez, California.

Replacement Customer ” has the meaning set forth in Section 32 .

Reserved Capacities ” means the Rail Reserved Capacity, the Light Ends Reserved Capacity and the Clean Products Reserved Capacity, and “ Reserved Capacity ” means any one of them.

Restoration ” has the meaning set forth in Section 28(b) .

Shell Capacity ” means the gross storage capacity of a tank for each respective Product, based upon its dimensions, as set forth in an applicable Terminal Service Order.

Shortfall Payment ” has the meaning set forth in Section 4(d) .

Storage First Offer Period ” has the meaning set forth in Section 31 .

Storage Right of First Refusal ” has the meaning set forth in Section 31 .

Storage Services Fee ” has the meaning set forth in Section 5(a) .

Surcharge ” has the meaning set forth in Section 11(a) .

TAC ” has the meaning set forth in the Recitals.

Tank Heels ” consist of the minimum quantity of Product which either (a) must remain in a tank during all periods when the tank is available for service to keep the tank in regulatory compliance or (b) is necessary for physical operation of the tank.

Term ” has the meaning set forth in Section 2 .

 

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Terminal ” means TLO’s Martinez Terminal adjacent to the Refinery, consisting of a three-lane truck rack for the terminalling of Clean Products, and a two-lane truck terminal and a rail loading and unloading facility for the terminalling of Light Ends.

Terminal Service Order ” has the meaning set forth in Section 13(a) .

Terminalling Equipment ” has the meaning set forth in Section 4(c) .

Terminalling First Offer Period ” has the meaning set forth in Section 30(b) .

Terminalling Right of First Refusal ” has the meaning set forth in Section 30(b) .

Terminalling Service Fee ” means for any Month during the Term, the total fee per Barrel of throughput paid by Customer during that Month for terminalling and Ancillary Services at the Terminal, but excluding the Storage Services Fee, as set forth on a Terminal Service Order.

Termination Notice ” has the meaning set forth in Section 27(a) .

Tesoro ” has the meaning set forth in the Recitals.

Third Amended and Restated Omnibus Agreement ” means that certain Third Amended and Restated Omnibus Agreement, entered into concurrently herewith, among Tesoro, Customer, Tesoro Companies, Inc., TAC, the General Partner and the Partnership, as such agreement may be amended, supplemented or restated from time to time.

Throughput Right of First Refusal ” has the meaning set forth in Section 28(e) .

TLO ” has the meaning set forth in the Preamble.

Transmix ” has the meaning set forth in Section 6 .

ULSD ” means ultra-low sulfur diesel.

 

2. TERM

The initial term of this Agreement shall commence on the date hereof (the “ Commencement Date ”) and shall continue through July 1, 2024 (the “ Initial Term ”); provided, however, that Customer may, at its option, extend the Initial Term for up to two (2) renewal terms of five (5) years each (each, an “ Extension Period ”) by providing written notice of its intent to TLO no less than three hundred sixty-five (365) calendar days prior to the end of the Initial Term or the then-current Extension Period. The Initial Term, and any Extension Period, shall be referred to herein as the “ Term .”

 

3. SERVICES

During the Term and subject to the terms and conditions of this Agreement and any Terminal Service Order, TLO shall make available to Customer the following services:

(a) Commingled storage and throughput capacity pursuant to Section 4 below;

 

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(b) Dedicated storage pursuant to Section 5 below;

(c) Railcar loading, unloading and switching services as set forth on a Terminal Service Order; and

(d) The services pursuant to Sections 6-9 below, other additization services as set forth on a Terminal Service Order and any and other services pursuant to a Terminal Service Order (collectively, the “ Ancillary Services ”).

 

4. THROUGHPUT

(a) Throughput Commitment and Terminalling Service Fee . Customer shall deliver and/or pay for the Minimum Throughput Commitments at the Terminal, and TLO shall make available to Customer at all times commingled storage and throughput capacity at the Terminal sufficient to allow Customer to throughput the Reserved Capacities. Customer shall pay the Terminalling Service Fee for such service as set forth in a Terminal Service Order. Allocation of storage and throughput capacity for separate Products at the Terminal shall be set forth in a Terminal Service Order, if applicable. TLO shall not make any commitments to third parties that would interfere with the ability of Customer to throughput the Reserved Capacities. Customer commits to deliver and/or pay for the Minimum Throughput Commitments on a Monthly basis during the Term.

(b) Excess Capacity . Customer may throughput volumes in excess of a Minimum Throughput Commitment, up to the then-available capacity of the Terminal, net of any third-party commitments, as determined by TLO at any time, which allocation of any excess capacity shall be in accordance with current practices, or as otherwise may be set forth in a Terminal Service Order. If during any Month during the Term, Customer throughputs aggregate volumes greater than a Minimum Throughput Commitment, then Customer shall pay TLO an amount equal to the fee determined by multiplying the actual volumes throughput by Customer in excess of the applicable Minimum Throughput Commitment by the Terminalling Service Fee (the “ Excess Amount ”).

(c) Removal of Equipment from Service . If at any time during the Term, any tank, rack or other equipment or facility of TLO that is dedicated to Customer or otherwise being used to provide services hereunder (“ Terminalling Equipment ”), is removed from service, and if removal of such Terminalling Equipment restricts Customer from being able to throughput a Reserved Capacity or receive associated Ancillary Services, then until such Terminalling Equipment is restored to service, Customer’s applicable Minimum Throughput Commitment shall be reduced by the difference between the applicable Minimum Throughput Commitment and the amount that Customer can effectively throughput at such location without restriction until such Terminalling Equipment is restored to service.

(d) Shortfall Payments . If, during any Month during the Term, Customer throughputs aggregate volumes less than a Minimum Throughput Commitment for such Month, then Customer shall pay TLO an amount (a “ Shortfall Payment ”) for any shortfall. Shortfall Payments shall be equal to the amount determined by taking the difference between (i) the applicable

 

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Minimum Throughput Commitment multiplied by the Terminal Service Fee and (ii) the applicable actual volumes throughput by Customer multiplied by the Terminal Service Fee. The dollar amount of any Shortfall Payment paid by Customer shall be posted as a credit to Customer’s account and may be applied against any Excess Amounts owed by Customer during any of the succeeding three (3) Months. Credits will be applied in the order in which such credits accrue and any remaining portion of the credit that is not used by Customer during the succeeding three (3) Months shall expire ( e.g ., a credit that accrues in January will be available in February, March and April, will expire at the end of April, and must be applied prior to applying any credit which accrues in February).

(e) Third Party Throughput Credit . If TLO throughputs volumes from third parties (other than Replacement Customers) at the Terminal during any Month, such volumes shall be applied as a credit to reduce the applicable Minimum Throughput Commitment, up to a maximum amount equal to such Minimum Throughput Commitment. All volumes throughput by Replacement Customers shall be applied as a credit to reduce the applicable Minimum Throughput Commitment.

 

5. DEDICATED STORAGE

(a) Storage Services Fee . Customer shall pay a Monthly fee (the “ Storage Services Fee ”) to reserve, on a firm basis, all of the existing aggregate Shell Capacity of certain tanks (the “ Dedicated Tanks ”) as specified on a Terminal Service Order. Such fee shall be payable by Customer on a Monthly basis throughout the Term of the Agreement, regardless of the actual volumes of Products stored by TLO on behalf of Customer; provided, however, that the Parties shall from time to time negotiate an appropriate adjustment to such fee if the following conditions are met: (i) Customer requires the full Operating Capacity of the Dedicated Tanks, (ii) the full Operating Capacity of the Tanks is not available to Customer for any reason (other than any reason resulting from or relating to actions or inactions by Customer), and (iii) TLO is unable to otherwise accommodate the actual volumes of Products required to be stored by Customer pursuant to the terms of this Agreement or any Terminal Service Order. Unless otherwise agreed, such adjustment shall be made in proportion to the reduction in Operating Capacity for any time period compared with the Operating Capacity then in effect for the affected Dedicated Tanks pursuant to the mutually agreed Terminal Service Orders. The Parties recognize that the existing Operating Capacity of certain tanks may be less than the Shell Capacity of such Dedicated Tanks, but the Parties acknowledge and agree that the Storage Services Fee shall be set in terms of a dollar-per-Barrel per Month rate based on Shell Capacity in the applicable Terminal Service Order. Such Storage Services Fee shall include all storage, pumping, and transshipment between and among the Dedicated Tanks.

(b) Calculation of Storage Services Fee . The Storage Services Fee shall be calculated using the per Barrel rate set forth on the initial Terminal Service Order executed effective as of the Commencement Date for the then-existing aggregate Shell Capacity of the tanks specified in such initial Terminal Service Order. The Storage Services Fee owed during the Month in which the Commencement Date occurs, if less than a full calendar month, shall be prorated in accordance with the ratio of (i) the number of days in such Month during which this Agreement is effective to (ii) the total number of days in such Month.

 

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6. PRODUCT DOWNGRADE AND INTERFACE

TLO shall account for the volume of Product downgraded, and Customer’s inventory of Products and/or interface shall be adjusted, provided that, interface volume (“ Transmix ”) received shall be allocated (a) in the case of dedicated storage, entirely to Customer and (b) in the case of commingled storage, among Customer and other customers receiving Products generating such Transmix in the same shipment or stored in commingled storage in proportion to each customer’s volume of Products in such shipment or storage. Customer shall remove its Transmix upon notice from TLO and shall be subject to applicable Transmix handling fees upon its removal, as provided in a Terminal Service Order. If Transmix is not removed within fifteen (15) Business Days after notification (such time period to be extended to the extent of any delay or hindrance by TLO, its agents or contractors for any reason), TLO shall have the right to sell such Transmix at market rates and return any proceeds to Customer, less applicable Transmix handling fees in effect at the time of such sale. Product downgraded as a result of ordinary Terminal or pipeline operations including line flushing, rack meter provings or other necessary Terminal operations shall not constitute losses for which TLO is liable to Customer.

 

7. ADDITIZATION OPTIONS

(a) Additive Injection Service . If available at the Terminal, TLO shall provide equipment for the injection of additives, as provided below. Customer shall designate pursuant to a Terminal Service Order which additive injection service shall be provided.

(b) DCA Additization . All gasoline Product leaving the Terminal shall be additized (“ Additized Gasoline ”). As an exception, TLO shall accommodate a request from Customer to lift base gasoline from the Terminal. In that case, the bill of lading issued by TLO shall label all such Product as base gasoline (“ Base Gasoline ”). TLO shall provide a generic Deposit Control Additive (“ DCA ”) injection service, including all required reporting and record keeping prescribed by Applicable Law. The additive supplied shall be an Environmental Protection Agency (“ EPA ”) certified DCA. Subject to the other provisions hereof, Customer may request TLO to instead inject a different proprietary DCA into certain gasoline delivered hereunder, instead of the generic DCA provided by TLO, and TLO shall accommodate such requests pursuant to a Terminal Service Order specifying the specific additization required and fees to be charged for its injection, subject to Customer providing a suitable Additized Gasoline system for such proprietary additive. TLO shall ensure that such additive is injected into all appropriate gasoline Product delivered to Customer at a rate no lower than the Lowest Allowable Concentration (“ LAC ”) at which such additive was certified. The gasoline additization rate shall be determined by Customer, but shall not be less than 1.1 times the LAC specified by the respective additive manufacturer or supplier. Notwithstanding the above, Customer shall be solely responsible for registering with the EPA or any other government agency its use of generic or proprietary additive in its fuels, as required by Applicable Law. Customer shall submit evidence of registration in compliance with 40 C.F.R. Part 80. Customer shall also be responsible for full compliance with any quarterly or other regulatory reporting, and any other requirements under Applicable Law related to use of generic or proprietary additive in Customer’s Product.

 

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(c) Lubricity and Conductivity Additization . TLO shall maintain and operate diesel lubricity and conductivity additive injection facilities (the “ Diesel Additive Facilities ”) at the Terminal in accordance with customary industry standards during the Term, including all required reporting and record keeping prescribed by Applicable Law. TLO shall arrange for purchase and delivery of any and all required lubricity and conductivity additive for injection through the Diesel Additive Facilities at the Terminal. TLO shall inject into all ULSD delivered to Customer at the Terminal an amount of lubricity and conductivity additive that TLO determines to be sufficient to comply with current ASTM diesel lubricity and conductivity specifications. TLO shall, upon request, provide Customer with documentation of additive specifications and additive injection, which TLO shall keep on file at the Terminal.

(d) Red Dye Additization . TLO shall provide a generic red dye additive (“ Red Dye ”) injection service for diesel, including all required reporting and record keeping prescribed by Applicable Law. TLO shall be responsible for determining the injection rates, Red Dye inventory levels, meter readings, and calculations of actual treat rates, in compliance with the minimum levels prescribed by the Internal Revenue Service. Customer is responsible for designating which of its accounts shall be authorized to use Red Dye diesel injection services. TLO equipment shall enable designated Carriers and accounts to inject Red Dye upon request prior to loading diesel Product at the Terminal. Customer’s Carrier shall be solely responsible for designating that a load of diesel Product be injected with Red Dye, and TLO shall have no liability with regard to whether a load of Product is additized with Red Dye. TLO shall not be responsible for any loss, damage or liability that arises from Carrier injecting or failing to inject Red Dye into Customer’s Product, unless caused by TLO’s equipment failure or negligence.

(e) Responsibility for Provision of Additive . For any additization services provided pursuant to this Section 7 , TLO shall be responsible for providing generic additives, and Customer shall be responsible for providing any special or proprietary additives requested by Customer.

(f) Special Additive Equipment . As set forth in a Terminal Service Order, and subject to the other provisions set forth herein and the availability of suitable space at the Terminal, Customer shall have the option of having TLO install and maintain at the Terminal, at Customer’s sole risk, cost and expense, such special additive equipment as may be desirable for Products to be delivered to Customer’s account hereunder. The engineering and installation of any fixture, equipment or appurtenance placed on the Terminal in respect thereof shall be subject to TLO’s prior approval and supervision. During the Term, TLO shall operate the special additive equipment with any fees therefor to be set forth in a Terminal Service Order. Upon the expiration of the Term, TLO will have the option to purchase the special additive equipment for a price to be set forth in a Terminal Service Order.

 

8. BIODIESEL SERVICES

(a) Biodiesel Facilities . If available at the Terminal, TLO shall operate B99/B100 (“ Biodiesel ”) truck rack, tank and inbound manifold blending facilities (the “ Biodiesel Facilities ”) as provided in a Terminal Service Order. The Biodiesel Facilities are intended to provide a means to blend Biodiesel with ULSD. Customer shall be required to keep a Tank Heel inventory in the Biodiesel tanks in proportion with the number of active inventory holders in the tanks.

 

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(b) Payment . Customer shall pay TLO for the Biodiesel blending and throughput provided by TLO as set forth in a Terminal Service Order.

(c) Biodiesel Services Provided . TLO shall (i) coordinate with Customer the scheduling of Biodiesel trucks from Customer to the Terminal; (ii) provide necessary services to convey Customer’s Biodiesel from trucks to appropriate Biodiesel storage tanks where it shall be stored until blended with ULSD and delivered to Customer; and (iii) blend and inject Customer’s Biodiesel into Customer’s ULSD in accordance with Customer’s instructions and Applicable Law. The provision of any new equipment necessary for the services in this Section 8(c) , and which Party shall own and operate such equipment during and after the Term, shall be set forth on a Terminal Service Order.

 

9. ETHANOL BLENDING SERVICES

(a) Services and Equipment . Where ethanol receiving, storage and blending facilities are available at the Terminal, upon Customer’s request, the Parties shall execute a Terminal Service Order pursuant to which TLO shall receive, store and blend ethanol into Customer’s gasoline at the Terminal (“ Ethanol Services ”). TLO shall provide and operate all equipment required for the Ethanol Services. The equipment shall consist of truck and/or rail unloading racks, tanks, pumps, motors, injectors, computer control, and any other ancillary equipment necessary for the providing of the Ethanol Services.

(b) Ethanol Inventories . Customer shall be solely responsible for supplying inventories of ethanol at its own expense, including the scheduling and transporting of ethanol into the Terminal, subject to notice and scheduling procedures mutually agreeable to the Parties. TLO shall receive Customer’s ethanol into fungible ethanol storage at the Terminal, unless otherwise specified in a Terminal Service Order.

(c) Blending Instructions . Upon a request from Customer for Ethanol Services, a Terminal Service Order shall provide the desired blending ratio of ethanol to gasoline at the Terminal (“ Blending Instructions ”), including the minimum Octane (R+M/2) rating for each grade of Customer’s gasoline Product, prior to blending. A change to the blending ratios shall require a Terminal Service Order.

(d) Records . TLO shall maintain for a minimum of five (5) years written or electronic records of the type and volume of oxygenate blended into Customer’s gasoline.

(e) Quality Assurance . TLO shall maintain an industry standard quality assurance oversight program of the ethanol blending process. TLO shall provide Customer with an annual report within fifteen (15) Business Days after the end of each calendar year that, at a minimum, summarizes the volume of Customer’s gasoline received by TLO, the volume of oxygenate added to Customer’s gasoline and total volume of blended gasoline.

 

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(f) Monitoring . TLO shall allow Customer or its agents to monitor the oxygenate blending operation by periodic audit, sampling, testing and/or records review to ensure the overall volumes and type of oxygenate blended into gasoline is consistent with the oxygenate claimed by Customer as required by 40 C.F.R. 80.101(d)(4)(ii)(B)(2). The scope and type of such audits will be negotiated in good faith by the Parties in advance and memorialized in writing.

(g) Customer Liability . TLO shall rely on Blending Instructions and data provided by Customer in performing its obligations under this Agreement or any Terminal Service Order. Customer agrees to be solely responsible for all claims arising from TLO’s use of or reliance on these Blending Instructions and data.

(h) Condition . When performing the Ethanol Services as per Customer’s Blending Instructions, TLO shall not certify to Customer or any third-party that blended gasoline does or shall meet ASTM D 4814 or any federal, state, or local regulatory specifications. Customer agrees that it is receiving from TLO the Blended Gasoline in an “AS IS, WHERE IS” condition without warranties of any kind, including any warranties of merchantability or fitness for a particular purpose, or its ability to meet ASTM or regulatory specifications.

 

10. REIMBURSEMENT FOR NEWLY IMPOSED TAXES AND REGULATORY FEES; EXCISE TAXES

(a) Prompt Reimbursement . Customer shall promptly pay or reimburse TLO for any newly imposed taxes, levies, royalties, assessments, licenses, fees, charges, surcharges and sums due of any nature whatsoever (other than income taxes, gross receipt taxes and similar taxes) by any federal, state or local government or agency that TLO incurs on Customer’s behalf for the services provided by TLO under this Agreement or any Terminal Service Order. If TLO is required to pay any of the foregoing, Customer shall promptly reimburse TLO in accordance with the payment terms set forth in this Agreement. Any such newly imposed taxes or regulatory fees as provided for in this Section 10(a) shall be specified in an applicable Terminal Service Order.

(b) Excise Tax Certification . Upon written request by TLO, Customer shall supply TLO with a completed signed original notification certificate of gasoline and diesel fuel registrant as required by the Internal Revenue Service’s excise tax regulation. Customer further agrees to comply with all Applicable Law with respect to such taxes.

(c) Exemption Certification . If Customer is exempt from the payment of any taxes allocated to Customer under the foregoing provisions, Customer shall furnish TLO with the proper exemption certificates.

 

11. EXPENDITURE REQUIRED BY NEW LAWS AND REGULATIONS

(a) Surcharge . If, during the Term, any existing laws or regulations are changed or any new laws or regulations are enacted that require TLO to make substantial and unanticipated expenditures (whether capitalized or otherwise) with respect to the Terminal, TLO may, subject to the terms of this Section 11 , impose a surcharge to increase the applicable service fee (“ Surcharge ”), to cover Customer’s pro rata share of the cost of complying with these laws or regulations, based upon the percentage of Customer’s use of the services or facilities impacted by such new laws or regulations.

 

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(b) Notification and Mitigation . TLO shall notify Customer of any proposed Surcharge to be imposed pursuant to Section 11(a) sufficient to cover the cost of any required capital projects and any ongoing increased operating costs. TLO and Customer then shall negotiate in good faith for up to thirty (30) days to mutually determine the effect of the change in law or regulation or new law or regulation, the cost thereof, and how such cost shall be amortized at an interest rate of no more than nine percent (9%) as a Surcharge, with the understanding that TLO and Customer shall use their reasonable commercial efforts to mitigate the impact of, and comply with, these laws and regulations. Without limiting the foregoing, if expenditures requiring a Surcharge may be avoided or reduced through changes in operations, then the Parties shall negotiate in good faith to set forth the appropriate changes in a Terminal Service Order to evidence the reduction of the amount of a Surcharge while leaving the Parties in the same relative economic position they held before the laws or regulations were changed or enacted.

(c) Less Than 15% Surcharge . In the event any Surcharge results in less than a fifteen percent (15%) increase in the applicable service fee, Customer will be assessed such Surcharge on all future invoices during the period in which such Surcharge is in effect for the applicable amortization period, and TLO shall not terminate the affected service from this Agreement.

(d) 15% or More Surcharge . In the event any Surcharge results in a fifteen percent (15%) or more increase in the applicable service fee, TLO shall notify Customer of the amount of the Surcharge required to reimburse TLO for its costs, plus carrying costs, together with reasonable supporting detail for the nature and amount of any such Surcharge.

(i) If within thirty (30) days of such notification provided in this Section 11(d) , Customer does not agree to pay such Surcharge or to reimburse TLO up front for its costs, TLO may elect to either:

 

  a. require Customer to pay such Surcharge, up to a fifteen percent (15%) increase in the applicable service fee; or

 

  b. terminate the service under this Agreement to which the Surcharge applies, upon notice to Customer.

(ii) TLO’s performance obligations under this Agreement shall be suspended or reduced during the above thirty (30) day period to the extent that TLO would be obligated to make such expenditures to continue performance during such period.

(e) Resolution of Surcharge . Following a resolution with respect to the amount and manner of payment of a Surcharge pursuant to this Section 11 , the Parties shall execute an appropriate Terminal Service Order memorializing the terms of such resolution.

(f) Payment of Surcharge . In lieu of paying the Surcharge in connection with any required capital project, Customer may, at its option, elect to pay the full cost of the substantial and unanticipated expenditures upon completion of a project.

 

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12. REIMBURSEMENT FOR TANK CLEANING AND CONVERSION

(a) Reimbursement for Tank Cleaning . If any Dedicated Tanks are removed from service or cleaning of any tanks is performed by TLO at the specific request of Customer, Customer shall bear (or reimburse TLO) for all costs to clean, degas or otherwise prepare the tank(s) including, without limitation, the cost of removal, processing, transportation, disposal, of all waste and the cost of any taxes or charges TLO may be required to pay in regard to such waste. For any tanks that are dedicated to Customer for segregated storage of Customer’s Products as set forth in any Terminal Service Order, Customer agrees to reimburse TLO for the reasonable cost of changes necessary to return the dedicated storage tanks to TLO on termination of their dedication for segregated storage under this Agreement, in the same condition as originally received less normal wear and tear, unless otherwise mutually agreed by the Parties.

(b) Reimbursement for Tank Conversion . If Customer requests that any dedicated tank be changed for storage of a different grade or type of Product, TLO shall agree to a change in such service, if the same can be accomplished in accordance with reasonable commercial standards, accepted industry and engineering guidelines, permit requirements and Applicable Law. If any such modifications, improvements, vapor recovery, cleaning, degassing, or other preparation of the tanks is performed by TLO at the request of Customer, Customer shall bear all direct costs attributable thereto, including, without limitation, the cost of removal, processing, transportation, and disposal of all waste and the cost of any taxes or mutually agreed charges TLO may be required to pay in regard to such waste, which costs shall be set forth on the applicable Terminal Service Order.

 

13. TERMINAL SERVICE ORDERS; PAYMENT

(a) Description . TLO and Customer shall enter into one or more terminal service orders for the Terminal substantially in the form attached hereto as Exhibit 1 (each, a “ Terminal Service Order ”). Upon a request by Customer pursuant to this Agreement or as deemed necessary or appropriate by TLO in connection with the services to be delivered pursuant hereto, TLO shall generate a Terminal Service Order to set forth the specific terms and conditions for providing the applicable services described therein and the applicable fees to be charged for such services. No Terminal Service Order shall be effective until fully executed by both TLO and Customer.

(b) Included Items . Items available for inclusion on a Terminal Service Order include, but are not limited to, the following:

(i) allocation of throughput capacity by Product, and the rates by Product for determining the Terminalling Service Fee pursuant to Section 4 ;

(ii) identification of tanks to be utilized for dedicated storage tanks and the Storage Services Fee pursuant to Section 5 ;

(iii) Transmix handling fees pursuant to Section 6 ;

(iv) additization pursuant to Section 7 ;

 

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(v) special or proprietary additive injection services, including any installation and maintenance of special additive equipment, pursuant to Section 7(f) , and the fees related thereto;

(vi) biodiesel services and new equipment pursuant to Section 8(c) and the fees related thereto;

(vii) ethanol blending services pursuant to Section 9 and the fees related thereto;

(viii) reimbursement related to newly imposed taxes pursuant to Section 10 ;

(ix) Surcharges related to expenditures as a result of newly imposed laws and regulations pursuant to Section 11 ;

(x) tank cleaning or conversion pursuant to Section 12 ;

(xi) terms and conditions for the provision of railcar loading, unloading and switching services; and

(xii) any other services as may be agreed.

(c) Invoices . TLO shall invoice Customer on a monthly basis and Customer shall pay all amounts due under this Agreement and any Terminal Service Order no later than ten (10) calendar days after Customer’s receipt of TLO’s invoices. Any past due payments owed by Customer shall accrue interest, payable on demand, at the lesser of (i) the rate of interest announced publicly by JPMorgan Chase Bank, in New York, New York, as JPMorgan Chase Bank’s prime rate (which Parties acknowledge and agree is announced by such bank and used by the Parties for reference purposes only and may not represent the lowest or best rate available to any of the customers of such bank or the Parties), plus four percent (4%), and (ii) the highest rate of interest (if any) permitted by Applicable Law, from the due date of the payment through the actual date of payment.

(d) Fee Increases . Any fees of a fixed amount set forth in this Agreement and any Terminal Service Order shall be increased on July 1 of each year of the Term, commencing on July 1, 2015, by a percentage equal to the greater of zero or the positive change, if any, in the CPI-U (All Urban Consumers) for the prior calendar year, as reported by the Bureau of Labor Statistics, and rounded to the nearest one-tenth (1/10) of one percent (1%).

(e) Conflict between Agreement and Terminal Service Order . In case of any conflict between the terms of this Agreement and the terms of any Terminal Service Order, the terms of the applicable Terminal Service Order shall govern.

 

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14. CUSTODY TRANSFER AND TITLE

(a) Custody of Pipeline Receipts and Deliveries . For Product received into the Terminal by pipeline, custody of the Product shall pass to TLO at the flange where it enters the Terminal’s receiving line. For Product delivered by the Terminal into a pipeline, custody of the Product shall pass to Customer at the flange where it exits the Terminal’s delivery line.

(b) Custody of Truck Receipts and Deliveries . For receipts and deliveries to or from trucks, custody shall pass at the flange where the hoses at TLO’s facility interconnect with the truck.

(c) Custody of Rail Receipts and Deliveries . For Product received by rail, custody shall pass to TLO when the switching locomotive used to transfer Customer’s rail cars to the Terminal is uncoupled from such rail cars at the Terminal.

(d) Custody of Marine Receipts and Deliveries . For receipts and deliveries to or from marine vessels, custody shall pass at the flange where the Terminal interconnects with the hoses connected to the marine vessel.

(e) In-Tank . Deliveries by book transfer shall be reflected in the books of TLO.

(f) Title Transfer . Upon re-delivery of any Product to Customer’s account, Customer shall become solely responsible for any loss, damage or injury to Person or property or the environment, arising out of transportation, possession or use of such Product after transfer of custody and the loss allowance provisions hereof shall apply to Product while in TLO’s custody. Title to all of Customer’s Product received in the Terminal shall remain with Customer at all times. Both Parties acknowledge that this Agreement represents a bailment of Products by Customer to TLO and not a consignment of Products, it being understood that TLO has no authority hereunder to sell or seek purchasers for the Products of Customer, except for Transmix as provided in Section 6 above. Customer hereby warrants that it shall, at all times, have good title to and the right to deliver, throughput, store and receive Products pursuant to the terms of this Agreement and any Terminal Service Order.

 

15. PRODUCT QUALITY

(a) Product Specifications of Delivered Products. Customer warrants that all Products delivered under this Agreement and any Terminal Service Order shall meet the latest applicable pipeline specifications or mutually agreed upon specifications for that Product upon receipt at the Terminal and contain no deleterious substances or concentrations of any contaminants that may make it or its components commercially unacceptable in general industry application. Customer shall not deliver to the Terminal any Products which: (i) would in any way be injurious to the Terminal; (ii) would render the Terminal unfit for the proper storage of similar Products; (iii) would contaminate or otherwise downgrade the quality of the Products stored in commingled storage; (iv) may not be lawfully stored at the Terminal; or (v) otherwise do not meet applicable Product specifications for such Product that are customary in the location of the Terminal. If, however, there are Products that do not have such applicable specifications, the specifications shall be mutually agreed upon by the Parties. Should Customer’s commingled Products not comply with the minimum quality standards set forth in this Agreement or any Terminal Service Order, Customer shall be liable for all loss, damage and cost incurred thereby, including damage to Products of third parties commingled with Customer’s unfit Products.

 

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(b) Product Specifications of Commingled Storage . TLO shall have the right to store compatible Products received for Customer’s account with Products belonging to TLO or third parties in TLO’s commingled storage tanks. TLO shall handle Customer’s fungible Products in accordance with TLO’s prevailing practices and procedures for handling such Products. The quality of all Products tendered into commingled storage for Customer’s account shall be verified either by Customer’s refinery analysis or supplier’s certification, such that Products so tendered shall meet TLO’s Product specifications. All costs for such analysis shall be borne solely by Customer. TLO shall have the right to sample any Product tendered to the Terminal hereunder. The cost of such sampling shall be borne solely by TLO. All Products returned to Customer shall comply with Product specifications in effect on the date the Products are delivered to Customer. Notwithstanding any other provision herein, any and all Products that leave the Terminal shall meet all relevant ASTM, EPA, federal and state specifications.

(c) Liability for Commingled Storage . TLO shall exercise reasonable care to ensure that all Products delivered by third parties into commingled storage with Customer’s Products meet applicable Product specifications for such Product that are customary in the location of the Terminal. In the event that Customer’s Products are commingled with third-party Products that do not comply with the minimum quality standards set forth in this Agreement or any Terminal Service Order, TLO shall be liable for all loss, damage and cost incurred thereby.

 

16. MEASUREMENT AND VOLUME LOSSES

(a) Methods of Measurement .

(i) All quantities of Products received or delivered by or into trucks or marine vessels shall be measured and determined based upon the meter readings at the Terminal, as reflected by delivery tickets or bills of lading, or if such meters are unavailable, by applicable calibration tables, as set forth on a Terminal Service Order or pursuant to mutual agreement of the Parties.

(ii) All quantities of Products received or delivered by or into railcars shall be measured and determined based upon the meter readings at the Terminal, or if such meters are unavailable, by applicable calibration tables, as set forth on a Terminal Service Order or pursuant to mutual agreement of the Parties.

(iii) All quantities of Products received and delivered by pipeline shall be measured and determined based upon the meter readings of the pipeline operator, as reflected by delivery tickets, or if such meters are unavailable, by applicable calibration tables, as set forth on a Terminal Service Order or pursuant to mutual agreement of the Parties.

(iv) Deliveries by book transfer shall be reflected by entries in the books of TLO.

(v) All quantities shall be adjusted to net gallons at 60° F in accordance with ASTM D-1250 Petroleum Measurement Tables, or latest revisions thereof. Meters and temperature probes shall be calibrated according to applicable API standards. Customer shall have the right, at its sole expense, and in accordance with rack location procedure,

 

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to independently certify such calibration. Storage tank gauging shall be performed by TLO’s personnel. TLO’s gauging shall be deemed accurate unless challenged by an independent certified gauger. Customer may perform joint gauging at its sole expense with TLO’s personnel at the time of delivery or receipt of Product, to verify the amount involved. If Customer should request an independent gauger, such gauger must be acceptable to TLO and such gauging shall be at Customer’s sole expense.

(b) Measurement and Volume Loss Control Practices .

(i) TLO shall have no obligation to measure volume gains and losses. In the event third-party Products are terminalled at the Terminal, the Parties shall mutually determine the measurement and volume loss control practices for the Terminal.

(ii) TLO shall be responsible to Customer only for Product losses and/or shortages resulting from the negligent or wrongful acts and omissions of TLO; provided that TLO shall not be responsible to Customer for any Product losses and/or shortages for which Customer is compensated by its cargo/inventory insurance carrier, including through the cargo/inventory insurance coverage required by Section 24 . If Customer fails to maintain the cargo/inventory insurance coverage required by Section 24 , then TLO shall also not be responsible to Customer for any Product losses and/or shortages to the extent Customer would have been compensated by its insurance carrier had Customer maintained the cargo/inventory insurance coverage required by Section 24 .

(iii) Customer shall be responsible for all Product losses and/or shortages it may suffer other than those covered by Section 16(b)(ii) .

 

17. PRODUCT DELIVERIES, RECEIPTS AND WITHDRAWALS

(a) Product Deliveries . All supervised deliveries, receipts and withdrawals hereunder shall be made at such times as may be required by Customer upon prior notice and approval by TLO, all in accordance with the agreed-upon scheduling. Unsupervised deliveries, receipts and withdrawals shall be made only with TLO’s prior approval and in strict accordance with TLO’s current operating procedures for the Terminal. Customer warrants that all vehicles permitted to enter the Terminal on behalf of Customer shall meet all requirements and standards promulgated by applicable regulatory authority including the Department of Transportation, the Occupational Safety and Health Administration, and the EPA. Customer further warrants that it shall only send to the Terminal those employees, agents and other representatives acting on behalf of and at Customer’s direction who have been properly instructed as to the characteristics and safe hauling methods associated with the Products to be loaded and hauled. Customer further agrees to be responsible to TLO for the performance under this Agreement by its agents and/or representatives receiving or delivering Products at the Terminal.

(b) Loading Devices . Customer shall withdraw from the Terminal only those Products that it is authorized to withdraw hereunder. Customer shall neither duplicate nor permit the duplication of any loading device (i.e., card lock access), provided hereunder. Customer shall be fully and solely responsible for all Products loaded through the use of the loading devices issued to Customer in accordance with this Agreement; provided however, that Customer shall

 

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not have any responsibility or liability hereunder in the event that the load authorization system provided hereunder fails or malfunctions in any way unless a credit department override is provided, which authorizes Customer to load the Products.

(c) Legal Compliance . Both Parties shall abide by all federal, state and local statutes, laws and ordinances and all rules and regulations which are promulgated by TLO and which are either furnished to Customer or posted at the Terminal, with respect to the use of the Terminal as herein provided. It is understood and agreed by Customer that these rules and regulations may be changed, amended or modified by TLO at any time. All changes, amendments and modifications shall become binding upon Customer ten (10) days following the posting of a copy at the Terminal or the receipt by Customer of a copy, whichever occurs sooner.

(d) Customer Representatives . For all purposes hereunder, Customer’s jobbers, distributors, Carriers, haulers and other customers designated in writing or otherwise by Customer to have loading privileges under this Agreement or having possession of any loading device furnished to Customer pursuant to this Agreement, together with their respective officers, servants and employees, shall, when they access the Terminal, be deemed to be representatives of Customer.

 

18. DELIVERIES INTO TRANSPORT TRUCKS

Prior to transporting any Products loaded into transport trucks at the Terminal, TLO shall make or cause to be made, the following certifications on the delivery receipt or bill of lading covering the Products received:

“If required by 49 C.F.R. 172.204, this is to certify that the above-named materials are properly classified, described, packaged, marked and labeled, and are in proper condition for transportation according to the applicable regulations of the Department of Transportation. Carrier hereby certifies that the cargo tank used for this shipment is a proper container for the commodity loaded therein and complies with Department of Transportation specifications and certifies that cargo tank is properly placarded and marked to comply with regulations pertaining to hazardous materials.”

TLO shall require each Carrier coming into the Terminal to expressly agree in writing to be bound by the provisions of a carrier access agreement with respect to withdrawals and loading of Products hereunder, to conduct its operations at the Terminal in a safe manner, in accordance with all Applicable Law.

 

19. ACCOUNTING PROVISIONS AND DOCUMENTATION

(a) Required Reports . TLO shall furnish Customer with the following reports covering services hereunder involving Customer’s Products:

(i) within ten (10) Business Days following the end of the Month, a statement showing, by Product: (A) Customer’s monthly aggregate deliveries into the Terminal; (B) Customer’s monthly receipts from the Terminal; (C) calculation of all Customer’s monthly storage and handling fees; (D) Customer’s opening inventory for the preceding

 

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Month; (E) appropriate volume loss adjustments (as applicable in accordance with Section 16 ); (F) Customer’s closing inventory for the preceding Month; and (G) the actual volumes of TLO third party throughput handled at the Terminal during a Month up to the applicable Minimum Throughput Commitment, pursuant to Section 4(e) ;

(ii) a copy of any meter calibration report, to be available for inspection upon reasonable request by Customer at the Terminal following any calibration;

(iii) upon delivery from the Terminal, a hard copy bill of lading to the Carrier for each delivery; upon reasonable request only, a hard copy bill of lading shall be provided to Customer’s accounting group; upon each delivery from the Terminal, bill of lading information shall be sent electronically through a mutually agreeable system; and

(iv) transfer documents for each in-tank transfer.

(b) Required Maintenance of Truck Loading Capabilities . TLO shall be required to maintain the capabilities to support truck load authorization technologies at the Terminal.

 

20. AUDIT AND CLAIMS PERIOD

Each Party and its duly authorized agents and/or representatives shall have reasonable access to the accounting records and other documents maintained by the other Party which relate to this Agreement, and shall have the right to audit such records at any reasonable time or times during the Term and for a period of up to three (3) years after termination of this Agreement. Claims as to shortage in quantity or defects in quality shall be made by written notice within ninety (90) days after the delivery in question or shall be deemed to have been waived.

 

21. LIEN WAIVERS

TLO hereby waives, relinquishes and releases any and all liens, including without limitation, any and all warehouseman’s liens, custodian’s liens, rights of retention and/or similar rights under all applicable laws, which TLO would or might otherwise have under or with respect to the Products throughput, stored or handled hereunder. TLO further agrees to furnish documents reasonably acceptable to Customer and its lender(s) (if applicable), and to cooperate with Customer in assuring and demonstrating that Products titled in Customer’s name shall not be subject to any lien on the Terminal or TLO’s Products throughput or stored there.

 

22. LIMITATION ON LIABILITY

(a) No Special Damages . Notwithstanding anything to the contrary contained herein, neither Party shall be liable or responsible to the other Party or such other Party’s affiliated Persons for any consequential, incidental, or punitive damages, or for loss of profits or revenues (collectively referred to as “special damages”) incurred by such Party or its affiliated Persons that arise out of or relate to this Agreement, REGARDLESS OF WHETHER ANY SUCH CLAIM ARISES UNDER OR RESULTS FROM CONTRACT, NEGLIGENCE, OR STRICT LIABILITY OF THE PARTY WHOSE LIABILITY IS BEING WAIVED HEREBY; provided that the foregoing limitation is not intended and shall not affect special damages actually awarded to a third party or assessed by a governmental authority and for which a Party is properly entitled to indemnification from the other Party pursuant to the express provisions of this Agreement.

 

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(b) Claims and Liability for Lost Product . TLO shall not be liable to Customer for lost or damaged Product unless Customer notifies TLO in writing within ninety (90) days of the report of any incident or the date Customer learns of any such loss or damage to the Product. TLO’s maximum liability to Customer for any lost or damaged Product shall be limited to (i) the lesser of (1) the replacement value of the Product at the time of the incident based upon the price as posted by Platts or similar publication for similar Product in the same locality, and if no other similar Product is in the locality, then in the state, or (2) the actual cost paid for the Product by Customer (copies of Customer’s invoices of cost paid must be provided), less (ii) the salvage value, if any, of the damaged Product.

(c) No Guarantees or Warranties . Except as expressly provided in the Agreement, neither Customer nor TLO makes any guarantees or warranties of any kind, expressed or implied. TLO specifically disclaims all implied warranties of any kind or nature, including any implied warranty of merchantability and/or any implied warranty of fitness for a particular purpose.

 

23. INDEMNITIES

(a) TLO Indemnities . Notwithstanding anything else contained in this Agreement or any Terminal Service Order, TLO shall release, defend, protect, indemnify, and hold harmless Customer, its carriers, and each of its and their respective affiliates, officers, directors, employees, agents, contractors, successors, and assigns (excluding any member of the Partnership Group) (collectively the “ Customer Group ”), from and against any and all demands, claims (including third-party claims), losses, costs, suits, or causes of action (including, but not limited to, any judgments, losses, liabilities, fines, penalties, expenses, interest, reasonable legal fees, costs of suit, and damages, whether in law or equity and whether in contract, tort, or otherwise) for or relating to (i) personal or bodily injury to, or death of the employees of Customer, TLO or the General Partner, and, as applicable, their carriers, customers, representatives, and agents, (ii) loss of or damage to any property, products, material, and/or equipment belonging to Customer, TLO and, as applicable, their carriers, customers, representatives, and agents, and each of their respective affiliates, contractors, and subcontractors (except for those volume losses of Products provided for herein), (iii) loss of or damage to any other property, products, material, and/or equipment of any other description (except for those volume losses of Products provided for herein), and/or personal or bodily injury to, or death of any other Person or Persons; and with respect to clauses (i) through (iii) above, which is caused by or resulting in whole or in part from the negligent or wrongful acts or omissions of TLO or the General Partner in connection with the ownership or operation of the Terminal and the services provided hereunder, and, as applicable, their carriers, customers (other than Customer), representatives, and agents, or those of their respective employees with respect to such matters, and (iv) any losses incurred by Customer due to violations of this Agreement or any Terminal Service Order by TLO, or, as applicable, its customers (other than Customer), representatives, and agents; PROVIDED THAT TLO SHALL NOT BE OBLIGATED TO RELEASE, INDEMNIFY OR HOLD HARMLESS CUSTOMER OR ANY MEMBER OF THE CUSTOMER GROUP FROM AND AGAINST ANY CLAIMS TO THE EXTENT THEY

 

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RESULT FROM THE BREACH OF CONTRACT, STRICT LIABILITY OR THE NEGLIGENT ACTS, ERRORS OR OMISSIONS OR WILLFUL MISCONDUCT OF CUSTOMER OR ANY MEMBER OF THE CUSTOMER GROUP.

(b) Customer Indemnities . Notwithstanding anything else contained in this Agreement or any Terminal Service Order, Customer shall release, defend, protect, indemnify, and hold harmless TLO, General Partner, the Partnership, their subsidiaries and their respective officers, directors, members, managers, employees, agents, contractors, successors, and assigns (collectively the “ Partnership Group ”) from and against any and all demands, claims (including third-party claims), losses, costs, suits, or causes of action (including, but not limited to, any judgments, losses, liabilities, fines, penalties, expenses, interest, reasonable legal fees, costs of suit, and damages, whether in law or equity and whether in contract, tort, or otherwise) for or relating to (i) personal or bodily injury to, or death of the employees of TLO, the General Partner, Customer, and, as applicable, their carriers, customers, representatives, and agents; (ii) loss of or damage to any property, products, material, and/or equipment belonging to TLO, Customer, and, as applicable, their carriers, customers, representatives, and agents, and each of their respective affiliates, contractors, and subcontractors (except for those volume losses of Products provided for herein); (iii) loss of or damage to any other property, products, material, and/or equipment of any other description (except for those volume losses of Products provided for herein), and/or personal or bodily injury to, or death of any other Person or Persons; and with respect to clauses (i) through (iii) above, which is caused by or resulting in whole or in part from the negligent or wrongful acts or omissions of Customer, in connection with Customer’s use of the Terminal and the services provided hereunder and Customer’s Products stored hereunder, and, as applicable, its Carriers, customers, representatives, and agents, or those of their respective employees with respect to such matters; and (iv) any losses incurred by TLO due to violations of this Agreement or any Terminal Service Order by Customer, or, as applicable, its carriers, customers, representatives, and agents; PROVIDED THAT CUSTOMER SHALL NOT BE OBLIGATED TO RELEASE, INDEMNIFY OR HOLD HARMLESS TLO OR ANY MEMBER OF THE PARTNERSHIP GROUP FROM AND AGAINST ANY CLAIMS TO THE EXTENT THEY RESULT FROM THE BREACH OF CONTRACT, STRICT LIABILITY OR THE NEGLIGENT ACTS, ERRORS OR OMISSIONS OR WILLFUL MISCONDUCT OF TLO OR ANY MEMBER OF THE PARTNERSHIP GROUP.

(c) Written Claim . Neither Party shall be obligated to indemnify the other Party or be liable to the other Party unless a written claim for indemnity is delivered to the other Party within ninety (90) days after the date that a claim is reported or discovered, whichever is earlier.

(d) No Limitation . Except as expressly provided otherwise in this Agreement, the scope of these indemnity provisions may not be altered, restricted, limited, or changed by any other provision of this Agreement. The indemnity obligations of the Parties as set out in this Section 23 are independent of any insurance requirements as set out in Section 24 , and such indemnity obligations shall not be lessened or extinguished by reason of a Party’s failure to obtain the required insurance coverages or by any defenses asserted by a Party’s insurers.

(e) Survival . These indemnity obligations shall survive the termination of this Agreement until all applicable statutes of limitation have run regarding any claims that could be made with respect to the activities contemplated by this Agreement.

 

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(f) Mutual and Express Acknowledgement . THE INDEMNIFICATION PROVISIONS PROVIDED FOR IN THIS AGREEMENT HAVE BEEN EXPRESSLY NEGOTIATED IN EVERY DETAIL, ARE INTENDED TO BE GIVEN FULL AND LITERAL EFFECT, AND SHALL BE APPLICABLE WHETHER OR NOT THE LIABILITIES, OBLIGATIONS, CLAIMS, JUDGMENTS, LOSSES, COSTS, EXPENSES OR DAMAGES IN QUESTION ARISE OR AROSE SOLELY OR IN PART FROM THE GROSS, ACTIVE, PASSIVE OR CONCURRENT NEGLIGENCE, STRICT LIABILITY, OR OTHER FAULT OF ANY INDEMNIFIED PARTY. EACH PARTY ACKNOWLEDGES THAT THIS STATEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND CONSTITUTES CONSPICUOUS NOTICE. NOTICE IN THIS CONSPICUOUS NOTICE IS NOT INTENDED TO PROVIDE OR ALTER THE RIGHTS AND OBLIGATIONS OF THE PARTIES, ALL OF WHICH ARE SPECIFIED ELSEWHERE IN THIS AGREEMENT.

(g) Third Party Indemnification . If any Party has the rights to indemnification from a third party, the indemnifying party under this Agreement shall have the right of subrogation with respect to any amounts received from such third-party indemnification claim.

 

24. INSURANCE

(a) Minimum Limits . At all times during the Term and for a period of two (2) years after termination of this Agreement for any coverage maintained on a “claims-made” or “occurrence” basis, Customer and/or its Carrier (if applicable) shall maintain at their expense the below listed insurance in the amounts specified below, or self-insurance in such amounts as may be agreed pursuant to a Terminal Service Order. Customer shall require that Carrier cause all of its contractors providing authorized drivers or authorized vehicles, to carry such insurance, and Customer shall be liable to TLO for their failure to do so. Such insurance shall provide coverage to TLO and such policies, other than Worker’s Compensation Insurance, shall include TLO as an Additional Insured. Each policy shall provide that it is primary to and not contributory with any other insurance, including any self-insured retention, maintained by TLO (which shall be excess) and each policy shall provide the full coverage required by this Agreement. All such insurance shall be written with carriers and underwriters acceptable to TLO, and eligible to do business in the state where the Terminal is located and having and maintaining an A.M. Best financial strength rating of no less than “A-” and financial size rating no less than “VII”; provided that Customer and/or the Carrier may procure worker’s compensation insurance from the state fund of the state where the Terminal is located. All limits listed below are required MINIMUM LIMITS:

(i) Workers Compensation and Occupational Disease Insurance which fully complies with Applicable Law of the state where the Terminal is located, in limits not less than statutory requirements;

(ii) Employers Liability Insurance with a minimum limit of $1,000,000 for each accident, covering injury or death to any employee which may be outside the scope of the worker’s compensation statute of the jurisdiction in which the worker’s service is performed, and in the aggregate as respects occupational disease;

 

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(iii) Commercial General Liability Insurance, including contractual liability insurance covering Carrier’s indemnity obligations under this Agreement, with minimum limits of $1,000,000 combined single limit per occurrence for bodily injury and property damage liability, or such higher limits as may be required by TLO or by Applicable Law from time to time. This policy shall include Broad Form Contractual Liability insurance coverage which shall specifically apply to the obligations assumed in this Agreement by Customer;

(iv) Automobile Liability Insurance covering all owned, non-owned and hired vehicles, with minimum limits of $1,000,000 combined single limit per occurrence for bodily injury and property damage liability, or such higher limit(s) as may be required by Customer or by Applicable Law from time to time. Coverage must assure compliance with Sections 29 and 30 of the Motor Carrier Act of 1980 and all applicable rules and regulations of the Federal Highway Administration’s Bureau of Motor Carrier Safety and Interstate Commerce Commissioner (Form MCS 90 Endorsement). Limits of liability for this insurance must be in accordance with the financial responsibility requirement of the Motor Carrier Act, but not less than $1,000,000 per occurrence;

(v) Excess (Umbrella) Liability Insurance with limits not less than $4,000,000 per occurrence. Additional excess limits may be utilized to supplement inadequate limits in the primary policies required in items (ii), (iii), and (iv) above;

(vi) Pollution Legal Liability with limits not less than $25,000,000 per loss with an annual aggregate of $25,000,000. Coverage shall apply to bodily injury and property damage including loss of use of damaged property and property that has not been physically injured; cleanup costs, defense, including costs and expenses incurred in the investigation, defense or settlement of claim; and

(vii) Cargo/Inventory Insurance, with a limit of no less than $1,000,000, which property insurance shall be first-party insurance to adequately cover all Products owned by Customer located at the Terminal.

(b) Waiver of Subrogation . All such policies must be endorsed with a Waiver of Subrogation endorsement, effectively waiving rights of recovery under subrogation or otherwise, against TLO, and shall contain where applicable, a severability of interest clause and a standard cross liability clause.

(c) Copies of Insurance Certificates or Policies . Upon execution of this Agreement and prior to the operation of any equipment by Customer, Carrier or its authorized drivers at the Terminal, Customer and/or Carrier will furnish to TLO, and at least annually thereafter (or at any other times upon request by TLO) during the Term (and for any coverage maintained on a “claims-made” basis, for two (2) years after the termination of this Agreement), insurance certificates and/or certified copies of the original policies to evidence the insurance required herein, including on behalf of Carrier’s contractors providing authorized vehicles or authorized drivers. Such certificates shall be in the form of the “Accord” Certificate of Insurance, and reflect that they are for the benefit of TLO and shall provide that there will be no material change in or cancellation of the policies unless TLO is given at least thirty (30) days prior written notice. Certificates providing evidence of renewal of coverage shall be furnished to TLO prior to policy expiration.

 

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(d) Responsibility for Deductibles . Customer and/or Carrier shall be solely responsible for any deductibles or self-insured retention.

 

25. GOVERNMENT REGULATIONS

(a) Party Certification . Each Party certifies that none of the Products covered by this Agreement or any Terminal Service Order were derived from crude petroleum, petrochemical, or gas which was produced or withdrawn from storage in violation of any federal, state or other governmental law, nor in violation of any rule, regulation or promulgated by any governmental agency having jurisdiction in the premises.

(b) Licenses and Permits . If applicable, TLO shall maintain all necessary licenses and permits for the storage of Products at the Terminal.

(c) Compliance with Applicable Law . The Parties are entering into this Agreement and any Terminal Service Order in reliance upon and shall comply in all material respects with all Applicable Law which directly or indirectly affects the Products throughput hereunder, or any receipt, throughput delivery, transportation, handling or storage of Products hereunder or the ownership, operation or condition of the Terminal. Each Party shall be responsible for compliance with all Applicable Law associated with such Party’s respective performance hereunder and the operation of such Party’s facilities. In the event any action or obligation imposed upon a Party under this Agreement and any Terminal Service Order shall at any time be in conflict with any requirement of Applicable Law, then this Agreement and any Terminal Service Order shall immediately be modified to conform the action or obligation so adversely affected to the requirements of the Applicable Law, and all other provisions of this Agreement and any Terminal Service Order shall remain effective.

(d) Material Change in Applicable Law . If during the Term, any new Applicable Law becomes effective or any existing Applicable Law or its interpretation is materially changed, which change is not addressed by another provision of this Agreement or any Terminal Service Order and which has a material adverse economic impact upon a Party, either Party, acting in good faith, shall have the option to request renegotiation of the relevant provisions of this Agreement or a Terminal Service Order with respect to future performance. The Parties shall then meet to negotiate in good faith amendments to this Agreement or to an applicable Terminal Service Order that will conform to the new Applicable Law while preserving the Parties’ economic, operational, commercial and competitive arrangements in accordance with the understandings set forth herein.

 

26. SUSPENSION OF REFINERY OPERATIONS

(a) No Termination . This Agreement shall continue in full force and effect regardless of whether Customer decides to permanently or indefinitely suspend refining operations at the Refinery for any period.

 

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(b) Continued Liability for Shortfall Payments . If refining operations at the Refinery are suspended for any reason (including Refinery turnarounds and other scheduled maintenance), then Customer shall remain liable for Shortfall Payments under this Agreement for the duration of the suspension.

 

27. FORCE MAJEURE

(a) Definitions and Notice . As soon as possible upon the occurrence of a Force Majeure, TLO shall provide Customer with written notice of the occurrence of such Force Majeure (a “ Force Majeure Notice ”). TLO shall identify in such Force Majeure Notice the approximate length of time that TLO reasonably believes in good faith such Force Majeure shall continue (the “ Force Majeure Period ”). For the duration of the Force Majeure Period, Customer shall be permitted to reduce the applicable Minimum Throughput Commitment as provided in Section 28(b) . If TLO advises in any Force Majeure Notice that it reasonably believes in good faith that the Force Majeure Period shall continue for more than twelve (12) consecutive Months, then, subject to Section 28 below, at any time after TLO delivers such Force Majeure Notice, either Party may terminate this Agreement with respect to the terminalling service to which the Force Majeure applies, but only upon delivery to the other Party of a notice (a “ Termination Notice ”) at least twelve (12) Months prior to the expiration of the Force Majeure Period; provided, however, that such Termination Notice shall be deemed cancelled and of no effect if the Force Majeure Period ends prior to the expiration of such twelve (12)-Month period. For the avoidance of doubt, neither Party may exercise its right under this Section 27(a) to terminate this Agreement as a result of a Force Majeure if the Terminal has been restored to working order since the applicable Force Majeure, including pursuant to a Restoration.

(b) Revocation of Customer Termination Notice . Notwithstanding the foregoing, if Customer delivers a Termination Notice to TLO (the “ Customer Termination Notice ”) and, within thirty (30) days after receiving such Customer Termination Notice, TLO notifies Customer that TLO reasonably believes in good faith that it shall be capable of fully performing its obligations under this Agreement within a reasonable period of time and Customer mutually agrees (which agreement shall not be unreasonably withheld), then the Customer Termination Notice shall be deemed revoked and the applicable portion of this Agreement shall continue in full force and effect as if such Customer Termination Notice had never been given.

 

28. CAPABILITIES OF FACILITIES

(a) Service Interruption . Subject to Force Majeure and interruptions for routine repair and maintenance, consistent with customary terminal industry standards, TLO shall use reasonable commercial efforts to minimize the interruption of service at the Terminal and any portion thereof. TLO shall promptly inform Customer operational personnel of any anticipated partial or complete interruption of service at the Terminal, including relevant information about the nature, extent, cause and expected duration of the interruption and the actions TLO is taking to resume full operations, provided that TLO shall not have any liability for any failure to notify, or delay in notifying, Customer of any such matters except to the extent Customer has been materially prejudiced or damaged by such failure or delay.

 

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(b) Restoration of Capacity . Subject to Force Majeure and interruptions for routine repair and maintenance, consistent with customary terminal industry standards, TLO shall maintain the Terminal in a condition and with a capacity sufficient to throughput a volume of Customer’s Products at least equal to the applicable Reserved Capacity. TLO’s obligations may be temporarily suspended during the occurrence of, and for the entire duration of, a Force Majeure or any interruption of service that prevents TLO from terminalling the applicable Reserved Capacity. To the extent TLO is prevented from terminalling volumes equal to the applicable Reserved Capacity for reasons of Force Majeure or other interruption of service, then Customer’s obligation to throughput the applicable Minimum Throughput Commitment and pay any Shortfall Payment shall be reduced proportionately. At such time as TLO is capable of terminalling volumes equal to the applicable Reserved Capacity, Customer’s obligation to throughput the full, applicable Minimum Throughput Commitment shall be restored. If for any reason, including, without limitation, a Force Majeure event, the throughput capacity of the Terminal should fall below the applicable Reserved Capacity, then within a reasonable period of time after the commencement of such reduction, TLO shall make repairs to the Terminal to restore the capacity of the Terminal to that required for throughput of the applicable Reserved Capacity (“ Restoration ”). Except as provided below in Section 28(c) , all of such Restoration shall be at TLO’s cost and expense, unless the damage creating the need for such repairs was caused by the negligence or willful misconduct of Customer, its employees, agents or customers or the failure of Customer’s Products to meet the specifications as provided for in Section 15(a) .

(c) Capacity Resolution . In the event of the failure of TLO to maintain the Terminal in a condition and with a capacity sufficient to throughput a volume of Customer’s Products equal to a Reserved Capacity, then either Party shall have the right to call a meeting between executives of both Parties by providing at least two (2) Business Days’ advance written notice. Any such meeting shall be held at a mutually agreeable location and will be attended by executives of both Parties each having sufficient authority to commit his or her respective Party to a Capacity Resolution (hereinafter defined). At the meeting, the Parties will negotiate in good faith with the objective of reaching a joint resolution for the Restoration of capacity on the Terminal which will, among other things, specify steps to be taken by TLO to fully accomplish Restoration and the deadlines by which the Restoration must be completed (the “ Capacity Resolution ”). Without limiting the generality of the foregoing, the Capacity Resolution shall set forth an agreed upon time schedule for the Restoration activities. Such time schedule shall be reasonable under the circumstances, consistent with customary terminal industry standards and shall take into consideration TLO’s economic considerations relating to costs of the repairs and Customer’s requirements concerning its refining and marketing operations. TLO shall use commercially reasonable efforts to continue to provide storage and throughput of Customer’s Products at the Terminal, to the extent the Terminal has capability of doing so, during the period before Restoration is completed. In the event that Customer’s economic considerations justify incurring additional costs to restore the Terminal in a more expedited manner than the time schedule determined in accordance with the preceding sentence, Customer may require TLO to expedite the Restoration to the extent reasonably possible, subject to Customer’s payment, in advance, of the estimated incremental costs to be incurred as a result of the expedited time schedule. In the event the Parties agree to an expedited Restoration plan in which Customer agrees to fund a portion of the Restoration cost, then neither Party shall have the right to terminate this Agreement in connection with a Force Majeure, so long as such Restoration is completed with due diligence, and Customer shall pay its portion of the Restoration costs to TLO

 

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in advance based on an estimate based on reasonable engineering standards promulgated by the Association for Facilities Engineering. Upon completion, Customer shall pay the difference between the actual portion of Restoration costs to be paid by Customer pursuant to this Section 28(c) and the estimated amount paid under the preceding sentence within thirty (30) days after receipt of TLO’s invoice therefor, or, if appropriate, TLO shall pay Customer the excess of the estimate paid by Customer over TLO’s actual costs as previously described within thirty (30) days after completion of the Restoration.

(d) Restoration . If at any time after the occurrence of (x) a Partnership Change of Control or (y) a sale of the Refinery, TLO either (i) refuses or fails to meet with Customer within the period set forth in Section 28(c) , (ii) fails to agree to perform a Capacity Resolution in accordance with the standards set forth in Section 28(c) , or (iii) fails to perform its obligations in compliance with the terms of a Capacity Resolution, Customer may, as its sole remedy for any breach by TLO of any of its obligations under Section 28(c) , require TLO to complete a Restoration of the Terminal, subject to and to the extent permitted under the terms, conditions and/or restrictions of applicable leases, permits and/or Applicable Law. Any such Restoration required under this Section 28(d) shall be completed by TLO at Customer’s cost. TLO shall use commercially reasonable efforts to continue to provide storage and throughput of Customer’s Products at the Terminal, during the period while such Restoration is being completed. Any work performed by TLO pursuant to this Section 28(d) shall be performed and completed in a good and workmanlike manner consistent with applicable industry standards and in accordance with all Applicable Law. Additionally, during such period after the occurrence of (x) a Partnership Change of Control or (y) a sale of the Refinery, Customer may exercise any remedies available to it under this Agreement (other than termination), including the right to immediately seek temporary and permanent injunctive relief for specific performance by TLO of the applicable provisions of this Agreement, including, without limitation, the obligation to make Restorations as described herein.

(e) Throughput Right of First Refusal . Unless otherwise specified in a Terminal Service Order, all throughput of Customer’s volumes, along with storage related to such throughput, shall be on a fungible commingled basis, and TLO may commingle such Products with Products of third parties of like grade and kind. TLO shall have the right to enter into arrangements with third parties to throughput Products at the Terminal and provide storage related to such throughput; provided however, that (i) TLO shall not enter into any third party arrangements that would restrict or limit the ability of Customer to throughput the Reserved Capacities at the Terminal each Month without Customer’s consent, and (ii) TLO shall give Customer ninety (90) days prior written notice of any proposed throughput agreement with a third party, and if Customer makes an offer on terms no less favorable to TLO than the third-party offer, TLO shall be obligated to enter into a terminalling agreement with Customer on the terms set forth in its proposed offer (“ Throughput Right of First Refusal ”). If Customer does not exercise its Throughput Right of First Refusal in the manner set forth above, TLO may, for the next ninety (90) days, proceed with the negotiation of the third-party terminalling agreement. If no third-party terminalling agreement is consummated during such ninety-day period, the terms and conditions of this Section 28(e) shall again become effective.

 

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(f) Storage Tank Heels . All Tank Heels shall be allocated among storage users on a pro rata basis. Tank Heels cannot be withdrawn from any tank without prior approval of TLO. For storage tanks and capacities identified on a Terminal Service Order as dedicated to and used exclusively for the storage and throughput of Customer’s Product, Customer shall be responsible for providing all Tank Heels required for operation of such tanks.

 

29. TERMINATION

(a) Default . A Party shall be in default under this Agreement if:

(i) the Party breaches any provision of this Agreement or a Terminal Service Order, which breach has a material adverse effect on the other Party (with such material adverse effect being determined based on this Agreement and all Terminal Service Orders considered as a whole), and such breach is not excused by Force Majeure or cured within fifteen (15) Business Days after notice thereof (which notice shall describe such breach in reasonable detail) is received by such Party (unless such failure is not commercially reasonably capable of being cured in such fifteen (15) Business Day period in which case such Party shall have commenced remedial action to cure such breach and shall continue to diligently and timely pursue the completion of such remedial action after such notice); or

(ii) the Party (A) files a petition or otherwise commences, authorizes or acquiesces in the commencement of a proceeding or cause of action under any bankruptcy, insolvency, reorganization or similar Applicable Law, or has any such petition filed or commenced against it, (B) makes an assignment or any general arrangement for the benefit of creditors, (C) otherwise becomes bankrupt or insolvent (however evidenced) or (D) has a liquidator, administrator, receiver, trustee, conservator or similar official appointed with respect to it or any substantial portion of its property or assets.

(b) Rights upon Default . If either of the Parties is in default as described above, then (A) if Customer is in default, TLO may or (B) if TLO is in default, Customer may: (1) terminate this Agreement upon notice to the defaulting Party; (2) withhold any payments due to the defaulting Party under this Agreement; and/or (3) pursue any other remedy at law or in equity.

(c) Obligation to Cure Breach . If a Party breaches any provision of this Agreement or a Terminal Service Order, which breach does not have a material adverse effect on the other Party, the breaching Party shall still have the obligation to cure such breach.

(d) Product Removal . Customer shall, upon expiration or termination of this Agreement, promptly remove all of its Products including any downgraded and interface Product and Transmix from the Terminal, and TLO shall remove the remaining Tank Heels and tank bottoms and deliver them to Customer or Customer’s designee, within thirty (30) days of such termination or expiration. In the event all of the Product is not removed within such thirty (30) day period, Customer shall be assessed a storage fee to all Products held in storage more than thirty (30) days beyond the termination or expiration of this Agreement until such time Customer’s entire Product is removed from the Terminal; provided however, that Customer shall not be assessed any storage fees associated with the removal of Product if Customer’s ability to remove such Product is delayed or hindered by TLO, its agents or contractors for any reason.

 

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(e) Equipment Removal . Customer shall, upon expiration or termination of this Agreement, promptly remove any and all of its owned equipment (except those purchased by TLO pursuant to Section 7(f) above), and restore the Terminal to their condition prior to the installation of such equipment.

 

30. RIGHT TO ENTER INTO A NEW TERMINALLING AGREEMENT

(a) New Terminalling Services Agreement . Upon termination of this Agreement or a Terminal Service Order for reasons other than (x) a default by Customer and (y) any other termination of this Agreement or a Terminal Service Order initiated by TLO pursuant to Section 29 , Customer shall have the right to require TLO to enter into a new terminalling services agreement with Customer that (i) is consistent with the terms set forth in this Agreement, (ii) relates to the Terminal, and (iii) has commercial terms that are, in the aggregate, equal to or more favorable to TLO than fair market value terms as would be agreed by similarly-situated parties negotiating at arm’s length; provided, however; that the term of any such new terminalling services agreement shall not extend beyond July 1, 2034.

(b) Terminalling Right of First Refusal . In the event that TLO proposes to enter into a terminalling services agreement with a third party within two (2) years after the termination of this Agreement for reasons other than (x) by default by Customer and (y) any other termination of this Agreement initiated by TLO pursuant to Section 29 , TLO shall give Customer ninety (90) days’ prior written notice of any proposed new terminalling services agreement with a third party, including (i) details of all of the material terms and conditions thereof and (ii) a thirty (30)-day period (beginning upon Customer’s receipt of such written notice) (the “ Terminalling First Offer Period ”) in which Customer may make a good faith offer to enter into a new terminalling agreement with TLO (the “ Terminalling Right of First Refusal ”). If Customer makes an offer on terms no less favorable to TLO than the third-party offer with respect to such terminalling services agreement during the Terminalling First Offer Period, then TLO shall be obligated to enter into a terminalling services agreement with Customer on the terms set forth in Customer’s offer to TLO. If Customer does not exercise its Terminalling Right of First Refusal in the manner set forth above, TLO may, for the next ninety (90) days, proceed with the negotiation of the third-party terminalling services agreement. If no third party agreement is consummated during such ninety-day period, the terms and conditions of this Section 30(b) shall again become effective.

 

31. STORAGE RIGHT OF FIRST REFUSAL

In the event that TLO proposes to enter into a storage agreement with a third party upon opening up any new storage opportunity at the Terminal during the Term, TLO shall give Customer ninety (90) days’ prior written notice of any proposed new storage agreement with a third party, including (i) details of all of the material terms and conditions thereof and (ii) a thirty (30)-day period (beginning upon Customer’s receipt of such written notice) (the “ Storage First Offer Period ”) in which Customer may make a good faith offer to enter into a new storage agreement with TLO (the “ Storage Right of First Refusal ”). If Customer makes an offer on terms no less favorable to TLO than the third-party offer with respect to such storage agreement during the Storage First Offer Period, then TLO shall be obligated to enter into a storage agreement with Customer on the terms set forth in its proposed offer. If Customer does not

 

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exercise its Storage Right of First Refusal in the manner set forth above, TLO may, for the next ninety (90) days, proceed with the negotiation of the third-party storage agreement. If no third party agreement is consummated during such ninety-day period, the terms and conditions of this Section 31 shall again become effective.

 

32. SUBCONTRACT

Should Customer desire to subcontract to a third party (“ Replacement Customer ”) any dedicated or commingled storage subject to a Terminal Service Order, Customer must notify TLO in writing prior to the proposed start of the subcontract. TLO has the right to approve any Replacement Customer, which approval shall not be unreasonably withheld, conditioned or delayed. Unless otherwise agreed in writing between Customer and TLO, and between Replacement Customer and TLO, Customer will continue to be liable for all terms and conditions of this Agreement related to any subcontracted storage tank, including but not limited to, remittance of any fees set forth in a Terminal Service Order applicable to the subcontracted storage tank. Customer shall be responsible for collection of any fees due to Customer from the Replacement Customer. Customer and TLO may mutually agree that operational notices concerning scheduling and similar matters can be directly provided between TLO and any Replacement Customer.

 

33. ASSIGNMENT; PARTNERSHIP CHANGE OF CONTROL

(a) Assignment to TLO . On the Commencement Date, the General Partner shall assign all of its rights and obligations under this Agreement to the Partnership. The Partnership shall immediately assign its rights and obligations hereunder to TLO. Upon such assignment to TLO, TLO shall have all of the respective rights and obligations set forth herein during the Term.

(b) Customer Assignment to Third Party . Customer shall not assign all of its obligations hereunder or under a Terminal Service Order without TLO’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however; that Customer may assign this Agreement, without TLO’s consent, in connection with a sale by Customer of the Refinery so long as the transferee: (i) agrees to assume all of Customer’s obligations under this Agreement; and (ii) is financially and operationally capable of fulfilling the terms of this Agreement, which determination shall be made by Customer in its reasonable judgment.

(c) TLO Assignment to Third Party . TLO shall not assign its rights or obligations under this Agreement without Customer’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that (i) TLO may assign this Agreement without Customer’s consent in connection with a sale by TLO of the Terminal so long as the transferee: (A) agrees to assume all of TLO’s obligations under this Agreement; (B) is financially and operationally capable of fulfilling the terms of this Agreement, which determination shall be made by TLO in its reasonable judgment; and (C) is not a competitor of Customer; and (ii) TLO shall be permitted to make a collateral assignment of this Agreement solely to secure working capital financing for TLO.

 

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(d) Notification of Assignment . Any assignment that is not undertaken in accordance with the provisions set forth above shall be null and void ab initio . A Party making any assignment shall promptly notify the other Party of such assignment, regardless of whether consent is required. This Agreement and any Terminal Service Orders shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns.

(e) Partnership Change of Control . Customer’s obligations hereunder shall not terminate in connection with a Partnership Change of Control, provided however, that in the case of a Partnership Change of Control, Customer shall have the option to extend the Term as provided in Section 2 . TLO shall provide Customer with notice of any Partnership Change of Control at least sixty (60) days prior to the effective date thereof.

 

34. NOTICE

All notices, requests, demands, and other communications hereunder will be in writing and will be deemed to have been duly given: (a) if by transmission by hand delivery, when delivered; (b) if mailed via the official governmental mail system, five (5) Business Days after mailing, provided said notice is sent first class, postage pre-paid, via certified or registered mail, with a return receipt requested; (c) if mailed by an internationally recognized overnight express mail service such as Federal Express, UPS, or DHL Worldwide, one (1) Business Day after deposit therewith prepaid; or (d) if by e-mail, one Business Day after delivery with receipt confirmed. All notices will be addressed to the Parties at the respective addresses as follows:

If to Customer, to:

Tesoro Refining & Marketing Company LLC

19100 Ridgewood Parkway

San Antonio, Texas 78259

For legal notices :

Attention: Charles A. Cavallo III, Managing Attorney - Commercial

phone: (210) 626-4045

email: Charles.A.Cavallo@tsocorp.com

all other notices and communications :

Attention: Dennis C. Bak

phone: 310-847-3846

email: Dennis.C.Bak@tsocorp.com

If to TLO, to:

Tesoro Logistics Operations LLC

19100 Ridgewood Parkway

San Antonio, Texas 78259

 

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For legal notices :

Attention: Charles S. Parrish, General Counsel

phone: (210) 626-4280

email: Charles.S.Parrish@tsocorp.com

For all other notices and communications :

Attention: Rick D. Weyen, Vice President, Logistics

phone: (210) 626-4379

email: Rick.D.Weyen@tsocorp.com

or to such other address or to such other Person as either Party will have last designated by notice to the other Party.

 

35. CONFIDENTIAL INFORMATION

(a) Confidential Information and Exceptions Thereto . Each Party shall use reasonable efforts to retain the other Parties’ Confidential Information in confidence and not disclose the same to any third party nor use the same, except as authorized by the disclosing Party in writing or as expressly permitted in this Section 35 . Each Party further agrees to take the same care with the other Party’s Confidential Information as it does with its own, but in no event less than a reasonable degree of care. Excepted from these obligations of confidence and non-use is that information which:

(i) is available, or becomes available, to the general public without fault of the receiving Party;

(ii) was in the possession of the receiving Party on a non-confidential basis prior to receipt of the same from the disclosing Party (it being understood, for the avoidance of doubt, that this exception shall not apply to information of TLO that was in the possession of Customer or any of its affiliates as a result of their ownership or operation of the Terminal prior to the Commencement Date);

(iii) is obtained by the receiving Party without an obligation of confidence from a third party who is rightfully in possession of such information and, to the receiving Party’s knowledge, is under no obligation of confidentiality to the disclosing Party; or

(iv) is independently developed by the receiving Party without reference to or use of the disclosing Party’s Confidential Information.

For the purpose of this Section 35 , a specific item of Confidential Information shall not be deemed to be within the foregoing exceptions merely because it is embraced by, or underlies, more general information in the public domain or in the possession of the receiving Party.

(b) Required Disclosure . Notwithstanding Section 35(a) above, if the receiving Party becomes legally compelled to disclose the Confidential Information by a court, Governmental Authority or Applicable Law, or is required to disclose by the listing standards of any applicable securities exchange, any of the disclosing Party’s Confidential Information, the receiving Party

 

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shall promptly advise the disclosing Party of such requirement to disclose Confidential Information as soon as the receiving Party becomes aware that such a requirement to disclose might become effective, in order that, where possible, the disclosing Party may seek a protective order or such other remedy as the disclosing Party may consider appropriate in the circumstances. The receiving Party shall disclose only that portion of the disclosing Party’s Confidential Information that it is required to disclose and shall cooperate with the disclosing Party in allowing the disclosing Party to obtain such protective order or other relief.

(c) Return of Confidential Information . Upon written request by the disclosing Party, all of the disclosing Party’s Confidential Information in whatever form shall be returned to the disclosing Party upon termination of this Agreement or destroyed with destruction certified by the receiving Party, without the receiving Party retaining copies thereof except that one copy of all such Confidential Information may be retained by a Party’s legal department solely to the extent that such Party is required to keep a copy of such Confidential Information pursuant to Applicable Law, and the receiving Party shall be entitled to retain any Confidential Information in the electronic form or stored on automatic computer back-up archiving systems during the period such backup or archived materials are retained under such Party’s customary procedures and policies; provided, however, that any Confidential Information retained by the receiving Party shall be maintained subject to confidentiality pursuant to the terms of this Section 35 , and such archived or back-up Confidential Information shall not be accessed except as required by Applicable Law.

(d) Receiving Party Personnel . The receiving Party will limit access to the Confidential Information of the disclosing Party to those of its employees, attorneys and contractors that have a need to know such information in order for the receiving Party to exercise or perform its rights and obligations under this Agreement (the “ Receiving Party Personnel ”). The Receiving Party Personnel who have access to any Confidential Information of the disclosing Party will be made aware of the confidentiality provision of this Agreement, and will be required to abide by the terms thereof. Any third party contractors that are given access to Confidential Information of a disclosing Party pursuant to the terms hereof shall be required to sign a written agreement pursuant to which such Receiving Party Personnel agree to be bound by the provisions of this Agreement, which written agreement will expressly state that it is enforceable against such Receiving Party Personnel by the disclosing Party.

(e) Survival . The obligation of confidentiality under this Section 35 shall survive the termination of this Agreement for a period of two (2) years.

 

36. MISCELLANEOUS

(a) Amendment or Modification . This Agreement and any Terminal Service Orders may be amended or modified only by a written instrument executed by the Parties. Any of the terms and conditions of this Agreement or a Terminal Service Order may be waived in writing at any time by the Party entitled to the benefits thereof. No waiver of any of the terms and conditions of this Agreement, a Terminal Service Order or any breach thereof, will be effective unless in writing signed by a duly authorized individual on behalf of the Party against which the waiver is sought to be enforced. No waiver of any term or condition or of any breach of this Agreement or a Terminal Service Order will be deemed or will constitute a waiver of any other term or condition or of any later breach (whether or not similar), nor will such waiver constitute a continuing waiver unless otherwise expressly provided.

 

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(b) Integration . This Agreement, together with the Schedules and Terminal Service Orders and the other agreements executed on the date hereof in connection with the transactions contemplated by the Contribution Agreement, constitutes the entire agreement among the Parties pertaining to the subject matter hereof and supersedes all prior agreements and understandings of the Parties in connection therewith. In the event of a conflict of provisions of this Agreement and the Third Amended and Restated Omnibus Agreement, the provisions of the Third Amended and Restated Omnibus Agreement shall prevail with respect to issues related to the contribution of the assets described therein, but not with respect to the ordinary operations of such assets as set forth in this Agreement.

(c) Construction and Interpretation . In interpreting this Agreement, unless the context expressly requires otherwise, all of the following apply to the interpretation of this Agreement:

(i) Preparation of this Agreement has been a joint effort of the Parties and the resulting Agreement against one of the Parties as the drafting Party.

(ii) Plural and singular words each include the other.

(iii) Masculine, feminine and neutral genders each include the others.

(iv) The word “or” is not exclusive and includes “and/or.”

(v) The words “includes” and “including” are not limiting.

(vi) References to the Parties include their respective successors and permitted assignees.

(vii) The headings in this Agreement are included for convenience and do not affect the construction or interpretation of any provision of, or the rights or obligations of a Party under, this Agreement.

(d) Applicable Law; Forum, Venue and Jurisdiction . This Agreement and any Terminal Service Orders shall be governed by the laws of the State of Texas without giving effect to its conflict of laws principles. Each Party hereby irrevocably submits to the exclusive jurisdiction of any federal court of competent jurisdiction situated in the United States District Court for the Western District of Texas, San Antonio Division, or if such federal court declines to exercise or does not have jurisdiction, in the district court of Bexar County, Texas. The Parties expressly and irrevocably submit to the jurisdiction of said Courts and irrevocably waive any objection which they may now or hereafter have to the laying of venue of any action, suit or proceeding arising out of or relating to this Agreement or any Terminal Service Order brought in such Courts, irrevocably waive any claim that any such action, suit or proceeding brought in any such Court has been brought in an inconvenient forum and further irrevocably waive the right to object, with respect to such claim, action, suit or proceeding brought in any such Court, that such Court does not have jurisdiction over such Party. The Parties hereby irrevocably consent to the service of process by registered mail, postage prepaid, or by personal service within or without the State of Texas. Nothing contained herein shall affect the right to serve process in any manner permitted by law.

 

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(e) Counterparts . This Agreement and any Terminal Service Orders hereunder may be executed in one or more counterparts (including by facsimile or portable document format (.pdf)) for the convenience of the Parties hereto, each of which counterparts will be deemed an original, but all of which counterparts together will constitute one and the same agreement.

(f) Severability . Whenever possible, each provision of this Agreement and any Terminal Service Order will be interpreted in such manner as to be valid and effective under Applicable Law, but if any provision of this Agreement, a Terminal Service Order or the application of any such provision to any Person or circumstance will be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision hereof, and the Parties will negotiate in good faith with a view to substitute for such provision a suitable and equitable solution in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid, illegal or unenforceable provision.

(g) No Third Party Rights . Except as specifically provided in Section 23 herein, it is expressly understood that the provisions of this Agreement or any Terminal Service Order do not impart enforceable rights in anyone who is not a Party or successor or permitted assignee of a Party.

(h) Jury Waiver . EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY PROCEEDINGS RELATING TO THIS AGREEMENT OR ANY PERFORMANCE OR FAILURE TO PERFORM OF ANY OBLIGATION HEREUNDER.

[Signature Page Follows]

 

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

 

TESORO LOGISTICS OPERATIONS LLC     TESORO REFINING & MARKETING COMPANY LLC
By:  

/s/ Phillip M. Anderson

    By:  

/s/ G. Scott Spendlove

  Phillip M. Anderson       G. Scott Spendlove
  President       Senior Vice President and Chief Financial Officer

Solely with respect to Section 33(a) :

TESORO LOGISTICS GP, LLC

   

Solely with respect to Section 33(a) :

TESORO LOGISTICS LP

By:  

/s/ Phillip M. Anderson

    By:   Tesoro Logistics GP, LLC, its
  Phillip M. Anderson       general partner
  President      
      By:  

/s/ Phillip M. Anderson

        Phillip M. Anderson
        President

 

Signature Page to Terminalling Services Agreement - Martinez


EXHIBIT 1

FORM OF TERMINAL SERVICE ORDER

(MARTINEZ [ ]-         , 20    )

This Terminal Service Order is entered as of         , 20    , by and between Tesoro Refining & Marketing Company LLC, a Delaware limited liability company, and Tesoro Logistics Operations LLC, a Delaware limited liability company, pursuant to and in accordance with the terms of the Terminalling Services Agreement - Martinez, dated as of July 1, 2014, by and among such parties and Tesoro Logistics GP, LLC, a Delaware limited liability company, and Tesoro Logistics LP, a Delaware limited partnership (as amended, supplemented, or otherwise modified from time to time, the “ Agreement ”).

Capitalized terms not otherwise defined herein shall have the meaning set forth in the Agreement.

Pursuant to Section 13 of the Agreement, the parties hereto agree to the following provisions:

[Insert applicable provisions:

(i) allocation of throughput capacity by Product, and the rates by Product for determining the Terminalling Service Fee pursuant to Section 4 ;

(ii) identification of tanks to be utilized for dedicated storage tanks and the Storage Services Fee pursuant to Section 5 ;

(iii) Transmix handling fees pursuant to Section 6 ;

(iv) additization pursuant to Section 7 ;

(v) special or proprietary additive injection services, including any installation and maintenance of special additive equipment, pursuant to Section 7(f) , and the fees related thereto;

(vi) biodiesel services and new equipment pursuant to Section 8(c) and the fees related thereto;

(vii) ethanol blending services pursuant to Section 9 and the fees related thereto;

(viii) reimbursement related to newly imposed taxes pursuant to Section 10 ;

(ix) Surcharges related to expenditures as a result of newly imposed laws and regulations pursuant to Section 11 ;

(x) tank cleaning or conversion pursuant to Section 12 ;

(xi) terms and conditions for the provision of railcar loading, unloading and switching services; and

 

 

Exhibit 1 –

Terminalling Services Agreement - Martinez


(xii) any other services as may be agreed.]

Except as set forth in this Terminal Service Order, the other terms of the Agreement shall continue in full force and effect and shall apply to the terms of this Terminal Service Order.

[Signature Page Follows]

 

Exhibit 1 –

Terminalling Services Agreement - Martinez


IN WITNESS WHEREOF , the parties hereto have duly executed this Terminal Service Order as of the date first written above.

 

TESORO LOGISTICS OPERATIONS LLC     TESORO REFINING & MARKETING COMPANY LLC
By:  

 

    By:  

 

Name:       Name:  
Title:       Title:  

 

Exhibit 1 –

Terminalling Services Agreement - Martinez


EXHIBIT 2

MINIMUM COMMITMENTS AND RESERVED CAPACITIES

 

Product

  

Minimum Commitment

  

Reserved Capacity

Light Ends via truck rack

   112,542 Barrels per Month    132,313 Barrels per Month

Light Ends via rail

   184,630 Barrels per Month    217,175 Barrels per Month

Clean Products via truck rack

   453,209 Barrels per Month    533,205 Barrels per Month

 

Exhibit 2 –

Terminalling Services Agreement - Martinez

Exhibit 10.6

STORAGE SERVICES AGREEMENT - ANACORTES

This Storage Services Agreement – Anacortes (the “ Agreement ”) is executed as of July 1, 2014, and dated effective as of the Commencement Date (as defined below), by and between Tesoro Refining & Marketing Company LLC, a Delaware limited liability company (“ Customer ”), Tesoro Logistics Operations LLC, a Delaware limited liability company (“ TLO ”), and for purposes of Section 24(a) only, Tesoro Logistics GP, LLC, a Delaware limited liability company (the “ General Partner ”), and Tesoro Logistics LP, a Delaware limited partnership (the “ Partnership ”).

RECITALS

WHEREAS , on the date hereof, Tesoro Corporation, a Delaware corporation (“ Tesoro ”), Customer and Tesoro Alaska Company LLC, a Delaware limited liability company will contribute certain assets to the General Partner, the General Partner will contribute those assets to the Partnership and the Partnership will contribute those assets to TLO pursuant to the Contribution, Conveyance and Assumption Agreement dated as of June 23, 2014 (the “ Contribution Agreement ”), by and among Tesoro, Customer, Tesoro Alaska Company LLC, the Partnership, the General Partner and TLO;

WHEREAS , pursuant to the Contribution Agreement, TLO owns the storage facility for crude oil, refinery feedstocks and refined products located in Anacortes, Washington (referred to herein as the “ Storage Facility ”), which includes without limitation the Tanks and Pipelines defined below;

WHEREAS , TLO desires to provide storage and handling services with respect to crude oil, refinery feedstocks and refined products owned by Customer and stored in one or more of TLO’s Tanks (as defined below);

WHEREAS, TLO’s Tanks at the Storage Facility have an aggregate Shell Capacity (as defined below) of approximately 1,500,000 Barrels (as defined below);

WHEREAS, by virtue of its indirect ownership interests in the Partnership, Customer has an economic interest in the financial and commercial success of the Partnership and its operating subsidiary, TLO; and

WHEREAS , Customer and TLO desire to enter into this Agreement to memorialize the terms of their commercial relationship related to the subject matter hereof.

NOW, THEREFORE , in consideration of the covenants and obligations contained herein, the Parties (as defined below) to this Agreement hereby agree as follows:

1. DEFINITIONS

Capitalized terms used throughout this Agreement shall have the meanings set forth below, unless otherwise specifically defined herein.

Agreement ” has the meaning set forth in the Preamble.

API ” means American Petroleum Institute.


Applicable Law ” means any applicable statute, law, regulation, ordinance, rule, determination, judgment, rule of law, order, decree, permit, approval, concession, grant, franchise, license, requirement, or any similar form of decision of, or any provision or condition of any permit, license or other operating authorization issued by any Governmental Authority having or asserting jurisdiction over the matter or matters in question, whether now or hereafter in effect.

ASTM ” means ASTM International, formerly known as the American Society for Testing and Materials.

Barrel ” means a volume equal to 42 U.S. gallons of 231 cubic inches each, at 60 degrees Fahrenheit under one atmosphere of pressure.

Business Day ” means a day, other than a Saturday or Sunday, on which banks in New York, New York are open for the general transaction of business.

Capacity Resolution ” has the meaning set forth in Section 6(b).

Commencement Date ” has the meaning set forth in Section 3.

Commitment ” has the meaning set forth in Section 2(a).

Confidential Information ” means all confidential, proprietary or non-public information of a Party, whether set forth in writing, orally or in any other manner, including all non-public information and material of such Party (and of companies with which such Party has entered into confidentiality agreements) that another Party obtains knowledge of or access to, including non-public information regarding products, processes, business strategies and plans, customer lists, research and development programs, computer programs, hardware configuration information, technical drawings, algorithms, know-how, formulas, processes, ideas, inventions (whether patentable or not), trade secrets, schematics and other technical, business, marketing and product development plans, revenues, expenses, earnings projections, forecasts, strategies, and other non-public business, technological, and financial information.

Contribution Agreement ” has the meaning set forth in the Recitals.

Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract, or otherwise.

Customer ” has the meaning set forth in the Preamble.

Customer Group ” has the meaning set forth in Section 19(a).

Customer Termination Notice ” has the meaning set forth in Section 22(b).

Extension Period ” has the meaning set forth in Section 3.

First Offer Period ” has the meaning set forth in Section 21(b).

Force Majeure ” means events or circumstances, whether foreseeable or not, which are not reasonably within the control of TLO and which, by the exercise of due diligence, TLO is unable to prevent or overcome, that prevent performance of TLO’s obligations or limits Customer’s ability to make effective use of the Operating Capacity of the Storage Facility, including: acts of God, strikes, lockouts or

 

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other industrial disturbances, wars, riots, fires, floods, storms, orders of Governmental Authorities, explosions, terrorist acts, breakage, accident to machinery, equipment, storage tanks or lines of pipe, and inability to obtain or unavoidable delays in obtaining material or equipment and similar events, excluding circumstances due to market conditions.

Force Majeure Notice ” has the meaning set forth in Section 22(a).

Force Majeure Period ” has the meaning set forth in Section 22(a).

General Partner ” has the meaning set forth in the Preamble.

Governmental Authority ” means any federal, state, local or foreign government or any provincial, departmental or other political subdivision thereof, or any entity, body or authority exercising executive, legislative, judicial, regulatory, administrative or other governmental functions or any court, department, commission, board, bureau, agency, instrumentality or administrative body of any of the foregoing.

Month ” means the period commencing on the Commencement Date and ending on the last day of the calendar month in which service begins and each successive calendar month thereafter.

Operating Capacity ” means the effective storage capacity of a Tank, taking into account accepted engineering principles, industry standards, American Petroleum Institute guidelines and Applicable Laws, only as to Products that such Tank is capable of storing, within the requirements of applicable permit requirements and under actual conditions as they may exist at any time. The Operating Capacity of each Tank shall be listed on the applicable Terminal Service Order as of the date of such Terminal Service Order.

Operating Procedures ” has the meaning set forth in Section 14(a).

Partnership ” has the meaning set forth in the Preamble.

Partnership Change of Control ” means Tesoro ceases to Control the General Partner.

Partnership Group ” has the meaning set forth in Section 19(b).

Party ” or “ Parties ” means that each of Customer and TLO is a “Party” and collectively are the “Parties” to this Agreement.

Person ” means any individual, partnership, limited partnership, joint venture, corporation, limited liability company, limited liability partnership, trust, unincorporated organization or Governmental Authority or any department or agency thereof.

Pipeline ” or “ Pipelines ” means those pipelines within each Storage Facility that connect the Tanks to one another and to the receiving and delivery flanges of such Storage Facility.

Product ” or “ Products ” means crude oil, refinery feedstocks and refined products stored in the Tanks in the ordinary course of business.

psig ” means pound per square inch gauge.

Receiving Party Personnel ” has the meaning set forth in Section 28(d).

 

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Refinery ” means Customer’s refinery located in Anacortes, Washington.

Replacement Customer ” has the meaning set forth in Section 24(c).

Restoration ” has the meaning set forth in Section 6(a).

Right of First Refusal ” has the meaning set forth in Section 21(b).

Shell Capacity ” means the gross storage capacity of a Tank for each respective Product, based upon its dimensions, as set forth for each Tank on Schedule A attached hereto and in applicable Terminal Service Orders.

Storage Facility ” has the meaning set forth in the Recitals.

Storage Services Fee ” has the meaning set forth in Section 4(a).

Surcharge ” has the meaning set forth in Section 7(b)(i).

Tank 135 Restoration ” has the meaning set forth in Section 7(a).

Tank Heels ” consist of the minimum quantity of Product which either (a) must remain in a Tank during all periods when the Tank is available for service to keep the Tank in regulatory compliance or (b) is necessary for physical operation of the Tank.

Tanks ” mean the tanks owned by TLO and listed on Schedule A attached hereto, each of which is used for the storage of Products and located at each Storage Facility.

Term ” and “ Initial Term ” each have the meaning set forth in Section 3.

Terminal Service Order ” has the meaning set forth in Section 5(a).

Termination Notice ” has the meaning set forth in Section 22(a).

Tesoro ” has the meaning set forth in the Recitals.

Third Amended and Restated Omnibus Agreement ” means that certain Third Amended and Restated Omnibus Agreement, entered into concurrently herewith, among Tesoro, Customer, Tesoro Companies, Inc., Tesoro Alaska Company LLC, the General Partner and the Partnership, as such agreement may be amended, supplemented or restated from time to time.

TLO ” has the meaning set forth in the Preamble.

2. STORAGE COMMITMENT

(a) Commitment . During the Term of this Agreement and subject to the terms and conditions of this Agreement and the effective Operating Capacity of each Tank and the Storage Facility as a whole, TLO shall, as applicable, store all Products tendered by Customer at the Storage Facility (the “ Commitment ”).

 

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(b) Dedicated Storage . The Tanks identified on Schedule A attached hereto shall be dedicated and used exclusively for the storage of Customer’s Products. Customer shall be responsible for maintaining all Tank Heels required for operation of the Tanks. Tank Heels cannot be withdrawn from any Tank without prior approval of TLO. Customer shall pay the fees specified in the applicable Terminal Service Order for the dedication of the Tanks.

3. TERM

The initial term of this Agreement shall commence on the date hereof (the “ Commencement Date ”) and shall continue through July 1, 2024 (the “ Initial Term ”); provided, however, that Customer may, at its option, extend the Initial Term for up to two (2) renewal terms of five (5) years each (each, an “ Extension Period ”) by providing written notice of its intent to TLO no less than three hundred sixty-five (365) calendar days prior to the end of the Initial Term or the then-current Extension Period. The Initial Term, and any Extension Period shall be referred to herein as the “ Term .”

4. STORAGE SERVICES FEE

(a) Storage Services Fee . Customer shall pay a Monthly fee (the “ Storage Services Fee ”) to reserve, on a firm basis, all of the existing aggregate Shell Capacity of all of the Tanks in the Storage Facility. Such fee shall include all storage, pumping, and transshipment between and among the Tanks. Such fee shall be payable by Customer on a Monthly basis throughout the Term of the Agreement, regardless of the actual volumes of Products stored by TLO on behalf of Customer; provided, however, that the Parties shall from time to time negotiate an appropriate adjustment to such fee if the following conditions are met: (i) Customer requires the full Operating Capacity of the Tanks, (ii) the full Operating Capacity of the Tanks is not available to Customer for any reason (other than any reason resulting from or relating to actions or inactions by Customer), and (iii) TLO is unable to otherwise accommodate the actual volumes of Products required to be stored by Customer pursuant to the terms of this Agreement. Unless otherwise agreed, such adjustment shall be made in proportion to the reduction in Operating Capacity for any time period compared with the Operating Capacity then in effect for the affected Tank or Tanks pursuant to the mutually agreed Terminal Service Orders. (For example, if the Storage Services Fee applicable to the Shell Capacity of the affected Tank is $0.80 per Barrel per month x 345,000 Barrels = $276,000, and if the Operating Capacity in the then-applicable Terminal Service Order is 301,000 Barrels, and if the Operating Capacity falls 10% to 270,900, then Customer’s Storage Services Fee for the affected Tank during the period in which the full Operating Capacity of such Tank is not available to Customer for any reason (other than any reason resulting from or relating to actions or inactions by Customer) would be reduced by 10% to $248,400.) Prior to the calculation of a reduced Storage Services Fee in the manner set forth above, there shall have been at least a consecutive twenty-four (24) hour interruption in service. The Parties recognize that the existing Operating Capacity of certain Tanks may be less than the Shell Capacity of such Tanks, but the Parties acknowledge and agree that the Storage Services Fee shall be set in terms of a dollar-per-Barrel per Month rate based on Shell Capacity in the applicable Terminal Service Order.

(b) Rate and Fee . The Storage Services Fee shall be calculated using the per Barrel rate set forth on the Terminal Service Orders executed effective as of the Commencement Date for the then-existing aggregate Shell Capacity of all of the Tanks in the Storage Facility. The Storage Services Fee owed during the Month in which the Commencement Date occurs, if less than a full calendar month, shall be prorated in accordance with the ratio of (i) the number of days in such Month during which this Agreement is effective to (ii) the total number of days in such Month.

 

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5. TERMINAL SERVICE ORDERS

(a) Description . TLO and Customer shall enter into the Terminal Service Orders referred to in Section 5(b) and may enter into additional terminal service orders substantially in the form attached hereto as Schedule A (each, a “ Terminal Service Order ”). Upon a request by Customer pursuant to this Agreement or as deemed necessary or appropriate by TLO in connection with the services to be delivered pursuant hereto, TLO shall generate a Terminal Service Order to set forth the specific terms and conditions for providing the applicable services described therein and the applicable fees to be charged for such services. No Terminal Service Order shall be effective until fully executed by both TLO and Customer.

(b) Included Items . Items available for inclusion on a Terminal Service Order include, but are not limited to, the following:

(i) the Operating Capacity and Shell Capacity of each Tank;

(ii) the Storage Services Fee pursuant to Section 4;

(iii) any reimbursement pursuant to Section 7(a);

(iv) any Surcharge pursuant to Section 7(b);

(v) any modification, cleaning, or conversion of a Tank as requested by Customer pursuant to Section 8(a);

(vi) any agreements with respect to the Storage Service Fee during periods of repair or maintenance pursuant to Section 8(b);

(vii) any reimbursement related to newly imposed taxes and regulations pursuant to Section 9;

(viii) steam services pursuant to Section 15(a);

(ix) oily water removal pursuant to Section 15(b); and

(x) any other services that may be agreed upon by the Parties.

(c) Fee Increases . Any fees of a fixed amount set forth in this Agreement and any Terminal Service Order shall be increased on July 1 of each year of the Term, commencing on July 1, 2015, by a percentage equal to the greater of zero or the positive change, if any, in the CPI-U (All Urban Consumers) for the prior calendar year, as reported by the Bureau of Labor Statistics, and rounded to the nearest one-tenth (1/10) of one percent (1%).

(d) Conflicts . In case of any conflict between the terms of this Agreement and the terms of any Terminal Service Order, the terms of the applicable Terminal Service Order shall govern.

6. CAPABILITIES OF FACILITIES

(a) Maintenance and Repair . Subject to Force Majeure and interruptions for routine repair and maintenance, consistent with customary terminal industry standards, TLO shall maintain each Tank and the Pipelines in a condition and with a capacity sufficient to store and handle a volume of Customer’s Products at least equal to the current Operating Capacity for the Storage Facility as a whole. TLO’s obligations may be temporarily suspended during the occurrence of, and for the entire duration of, a Force Majeure or other interruption of service, to the extent such Force Majeure or other interruption of service impairs TLO’s ability to perform such obligations. If for any reason, including, without limitation, a

 

6


Force Majeure event, the condition of any Tanks and/or associated Pipelines are below the level necessary for TLO to store and handle a volume of Customer’s Products at least equal to the current Operating Capacity, then within a reasonable period of time thereafter, TLO shall make repairs to restore the capacity of such Tank and/or associated Pipeline(s) to ensure service at the current Operating Capacity (“ Restoration ”). Except as provided below in Section 6(b), all of such Restoration shall be at TLO’s cost and expense unless the damage creating the need for such repairs was caused by the negligence or willful misconduct of Customer, its employees, agents or customers.

(b) Capacity Resolution . In the event of the failure of TLO to maintain any Pipeline or Tank in a condition and with a capacity sufficient to store and handle a volume of Customer’s Products equal to its current Operating Capacity, then either Party shall have the right to call a meeting between executives of both Parties by providing at least two (2) Business Days’ advance written notice. Any such meeting shall be held at a mutually agreeable location and will be attended by executives of both Parties each having sufficient authority to commit his or her respective Party to a Capacity Resolution (as defined below). At the meeting, the Parties will negotiate in good faith with the objective of reaching a joint resolution for the Restoration of capacity of the Tank and/or its associated Pipeline(s) which will, among other things, specify steps to be taken by TLO to fully accomplish Restoration and the deadlines by which the Restoration must be completed (the “ Capacity Resolution ”). Without limiting the generality of the foregoing, the Capacity Resolution shall set forth an agreed upon time schedule for the Restoration activities. Such time schedule shall be reasonable under the circumstances, consistent with customary terminal industry standards and shall take into consideration TLO’s economic considerations relating to costs of the repairs and Customer’s requirements concerning its refining and marketing operations. TLO shall use commercially reasonable efforts to continue to provide storage of Customer’s Products at the Storage Facility, to the extent the Storage Facility has the capability of doing so, during the period before Restoration is completed. In the event that Customer’s economic considerations justify incurring additional costs to restore the Tank and/or associated Pipeline(s) in a more expedited manner than the time schedule determined in accordance with the preceding sentences, Customer may require TLO to expedite the Restoration to the extent reasonably possible, subject to Customer’s payment upon the occurrence of mutually agreed upon milestones in the Restoration process. In the event that the Operating Capacity of a Tank is reduced, and the Parties agree that the Restoration of such Tank to its full Operating Capacity is not justified under the standards set forth in the preceding sentences, then the Parties shall negotiate an appropriate adjustment to the Storage Services Fee to account for the reduced Operating Capacity available for Customer’s use. In the event the Parties agree to an expedited Restoration plan in which Customer agrees to pay the Restoration costs based on milestone payments or if the Parties agree to a reduced Storage Services Fee, then neither Party shall have the right to terminate this Agreement or any applicable Terminal Service Order pursuant to Section 23 below, so long as any such Restoration is completed with due diligence.

(c) Customer’s Right To Cure . If at any time after the occurrence of (x) a Partnership Change of Control or (y) a sale of the Refinery, TLO either (i) refuses or fails to meet with Customer within the period set forth in Section 6(b), (ii) fails to agree to perform a Capacity Resolution in accordance with the standards set forth in Section 6(b), or (iii) fails to perform its obligations in compliance with the terms of a Capacity Resolution, Customer may, as its sole remedy for any breach by TLO of any of its obligations under Section 6(b), require TLO to complete a Restoration of the affected Pipeline or Tank, and the Storage Services Fee shall be reduced, as described in Section 6(b) above, to account for the reduced Operating Capacity available for Customer’s use until such Restoration is completed. Any such Restoration required under this Section 6(c) shall be completed by TLO at Customer’s cost. TLO shall use commercially reasonable efforts to continue to provide storage and throughput of Customer’s Products at the affected Tank or Pipeline while such Restoration is being completed. Any work performed by TLO pursuant to this Section 6(c) shall be performed and completed in a good and workmanlike manner consistent with applicable pipeline industry standards and in

 

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accordance with Applicable Law. Additionally, during such period after the occurrence of (x) a Partnership Change of Control or (y) a sale of the Refinery, Customer may exercise any remedies available to it under this Agreement or any Terminal Service Order (other than termination), including the right to immediately seek temporary and permanent injunctive relief for specific performance by TLO of the applicable provisions of this Agreement or any Terminal Service Order, including, without limitation, the obligation to make Restorations as described herein.

7. REIMBURSEMENT; SURCHARGES

(a) Reimbursement . Customer shall reimburse TLO for all of the following: (i) the actual cost of any expenditures that TLO agrees to make upon Customer’s request, (ii) any cleaning, degassing or other preparation of the Tanks at the expiration of this Agreement, and (iii) any costs incurred by TLO to restore Tank 135 to API 653 specifications (the “ Tank 135 Restoration ”).

(b) Surcharges .

(i) If, during the Term, any existing laws or regulations are changed or any new laws or regulations are enacted that require TLO to make substantial and unanticipated expenditures (whether capitalized or otherwise) with respect to a Storage Facility or with respect to the services provided hereunder, TLO may, subject to the terms of this Section 7(b), impose a surcharge to increase the applicable service fee (a “ Surcharge ”) to cover Customer’s pro rata share of the cost of complying with these laws or regulations, based upon the percentage of Customer’s use of the services or facilities impacted by such new laws or regulations.

(ii) TLO shall notify Customer of any proposed Surcharge to be imposed pursuant to Section 7(b)(i) sufficient to cover the cost of any required capital projects and any ongoing increased operating costs. TLO and Customer then shall negotiate in good faith for up to thirty (30) days to mutually determine the effect of the change in law or regulation or new law or regulation, the cost thereof, and how such cost shall be amortized at an interest rate of no more than nine percent (9%) as a Surcharge, with the understanding that TLO and Customer shall use their reasonable commercial efforts to mitigate the impact of, and comply with, these laws and regulations. Without limiting the foregoing, if expenditures requiring a Surcharge may be avoided or reduced through changes in operations, then the Parties shall negotiate in good faith to set forth the appropriate changes to Operating Capacities or other performance standards set forth in a Terminal Service Order to evidence the reduction of the amount of a Surcharge while leaving the Parties in the same relative economic position they held before the laws or regulations were changed or enacted.

(iii) In the event any Surcharge results in less than a fifteen percent (15%) increase in the applicable service fee, Customer will be assessed such Surcharge on all future invoices during the period in which such Surcharge is in effect for the applicable amortization period, and TLO shall not terminate the affected service from this Agreement.

(iv) In the event any Surcharge results in a fifteen percent (15%) or more increase in the applicable service fee, TLO shall notify Customer of the amount of the Monthly Surcharge required to reimburse TLO for its costs, plus carrying costs, together with reasonable supporting detail for the nature and amount of any such Surcharge.

 

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(A) If within thirty (30) days of such notification provided in Section 7(b)(iv), Customer does not agree to pay such Surcharge or to reimburse TLO up front for its costs, TLO may elect to either:

(1) require Customer to pay such Surcharge, up to a fifteen percent (15%) increase in the applicable service fee; or

(2) terminate the Tank(s) or other facilities from this Agreement upon notice to Customer.

(B) TLO’s performance obligations under this Agreement shall be suspended or reduced during the above thirty (30)-day period to the extent that TLO would be obligated to make such expenditures to continue performance during such period.

(v) Following a resolution with respect to the amount and manner of payment of a Surcharge pursuant to this Section 7, the Parties shall execute an appropriate Terminal Service Order memorializing the terms of such resolution.

(vi) In lieu of paying the Surcharge in connection with any required capital project, Customer may, at its option, elect to pay the full cost of the substantial and unanticipated expenditures upon completion of a project.

8. TANK MODIFICATION, REPAIR AND CLEANING; REMOVAL OF PRODUCT

(a) Tank Modifications . Each of the Tanks shall be used for its historical service, provided however, that Customer may request that a Tank be changed for storage of a different grade or type of Product. In such an instance, TLO shall agree to a change in such service, if the same can be accomplished in accordance with reasonable commercial standards, accepted industry and engineering guidelines, permit requirements and Applicable Law. If any such modifications, improvements, vapor recovery, cleaning, degassing, or other preparation of the tanks is performed by TLO at the request of Customer, Customer shall bear all direct costs attributable thereto, including, without limitation, the cost of removal, processing, transportation, and disposal of all waste and the cost of any taxes or mutually agreed charges TLO may be required to pay in regard to such waste (subject to subparagraph (c) below), which costs shall be set forth on the applicable Terminal Service Order. TLO may require Customer to pay all such amounts prior to commencement of any remodeling work on the Tanks, or by mutual agreement, the Parties may agree upon an increase in the Storage Services Fee to reimburse TLO for its costs of such modifications, plus a reasonable return on capital. All of such costs associated with Tank modifications shall be documented by a Terminal Service Order to be executed by the Parties.

(b) Responsibility for Fees . Should TLO take any of the Tanks out of service for regulatory requirements, repair, or maintenance, Customer shall be solely responsible for any alternative storage or Product movements as required and all third-party fees associated with such movements that are not within a Storage Facility; provided that TLO shall not be reimbursed for any costs of transportation through TLO’s facilities that it might be entitled to collect under any tariff or agreement with Customer. Unless a Tank is removed specifically at Customer’s request, or as otherwise agreed pursuant to a Terminal Service Order, Customer shall not be responsible to TLO for any Storage Services Fees for any Tanks taken out of service during the period that such Tank is out of service.

(c) Removal of Product . Materials stored in or removed from any Storage Facility shall at all times remain owned by Customer or any applicable Replacement Customer, and the owner of the Product shall always remain responsible for, at the owner’s sole cost, receiving custody of all of its materials to be removed from such Storage Facility, making appropriate arrangements to receive custody at such Storage Facility in a manner acceptable to TLO, and disposal of such material after custody is returned to the owner. Customer shall be responsible for any fees and costs associated with the disposal of hazardous waste (unless caused by TLO’s negligence). TLO shall have no obligations regarding disposition of such materials, other than to return custody to the owner at such Storage Facility.

 

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9. NEWLY IMPOSED TAXES AND REGULATIONS

Customer shall promptly reimburse TLO for any newly imposed taxes, levies, royalties, assessments, licenses, fees, charges, surcharges and sums due of any nature whatsoever (other than income taxes, gross receipt taxes and similar taxes) by any federal, state or local government or agency that TLO incurs on Customer’s behalf for the services provided by TLO under this Agreement or any applicable Terminal Service Order. If TLO is required to pay any of the foregoing, Customer shall promptly reimburse TLO in accordance with the payment terms set forth in this Agreement. Any such newly imposed taxes shall be specified in an applicable Terminal Service Order.

10. PAYMENTS

TLO shall invoice Customer on a Monthly basis, and Customer shall pay all amounts due under this Agreement and any Terminal Service Order no later than ten (10) days after Customer’s receipt of TLO’s invoice. Any past due payments owed by Customer shall accrue interest, payable on demand, at the lesser of (i) the rate of interest announced publicly by JPMorgan Chase Bank, in New York, New York, as JPMorgan Chase Bank’s prime rate (which Parties acknowledge and agree is announced by such bank and used by the Parties for reference purposes only and may not represent the lowest or best rate available to any of the customers of such bank or the Parties), plus four percent (4%), and (ii) the highest rate of interest (if any) permitted by Applicable Law, from the due date of the payment through the actual date of payment.

11. SCHEDULING

All scheduling of delivery into and redelivery out of the Tanks shall be decided by mutual agreement of the Parties. Customer shall identify to TLO prior to the delivery of any Product to a Storage Facility, the specific Tanks to be used for receiving and storing such Product.

12. SERVICES; VOLUME LOSSES; MEASUREMENT

(a) Services . The services provided by TLO pursuant to this Agreement or any applicable Terminal Service Order shall only consist of storage of the Products at the Tanks.

(b) Measurement and Volume Loss Control Practices .

(i) TLO shall have no obligation to measure volume gains and losses. In the event third-party Products are stored at the Storage Facility, the Parties shall mutually determine the measurement and volume loss control practices for the Storage Facility.

(ii) TLO shall be responsible to Customer only for Product losses and/or shortages resulting from the negligent or wrongful acts and omissions of TLO; provided that TLO shall not be responsible to Customer for any Product losses and/or shortages for which Customer is compensated by its cargo/inventory insurance carrier, including through the cargo/inventory insurance coverage required by Section 26. If Customer fails to maintain the cargo/inventory insurance coverage required by Section 26, then TLO shall also not be responsible to Customer for any Product losses and/or shortages to the extent Customer would have been compensated by its insurance carrier had Customer maintained the cargo/inventory insurance coverage required by Section 26.

 

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(iii) Customer shall be responsible for all Product losses and/or shortages it may suffer other than those covered by Section 12(b)(ii).

(c) Pipeline Measurement . All quantities of Products received and delivered by pipeline at shall be measured and determined based upon the meter readings of the pipeline operator, as reflected by delivery tickets, or if such meters are unavailable, by applicable calibration tables. All quantities shall be adjusted to net gallons at 60° F in accordance with ASTM D-1250 Petroleum Measurement Tables, or latest revisions thereof. Meters and temperature probes shall be calibrated according to applicable API standards. Customer shall have the right, at its sole expense, and in accordance with applicable procedure, to independently certify such calibration.

(d) Storage Tank Measurement . Storage Tank gauging shall be performed by TLO’s personnel. Customer may perform joint gauging at its sole expense with TLO’s personnel at the time of delivery or receipt of Product, to verify the amount involved. If Customer requests an independent gauger, such gauger must be acceptable to TLO and such gauging shall be at Customer’s sole expense.

13. CUSTODY TRANSFER AND TITLE

TLO shall be deemed to have custody of the Product after it enters TLO’s fixed receiving flange and until the Product leaves the fixed delivery flange on the receiving manifold at the Storage Facility. Customer shall be deemed to receive custody of the Product when it enters the delivery flange into the applicable pipeline which delivers Product into the Refinery. Upon re-delivery of any Product to Customer’s account, Customer shall become solely responsible for any loss, damage or injury to Person or property or the environment, arising out of transportation, possession or use of such Product after transfer of custody. Title to all Customer’s Products received in each Storage Facility shall remain with Customer at all times. Both Parties acknowledge that this Agreement and any Terminal Service Order represent a bailment of Products by Customer to TLO and not a consignment of Products, it being understood that TLO has no authority hereunder to sell or seek purchasers for the Products of Customer. Customer hereby warrants that it shall have good title to and the right to deliver, store and receive Products pursuant to the terms of this Agreement or any applicable Terminal Service Order. Customer acknowledges that, notwithstanding anything to the contrary contained in this Agreement or in any Terminal Service Order, Customer acquires no right, title or interest in or to the Storage Facility), except the right to receive, deliver and store the Products in the Tanks. TLO shall retain control of the Storage Facility.

14. OPERATING PROCEDURES; SERVICE INTERRUPTIONS

(a) Operating Procedures for Customer . Customer hereby agrees to strictly abide by any and all procedures (the “ Operating Procedures ”) relating to the operation and use of the Storage Facility (including the Tanks) and the Pipelines that generally apply to receipt, delivery, storage, and movement of Products at the Storage Facility. TLO shall provide Customer with a current copy of its Operating Procedures and shall provide Customer with thirty (30) days’ prior written notice of any changes to the Operating Procedures, unless a shorter implementation of such revised Operating Procedures is required by Applicable Law.

(b) Operating Procedures for TLO . TLO shall carry out the handling of the Products at the Storage Facility, the Tanks, and the Pipelines in accordance with the Operating Procedures.

 

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(c) Service Interruptions . TLO shall use reasonable commercial efforts to minimize the interruption of service at each Tank and/or any of the associated Pipeline(s). TLO shall promptly inform Customer’s operational personnel of any anticipated partial or complete interruption of service at any Tank and/or associated Pipelines, including relevant information about the nature, extent, cause and expected duration of the interruption and the actions TLO is taking to resume full operations, provided that TLO shall not have any liability for any failure to notify, or delay in notifying, Customer of any such matters except to the extent Customer has been materially prejudiced or damaged by such failure or delay.

15. STEAM SERVICES; REMOVAL OF OILY WATER

(a) Steam Services . Customer, at its sole cost and expense, shall provide TLO steam for the Storage Facility, measuring 1200 psig at 1500 ° F, pursuant to an applicable Terminal Service Order.

(b) Removal of Oily Water . Customer shall provide services for oily water removal pursuant to an applicable Terminal Service Order.

16. LIENS

TLO hereby waives, relinquishes and releases any and all liens, including without limitation, any and all warehouseman’s liens, custodian’s liens, rights of retention and/or similar rights under all applicable laws, which TLO would or might otherwise have under or with respect to all Products stored or handled hereunder. TLO further agrees to furnish documents reasonably acceptable to Customer and its lender(s) (if applicable), and to cooperate with Customer in assuring and demonstrating that Product titled in Customer’s name shall not be subject to any lien on the Storage Facility or TLO’s Product stored there.

17. COMPLIANCE WITH LAW AND GOVERNMENT REGULATIONS

(a) Compliance With Law . None of the Products covered by this Agreement or any Terminal Service Order shall be derived from any Product which was produced or withdrawn from storage in violation of any federal, state or other governmental law, nor in violation of any rule, regulation or promulgated by any governmental agency having jurisdiction.

(b) Licenses and Permits . TLO shall maintain all necessary licenses and permits for the storage of Products at the Storage Facility.

(c) Applicable Law . The Parties are entering into this Agreement and any Terminal Service Order in reliance upon and shall fully comply with all Applicable Law which directly or indirectly affects the Products hereunder, or any receipt, throughput delivery, transportation, handling or storage of Products hereunder or the ownership, operation or condition of the Storage Facility. Each Party shall be responsible for compliance with all Applicable Laws associated with such Party’s respective performance hereunder and the operation of such Party’s facilities. In the event any action or obligation imposed upon a Party under this Agreement and any Terminal Service Order shall at any time be in conflict with any requirement of Applicable Law, then this Agreement and any Terminal Service Order, shall immediately be modified to conform the action or obligation so adversely affected to the requirements of the Applicable Law, and all other provisions of this Agreement and any Terminal Service Order shall remain effective.

(d) New Or Changed Applicable Law . If during the Term, any new Applicable Law becomes effective or any existing Applicable Law or its interpretation is materially changed, which change is not addressed by another provision of this Agreement or any Terminal Service Order and which has a material adverse economic impact upon a Party, then either Party, acting in good faith, shall have the option to request renegotiation of the relevant provisions of this Agreement or any Terminal Service

 

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Order with respect to future performance. The Parties shall then meet and negotiate in good faith amendments to this Agreement or to an applicable Terminal Service Order that will conform to the new Applicable Law while preserving the Parties’ economic, operational, commercial and competitive arrangements in accordance with the understandings set forth herein.

18. LIMITATION ON LIABILITY; WARRANTIES

(a) No Special Damages . IN NO EVENT SHALL A PARTY BE LIABLE TO THE OTHER PARTY FOR ANY LOST PROFITS OR INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, NO MATTER HOW CHARACTERIZED, RELATING TO THIS AGREEMENT AND ARISING FROM ANY CAUSE WHATSOEVER, EXCEPT WITH RESPECT TO INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES ACTUALLY AWARDED TO A THIRD PARTY OR ASSESSED BY A GOVERNMENTAL AUTHORITY AND FOR WHICH A PARTY IS PROPERLY ENTITLED TO INDEMNIFICATION FROM THE OTHER PARTY PURSUANT TO THE EXPRESS PROVISIONS OF THIS AGREEMENT.

(b) Claims and Liability for Lost Product . TLO shall not be liable to Customer for lost or damaged Product unless Customer notifies TLO in writing within ninety (90) days of the report of any incident or the date Customer learns of any such loss or damage to the Product. TLO’s maximum liability to Customer for any lost or damaged Product shall be limited to (i) the lesser of (1) the replacement value of the Product at the time of the incident based upon the price as posted by Platts or similar publication for similar Product in the same locality, and if no other similar Product is in the locality, then in the state, or (2) the actual cost paid for the Product by Customer (copies of Customer’s invoices of cost paid must be provided), less (ii) the salvage value, if any, of the damaged Product.

(c) No Guarantees or Warranties. Except as expressly provided in the Agreement, neither Customer nor TLO makes any guarantees or warranties of any kind, expressed or implied. TLO specifically disclaims all implied warranties of any kind or nature, including any implied warranty of merchantability and/or any implied warranty of fitness for a particular purpose.

19. INDEMNIFICATION

(a) TLO Indemnities . Notwithstanding anything else contained in this Agreement or any Terminal Service Order, TLO shall release, defend, protect, indemnify, and hold harmless Customer, its carriers, and each of its and their respective affiliates, officers, directors, employees, agents, contractors, successors, and assigns (excluding any member of the Partnership Group) (collectively the “ Customer Group ”), from and against any and all demands, claims (including third-party claims), losses, costs, suits, or causes of action (including, but not limited to, any judgments, losses, liabilities, fines, penalties, expenses, interest, reasonable legal fees, costs of suit, and damages, whether in law or equity and whether in contract, tort, or otherwise) for or relating to (i) personal or bodily injury to, or death of the employees of Customer, TLO or the General Partner, and, as applicable, their carriers, customers, representatives, and agents, (ii) loss of or damage to any property, products, material, and/or equipment belonging to Customer, TLO and, as applicable, their carriers, customers, representatives, and agents, and each of their respective affiliates, contractors, and subcontractors (except for those volume losses of Products provided for herein), (iii) loss of or damage to any other property, products, material, and/or equipment of any other description (except for those volume losses of Products provided for herein), and/or personal or bodily injury to, or death of any other Person or Persons; and with respect to clauses (i) through (iii) above, which is caused by or resulting in whole or in part from the negligent or wrongful acts or omissions of TLO or the General Partner in connection with the ownership or operation of the Pipelines or the Storage Facility and the services provided hereunder, and, as applicable, their carriers, customers

 

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(other than Customer), representatives, and agents, or those of their respective employees with respect to such matters, and (iv) any losses incurred by Customer due to violations of this Agreement or any Terminal Service Order by TLO, or, as applicable, its customers (other than Customer), representatives, and agents; PROVIDED THAT TLO SHALL NOT BE OBLIGATED TO RELEASE, INDEMNIFY OR HOLD HARMLESS CUSTOMER OR ANY MEMBER OF THE CUSTOMER GROUP FROM AND AGAINST ANY CLAIMS TO THE EXTENT THEY RESULT FROM THE BREACH OF CONTRACT, STRICT LIABILITY OR THE NEGLIGENT ACTS, ERRORS, OMISSIONS OR WILLFUL MISCONDUCT OF CUSTOMER OR ANY MEMBER OF THE CUSTOMER GROUP.

(b) Customer Indemnities . Notwithstanding anything else contained in this Agreement or any Terminal Service Order, Customer shall release, defend, protect, indemnify, and hold harmless TLO, General Partner, the Partnership, their subsidiaries and their respective officers, directors, members, managers, employees, agents, contractors, successors, and assigns (collectively the “ Partnership Group ”) from and against any and all demands, claims (including third-party claims), losses, costs, suits, or causes of action (including, but not limited to, any judgments, losses, liabilities, fines, penalties, expenses, interest, reasonable legal fees, costs of suit, and damages, whether in law or equity and whether in contract, tort, or otherwise) for or relating to (i) personal or bodily injury to, or death of the employees of TLO, the General Partner, Customer, and, as applicable, their carriers, customers, representatives, and agents; (ii) loss of or damage to any property, products, material, and/or equipment belonging to TLO, Customer, and, as applicable, their carriers, customers, representatives, and agents, and each of their respective affiliates, contractors, and subcontractors (except for those volume losses of Products provided for herein); (iii) loss of or damage to any other property, products, material, and/or equipment of any other description (except for those volume losses of Products provided for herein), and/or personal or bodily injury to, or death of any other Person or Persons; and with respect to clauses (i) through (iii) above, which is caused by or resulting in whole or in part from the negligent or wrongful acts or omissions of Customer, in connection with Customer’s use of the Pipelines or the Storage Facility and the services provided hereunder and Customer’s Products stored hereunder, and, as applicable, its carriers, customers, representatives, and agents, or those of their respective employees with respect to such matters; and (iv) any losses incurred by TLO due to violations of this Agreement or any Terminal Service Order by Customer, or, as applicable, its carriers, customers, representatives, and agents; PROVIDED THAT CUSTOMER SHALL NOT BE OBLIGATED TO RELEASE, INDEMNIFY OR HOLD HARMLESS TLO OR ANY MEMBER OF THE PARTNERSHIP GROUP FROM AND AGAINST ANY CLAIMS TO THE EXTENT THEY RESULT FROM THE BREACH OF CONTRACT, STRICT LIABILITY OR THE NEGLIGENT ACTS, ERRORS, OMISSIONS OR WILLFUL MISCONDUCT OF TLO OR ANY MEMBER OF THE PARTNERSHIP GROUP.

(c) Written Claim . Neither Party shall be obligated to indemnify the other Party or be liable to the other Party unless a written claim for indemnity is delivered to the other Party within ninety (90) days after the date that a claim is reported or discovered, whichever is earlier.

(d) No Limitation . Except as expressly provided otherwise in this Agreement, the scope of these indemnity provisions may not be altered, restricted, limited, or changed by any other provision of this Agreement. The indemnity obligations of the Parties as set out in this Section 19 are independent of any insurance requirements as set out in Section 26, and such indemnity obligations shall not be lessened or extinguished by reason of a Party’s failure to obtain the required insurance coverages or by any defenses asserted by a Party’s insurers.

(e) Survival . These indemnity obligations shall survive the termination of this Agreement until all applicable statutes of limitation have run regarding any claims that could be made with respect to the activities contemplated by this Agreement.

 

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(f) Mutual and Express Acknowledgement . THE INDEMNIFICATION PROVISIONS PROVIDED FOR IN THIS AGREEMENT HAVE BEEN EXPRESSLY NEGOTIATED IN EVERY DETAIL, ARE INTENDED TO BE GIVEN FULL AND LITERAL EFFECT, AND SHALL BE APPLICABLE WHETHER OR NOT THE LIABILITIES, OBLIGATIONS, CLAIMS, JUDGMENTS, LOSSES, COSTS, EXPENSES OR DAMAGES IN QUESTION ARISE OR AROSE SOLELY OR IN PART FROM THE GROSS, ACTIVE, PASSIVE OR CONCURRENT NEGLIGENCE, STRICT LIABILITY, OR OTHER FAULT OF ANY INDEMNIFIED PARTY. EACH PARTY ACKNOWLEDGES THAT THIS STATEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND CONSTITUTES CONSPICUOUS NOTICE. NOTICE IN THIS CONSPICUOUS NOTICE IS NOT INTENDED TO PROVIDE OR ALTER THE RIGHTS AND OBLIGATIONS OF THE PARTIES, ALL OF WHICH ARE SPECIFIED ELSEWHERE IN THIS AGREEMENT.

(g) Third Party Indemnification . If any Party has the rights to indemnification from a third party, the indemnifying party under this Agreement shall have the right of subrogation with respect to any amounts received from such third-party indemnification claim.

20. TERMINATION

(a) Termination for Default . A Party shall be in default under this Agreement or any Terminal Service Order if:

(i) the Party breaches any provision of this Agreement or a Terminal Service Order, which breach has a material adverse effect on the other Party (with such material adverse effect being determined based on this Agreement and all Terminal Service Orders considered as a whole), and such breach is not excused by Force Majeure or cured within fifteen (15) Business Days after notice thereof (which notice shall describe such breach in reasonable detail) is received by such Party (unless such failure is not commercially reasonably capable of being cured in such fifteen (15) Business Day period in which case such Party shall have commenced remedial action to cure such breach and shall continue to diligently and timely pursue the completion of such remedial action after such notice); or

(ii) the Party (A) files a petition or otherwise commences, authorizes or acquiesces in the commencement of a proceeding or cause of action under any bankruptcy, insolvency, reorganization or similar Applicable Law, or has any such petition filed or commenced against it, (B) makes an assignment or any general arrangement for the benefit of creditors, (C) otherwise becomes bankrupt or insolvent (however evidenced) or (D) has a liquidator, administrator, receiver, trustee, conservator or similar official appointed with respect to it or any substantial portion of its property or assets.

If either Party is in default as described above, then (i) if Customer is in default, TLO may or (ii) if TLO is in default, Customer may: (A) terminate this Agreement and all applicable Terminal Service Orders upon notice to the defaulting Party; (B) withhold any payments due to the defaulting Party under this Agreement and the Terminal Service Orders; and/or (C) pursue any other remedy at law or in equity.

(b) Obligation to Cure . If a Party breaches any provision of this Agreement or a Terminal Service Order, which breach does not have a material adverse effect on the other Party, the breaching Party shall still have the obligation to cure such breach.

 

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(c) Obligations at Termination . Unless otherwise mutually agreed by the Parties, within thirty (30) days of the termination or expiration of this Agreement, (i) Customer shall promptly remove all of its removable Products from the Storage Facility and (ii) TLO shall remove the remaining Tank Heels and tank bottoms and deliver them to Customer or Customer’s designee. In the event all of the Product is not removed within such thirty (30) day period, Customer shall be assessed a holdover storage fee, calculated on the same basis as the Storage Services Fee, to all Products held in storage more than thirty (30) days beyond the termination or expiration of this Agreement until such time Customer’s entire Product is removed from the Tanks and the Storage Facility; provided, however, that Customer shall not be assessed any storage fees associated with the removal of Product to the extent that Customer’s ability to remove such Product is delayed or hindered by TLO, its agents, or contractors for any reason.

21. RIGHT TO ENTER INTO A NEW STORAGE AGREEMENT

(a) Right to Enter New Agreement . Upon termination of this Agreement for reasons other than (x) a default by Customer and (y) any other termination of this Agreement initiated by TLO pursuant to Section 20, Customer shall have the right to require TLO to enter into a new storage services agreement (with ancillary Terminal Service Orders, as appropriate) with Customer that (i) is consistent with the terms set forth in this Agreement and Terminal Service Orders in effect at the time of such termination, (ii) relates to the Storage Facility and the Tanks, and (iii) has commercial terms that are, in the aggregate, equal to or more favorable to TLO than fair market value terms as would be agreed by similarly-situated parties negotiating at arm’s length; provided, however, that the term of any such new storage services agreement shall not extend beyond July 1, 2034.

(b) New Agreement; Right of First Refusal . In the event that TLO proposes to enter into a storage services agreement with a third party within two (2) years after the termination of this Agreement for reasons other than (x) by default by Customer and (y) any other termination of this Agreement initiated by Customer pursuant to Section 20, TLO shall give Customer ninety (90) days’ prior written notice of any proposed new storage services agreement with a third party, including (i) details of all of the material terms and conditions thereof and (ii) a thirty (30)-day period (beginning upon Customer’s receipt of such written notice) (the “ First Offer Period ”) in which Customer may make a good faith offer to enter into a new storage services agreement with TLO (the “ Right of First Refusal ”). If Customer makes an offer on terms no less favorable to TLO than the third-party offer with respect to such storage services agreement during the First Offer Period, then TLO shall be obligated to enter into a storage services agreement with Customer on the terms set forth in Customer’s offer to TLO. If Customer does not exercise its Right of First Refusal in the manner set forth above, TLO may, for the next ninety (90) days, proceed with the negotiation of the third-party storage services agreement. If no third party agreement is consummated during such ninety-day period, the terms and conditions of this Section 21(b) shall again become effective.

22. FORCE MAJEURE

(a) Force Majeure Notice . As soon as possible upon the occurrence of a Force Majeure, TLO shall provide Customer with written notice of the occurrence of such Force Majeure (a “ Force Majeure Notice ”). TLO shall identify in such Force Majeure Notice the approximate length of time that TLO reasonably believes in good faith such Force Majeure shall continue (the “ Force Majeure Period ”). For the duration of the Force Majeure Period, the Storage Services Fee shall be reduced by an amount equal to the Shell Capacity for each affected Tank, provided that if Customer is able to continue to store Product in a Tank during the Force Majeure Period, but at a reduced Operating Capacity, the Storage Services Fee shall be reduced in proportion to the amount the effective Operating Capacity is reduced. If TLO advises in any Force Majeure Notice that it reasonably believes in good faith that the Force Majeure Period shall continue for more than twelve (12) consecutive Months, then, subject to Section 6 above, at

 

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any time after TLO delivers such Force Majeure Notice, either Party may terminate that portion of this Agreement or any Terminal Service Order solely with respect to the affected Tank(s) at the Storage Facility, but only upon delivery to the other Party of a notice (a “ Termination Notice ”) at least twelve (12) Months prior to the expiration of the Force Majeure Period; provided, however; that such Termination Notice shall be deemed cancelled and of no effect if the Force Majeure Period ends prior to the expiration of such twelve-Month period. For the avoidance of doubt, neither Party may exercise its right under this Section 22(a) to terminate this Agreement or any Terminal Service Order as a result of a Force Majeure with respect to any machinery, storage, tanks, lines of pipe or other equipment that has been unaffected by, or has been restored to working order since, the applicable Force Majeure, including pursuant to a Restoration under Section 6.

(b) Termination Notice . Notwithstanding the foregoing, if Customer delivers a Termination Notice to TLO (the “ Customer Termination Notice ”) and, within thirty (30) days after receiving such Customer Termination Notice, TLO notifies Customer that TLO reasonably believes in good faith that it shall be capable of fully performing its obligations under this Agreement or any Terminal Service Order within a reasonable period of time and Customer mutually agrees, which agreement shall not be unreasonably withheld, then the Customer Termination Notice shall be deemed revoked and the applicable portion of this Agreement or any Terminal Service Order shall continue in full force and effect as if such Customer Termination Notice had never been given.

23. SUSPENSION OF REFINERY OPERATIONS

This Agreement shall continue in full force and effect regardless of whether Customer decides to permanently or temporarily suspend refining operations at the Refinery. Customer is not permitted to suspend or reduce its obligations under this Agreement or any Terminal Service Order in connection with a shutdown of the Refinery for scheduled turnarounds or other regular servicing or maintenance. If refining operations at the Refinery are suspended for any reason (including Refinery turnarounds and other scheduled maintenance), then Customer shall remain liable for Storage Services Fees under this Agreement or any Terminal Service Order for the duration of the suspension. Customer shall provide at least thirty (30) days’ prior written notice of any suspension of operations at the Refinery due to a planned turnaround or scheduled maintenance.

24. ASSIGNMENT; SUBCONTRACT; PARTNERSHIP CHANGE OF CONTROL

(a) Assignment to TLO . On the Commencement Date, the General Partner shall assign all of its rights and obligations under this Agreement to the Partnership. The Partnership shall immediately assign its rights and obligations hereunder to TLO. Upon such assignment to TLO, TLO shall have all of the respective rights and obligations set forth herein during the Term of this Agreement.

(b) Customer Assignment to Third Party . Customer shall not assign any of its rights or obligations under this Agreement without TLO’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; provided , however , that Customer may assign this Agreement without TLO’s consent in connection with a sale by Customer of the Refinery so long as the transferee: (i) agrees to assume all of Customer’s obligations under this Agreement and (ii) is financially and operationally capable of fulfilling the terms of this Agreement, which determination shall be made by Customer in its reasonable judgment.

(c) Subcontract . Should Customer desire to subcontract to a third party (“ Replacement Customer ”) any dedicated storage subject to a Terminal Service Order, Customer must notify TLO in writing prior to the proposed start of the subcontract. TLO has the right to approve any Replacement Customer, which approval shall not be unreasonably withheld, conditioned or delayed. Unless otherwise

 

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agreed in writing between Customer and TLO, and between Replacement Customer and TLO, Customer will continue to be liable for all terms and conditions of this Agreement related to any subcontracted Tank, including, but not limited to, remittance of any fees set forth in a Terminal Service Order applicable to the subcontracted Tank. Customer shall be responsible for collection of any fees due to Customer from the Replacement Customer. Customer and TLO may mutually agree that operational notices concerning scheduling and similar matters can be directly provided between TLO and any Replacement Customer.

(d) TLO Assignment . TLO shall not assign any of its rights or obligations under this Agreement without Customer’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; provided , however , that (i) TLO may assign this Agreement without Customer’s consent in connection with a sale by TLO of the Storage Facility so long as the transferee: (A) agrees to assume all of TLO’s obligations under this Agreement; (B) is financially and operationally capable of fulfilling the terms of this Agreement, which determination shall be made by TLO in its reasonable judgment; and (C) is not a competitor of Customer; and (ii) TLO shall be permitted to make a collateral assignment of this Agreement solely to secure working capital financing for TLO.

(e) Notification of Assignment . Any assignment that is not undertaken in accordance with the provisions set forth above shall be null and void ab initio . A Party making any assignment shall promptly notify the other Party of such assignment, regardless of whether consent is required. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns.

(f) Partnership Change of Control . Customer’s obligations hereunder shall not terminate in connection with a Partnership Change of Control, provided, however, that in the case of any Partnership Change of Control, Customer shall have the option to extend the Term of this Agreement as provided in Section 3. TLO shall provide Customer with notice of any Partnership Change of Control at least sixty (60) days prior to the effective date thereof.

25. ACCOUNTING PROVISIONS AND DOCUMENTATION; AUDIT

(a) Storage Services Fee Documentation . Within ten (10) Business Days following the end of each Month, TLO shall furnish Customer with a statement showing, by Tank, a calculation of all of Customer’s Monthly Storage Services Fees. TLO shall furnish all appropriate documentation to support the calculation of all fees, and, to the extent reasonably available, to document movement of Products through the Storage Facility.

(b) Access . Each Party and its duly authorized agents and/or representatives shall have reasonable access to the accounting records and other documents maintained by the other Party which relate to this Agreement, and shall have the right to audit such records at any reasonable time or times during the Term and for a period of up to three (3) years after termination of this Agreement. Claims as to shortage in quantity or defects in quality shall be made by written notice within ninety (90) days after the delivery in question or shall be deemed to have been waived.

26. INSURANCE

(a) Coverage . At all times during the Term and for a period of two (2) years after termination of this Agreement for any coverage maintained on a “claims-made” or “occurrence” basis, Customer shall maintain at its expense the below listed insurance in the amounts specified below, or self-insurance in such amounts as may be agreed pursuant to a Terminal Service Order. Such insurance shall provide coverage to TLO and such policies, other than Worker’s Compensation Insurance, shall include TLO as an Additional Insured. Each policy shall provide that it is primary to and not contributory with any other insurance, including any self-insured retention, maintained by TLO (which shall be excess) and each

 

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policy shall provide the full coverage required by this Agreement and any Terminal Service Order. All such insurance shall be written with carriers and underwriters acceptable to TLO, and eligible to do business in the state where the Storage Facility is located and having and maintaining an A.M. Best financial strength rating of no less than “A-” and financial size rating no less than “VII”; provided that Customer may procure worker’s compensation insurance from the state where the Storage Facility is located. All limits listed below are required MINIMUM LIMITS:

(i) Workers Compensation and Occupational Disease Insurance which fully complies with Applicable Law of the state where the Storage Facility is located, in limits not less than statutory requirements;

(ii) Employers Liability Insurance with a minimum limit of $1,000,000 for each accident, covering injury or death to any employee which may be outside the scope of the worker’s compensation statute of the jurisdiction in which the worker’s service is performed, and in the aggregate as respects occupational disease;

(iii) Commercial General Liability Insurance, with minimum limits of $1,000,000 combined single limit per occurrence for bodily injury and property damage liability, or such higher limits as may be required by TLO or by Applicable Law from time to time. This policy shall include Broad Form Contractual Liability insurance coverage which shall specifically apply to the obligations assumed in this Agreement and any Terminal Service Order by Customer;

(iv) Automobile Liability Insurance covering all owned, non-owned and hired vehicles, with minimum limits of $1,000,000 combined single limit per occurrence for bodily injury and property damage liability, or such higher limit(s) as may be required by Customer or by Applicable Law from time to time. Limits of liability for this insurance must be not less than $1,000,000 per occurrence;

(v) Excess (Umbrella) Liability Insurance with limits not less than $4,000,000 per occurrence. Additional excess limits may be utilized to supplement inadequate limits in the primary policies required in items (ii), (iii), and (iv) above;

(vi) Pollution Legal Liability with limits not less than $25,000,000 per loss with an annual aggregate of $25,000,000. Coverage shall apply to bodily injury and property damage including loss of use of damaged property and property that has not been physically injured; cleanup costs, defense, including costs and expenses incurred in the investigation, defense or settlement of claim; and

(vii) Cargo/Inventory Insurance, with a limit of no less than $1,000,000, which property insurance shall be first-party property insurance to adequately cover all Products owned by Customer located at the Storage Facility.

(b) Waiver of Subrogation . All such policies must be endorsed with a Waiver of Subrogation endorsement, effectively waiving rights of recovery under subrogation or otherwise, against TLO, and shall contain where applicable, a severability of interest clause and a standard cross liability clause.

(c) Insurance Certificates . Upon execution of this Agreement and prior to the operation of any equipment by Customer, Customer will furnish to TLO, and at least annually thereafter (or at any other times upon request by TLO) during the Term (and for any coverage maintained on a “claims-made” basis, for two (2) years after the termination of this Agreement or any applicable Terminal Service Order), insurance certificates and/or certified copies of the original policies to evidence the insurance required herein. Such certificates shall be in the form of the “Accord” Certificate of Insurance, and reflect that they are for the benefit of TLO and shall provide that there will be no material change in or cancellation of the policies unless TLO is given at least thirty (30) days prior written notice. Certificates providing evidence of renewal of coverage shall be furnished to TLO prior to policy expiration.

 

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(d) Self-Insurance . Customer shall be solely responsible for any deductibles or self-insured retention.

27. NOTICE

All notices, requests, demands, and other communications hereunder will be in writing and will be deemed to have been duly given: (i) if by transmission by hand delivery, when delivered; (ii) if mailed via the official governmental mail system, five (5) Business Days after mailing, provided said notice is sent first class, postage pre-paid, via certified or registered mail, with a return receipt requested; (iii) if mailed by an internationally recognized overnight express mail service such as Federal Express, UPS, or DHL Worldwide, one (1) Business Day after deposit therewith prepaid; or (iv) by e-mail one (1) Business Day after delivery with receipt confirmed. All notices will be addressed to the Parties at the respective addresses as follows:

If to Customer, to:

Tesoro Refining & Marketing Company LLC

19100 Ridgewood Parkway

San Antonio, Texas 78259

For legal notices :

Attention: Charles A. Cavallo III, Managing Attorney - Commercial

phone: (210) 626-4045

email: Charles.A.Cavallo@tsocorp.com

For all other notices and communications :

Attention: Dennis C. Bak

phone: 310-847-3846

email: Dennis.C.Bak@tsocorp.com

If to TLO, to:

Tesoro Logistics Operations LLC

19100 Ridgewood Parkway

San Antonio, Texas 78259

For legal notices :

Attention: Charles S. Parrish, General Counsel

phone: (210) 626-4280

email: Charles.S.Parrish@tsocorp.com

For all other notices and communications :

Attention: Rick D. Weyen, Vice President, Logistics

phone: (210) 626-4379

email: Rick.D.Weyen@tsocorp.com

or to such other address or to such other Person as either Party will have last designated by notice to the other Party.

 

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28. CONFIDENTIAL INFORMATION

(a) Obligations . Each Party shall use reasonable efforts to retain the other Parties’ Confidential Information in confidence and not disclose the same to any third party nor use the same, except as authorized by the disclosing Party in writing or as expressly permitted in this Section 28 . Each Party further agrees to take the same care with the other Party’s Confidential Information as it does with its own, but in no event less than a reasonable degree of care. Excepted from these obligations of confidence and non-use is that information which:

(i) is available, or become available, to the general public without fault of the receiving Party;

(ii) was in the possession of the receiving Party on a non-confidential basis prior to receipt of the same from the disclosing Party (it being understood, for the avoidance of doubt, that this exception shall not apply to information of TLO that was in the possession of Customer or any of its affiliates as a result of their ownership or operation of the Storage Facility prior to the Commencement Date);

(iii) is obtained by the receiving Party without an obligation of confidence from a third party who is rightfully in possession of such information and, to the receiving Party’s knowledge, is under no obligation of confidentiality to the disclosing Party; or

(iv) is independently developed by the receiving Party without reference to or use of the disclosing Party’s Confidential Information.

For the purpose of this Section 28 , a specific item of Confidential Information shall not be deemed to be within the foregoing exceptions merely because it is embraced by, or underlies, more general information in the public domain or in the possession of the receiving Party.

(b) Required Disclosure . Notwithstanding Section 28(a) above, if the receiving Party becomes legally compelled to disclose the Confidential Information by a court, Governmental Authority or Applicable Law, or is required to disclose by the listing standards of any applicable securities exchange of the disclosing Party’s Confidential Information, the receiving Party shall promptly advise the disclosing Party of such requirement to disclose Confidential Information as soon as the receiving Party becomes aware that such a requirement to disclose might become effective, in order that, where possible, the disclosing Party may seek a protective order or such other remedy as the disclosing Party may consider appropriate in the circumstances. The receiving Party shall disclose only that portion of the disclosing Party’s Confidential Information that it is required to disclose and shall cooperate with the disclosing Party in allowing the disclosing Party to obtain such protective order or other relief.

(c) Return of Information . Upon written request by the disclosing Party, all of the disclosing Party’s Confidential Information in whatever form shall be returned to the disclosing Party or destroyed with destruction certified by the receiving Party upon termination of this Agreement, without the receiving Party retaining copies thereof except that one copy of all such Confidential Information may be retained by a Party’s legal department solely to the extent that such Party is required to keep a copy of such Confidential Information pursuant to Applicable Law, and the receiving Party shall be entitled to retain any Confidential Information in the electronic form or stored on automatic computer back-up archiving systems during the period such backup or archived materials are retained under such Party’s customary procedures and policies; provided , however , that any Confidential Information retained by the receiving Party shall be maintained subject to confidentiality pursuant to the terms of this Section 28, and such archived or back-up Confidential Information shall not be accessed except as required by Applicable Law.

 

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(d) Receiving Party Personnel . The receiving Party will limit access to the Confidential Information of the disclosing Party to those of its employees, attorneys and contractors that have a need to know such information in order for the receiving Party to exercise or perform its rights and obligations under this Agreement or any Terminal Service Order (the “ Receiving Party Personnel ”). The Receiving Party Personnel who have access to any Confidential Information of the disclosing Party will be made aware of the confidentiality provision of this Agreement, and will be required to abide by the terms thereof. Any third party contractors that are given access to Confidential Information of a disclosing Party pursuant to the terms hereof shall be required to sign a written agreement pursuant to which such Receiving Party Personnel agree to be bound by the provisions of this Agreement, which written agreement will expressly state that it is enforceable against such Receiving Party Personnel by the disclosing Party.

(e) Survival . The obligation of confidentiality under this Section 28 shall survive the termination of this Agreement for a period of two (2) years.

29. MISCELLANEOUS

(a) Modification; Waiver . This Agreement or any Terminal Service Order may be amended or modified only by a written instrument executed by the Parties. Any of the terms and conditions of this Agreement or any Terminal Service Order may be waived in writing at any time by the Party entitled to the benefits thereof. No waiver of any of the terms and conditions of this Agreement or any Terminal Service Order, or any breach thereof, will be effective unless in writing signed by a duly authorized individual on behalf of the Party against which the waiver is sought to be enforced. No waiver of any term or condition or of any breach of this Agreement or any Terminal Service Order will be deemed or will constitute a waiver of any other term or condition or of any later breach (whether or not similar), nor will such waiver constitute a continuing waiver unless otherwise expressly provided.

(b) Integration . This Agreement, together with the Schedules and Terminal Service Orders and the other agreements executed on the date hereof in connection with the transactions contemplated by the Contribution Agreement, constitutes the entire agreement among the Parties pertaining to the subject matter hereof and supersedes all prior agreements and understandings of the Parties in connection therewith. In the event of a conflict of provisions of this Agreement and the Third Amended and Restated Omnibus Agreement, the provisions of the Third Amended and Restated Omnibus Agreement shall prevail with respect to issues related to the contribution of the assets described therein, but not with respect to the ordinary operations of such assets as set forth in this Agreement.

(c) Construction and Interpretation . In interpreting this Agreement, unless the context expressly requires otherwise, all of the following apply to the interpretation of this Agreement:

(i) Preparation of this Agreement has been a joint effort of the Parties and the resulting Agreement against one of the Parties as the drafting Party.

(ii) Plural and singular words each include the other.

(iii) Masculine, feminine and neutral genders each include the others.

(iv) The word “or” is not exclusive and includes “and/or.”

 

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(v) The words “includes” and “including” are not limiting.

(vi) References to the Parties include their respective successors and permitted assignees.

(vii) The headings in this Agreement are included for convenience and do not affect the construction or interpretation of any provision of, or the rights or obligations of a Party under, this Agreement.

(d) Governing Law; Jurisdiction . This Agreement and any Terminal Service Order shall be governed by the laws of the State of Texas without giving effect to its conflict of laws principles. Each Party hereby irrevocably submits to the exclusive jurisdiction of any federal court of competent jurisdiction situated in the United States District Court for the Western District of Texas, San Antonio Division, or if such federal court declines to exercise or does not have jurisdiction, in the district court of Bexar County, Texas. The Parties expressly and irrevocably submit to the jurisdiction of said Courts and irrevocably waive any objection which they may now or hereafter have to the laying of venue of any action, suit or proceeding arising out of or relating to this Agreement or any Terminal Service Order brought in such Courts, irrevocably waive any claim that any such action, suit or proceeding brought in any such Court has been brought in an inconvenient forum and further irrevocably waive the right to object, with respect to such claim, action, suit or proceeding brought in any such Court, that such Court does not have jurisdiction over such Party. The Parties hereby irrevocably consent to the service of process by registered mail, postage prepaid, or by personal service within or without the State of Texas. Nothing contained herein shall affect the right to serve process in any manner permitted by law.

(e) Counterparts . This Agreement and any Terminal Service Order may be executed in one or more counterparts (including by facsimile or portable document format (pdf)) for the convenience of the Parties hereto, each of which counterparts will be deemed an original, but all of which counterparts together will constitute one and the same agreement.

(f) Severability . Whenever possible, each provision of this Agreement and any Terminal Service Order will be interpreted in such manner as to be valid and effective under applicable law, but if any provision of this Agreement or any Terminal Service Order or the application of any such provision to any Person or circumstance will be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision hereof, and the Parties will negotiate in good faith with a view to substitute for such provision a suitable and equitable solution in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid, illegal or unenforceable provision.

(g) No Third Party Beneficiaries . Except as specifically provided herein, including as set forth in Section 19, it is expressly understood that the provisions of this Agreement and any Terminal Service Order do not impart enforceable rights in anyone who is not a Party or successor or permitted assignee of a Party.

(h) WAIVER OF JURY TRIAL . EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY PROCEEDINGS RELATING TO THIS AGREEMENT OR ANY PERFORMANCE OR FAILURE TO PERFORM OF ANY OBLIGATION HEREUNDER.

(i) Schedules and Terminal Service Orders(s) . Each of the Schedules and Terminal Service Order(s) attached hereto and referred to herein is hereby incorporated in and made a part of this Agreement as if set forth in full herein.

 

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

 

TESORO LOGISTICS OPERATIONS LLC     TESORO REFINING & MARKETING COMPANY LLC
By:  

/s/ Phillip M. Anderson

    By:  

/s/ G. Scott Spendlove

  Phillip M. Anderson       G. Scott Spendlove
  President       Senior Vice President and Chief Financial Officer

Solely with respect to Section 24(a):

TESORO LOGISTICS GP, LLC

   

Solely with respect to Section 24(a):

TESORO LOGISTICS LP

By:  

/s/ Phillip M. Anderson

     
  Phillip M. Anderson     By:   Tesoro Logistics GP, LLC, its
  President       general partner
      By:  

/s/ Phillip M. Anderson

        Phillip M. Anderson
        President

Signature Page to Storage Services Agreement – Anacortes


SCHEDULE A

TANKS

 

TANK NUMBER

   SHELL CAPACITY (in Barrels)  

135

     170,000   

136

     177,000   

165

     597,000   

166

     598,000   

Schedule A

Storage Services Agreement – Anacortes


EXHIBIT 1

FORM OF TERMINAL SERVICE ORDER

(ANACORTES [     ]-             , 20        )

This Terminal Service Order is entered as of             , 20        , by and between Tesoro Refining & Marketing Company LLC, a Delaware limited liability company and Tesoro Logistics Operations LLC, a Delaware limited liability company, pursuant to and in accordance with the terms of the Storage Services Agreement – Anacortes dated as of July 1, 2014, by and among such parties and Tesoro Logistics GP, LLC, a Delaware limited liability company, and Tesoro Logistics LP, a Delaware limited partnership (the “Agreement”).

Capitalized terms not otherwise defined herein shall have the meaning set forth in the Agreement.

Pursuant to Section 5 of the Agreement, the parties hereto agree to the following provisions:

(i) the Operating Capacity and Shell Capacity of each Tank;

(ii) the Storage Services Fee pursuant to Section 4;

(iii) any reimbursement pursuant to Section 7(a);

(iv) any Surcharge pursuant to Section 7(b);

(v) any modification, cleaning, or conversion of a Tank as requested by Customer pursuant to Section 8(a);

(vi) any agreements with respect to the Storage Service Fee during periods of repair or maintenance pursuant to Section 8(b);

(vii) any reimbursement related to newly imposed taxes and regulations pursuant to Section 9;

(viii) steam services pursuant to Section 15(a);

(ix) oily water removal pursuant to Section 15(b); and

(x) any other services that may be agreed upon by the Parties.

Except as set forth in this Terminal Service Order, the other terms of the Agreement shall continue in full force and effect and shall apply to the terms of this Terminal Service Order.

Exhibit 1

Storage Services Agreement – Anacortes


IN WITNESS WHEREOF , the parties hereto have duly executed this Terminal Service Order as of the date first written above.

 

TESORO REFINING & MARKETING COMPANY LLC
By:    
Name:  
Title:  

 

TESORO LOGISTICS OPERATIONS LLC
By:    
Name:  
Title:  

Exhibit 1

Storage Services Agreement – Anacortes

Exhibit 10.7

THIRD AMENDED AND RESTATED OMNIBUS AGREEMENT

This THIRD AMENDED AND RESTATED OMNIBUS AGREEMENT (the “ Agreement ”) is entered into on, and effective as of, July 1, 2014, among Tesoro Corporation, a Delaware corporation (“ Tesoro ”), on behalf of itself and the other Tesoro Entities (as defined herein), Tesoro Refining & Marketing Company LLC, a Delaware limited liability company and formerly known as Tesoro Refining and Marketing Company (“ TRMC ”), Tesoro Companies, Inc., a Delaware corporation (“ Tesoro Companies ”), Tesoro Alaska Company LLC, a Delaware limited liability company and formerly known as Tesoro Alaska Company (“ Tesoro Alaska ”), Tesoro Logistics LP, a Delaware limited partnership (the “ Partnership ”), and Tesoro Logistics GP, LLC, a Delaware limited liability company (the “ General Partner ”). The above-named entities are sometimes referred to in this Agreement each as a “ Party ” and collectively as the “ Parties .”

R E C I T A L S:

1. The Parties executed that certain Second Amended and Restated Omnibus Agreement dated as of November 15, 2012, amended by that certain Amendment No. 1 to Second Amended and Restated Omnibus Agreement dated as of June 1, 2013, and Amendment No. 2 to Second Amended and Restated Omnibus Agreement dated as of December 6, 2013 (collectively, the “ Second Omnibus Agreement ”).

2. The Parties desired by their execution of the Second Omnibus Agreement to evidence their understanding, as more fully set forth in Article II , with respect to certain business opportunities that the Tesoro Entities (as defined herein) will not engage in for so long as the Partnership is an Affiliate of Tesoro.

3. The Parties desired by their execution of the Second Omnibus Agreement to evidence their understanding, as more fully set forth in Article III , with respect to certain indemnification obligations of the Parties to each other.

4. The Parties desired by their execution of the Second Omnibus Agreement to evidence their understanding, as more fully set forth in Article IV , with respect to the amount to be paid by the Partnership for the centralized corporate services to be performed by the Tesoro Entities (as defined herein) for and on behalf of the Partnership Group (as defined herein).

5. The Parties desired by their execution of the Second Omnibus Agreement to evidence their understanding, as more fully set forth in Article V , with respect to certain maintenance capital and other expenditures to be reimbursed by the Tesoro Entities to the Partnership Group.

6. The Parties desired by their execution of the Second Omnibus Agreement to evidence their understanding, as more fully set forth in Article VI , with respect to the Partnership Group’s right of first offer with respect to the ROFO Assets (as defined herein).

7. The Parties desired by their execution of the Second Omnibus Agreement to evidence their understanding, as more fully set forth in Article VII , with respect to the granting of a license from Tesoro to the Partnership Group and the General Partner.


8. The Parties desired by their execution of the Second Omnibus Agreement to evidence their understanding, as more fully set forth in Article VIII , with respect to the transfer of the Represented Employees (as defined herein) from the Tesoro Entities to the General Partner and the Partnership Group’s right to use certain vehicles leased by the General Partner.

9. The Parties desire to amend and restate the Second Omnibus Agreement to allow, among other items, for the application of the terms hereof to additional contributions of assets from the Tesoro Entities to the Partnership Group.

In consideration of the premises and the covenants, conditions, and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS

1.1 Definitions . As used in this Agreement, the following terms shall have the respective meanings set forth below:

Administrative Fee ” is defined in Section 4.1 .

Affiliate ” is defined in the Partnership Agreement.

Annual Environmental Deductible ” is defined in Section 3.7 .

Annual ROW Deductible ” is defined in Section 3.7 .

Assets ” means all logistics assets, including, but not limited to, all gathering pipelines, transportation pipelines, storage tanks, trucks, truck racks, terminal facilities, wharves, rail tracks, offices and related equipment, real estate and other assets, or portions thereof, conveyed, contributed or otherwise transferred or intended to be conveyed, contributed or otherwise transferred pursuant to a Contribution Agreement to any member of the Partnership Group, or, with respect to a Contribution Agreement, owned by, leased by or necessary for the operation of the business, properties or assets of any member of the Partnership Group, prior to or as of the applicable Closing Date.

Closing Date ” means the applicable date for each Contribution Agreement as set forth on Schedule VII to this Agreement.

Conflicts Committee ” is defined in the Partnership Agreement.

Contribution Agreement ” means the applicable contribution agreement identified on Schedule VII to this Agreement, together with the applicable additional conveyance documents and instruments contemplated or referenced thereunder.

Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether (a) through ownership of securities of any class of a Person entitling the holders thereof to vote on a regular basis in the election of members of the board of directors or other governing body of such Person, (b) by contract, or (c) otherwise.

 

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Covered Environmental Losses ” is defined in Section 3.1 .

Environmental Laws ” means all federal, state, and local laws, statutes, rules, regulations, orders, judgments, ordinances, codes, injunctions, decrees, Environmental Permits and other legally enforceable requirements and rules of common law now or hereafter in effect, relating to pollution or protection of human health and the environment including, without limitation, the federal Comprehensive Environmental Response, Compensation, and Liability Act, the Superfund Amendments Reauthorization Act, the Resource Conservation and Recovery Act, the Clean Air Act, the Federal Water Pollution Control Act, the Toxic Substances Control Act, the Oil Pollution Act, the Safe Drinking Water Act, the Hazardous Materials Transportation Act, and other environmental conservation and protection laws, each as amended from time to time.

Environmental Permit ” means any permit, approval, identification number, license, registration, consent, exemption, variance or other authorization required under or issued pursuant to any applicable Environmental Law.

First Deadline Date ” means the applicable date for each Contribution Agreement set forth on Schedule VII to this Agreement.

Hazardous Substance ” means (a) any substance that is designated, defined or classified as a hazardous waste, solid waste, hazardous material, pollutant, contaminant or toxic or hazardous substance, or terms of similar meaning, or that is otherwise regulated under any Environmental Law, including, without limitation, any hazardous substance as defined under the Comprehensive Environmental Response, Compensation, and Liability Act, as amended, and (b) petroleum, oil, gasoline, natural gas, fuel oil, motor oil, waste oil, diesel fuel, jet fuel, and other refined petroleum hydrocarbons.

Identification Deadline ” means the later of (a) the First Deadline Date, and (b) the earlier of (i) the Second Deadline Date and (ii) the occurrence of a Partnership Change of Control.

Indemnified Party ” means the Partnership Group or the Tesoro Entities, as the case may be, in its capacity as the party entitled to indemnification in accordance with Article III .

Indemnifying Party ” means with respect to a Contribution Agreement, the Partnership Group or the Tesoro Indemnifying Parties, as the case may be, in their respective capacity as the party from whom indemnification may be sought in accordance with Article III .

License ” is defined in Section 7.1 .

Limited Partner ” is defined in the Partnership Agreement.

Losses ” means any losses, damages, liabilities, claims, demands, causes of action, judgments, settlements, fines, penalties, costs and expenses (including, without limitation, court costs and reasonable attorney’s and expert’s fees) of any and every kind or character, known or unknown, fixed or contingent.

 

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Marks ” is defined in Section 7.1 .

Name ” is defined in Section 7.1 .

Non-Covered Environmental Losses ” is defined in Section 3.1(b) .

Offer ” is defined in Section 2.3 .

Partnership Agreement ” means the First Amended and Restated Agreement of Limited Partnership of Tesoro Logistics LP dated as of April 26, 2011.

Partnership Change of Control ” means Tesoro ceases to Control the general partner of the Partnership.

Partnership Group ” means the Partnership and any of its Subsidiaries, treated as a single consolidated entity.

Partnership Group Member ” means any member of the Partnership Group.

Partnership Security ” is defined in the Partnership Agreement.

Party ” and “ Parties ” are defined in the introduction to this Agreement.

Person ” means an individual or a corporation, limited liability company, partnership, joint venture, trust, unincorporated organization association, government agency or political subdivision thereof or other entity.

Pipeline Rate Regulatory Agencies ” means the applicable federal, state and local governmental or regulatory agencies having jurisdiction over rates to be charged for services provided with respect to the Assets contributed under a Contribution Agreement.

Proposed Transaction ” is defined in Section 6.2(a) .

Prudent Industry Practice ” means such practices, methods, acts, techniques, and standards as are in effect at the time in question that are consistent with the higher of (a) the standards generally followed by the United States pipeline, terminalling and rail industries and (b) the standards applied or followed by the Tesoro Entities in the performance of similar tasks or projects, or by the General Partner or the Partnership Group in the performance of similar tasks or projects.

Represented Employees ” is defined in Section 8.1(a) .

Retained Assets ” means with respect to a particular Contribution Agreement, all assets owned by any of the Tesoro Entities that were not directly or indirectly conveyed, contributed or otherwise transferred to the Partnership Group pursuant to that Contribution Agreement or the other documents referred to in that Contribution Agreement, including, for the avoidance of

 

4


doubt, all gathering pipelines, transportation pipelines, storage tanks, trucks, truck racks, terminal facilities, offices and related equipment, real estate and other related assets, or portions thereof owned by any of the Tesoro Entities and located in Hawaii; provided, however, that once any such assets have been directly or indirectly conveyed, contributed or otherwise transferred to the Partnership Group pursuant to any other Contribution Agreement or the other documents referred to in any other Contribution Agreement, such assets shall not be included in the definition of “Retained Assets” for purposes of the first-referenced Contribution Agreement in this definition with respect to the period on or after the Closing Date under that other Contribution Agreement.

ROFO Asset Owner ” means, with respect to a ROFO Asset, the applicable Tesoro Entity set forth opposite such ROFO Asset on Schedule V to this Agreement.

ROFO Assets ” means the assets listed on Schedule V to this Agreement.

ROFO Notice ” is defined in Section 6.2(a) .

ROFO Period ” is defined in Section 6.1(a) .

ROFO Response ” is defined in Section 6.2(a) .

Second Deadline Date ” means the applicable date for each Contribution Agreement as set forth on Schedule VII to this Agreement.

Second Omnibus Agreement ” is defined in the recitals to this Agreement.

Schedules ” means Schedules I through VII attached to this Agreement, as may be amended and restated pursuant to Section 9.2.

Subject Assets ” is defined in Section 2.2(c) .

Subsidiary ” means, with respect to any Person, (a) a corporation of which more than 50% of the voting power of shares entitled (without regard to the occurrence of any contingency) to vote in the election of directors or other governing body of such corporation is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person or a combination thereof, (b) a partnership (whether general or limited) in which such Person or a Subsidiary of such Person is, at the date of determination, a general or limited partner of such partnership, but only if more than 50% of the partnership interests of such partnership (considering all of the partnership interests of the partnership as a single class) is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person, or a combination thereof, or (c) any other Person (other than a corporation or a partnership) in which such Person, one or more Subsidiaries of such Person, or a combination thereof, directly or indirectly, at the date of determination, has (i) at least a majority ownership interest or (ii) the power to elect or direct the election of a majority of the directors, managers or other governing body of such Person.

 

5


Tesoro Entities ” means Tesoro and any Person Controlled, directly or indirectly, by Tesoro other than the General Partner or a Partnership Group Member; and “ Tesoro Entity ” means any of the Tesoro Entities.

Tesoro Indemnifying Parties ” is defined in Section 3.1(a) .

Tesoro Indemnified Parties ” is defined in Section 3.4 .

Third Deadline Date ” means the applicable date for each Contribution Agreement as set forth on Schedule VII to this Agreement.

Transfer ” means to, directly or indirectly, sell, assign, lease, convey, transfer or otherwise dispose of, whether in one or a series of transactions.

ARTICLE II

BUSINESS OPPORTUNITIES

2.1 Restricted Activities . Except as permitted by Section 2.2 , the General Partner and each of the Tesoro Entities shall be prohibited from owning, operating, engaging in, acquiring, or investing in any business that owns or operates crude oil or refined products pipelines, terminals or storage facilities in the United States.

2.2 Permitted Exceptions . Notwithstanding any provision of Section 2.1 to the contrary, the Tesoro Entities may engage in the following activities under the following circumstances:

(a) the ownership and/or operation of any of the Retained Assets (including replacements or expansions of the Retained Assets);

(b) the acquisition, ownership or operation of any logistics asset, including, without limitation, any crude oil or refined products pipeline, terminal or storage facility, that is acquired or constructed by a Tesoro Entity and that is (i) within, directly connected to, substantially dedicated to, or an integral part of, any refinery owned, acquired or constructed by a Tesoro Entity or (ii) acquired or constructed by a Tesoro Entity to replace an Asset of the Partnership Group that no longer provides services to any Tesoro Entity due to the occurrence of a force majeure event under a commercial contract between one or more Tesoro Entities and one or more members of the Partnership Group that prevents the Partnership Group from providing services under such commercial contract;

(c) the acquisition, ownership or operation of any asset or group of related assets used in the activities described in Section 2.1 that are acquired or constructed by a Tesoro Entity after April 26, 2011 (the “ Subject Assets ”) if:

(i) the fair market value of the Subject Assets (as determined in good faith by the Board of Directors, or other governing body, of the Tesoro Entity that will own the Subject Assets) is less than $5 million at the time of such acquisition by the Tesoro Entity or completion of construction, as the case may be; or

 

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(ii) in the case of an acquisition or the construction of Subject Assets with a fair market value (as determined in good faith by the Board of Directors, or other governing body, of the Tesoro Entity that will own the Subject Assets) equal to or greater than $5 million at the time of such acquisition by a Tesoro Entity or the completion of construction, as applicable, the Partnership has been offered the opportunity to purchase the Subject Assets in accordance with Section 2.3 and the Partnership has elected not to purchase the Subject Assets; and

(d) the ownership of equity interests in the General Partner and the Partnership Group.

2.3 Procedures .

(a) If a Tesoro Entity acquires or constructs Subject Assets as described in Section 2.2(c)(ii) , then not later than six months after the consummation of the acquisition or the completion of construction by such Tesoro Entity of the Subject Assets, as the case may be, the Tesoro Entity shall notify the General Partner in writing of such acquisition or construction and offer the Partnership Group the opportunity to purchase such Subject Assets in accordance with this Section 2.3 (the “ Offer ”). The Offer shall set forth the terms relating to the purchase of the Subject Assets and, if any Tesoro Entity desires to utilize the Subject Assets, the Offer will also include the terms on which the Partnership Group will provide services to the Tesoro Entity to enable the Tesoro Entity to utilize the Subject Assets. As soon as practicable, but in any event within 60 days after receipt of the Offer, the General Partner shall notify the Tesoro Entity in writing that either (i) the General Partner has elected not to cause a Partnership Group Member to purchase the Subject Assets, in which event the Tesoro Entity shall be forever free to continue to own or operate such Subject Assets, or (ii) the General Partner has elected to cause a Partnership Group Member to purchase the Subject Assets, in which event the procedures outlined in the remainder of this Section 2.3 shall apply.

(b) If the Tesoro Entity and the General Partner are able to agree on the fair market value of the Subject Assets that are subject to the Offer and the other terms of the Offer including, without limitation, the terms, if any, on which the Partnership Group will provide services to the Tesoro Entity to enable the Tesoro Entity to utilize the Subject Assets, within 60 days after receipt by the General Partner of the Offer, a Partnership Group Member shall purchase the Subject Assets for the agreed upon fair market value as soon as commercially practicable after such agreement has been reached and, if applicable, enter into an agreement with the Tesoro Entity to provide services in a manner consistent with the Offer.

(c) If the Tesoro Entity and the General Partner are unable to agree on the fair market value of the Subject Assets that are subject to the Offer or the other terms of the Offer including, if applicable, the terms on which the Partnership Group will provide services to the Tesoro Entity to enable the Tesoro Entity to utilize the Subject Assets, within 60 days after receipt by the General Partner of the Offer, the Tesoro Entity and the General Partner will engage a mutually agreed upon, nationally recognized investment banking firm to determine the fair market value of the Subject Assets and any other terms on which the Partnership Group and the Tesoro Entity are unable to agree. The investment banking firm will determine the fair market value of the Subject Assets and any other terms on which the Partnership Group and the

 

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Tesoro Entity are unable to agree within 30 days of its engagement and furnish the Tesoro Entity and the General Partner its determination. The fees of the investment banking firm will be split equally between the Tesoro Entity and the Partnership Group. Once the investment banking firm has submitted its determination of the fair market value of the Subject Assets and any other terms on which the Partnership Group and the Tesoro Entity are unable to agree, the General Partner will have the right, but not the obligation to cause a Partnership Group Member to purchase the Subject Assets pursuant to the Offer, as modified by the determination of the investment banking firm. If the General Partner elects to cause a Partnership Group Member to purchase the Subject Assets, then the Partnership Group Member shall purchase the Subject Assets under the terms of the Offer, as modified by the determination of the investment banking firm as soon as commercially practicable after such determination and, if applicable, enter into an agreement with the Tesoro Entity to provide services in a manner consistent with the Offer, as modified by the determination of the investment banking firm.

2.4 Scope of Prohibition . Except as provided in this Article II and the Partnership Agreement, each Tesoro Entity shall be free to engage in any business activity, including those that may be in direct competition with any Partnership Group Member.

2.5 Enforcement . The Tesoro Entities agree and acknowledge that the Partnership Group does not have an adequate remedy at law for the breach by the Tesoro Entities of the covenants and agreements set forth in this Article II , and that any breach by the Tesoro Entities of the covenants and agreements set forth in this Article II would result in irreparable injury to the Partnership Group. The Tesoro Entities further agree and acknowledge that any Partnership Group Member may, in addition to the other remedies which may be available to the Partnership Group, file a suit in equity to enjoin the Tesoro Entities from such breach, and consent to the issuance of injunctive relief under this Agreement.

ARTICLE III

INDEMNIFICATION

3.1 Environmental Indemnification .

(a) Subject to Section 3.2 and Section 3.7 and with respect to Assets conveyed, contributed or otherwise transferred pursuant to a Contribution Agreement, each of the Tesoro Entities set forth on Schedule VII attached to this Agreement with respect to that Contribution Agreement (the “ Tesoro Indemnifying Parties ”), severally and not jointly, shall indemnify, defend and hold harmless the Partnership Group from and against any Losses suffered or incurred by the Partnership Group, directly or indirectly, or as a result of any claim by a third party, by reason of or arising out of:

(i) any violation or correction of violation of Environmental Laws;

(ii) any event, condition or environmental matter associated with or arising from the ownership or operation of the Assets (including, without limitation, the presence of Hazardous Substances on, under, about or migrating to or from the Assets or the disposal or release of Hazardous Substances generated by operation of the Assets at non-Asset locations) including, without limitation, (A) the cost and expense of any investigation, assessment,

 

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evaluation, monitoring, containment, cleanup, repair, restoration, remediation, or other corrective action required or necessary under Environmental Laws, (B) the cost or expense of the preparation and implementation of any closure, remedial, corrective action, or other plans required or necessary under Environmental Laws, and (C) the cost and expense of any environmental or toxic tort pre-trial, trial, or appellate legal or litigation support work;

(iii) any event, condition or environmental matter or legal action pending as of the applicable Closing Date against the Tesoro Entities, a true and correct summary of which with respect to Assets conveyed, contributed or otherwise transferred pursuant to a particular Contribution Agreement is described on Schedule I to this Agreement; and

(iv) any event, condition or environmental matter associated with or arising from the Retained Assets, whether occurring before or after the applicable Closing Date;

provided , however , that with respect to any violation under Section 3.1(a)(i) or any event, condition or environmental matter included under Section 3.1(a)(ii) that is associated with the ownership or operation of the Assets conveyed, contributed or otherwise transferred pursuant to a particular Contribution Agreement, the Tesoro Indemnifying Parties will be obligated to indemnify the Partnership Group only to the extent that such violation, event, condition or environmental matter (x) occurred before the Closing Date for that Contribution Agreement under then-applicable Environmental Laws and (y)(i) such violation, event, condition or environmental matter is set forth on Schedule II to this Agreement or (ii) Tesoro is notified in writing of such violation, event, condition or environmental matter prior to the applicable Identification Deadline ( Sections 3.1(a)(i) through (iv)  collectively, with respect to that Contribution Agreement being “ Covered Environmental Losses ”).

(b) The Partnership Group shall indemnify, defend and hold harmless the Tesoro Entities from and against any Losses suffered or incurred by the Tesoro Entities, directly or indirectly, or as a result of any claim by a third party, by reason of or arising out of:

(i) any violation or correction of violation of Environmental Laws associated with or arising from the ownership or operation of the Assets; and

(ii) any event, condition or environmental matter associated with or arising from the ownership or operation of the Assets (including, but not limited to, the presence of Hazardous Substances on, under, about or migrating to or from the Assets or the disposal or release of Hazardous Substances generated by operation of the Assets at non-Asset locations) including, without limitation, (A) the cost and expense of any investigation, assessment, evaluation, monitoring, containment, cleanup, repair, restoration, remediation, or other corrective action required or necessary under Environmental Laws, (B) the cost or expense of the preparation and implementation of any closure, remedial, corrective action, or other plans required or necessary under Environmental Laws, and (C) the cost and expense for any environmental or toxic tort pre-trial, trial, or appellate legal or litigation support work;

and regardless of whether such violation under Section 3.1(b)(i) or such event, condition or environmental matter included under Section 3.1(b)(ii) occurred before or after the applicable

 

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Closing Date, in each case, to the extent that any of the foregoing are not Covered Environmental Losses for which the Partnership Group is entitled to indemnification from the Tesoro Indemnifying Parties under this Article III without giving effect to the Annual Environmental Deductible. The Losses covered by this Section 3.1(b) are hereinafter referred to as ‘ Non-Covered Environmental Losses .”

3.2 Right of Way Indemnification . Subject to Section 3.7 , and with respect to Assets conveyed, contributed or otherwise transferred pursuant to a particular Contribution Agreement, each of the Tesoro Indemnifying Parties as set forth on Schedule VII with respect to that Contribution Agreement, severally and not jointly, shall indemnify, defend and hold harmless the Partnership Group from and against any Losses suffered or incurred by the Partnership Group by reason of or arising out of (a) the failure of the applicable Partnership Group Member (or other party specified on Schedule VII ) to be the owner of such valid and indefeasible easement rights or fee ownership or leasehold interests in and to the lands on which any crude oil or refined products pipeline or related pump station, wharf, storage tank, terminal, rail tracks or truck rack or any related facility or equipment conveyed or contributed to the applicable Partnership Group Member on the applicable Closing Date is located as of such Closing Date, and such failure renders the Partnership Group liable to a third party or unable to use or operate the Assets in substantially the same manner that the Assets were used and operated by the applicable Tesoro Entity immediately prior to the applicable Closing Date; (b) the failure of the applicable Partnership Group Member to have the consents, licenses and permits necessary to allow any such pipeline referred to in clause (a)  of this Section 3.2 to cross the roads, waterways, railroads and other areas upon which any such pipeline is located as of the applicable Closing Date, and such failure renders the Partnership Group liable to a third party or unable to use or operate the Assets in substantially the same manner that the Assets were used and operated by the applicable Tesoro Entity immediately prior to such Closing Date; and (c) the cost of curing any condition set forth in clause (a)  or (b)  of this Section 3.2 that does not allow any Asset to be operated in accordance with Prudent Industry Practice, in each case to the extent that Tesoro is notified in writing of any of the foregoing prior to the Identification Deadline.

3.3 Reserved .

3.4 Represented Employees . With respect to Assets conveyed, contributed or otherwise transferred pursuant to a particular Contribution Agreement, and if applicable, the General Partner shall indemnify, defend and hold harmless each of the Tesoro Entities set forth on Schedule VII attached to this Agreement with respect to that Contribution Agreement (the “ Tesoro Indemnified Parties ”) from and against any Losses suffered or incurred by the Tesoro Indemnified Parties by reason of or arising out of the transfer of the Represented Employees to the General Partner pursuant to Section 8.1 and the employment of the Represented Employees by the General Partner, including any Losses suffered or incurred resulting from actions taken, or liabilities incurred by the Tesoro Indemnified Parties with respect to the Represented Employees in connection with applicable collective bargaining agreements covering such Represented Employees.

 

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3.5 Additional Indemnification .

(a) In addition to and not in limitation of the indemnification provided under Sections 3.1(a) , 3.2 , and 3.3 and with respect to a respective Contribution Agreement, each of the Tesoro Indemnifying Parties, severally and not jointly, shall indemnify, defend, and hold harmless the Partnership Group from and against any Losses suffered or incurred by the Partnership Group by reason of or arising out of (i) events and conditions associated with the ownership or operation of the Assets and occurring before the applicable Closing Date (other than Covered Environmental Losses and Non-Covered Environmental Losses, which are provided for under Sections 3.1 , and those Losses provided for under Section 3.2 ) to the extent that Tesoro is notified in writing of any of the foregoing prior to the Third Deadline Date, (ii) any pending (as of the applicable Closing Date) legal actions against the Tesoro Entities set forth on Schedule III to this Agreement, (iii) events and conditions associated with the Retained Assets and whether occurring before or after the applicable Closing Date, (iv) the failure to obtain any necessary consent from the Pipeline Rate Regulatory Agencies, if applicable, and (v) all federal, state and local income tax liabilities attributable to the ownership or operation of the Assets prior to the applicable Closing Date, including under Treasury Regulation Section 1.1502-6 (or any similar provision of state or local law), and any such income tax liabilities of the Tesoro Entities that may result from the consummation of the formation transactions for the Partnership Group and the General Partner occurring on or prior to the applicable Closing Date.

(b) In addition to and not in limitation of the indemnification provided under Sections 3.1(a) , 3.2 , and 3.3 , with respect to the “West Coast Assets Contribution Agreement” set forth on Schedule VII :

(i) Tesoro Alaska shall indemnify, defend and hold harmless the Partnership Group from and against any Losses incurred by the Partnership Group, directly or indirectly, by reason of or arising out of a failure of the Tesoro Alaska Pipeline due to “Level 1 Risks” identified pursuant to Coffman Engineers report dated May 8, 2014, until the earlier of (A) the completion of the actions items identified in such report or (B) December 31, 2015;

(ii) Tesoro Alaska shall indemnify defend and hold harmless the Partnership Group from and against any Losses incurred by the Partnership Group, directly or indirectly, by reason of or arising out of the fire water supply system at the Nikiski Terminal (as defined in the West Coast Assets Contribution Agreement) until the earlier of (A) the completion of the repairs or action items identified in the fire water supply study, or (B) December 31, 2015; and

(iii) TRMC shall indemnify defend and hold harmless the Partnership Group from and against any Losses incurred by the Partnership Group, directly or indirectly, by reason of or arising out of the existing excess flow shutoff valves at any of the Anacortes light ends rail facility, the Anacortes light ends truck loading rack or the Martinez clean products truck loading rack until the earlier of (A) the completion of the installation of replacement excess flow shutoff valves at the applicable facility or (B) December 31, 2015.

Notwithstanding the foregoing, the General Partner shall not, and agrees to cause the Partnership Group not to, change the operational parameters of the assets described in Sections 3.5(b)(i )

 

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through (iii)  above from the operational parameters of such assets in effect as of the applicable Closing Date without the prior written consent of the applicable Tesoro Entity. Any change to the operational parameters in violation of this Section 3.5(b) shall terminate the indemnity provided by this Section 3.5(b) as of the date of such change, provided, however, that such termination shall not affect any obligation of the applicable Tesoro Entities that arose before the date of termination.

(c) In addition to and not in limitation of the indemnification provided under Section 3.1(b) or 3.4 or the Partnership Agreement, the Partnership Group shall indemnify, defend, and hold harmless the Tesoro Entities from and against any Losses suffered or incurred by the Tesoro Entities by reason of or arising out of events and conditions associated with the ownership or operation of the Assets and occurring after the applicable Closing Date (other than the Covered Environmental Losses and Non-Covered Environmental Losses which are provided for under Section 3.1 ), unless such indemnification would not be permitted under the Partnership Agreement by reason of one of the provisos contained in Section 7.7(a) of the Partnership Agreement.

3.6 Indemnification Procedures .

(a) The Indemnified Party agrees that within a reasonable period of time after it becomes aware of facts giving rise to a claim for indemnification under this Article III , it will provide notice thereof in writing to the Indemnifying Party, specifying the nature of and specific basis for such claim.

(b) The Indemnifying Party shall have the right to control all aspects of the defense of (and any counterclaims with respect to) any claims brought against the Indemnified Party that are covered by the indemnification under this Article III , including, without limitation, the selection of counsel, determination of whether to appeal any decision of any court and the settling of any such claim or any matter or any issues relating thereto; provided , however , that no such settlement shall be entered into without the consent of the Indemnified Party unless it includes a full release of the Indemnified Party from such claim.

(c) The Indemnified Party agrees to cooperate in good faith and in a commercially reasonable manner with the Indemnifying Party, with respect to all aspects of the defense of any claims covered by the indemnification under this Article III , including, without limitation, the prompt furnishing to the Indemnifying Party of any correspondence or other notice relating thereto that the Indemnified Party may receive, permitting the name of the Indemnified Party to be utilized in connection with such defense, the making available to the Indemnifying Party of any files, records or other information of the Indemnified Party that the Indemnifying Party considers relevant to such defense, the making available to the Indemnifying Party of any employees of the Indemnified Party and the granting to the Indemnifying Party of reasonable access rights to the properties and facilities of the Indemnified Party; provided , however , that in connection therewith the Indemnifying Party agrees to use reasonable efforts to minimize the impact thereof on the operations of the Indemnified Party and further agrees to maintain the confidentiality of all files, records, and other information furnished by the Indemnified Party pursuant to this Section 3.6 . In no event shall the obligation of the Indemnified Party to cooperate with the Indemnifying Party as set forth in the immediately

 

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preceding sentence be construed as imposing upon the Indemnified Party an obligation to hire and pay for counsel in connection with the defense of any claims covered by the indemnification set forth in this Article III ; provided , however , that the Indemnified Party may, at its own option, cost and expense, hire and pay for counsel in connection with any such defense. The Indemnifying Party agrees to keep any such counsel hired by the Indemnified Party informed as to the status of any such defense, but the Indemnifying Party shall have the right to retain sole control over such defense.

(d) In determining the amount of any Losses for which the Indemnified Party is entitled to indemnification under this Agreement, the gross amount of the indemnification will be reduced by (i) any insurance proceeds realized by the Indemnified Party, and such correlative insurance benefit shall be net of any incremental insurance premium that becomes due and payable by the Indemnified Party as a result of such claim and (ii) all amounts recovered by the Indemnified Party under contractual indemnities from third Persons.

3.7 Limitations Regarding Indemnification .

(a) The Tesoro Indemnifying Parties shall not, in any calendar year, be obligated to indemnify, defend and hold harmless the Partnership Group for a Covered Environmental Loss under Section 3.1(a)(ii) until such time as the aggregate amount of all Covered Environmental Losses in such calendar year exceeds the amount listed on Schedule VIII under “Annual Environmental Deductible” (the “ Annual Environmental Deductible ”), at which time the Tesoro Indemnifying Parties shall be obligated to indemnify the Partnership Group for the amount of Covered Environmental Losses under Section 3.1(a)(ii) that are in excess of the Annual Environmental Deductible that are incurred by the Partnership Group in such calendar year. The Tesoro Indemnifying Parties shall not, in any calendar year, be obligated to indemnify, defend and hold harmless the Partnership Group for any individual Loss under Section 3.2 until such time as the aggregate amount of all Losses under Section 3.2 that are in such calendar year exceeds the amount listed on Schedule VIII under “Annual ROW Deductible” (the “ Annual ROW Deductible ”), at which time the Tesoro Indemnifying Parties shall be obligated to indemnify the Partnership Group for all Losses under Section 3.2 in excess of the Annual ROW Deductible that are incurred by the Partnership Group in such calendar year.

(b) With respect to Sections 3.1 , 3.2 and 3.5(a) , each of the Tesoro Indemnifying Parties shall only be required to indemnify the Partnership Group for Covered Environmental Losses under Section 3.1 , Losses under Section 3.2 or Losses under Section 3.5(a) incurred in connection with or related to Assets conveyed, contributed or otherwise transferred to the Partnership Group by such Tesoro Indemnifying Party.

(c) For the avoidance of doubt, there is no monetary cap on the amount of indemnity coverage provided by any Indemnifying Party under this Article III .

(d) NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IN NO EVENT SHALL ANY PARTY’S INDEMNIFICATION OBLIGATION HEREUNDER COVER OR INCLUDE CONSEQUENTIAL, INDIRECT, INCIDENTAL, PUNITIVE, EXEMPLARY, SPECIAL OR SIMILAR DAMAGES OR LOST PROFITS SUFFERED BY ANY OTHER PARTY ENTITLED TO INDEMNIFICATION UNDER THIS AGREEMENT,

 

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REGARDLESS OF WHETHER ANY SUCH CLAIM ARISES UNDER OR RESULTS FROM CONTRACT, NEGLIGENCE, OR STRICT LIABILITY OF THE PARTY WHOSE LIABILITY IS BEING WAIVED HEREBY; provided that the foregoing limitation is not intended and shall not affect special damages actually awarded to a third party or assessed by a governmental authority and for which a Party is properly entitled to indemnification pursuant to the express provisions of this Agreement.

3.8 The Parties agree to the special indemnification provisions set forth on Schedule IX .

ARTICLE IV

CORPORATE SERVICES

4.1 General .

(a) Tesoro agrees to provide, and agrees to cause the applicable Tesoro Entities to provide, on behalf of the General Partner, for the Partnership Group’s benefit all of the centralized corporate services that Tesoro and the applicable Tesoro Entities have traditionally provided in connection with the Assets including, without limitation, the general and administrative services listed on Schedule IV to this Agreement. As consideration for such services, the Partnership will pay Tesoro a monthly administrative fee in the amount set forth in Schedule VIII to this Agreement (the “ Administrative Fee ”), payable on or before the tenth business day of each month, commencing in the first month following the date hereof. Tesoro may increase the Administrative Fee on July 1 of each year, commencing on July 1, 2015, by a percentage equal to the positive change, if any, in the CPI-U (All Urban Consumers) for the prior calendar year, rounded to the nearest one-tenth (1/10) of one percent (1%), or to reflect any increase in the cost of providing centralized corporate services to the Partnership Group due to changes in any law, rule or regulation applicable to the Tesoro Entities or the Partnership Group, including any interpretation of such laws, rules or regulations.

(b) At the end of each calendar year, the Partnership will have the right to submit to Tesoro a proposal to reduce the amount of the Administrative Fee for that year if the Partnership believes, in good faith, that the centralized corporate services performed by the Tesoro Entities for the benefit of the Partnership Group for the year in question do not justify payment of the full Administrative Fee for that year. If the Partnership submits such a proposal to Tesoro, Tesoro agrees that it will negotiate in good faith with the Partnership to determine if the Administrative Fee for that year should be reduced and, if so, the amount of such reduction. If the Parties agree that the Administrative Fee for that year should be reduced, then Tesoro shall promptly pay to the Partnership the amount of any reduction for that year.

(c) The Partnership Group shall reimburse Tesoro, without duplication of any reimbursements made pursuant to Section 7.4 of the Partnership Agreement, for all other direct or allocated costs and expenses incurred by the Tesoro Entities on behalf of the Partnership Group, including, but not limited to the following; provided, however, that the costs and expenses described in subsections (i) through (vi) below shall not apply with respect to employees of the General Partner or the Tesoro Entities that are providing the services listed on Schedule IV :

(i) salaries of employees of the General Partner or the applicable Tesoro Entities, to the extent, but only to the extent, such employees perform services for the Partnership Group, provided that for employees that do not devote all of their business time to the Partnership Group, such expenses shall be based on the annual weighted average of time spent and number of employees devoting services to the Partnership Group;

 

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(ii) except as otherwise provided in Section 4.1(c)(vi) below, the cost of employee benefits relating to employees of the General Partner or the applicable Tesoro Entities, including 401(k), pension, bonuses and health insurance benefits (but excluding Tesoro stock-based compensation expense), to the extent, but only to the extent, such employees perform services for the Partnership Group, provided that for employees that do not devote all of their business time to the Partnership Group, such expenses shall be based on the annual weighted average of time spent and number of employees devoting their services to the Partnership Group;

(iii) any expenses incurred or payments made by the applicable Tesoro Entities for insurance coverage with respect to the Assets or the business of the Partnership Group;

(iv) all expenses and expenditures incurred by the applicable Tesoro Entities as a result of the Partnership becoming and continuing as a publicly traded entity, including, but not limited to, costs associated with annual and quarterly reports, independent auditor fees, partnership governance and compliance, registrar and transfer agent fees, tax return and Schedule K-1 preparation and distribution, legal fees and independent director compensation;

(v) all sales, use, excise, value added or similar taxes, if any, that may be applicable from time to time with respect to the services provided by the applicable Tesoro Entities to the Partnership Group pursuant to Section 4.1(a) ;

(vi) any severance or similar amounts (“ Severance Amounts ”) due to the President of the General Partner or the Vice President, Operations of the General Partner in the event of a Change of Control (or similar term, in each case as defined in the applicable management stability agreement) of Tesoro under the terms of their respective management stability agreements with Tesoro, provided that such reimbursement shall be based on the percentage of time spent by such employee on the business of the Partnership Group during the last completed payroll period immediately preceding the date of such Change of Control. Notwithstanding anything in this Agreement to the contrary, in no event will the Partnership Group reimburse Tesoro for, or otherwise in any way be responsible for, (A) any Severance Amounts due to any employee of the General Partner or the applicable Tesoro Entities (other than the President of the General Partner or the Vice President, Operations of the General Partner) in the event of a Change of Control (or similar term, in each case as defined in the applicable Employment Agreement) of Tesoro, or (B) any Tesoro stock-based compensation expense related to accelerated vesting of Tesoro equity awards. For the purposes of this Section 4.1(c)(vi) , the term “ Employment Agreement ” shall include any employment agreement, management stability agreement or similar agreement between Tesoro and any employee of the General Partner or the applicable Tesoro Entities; and

(vii) any other expenses listed on Schedule IV and identified as applicable to this clause (vii).

 

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Such reimbursements shall be made on or before the tenth business day of the month following the month such costs and expenses are incurred, other than reimbursements solely related to bonuses for employees of the General Partner, which shall be reimbursed on or prior to the last business day of the month that such bonuses are paid. For the avoidance of doubt, the costs and expenses set forth in Section 4.1(c) shall be paid by the Partnership Group in addition to, and not as a part of or included in, the Administrative Fee.

ARTICLE V

CAPITAL AND OTHER EXPENDITURES

5.1 Reimbursement of Maintenance Capital and Other Expenditures . Tesoro, TRMC or Tesoro Alaska, as applicable, will either reimburse the Partnership or reimburse the General Partner and the General Partner will reimburse the Partnership, as applicable, on a dollar-for-dollar basis, without duplication, for each of the following:

(a) during the period commencing on April 26, 2011 and ending on the Second Deadline Date, expenses incurred by the Partnership Group solely in order to comply with vapor recovery or combustion and spill containment requirements associated with the Assets;

(b) during the period commencing on the applicable Closing Date and ending on the fifth anniversary of the applicable Closing Date, the expenses incurred by the Partnership Group for repairs and maintenance to storage tanks, pressure vessels and pipelines included as part of the Assets and expenses that are made solely in order to comply with current minimum standards under (i) the U.S. Department of Transportation’s Pipeline Integrity Management Rule 49 CFR 195.452 (ii) American Petroleum Institute (API) Standard 653 for Aboveground Storage Tanks, and (iii) applicable pressure vessel codes as required to allow a terminal to provide services to TRMC under an applicable terminal service agreement, but only if and to the extent that such repairs and maintenance are identified before, during or as a result of the first scheduled API 653 inspections, pressure vessel inspection or pipeline inspections or tests that occur after the applicable Closing Date, and this clause (b) shall apply only to the contribution agreements indicated on Schedule VII ; and

(c) those certain capital and expense projects related to the Assets and described on Schedule VI to this Agreement.

ARTICLE VI

RIGHT OF FIRST OFFER

6.1 Right of First Offer to Purchase Certain Assets retained by Tesoro Entities .

(a) Each ROFO Asset Owner hereby grants to the Partnership Group a right of first offer until April 26, 2021 (the “ ROFO Period ”) on any ROFO Asset set forth next to such ROFO Asset Owner’s name on Schedule V to this Agreement to the extent that such ROFO

 

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Asset Owner proposes to Transfer any ROFO Asset (other than to any other Tesoro Entity who agrees in writing that such ROFO Asset remains subject to the provisions of this Article VI and such Tesoro Entity assumes the obligations under this Article VI with respect to such ROFO Asset) or enter into any agreement to do any of the foregoing during the ROFO Period.

(b) The Parties acknowledge that any Transfer of ROFO Assets pursuant to the Partnership Group’s right of first offer is subject to the terms of all existing agreements with respect to the ROFO Assets; provided , however , that Tesoro represents and warrants that, to its knowledge after reasonable investigation, there are no terms in such agreements that would materially impair the rights granted to the Partnership Group pursuant to this Article VI with respect to any ROFO Asset.

6.2 Procedures .

(a) In the event a ROFO Asset Owner proposes to Transfer any applicable ROFO Asset (other than to another Tesoro Entity) during the ROFO Period (a “ Proposed Transaction ”), such ROFO Asset Owner shall, prior to entering into any such Proposed Transaction, first give notice in writing to the Partnership Group (the “ ROFO Notice ”) of its intention to enter into such Proposed Transaction. The ROFO Notice shall include any material terms, conditions and details as would be necessary for a Partnership Group Member to make a responsive offer to enter into the Proposed Transaction with the applicable ROFO Asset Owner, which terms, conditions and details shall at a minimum include any terms, condition or details that such ROFO Asset Owner would propose to provide to non-Tesoro Entities in connection with the Proposed Transaction. The Partnership Group shall have 60 days following receipt of the ROFO Notice to propose an offer to enter into the Proposed Transaction with such ROFO Asset Owner (the “ ROFO Response ”). The ROFO Response shall set forth the terms and conditions (including, without limitation, the purchase price the applicable Partnership Group Member proposes to pay for the ROFO Asset and the other terms of the purchase including, if requested by a Tesoro Entity, the terms on which the Partnership Group Member will provide services to the Tesoro Entity to enable the Tesoro Entity to utilize the applicable ROFO Asset) pursuant to which the Partnership Group would be willing to enter into a binding agreement for the Proposed Transaction. The decision to issue the ROFO Response and the terms of the ROFO Response shall be subject to approval by the Conflicts Committee. If no ROFO Response is delivered by the Partnership Group within such 60-day period, then the Partnership Group shall be deemed to have waived its right of first offer with respect to such ROFO Asset.

(b) Unless the ROFO Response is rejected pursuant to written notice delivered by the applicable ROFO Asset Owner to the applicable Partnership Group Member within 60 days of the delivery of the ROFO Response, such ROFO Response shall be deemed to have been accepted by the applicable ROFO Asset Owner and such ROFO Asset Owner shall enter into an agreement with the applicable Partnership Group Member providing for the consummation of the Proposed Transaction upon the terms set forth in the ROFO Response and, if applicable, the Partnership Group Member will enter into an agreement with the Tesoro Entity setting forth the terms on which the Partnership Group Member will provide services to the Tesoro Entity to enable the Tesoro Entity to utilize the ROFO Asset. Unless otherwise agreed between the applicable Tesoro Entity and Partnership Group Member, the terms of the purchase and sale agreement will include the following:

(i) the Partnership Group Member will deliver the agreed purchase price (in cash, Partnership Securities, an interest-bearing promissory note, or any combination thereof);

 

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(ii) the applicable ROFO Asset Owner will represent that it has title to the ROFO Assets that is sufficient to operate the ROFO Assets in accordance with their intended and historical use, subject to all recorded matters and all physical conditions in existence on the closing date for the purchase of the applicable ROFO Asset, plus any other such matters as the Partnership Group Member may approve. If the Partnership Group Member desires to obtain any title insurance with respect to the ROFO Asset, the full cost and expense of obtaining the same (including but not limited to the cost of title examination, document duplication and policy premium) shall be borne by the Partnership Group Member;

(iii) the applicable ROFO Asset Owner will grant to the Partnership Group Member the right, exercisable at the Partnership Group Member’s risk and expense prior to the delivery of the ROFO Response, to make such surveys, tests and inspections of the ROFO Asset as the Partnership Group Member may deem desirable, so long as such surveys, tests or inspections do not damage the ROFO Asset or interfere with the activities of the applicable ROFO Asset Owner;

(iv) the closing date for the purchase of the ROFO Asset shall occur no later than 180 days following receipt by ROFO Asset Owner of the ROFO Response pursuant to Section 6.2(a) ;

(v) the applicable ROFO Asset Owner and Partnership Group Member shall use commercially reasonable efforts to do or cause to be done all things that may be reasonably necessary or advisable to effectuate the consummation of any transactions contemplated by this Section 6.2(b) , including causing its respective Affiliates to execute, deliver and perform all documents, notices, amendments, certificates, instruments and consents required in connection therewith; and

(vi) neither the applicable ROFO Asset Owner nor the applicable Partnership Group Member shall have any obligation to sell or buy the applicable ROFO Asset if any of the consents referred to in Section 6.1(b)(v) has not been obtained.

(c) If the Partnership Group has not timely delivered a ROFO Response as specified above with respect to a Proposed Transaction that is subject to a ROFO Notice, the applicable ROFO Asset Owner shall be free to enter into a Proposed Transaction with any third party on terms and conditions no more favorable to such third party than those set forth in the ROFO Notice. If a ROFO Response with respect to any Proposed Transaction is rejected by the applicable ROFO Asset Owner, such ROFO Asset Owner shall be free to enter into a Proposed Transaction with any third party (i) on terms and conditions (excluding those relating to price) that are not more favorable in the aggregate to such third party than those proposed in respect of the Partnership Group in the ROFO Response and (ii) at a price equal to no less than 100% of the price offered by the applicable Partnership Group Member in the ROFO Response to such ROFO Asset Owner.

 

18


ARTICLE VII

LICENSE OF NAME AND MARK

7.1 Grant of License . Upon the terms and conditions set forth in this Article VII , Tesoro hereby grants and conveys to each of the entities currently or hereafter comprising a part of the Partnership Group a nontransferable, nonexclusive, royalty-free right and license (“ License ”) to use the name “Tesoro” (the “ Name ”) and any other trademarks owned by Tesoro which contain the Name (collectively, the “ Marks ”).

7.2 Ownership and Quality . The Partnership agrees that ownership of the Name and the Marks and the goodwill relating thereto shall remain vested in Tesoro both during the term of this License and thereafter, and the Partnership further agrees, and agrees to cause the other members of the Partnership Group, never to challenge, contest or question the validity of Tesoro’s ownership of the Name and Marks or any registration thereto by Tesoro. In connection with the use of the Name and the Mark, the Partnership and any other member of the Partnership Group shall not in any manner represent that they have any ownership in the Name and the Marks or registration thereof except as set forth herein, and the Partnership, on behalf of itself and the other members of the Partnership Group, acknowledge that the use of the Name and the Marks shall not create any right, title or interest in or to the Name and the Mark, and all use of the Name and the Marks by the Partnership or any other member of the Partnership Group, shall inure to the benefit of Tesoro. The Partnership agrees, and agrees to cause the other members of the Partnership Group, to use the Name and Marks in accordance with such quality standards established by Tesoro and communicated to the Partnership from time to time, it being understood that the products and services offered by the members of the Partnership Group immediately before the date hereof are of a quality that is acceptable to Tesoro and justifies the License.

7.3 Termination . The License shall terminate upon a termination of this Agreement pursuant to Section 9.4 .

ARTICLE VIII

REPRESENTED EMPLOYEES; VEHICLE LEASES

8.1 Transfer of Represented Employees . The Parties acknowledge and agree that certain TRMC employees then covered by collective bargaining agreements with TRMC existing as of an applicable Closing Date (the “ Represented Employees ”) have been or will be transferred to and shall become employees of the General Partner on or before the end of the fiscal year in which that Closing Date occurred. The Parties agree to cooperate and shall take all action necessary to effectuate such transfer and shall comply with the terms of the applicable collective bargaining agreements with respect to the Represented Employees.

8.2 Vehicle Leases . The Parties acknowledge and agree that the members of the Partnership Group shall have the right to use any vehicles leased by the General Partner for use in the operation of the Partnership Group’s business.

 

19


ARTICLE IX

MISCELLANEOUS

9.1 Choice of Law; Submission to Jurisdiction . This Agreement shall be subject to and governed by the laws of the State of Texas, excluding any conflicts-of-law rule or principle that might refer the construction or interpretation of this Agreement to the laws of another state. Each Party hereby submits to the jurisdiction of the state and federal courts in the State of Texas and to venue in San Antonio, Texas.

9.2 Notice . All notices or requests or consents provided for by, or permitted to be given pursuant to, this Agreement must be in writing and must be given by depositing same in the United States mail, addressed to the Person to be notified, postpaid, and registered or certified with return receipt requested or by delivering such notice in person or by facsimile to such Party. Notice given by personal delivery or mail shall be effective upon actual receipt. Notice given by facsimile shall be effective upon actual receipt if received during the recipient’s normal business hours or at the beginning of the recipient’s next business day after receipt if not received during the recipient’s normal business hours. All notices to be sent to a Party pursuant to this Agreement shall be sent to or made at the address set forth below or at such other address as such Party may stipulate to the other Parties in the manner provided in this Section 9.2 .

If to the Tesoro Entities:

Tesoro Corporation

19100 Ridgewood Parkway

San Antonio, Texas 78259-1828

Attn: Charles S. Parrish

Facsimile: (210) 745-4494

If to the Partnership Group:

Tesoro Logistics LP

c/o Tesoro Logistics GP, LLC, its General Partner

19100 Ridgewood Parkway

San Antonio, Texas 78259-1828

Attn: Charles S. Parrish

Facsimile: (210) 745-4494

9.3 Entire Agreement . This Agreement together with the Schedules attached hereto (which are incorporated herein by reference) constitute the entire agreement of the Parties relating to the matters contained herein, superseding all prior contracts or agreements, whether oral or written, relating to the matters contained herein.

9.4 Termination of Agreement . This Agreement, other than the provisions set forth in Article III hereof, may be terminated by Tesoro or the Partnership upon a Partnership Change of Control. For the avoidance of doubt, the Parties’ indemnification obligations under Article III shall survive the termination of this Agreement in accordance with their respective terms.

 

20


9.5 Amendment or Modification . This Agreement may be amended or modified from time to time only by the written agreement of all the Parties hereto. Each such instrument shall be reduced to writing and shall be designated on its face an “Amendment” or an “Addendum” to this Agreement.

9.6 Assignment . No Party shall have the right to assign its rights or obligations under this Agreement without the consent of the other Parties hereto; provided , however , that the Partnership may make a collateral assignment of this Agreement solely to secure working capital financing for the Partnership.

9.7 Counterparts . This Agreement may be executed in any number of counterparts with the same effect as if all signatory parties had signed the same document. All counterparts shall be construed together and shall constitute one and the same instrument. Delivery of an executed signature page of this Agreement by facsimile transmission or in portable document format (.pdf) shall be effective as delivery of a manually executed counterpart hereof.

9.8 Severability . If any provision of this Agreement shall be held invalid or unenforceable by a court or regulatory body of competent jurisdiction, the remainder of this Agreement shall remain in full force and effect.

9.9 Further Assurances . In connection with this Agreement and all transactions contemplated by this Agreement, each signatory party hereto agrees to execute and deliver such additional documents and instruments and to perform such additional acts as may be necessary or appropriate to effectuate, carry out and perform all of the terms, provisions and conditions of this Agreement and all such transactions.

9.10 Rights of Limited Partners . The provisions of this Agreement are enforceable solely by the Parties to this Agreement, and no Limited Partner of the Partnership shall have the right, separate and apart from the Partnership, to enforce any provision of this Agreement or to compel any Party to this Agreement to comply with the terms of this Agreement.

9.11 Amendment and Restatement . This Agreement amends and restates the Original Agreement in its entirety and the Parties agree that the terms and provisions of this Agreement replace the terms and provisions of the Original Agreement, which is no longer in force, as of the date hereof.

9.12 Amendment of Schedules . The Parties may amend and restate the Schedules at any time without otherwise amending or restating this Agreement by the execution by all of the Parties of a cover page to the amended Schedules in the form attached hereto as Exhibit A . Such amended and restated Schedules shall replace the prior Schedules as of the date of execution of the cover page and shall be incorporated by reference into this Agreement for all purposes.

[ Signature Page Follows ]

 

21


IN WITNESS WHEREOF , the Parties have executed this Agreement on, and effective as of, the date first written above.

 

TESORO CORPORATION
By:  

/s/ G. Scott Spendlove

  G. Scott Spendlove
  Senior Vice President and Chief Financial Officer
TESORO REFINING & MARKETING COMPANY LLC
By:  

/s/ G. Scott Spendlove

  G. Scott Spendlove
  Senior Vice President and Chief Financial Officer
TESORO COMPANIES, INC.
By:  

/s/ G. Scott Spendlove

  G. Scott Spendlove
  Senior Vice President and Chief Financial Officer
TESORO ALASKA COMPANY LLC
By:  

/s/ G. Scott Spendlove

  G. Scott Spendlove
  Senior Vice President and Chief Financial Officer

 

Signature Page 1 of 2 to

Third Amended and Restated Omnibus Agreement


TESORO LOGISTICS LP
By:   Tesoro Logistics GP, LLC,
  its general partner
By:  

/s/ Phillip M. Anderson

  Phillip M. Anderson
  President
TESORO LOGISTICS GP, LLC
By:  

/s/ Phillip M. Anderson

  Phillip M. Anderson
  President

 

Signature Page 2 of 2 to

Third Amended and Restated Omnibus Agreement


EXHIBIT A

FORM OF COVER PAGE FOR

AMENDMENT AND RESTATEMENT OF SCHEDULES

TO THIRD AMENDED AND RESTATED OMNIBUS AGREEMENT

A Third Amended and Restated Omnibus Agreement was executed as of July 1, 2014 (the “Third Amended and Restated Omnibus Agreement”), among Tesoro Corporation, on behalf of itself and the other Tesoro Entities, Tesoro Refining & Marketing Company LLC, Tesoro Companies, Inc., Tesoro Alaska Company LLC, Tesoro Logistics LP and Tesoro Logistics GP, LLC. Capitalized terms not otherwise defined in this document shall have the terms set forth in the Third Amended and Restated Omnibus Agreement.

The Parties agree that the Schedules are hereby amended and restated in their entirety as of the date hereof to be as attached hereto. Pursuant to Section 9.12 of the Third Amended and Restated Omnibus Agreement, such amended and restated Schedules shall replace the prior Schedules as of the date hereof and shall be incorporated by reference into the Third Amended and Restated Omnibus Agreement for all purposes.

Executed as of             , 20    .

 

TESORO CORPORATION
By:  

 

Name:  

 

Title:  

 

TESORO REFINING & MARKETING COMPANY LLC
By:  

 

Name:  

 

Title:  

 

TESORO COMPANIES, INC.
By:  

 

Name:  

 

Title:  

 

TESORO ALASKA COMPANY LLC
By:  

 

Name:  

 

Title:  

 

 

Page 1 of 2 of

Exhibit A to Third Amended and Restated Omnibus Agreement


TESORO LOGISTICS LP
By:   Tesoro Logistics GP, LLC,
  its general partner
By:  

 

Name:  

 

Title:  

 

TESORO LOGISTICS GP, LLC
By:  

 

Name:  

 

Title:  

 

 

Page 2 of 2 of

Exhibit A to Third Amended and Restated Omnibus Agreement


Schedule I

Pending Environmental Litigation

For Initial Contribution Agreement listed on Schedule VII :

None.

For Amorco Contribution Agreement listed on Schedule VII :

None.

For Long Beach Contribution Agreement listed on Schedule VII :

The soil and groundwater on the southern central portion of the site near the 24 inch crude oil line have been impacted with hydrocarbons from a release from the line first observed in September 2011. The California Regional Water Quality Control Board issued an Investigative Order dated September 30, 2011 and to date all requirements of the order have been met. Additional investigative or remedial activities may be required.

For Anacortes Rail Facility Contribution Agreement listed on Schedule VII :

None.

For BP Carson Tranche 1 Contribution Agreement listed on Schedule VII :

The environmental indemnification provisions of the Carson Assets Indemnity Agreement dated as of December 6, 2013 (“ Carson Assets Indemnity Agreement ”), among the Partnership, the General Partner, Tesoro Logistics Operations LLC (the “ Operating Company ”) and TRMC, supersede in their entirety the environmental indemnification provisions of Article III of the Third Amended and Restated Omnibus Agreement, except as otherwise expressly provided in the Carson Assets Indemnity Agreement.

For BP Carson Tranche 2 Contribution Agreement listed on Schedule VII :

The environmental indemnification provisions of the Carson Assets Indemnity Agreement supersede in their entirety the environmental indemnification provisions of Article III of the Third Amended and Restated Omnibus Agreement, except as otherwise expressly provided in the Carson Assets Indemnity Agreement.

For West Coast Assets Contribution Agreement listed on Schedule VII:

None

 

Page 1 of 1 of

Schedule I to Third Amended and Restated Omnibus Agreement


Schedule II

Environmental Matters

For Initial Contribution Agreement set forth on Schedule VII :

1. Anchorage #1 Terminal soil and groundwater have been impacted by gasoline and diesel releases from previously buried pipelines. The site is considered characterized and is currently undergoing removal of product from the water table, groundwater treatment, and long-term monitoring.

2. Anchorage #2 Terminal soil and groundwater have been impacted by gasoline releases occurring prior to Tesoro’s purchase of the facility. The site is considered characterized and is currently undergoing groundwater monitoring and treatment. Off-site groundwater investigations are scheduled for 2012.

3. Stockton Terminal soil and groundwater have been impacted by gasoline and diesel releases from pipelines and/or product storage tanks. The site is considered substantially characterized and is undergoing groundwater treatment and groundwater monitoring. Off-site groundwater impacts are commingled with neighboring petroleum storage terminals.

4. Burley Terminal groundwater was impacted by gasoline releases occurring prior to Tesoro’s purchase of the facility. Groundwater impacts were commingled with neighboring petroleum storage terminals. Hydrocarbon concentrations in groundwater samples do not exceed previously established target levels for groundwater and surface water protection. Regulatory closure is pending.

5. Wilmington Sales Terminal soil and groundwater have been impacted by gasoline releases occurring prior to Tesoro’s purchase of the facility. Groundwater investigation and monitoring is on-going. Tesoro is indemnified by the previous owner for Investigation and remediation obligations.

6. Salt Lake City Terminal soil and groundwater have been impacted by gasoline and diesel releases from pipelines and/or product storage tanks occurring prior to Tesoro’s purchase of the facility. The site is considered characterized and is currently undergoing removal of product from the water table and long-term monitoring. There are no known soil or groundwater impacts at the Northwest Crude Oil tank farm.

7. The Stockton Terminal emits volatile organic compounds (VOCs) below “major source” emission criteria. In 2010, the San Joaquin Air Quality Management District announced it is reducing its major source threshold. When the Stockton Terminal expands its operations or increases throughput, the potential to emit VOC will increase and the Stockton terminal will become subject to regulation as a major source. This will require a Title V Air Operating Permit. In addition, the Stockton facility will be required to install an automated continuous emission monitor at a cost of approximately $75,000.

 

Page 1 of 3 of

Schedule II to Third Amended and Restated Omnibus Agreement


Schedule II

Environmental Matters

(continued)

 

For Amorco Contribution Agreement set forth on Schedule VII :

1. The soil and groundwater on the site of the Tankage, as defined in the Amorco Contribution Agreement, have been impacted by methyl tertiary butyl ether releases from previously buried pipelines. The site is considered characterized and is currently undergoing removal of methyl tertiary butyl ether from the water table, groundwater treatment, and long-term monitoring.

2. Any environmental violation or contamination due to SHPL, as defined in the Amorco Contribution Agreement, being underground prior to the Closing Date.

For Long Beach Contribution Agreement listed on Schedule VII :

1. Any environmental violation or contamination, as defined in the Long Beach Contribution Agreement, prior to the Closing Date.

2. Any anomalies in the Pipeline System that require repair as discovered by the first internal line inspection of any portion of the Pipeline System for which TRMC is notified in writing prior to the First Deadline Date.

For Anacortes Rail Facility Contribution Agreement listed on Schedule VII :

None.

For BP Carson Tranche 1 Contribution Agreement listed on Schedule VII :

The environmental indemnification provisions of the Carson Assets Indemnity Agreement supersede in their entirety the environmental indemnification provisions of Article III of the Third Amended and Restated Omnibus Agreement, except as otherwise expressly provided in the Carson Assets Indemnity Agreement.

For BP Carson Tranche 2 Contribution Agreement listed on Schedule VII :

The environmental indemnification provisions of the Carson Assets Indemnity Agreement supersede in their entirety the environmental indemnification provisions of Article III of the Third Amended and Restated Omnibus Agreement, except as otherwise expressly provided in the Carson Assets Indemnity Agreement.

 

Page 2 of 3 of

Schedule II to Third Amended and Restated Omnibus Agreement


Schedule II

Environmental Matters

(continued)

 

For West Coast Assets Contribution Agreement listed on Schedule VII:

1. Nikiski Terminal. Subsurface soil and groundwater has not been assessed at this facility. There have been no historic releases that have prompted a soil and groundwater investigations. The area within the tank containment berms was lined with low-permeability soils in the early 1990s. The loading rack, fuel filters and piping manifolds are above concrete secondary containment.

2. Anacortes Light Ends Rail Facility and planned diesel truck rack areas. Subsurface soil and groundwater has not been assessed at this area of the Anacortes refinery. There have been no historic releases that have prompted a soil and groundwater investigation.

3. Anacortes Storage Facility . Historic tank overtopping events and tank bottom corrosion releases have impacted soil and groundwater in the shore tank area of the Anacortes refinery. Groundwater near the shore tanks is monitored for natural attenuation. Groundwater between the tanks and the nearby shoreline has not been characterized, however the hydrocarbon concentrations in this area is not expected to be a threat to human health or the environment.

4. Martinez Refinery LPG Loading Area . Past waste disposal and hydrocarbon releases have impacted areas surrounding the Martinez Refinery LPG loading rack, pad and tanks. Areas north and northeast of the rack were used for past waste disposal. There are documented intra-refinery pipeline releases in the north and western boundaries of the LPG rack concrete pad. The refinery plans to excavate and cap the nearby waste disposal area in 2017. The pipeline releases are being remediated as part of the overall Martinez refinery cleanup. Soil and groundwater directly beneath the loading rack, propane tanks and truck pad have not been sampled.

5. Tesoro Alaska Pipeline.

 

    The pump station for the Tesoro Alaska Pipeline is adjacent to the Kenai Refinery Lower Tank Farm. Multiple historic tank and buried pipeline releases have impacted soil and groundwater in the area; however there are no documented releases from the pipeline pump station. The soil and groundwater surrounding the pump station is considered characterized and undergoing groundwater monitoring and treatment.

 

    A pipeline release in 2001 resulted in soil, groundwater and surface water impacts in an undeveloped area of the Kenai Peninsula. The quantity of the release is not known. Soil surrounding the release was excavated and stockpiled at the Kenai Refinery while groundwater and surface water were remediated on-site. The Alaska Department of Environmental Conservation issued a No Further Action letter for this cleanup effort in 2008. There are no other known release sites on the pipeline between the Kenai Refinery and Anchorage.

 

    Historic spills and releases have impacted the Anchorage #1 terminal, including past releases from the Tesoro Alaska Pipeline receiving station. Groundwater remediation monitoring is ongoing across the Anchorage #1 terminal. In addition, a soil vapor venting system is being installed to address a flame suppressant compound detected in soils near the receiving station control room.

 

Page 3 of 3 of

Schedule II to Third Amended and Restated Omnibus Agreement


Schedule III

Pending Litigation

For Initial Contribution Agreement listed on Schedule VII :

None.

For Amorco Contribution Agreement listed on Schedule VII :

None.

For Long Beach Contribution Agreement listed on Schedule VII :

None.

For Anacortes Rail Facility Contribution Agreement listed on Schedule VII :

None.

For BP Carson Tranche 1 Contribution Agreement listed on Schedule VII:

None.

For BP Carson Tranche 2 Contribution Agreement listed on Schedule VII:

None.

For West Coast Assets Contribution Agreement listed on Schedule VII:

None

 

Page 1 of 1 of

Schedule III to Third Amended and Restated Omnibus Agreement


Schedule IV

Section 4.1(a): General and Administrative Services

 

(1) Executive management services of Tesoro employees who devote less than 50% of their business time to the business and affairs of the Partnership, including stock based compensation expense

 

(2) Financial and administrative services (including, but not limited to, treasury and accounting)

 

(3) Information technology services

 

(4) Legal services

 

(5) Health, safety and environmental services

 

(6) Human resources services

Section 4.1(c)(vii): Other Reimbursable Expenses

For Initial Contribution Agreement listed on Schedule VII :

None.

For Amorco Contribution Agreement listed on Schedule VII :

None.

For Long Beach Contribution Agreement listed on Schedule VII :

None.

For Anacortes Rail Facility Contribution Agreement listed on Schedule VII :

None.

For BP Carson Tranche 1 Contribution Agreement listed on Schedule VII :

None.

For BP Carson Tranche 2 Contribution Agreement listed on Schedule VII :

None.

 

Page 1 of 2 of

Schedule IV to Third Amended and Restated Omnibus Agreement


Schedule IV

Other Reimbursable Expenses

(continued)

 

For West Coast Assets Contribution Agreement listed on Schedule VII:

None.

 

Page 2 of 2 of

Schedule IV to Third Amended and Restated Omnibus Agreement


Schedule V

ROFO Assets

 

Asset

  

Owner

Golden Eagle Avon Wharf Facility (Martinez, California). A wharf facility located on the Sacramento River near the Golden Eagle Refinery consisting of a single-berth dock and related pipelines. The facility does not have crude oil or refined products storage capacity and receives refined products from the Golden Eagle Refinery through interconnecting pipelines for delivery into marine vessels. The facility can also receive refined products and intermediate feedstocks from marine vessels for delivery to the Golden Eagle Refinery.    TRMC
Nikiski Dock and Storage Facility (Nikiski, Alaska). A single-berth dock and storage facility located at the Kenai Refinery that includes five crude oil storage tanks with a combined capacity of approximately 930,000 barrels, ballast water treatment capability and associated pipelines, pumps and metering stations. The dock and storage facility receives crude oil from marine tankers and from local production fields via pipeline and truck, and also delivers refined products from the refinery to marine vessels.    Tesoro Alaska
Anacortes Marine Terminal (Anacortes, Washington). A marine terminal located at the Anacortes Refinery consisting of a crude oil and refined products wharf facility. The marine terminal receives crude oil and other feedstocks from marine vessels and third-party pipelines for delivery to the Anacortes Refinery. The facility also delivers refined products from the Anacortes Refinery to marine vessels.    TRMC

 

Page 1 of 1 of

Schedule V to Third Amended and Restated Omnibus Agreement


Schedule VI

Capital and Expense Projects

For Initial Contribution Agreement listed on Schedule VII :

Expense Projects

None.

Capital Projects

1. That certain project related to AFE # 102120001, which provides for side stream ethanol blending into all gasoline at the Salt Lake City terminal by adding truck ethanol unloading capability, utilizing the existing premium day tank for ethanol and delivering premium direct from the Salt Lake City refinery tankage. New ethanol truck unloading facilities will be installed. New Pumps will also be installed for delivering higher volumes of premium gasoline from the Salt Lake City refinery to the Salt Lake City terminal. An ethanol injection skid will be installed along with piping changing to the existing Salt Lake City terminal to allow the ethanol to be injected in the gasoline stream. This project has been completed.

2. That certain project AFE# 112120005 at the Mandan refinery, to update additive equipment to allow the offering of Shell additized gasoline. This project has been completed.

3. That certain project related to AFE # 107120005, which provides for ratio ethanol blending into gasoline on the rack at the Burley, Idaho Terminal by adding truck ethanol unloading capability, adding tankage for ethanol storage and installing new ethanol meters associated with each gasoline loading arm. New ethanol truck unloading facilities will also be installed.

4. That certain project AFE# 104100015-M at the Mandan refinery, to update the truck rack sprinkler system. This project has been completed.

5. That certain project number AFE# 122120002 (TCM Idea# 2010113017) at the Mandan refinery, to upgrade the rack blending hydraulic system to reduce/eliminate inaccurate blends at the load rack.

6. That certain project number TCM Idea # 2011433001 at the Mandan refinery, to move the JP8 to new bay and have three bays for loading product across the rack. This project has been cancelled.

7. That certain project number TCM Idea # 2011432602 at the Stockton terminal, install a continuous vapor emission monitor on the vapor recovery unit for compliance with air quality regulations.

 

Page 1 of 8 of

Schedule VI to Third Amended and Restated Omnibus Agreement


Schedule VI

Capital and Expense Projects

(continued)

 

For Amorco Contribution Agreement listed on Schedule VII :

Expense Projects

All major expense projects that are within the scope of open Work Orders as of the applicable Closing Date.

Capital Projects

1. That certain project related to AFE# 097100014 and AFE# 107100014 at the Amorco terminal, which provide repairs and upgrades to the wharf regarding MOTEMS standards.

2. That certain project related to AFE# 112100001 at the Amorco terminal, which installs a jet mixer system for crude lab testing.

For Long Beach Contribution Agreement listed on Schedule VII :

Expense Projects

1. Any cost that may be incurred to adjust diesel fuel tank vents near light fixtures after a review is conducted and if action is deemed necessary.

2. Costs related to substantial repair or replacement project scheduled for 2012 and 2013 for the pipeline segments in the portion of the Southern California Edison right-of-way area immediately adjacent to the marine terminal to address corrosion, and include IO# 3021407 titled “SCA.Wilmington Edison Reroute” and IO# 3021749 titled “SCA.Edison Reroute 24 inch, 16 inch, 14 inch”.

Capital Projects

1. That certain project related to AFE# 072104079LBT titled “UG Piping – LBT” related to underground pipeline repairs at the Terminal. In addition, any subsequent new projects to address the same specific under-ground piping issues per AFE# 072104079LBT (i.e. a second phase UG Piping project) that would occur on or before the end of year 2015.

2. That certain project related to the TCM Idea# 2012433432 AFE# 125120020 titled “LBT Berth 84a Loading Arm Replacement” which repairs or replaces the loading arms at the Terminal and any related AFE project that will occur upon final project approval to substantially repair or replace the loading arms at the Terminal.

3. That certain project related to the TCM Idea# 2012433433 AFE# 125120021 titled “LBT Berth 86 Loading Arm Replacement” which repairs or replaces the loading arms at the Terminal and any related AFE project that will occur upon final project approval to substantially repair or replace the loading arms at the Terminal.

4. Any remaining costs of those certain projects related to the leak detection on the Terminal and Terminal Pipelines which are substantially complete and include AFE# 107110002, AFE# 117110001, AFE# 117110003, AFE# 117110002, and AFE# 125120002.

 

Page 2 of 8 of

Schedule VI to Third Amended and Restated Omnibus Agreement


Schedule VI

Capital and Expense Projects

(continued)

 

For Anacortes Rail Facility Contribution Agreement listed on Schedule VII :

Expense Projects

None.

Capital Projects

Any capital costs or expenses that may be incurred for the installation of a custody transfer meter related to the AFE# 125120017 titled “CROF Custody Transfer Meter and Station”.

For BP Carson Tranche 1 Contribution Agreement listed on Schedule VII :

Expense Projects

Expenses associated with the API 653 internal inspection, the Carson Crude Terminal Tank 401 (AFE# 13E1219120001BP/WBS 19125.E012.975) scheduled to start in November 2013, including without limitation, cleaning of such Tank (including any waste removal) and any repairs to such Tank required as a result of such inspection.

Capital Projects

None.

For BP Carson Tranche 2 Contribution Agreement listed on Schedule VII :

Expense Projects

1. All 2013 and 2014 costs related to AFE# 136104215BP-M (PRISM ID 32503) for a partial replacement of Rhodia Sulfuric Acid Line 29 will be reimbursed by TRMC to cover the 2014 expenditure of $1.1 million for line neutralization, the pig run and tie-ins. Subject to confirmation with the refinery on exact outage dates, the bulk of this cost will be incurred in March and April.

2. All 2013 costs or 2013 carry-over costs related to AFE# 13E1012000002BP-M12 & 13E1012000002BP-M5 [PRISM ID 32518 (under the 2013 AFE # 13E1012000002BP)] for the Manual Entry Corrosion Program at Terminal 2 will be reimbursed by TRMC. All 2014 costs will be covered by the Partnership’s 2013 budget.

 

Page 3 of 8 of

Schedule VI to Third Amended and Restated Omnibus Agreement


Schedule VI

Capital and Expense Projects

(continued)

 

3. All remaining 2013 inspection and repair costs related to AFE# 13E1012000002BP-M2 (PRISM ID 32549) associated with the Marine Terminal 2 – TK 218 – API 653 Internal Inspection only (not including repairs at this point) will be reimbursed by TRMC. TRMC shall review and approve the tank repair scope and review inspection reports to prevent unnecessary upgrades or “urban renewal.”

4. All remaining 2013 inspection and repair costs related to AFE# 13E1212000001-M (PRISM ID 31418) associated with the Marine Terminal 2 – TK 205 – API 653 Internal Inspection only (not including repairs at this point) will be reimbursed by TRMC. TRMC shall review and approve the tank repair scope and review inspection reports to prevent unnecessary upgrades or “urban renewal.”

5. Remaining expenses related to AFE# 13E1179000001-M (PRISM ID 32040) to upgrade PLC systems in the LA Basin will be reimbursed by TRMC.

6. All remaining 2013 inspection and repair costs related to AFE# 13E1212000002-M (PRISM ID 31419) associated with the Marine Terminal 2 – TK 217 – API 653 Internal Inspection only (not including repairs at this point) will be reimbursed by TRMC. TRMC shall review and approve the tank repair scope and review inspection reports to prevent unnecessary upgrades or “urban renewal.”

7. All remaining expenses related to AFE# 136104222BP-M (PRISM ID 32556) associated with the Pipeline OQ Verification will be reimbursed by TRMC.

8. All remaining 2013 inspection and repair costs related to AFE# 13E1012000006-M (PRISM ID 31409) associated with the Carson Products – TK VH1 – API 653 Inspection only (not including repairs at this point) will be reimbursed by TRMC. TRMC shall review and approve the tank repair scope and review inspection reports to prevent unnecessary upgrades or “urban renewal.

Capital Projects

1. Maintenance capital expenditures related to that certain AFE# 136104194BP-M (PRISM ID 32480) at Terminal 2 to replace all fire water piping at Berths 76, 77 and 78 areas of Terminal 2 in Long Beach, CA with new piping. This project will also replace all associated valves, fixtures, monitors, and fire-fighting accessories.

2. Maintenance capital expenditures related to that certain TCM Idea# 2013434229 (PRISM ID 25829) at Terminal 2 to replace the existing bladder type foam tank with two atmospheric tanks and foam skids located at either end of the facility along with new piping to support the installation.

 

Page 4 of 8 of

Schedule VI to Third Amended and Restated Omnibus Agreement


Schedule VI

Capital and Expense Projects

(continued)

 

3. Maintenance capital expenditures related to that certain TCM Idea# 2013434243 (PRISM ID 20054) at Terminal 2 to replace the existing loading arms at T2’s Berth 77 and 78. The current parts are so old that they are no longer readily available, so in order to properly maintain this equipment to minimize down-time for repairs, these arms should be replaced with the newest models.

4. All capital expenditures related to that certain AFE# 136104077BP-M (PRISM ID 32481) for MOTEMS dock side piping upgrades at Terminal 2.

5. Maintenance capital expenditures related to that certain AFE# 145120008 (PRISM ID 32560) at Terminal 2 to replace the main 12kV electrical switchgear that experienced electrical damage due to several factors: nearing its equipment service life, component degradation, exposure to the elements. The main copper busbar component of the switchgear was recently replaced and dipped in epoxy coating. However, during the repairs, cracks on the insulation of the main horizontal operating bus were discovered. The exterior enclosure is slowly showing signs of corrosion and the glastic insulation materials are degrading.

6. Upon TRMC’s approval to complete the following projects, all capital costs incurred to connect the Los Angeles Wilmington and Carson refinery systems, as well as the crude and product pipeline systems: TCM Idea# 2013434786, AFE# 132110022-M (TCM Idea# 2013434419), TCM Idea# 2013434788, AFE# 132110023-M (TCM Idea# 2013434417), AFE# 132110025-M (TCM Idea# 2013434418), AFE# 132110030-M (TCM Idea# 2013434420), AFE# 132110031-M (TCM Idea# 2013434784), TCM Idea# 2013434785 and AFE# 132110026 (TCM Idea# 2013434137).

7. Upon TRMC’s approval to complete the project, all capital costs related to the project at Terminal 2 targeted to reduce Tesoro’s demurrage cost due to barge delivered additive alternative, under AFE# 132110024-M (TCM Idea# 2013434220).

8. All capital costs related to AFE# 131907046, the implementation of an equivalent solution using Tesoro ECC 6 MOC module, including necessary configuration changes and customization of interfaces to be completed and executed in line with other transformation projects identified as part of integrating other BP assets such as TMS5 to DTN Guardian3, Load Tracker, etc. in the Logistics area.

9. All capital costs related to AFE# 131907047. As a part of the BP Carson Tranche 1 Contribution Agreement, Tesoro acquired Maximo, i-Maintain, Maximo Mobile and Primavera. These applications are used for scheduling and managing routine maintenance tasks and planning capital projects (Primavera). These business functions will be transitioned to SAP PM (using GWOS) and a TSO instance of Primavera. This initiative should be performed in line with Maximo to SAP PM transformation project and with other logistics and refining projects.

10. All capital costs related to AFE# 131907045. This project, in conjunction with Tesoro’s acquisition of the BP Carson City Refinery, is designed to transition and successfully integrate the Southwest’s Logistics Mechanical Integrity Inspection System Information Technology assets into the Tesoro Information Technology application landscape.

 

Page 5 of 8 of

Schedule VI to Third Amended and Restated Omnibus Agreement


Schedule VI

Capital and Expense Projects

(continued)

 

For West Coast Assets Contribution Agreement listed on Schedule VII:

Expense Projects

1. Nikiski Terminal . Tesoro Alaska shall reimburse the Partnership Group for any costs or expenses incurred by the Partnership Group to reinstate water supply to the Operating Company’s Nikiski Terminal in connection with the water suppression system.

2. Anacortes Light Ends Rail Facility. TRMC shall reimburse the Partnership Group for any costs and expenses incurred by the Partnership Group:

 

    to determine the adequacy of fire water at the facility;

 

    with respect to any modifications needed to be made to fire water system to provide adequate fire water; and

 

    for relocation of the knockout drum, if relocation is required.

3. Anacortes Storage Facility

 

    TRMC shall reimburse the Partnership Group for any costs and expenses incurred by the Partnership Group to restore Tank 135 to API 653 specifications. TRMC shall be deemed to be the generator of all hazardous waste and other waste removed from Tank 135 in connection with such cleaning and restoration and shall be responsible for all obligations arising as the generator of such hazardous waste and other waste.

 

    At the General Partner’s direction, a third party engineering firm shall review support for current API 653 inspection interval timing for the tanks at the Anacortes Storage Facility other than Tank 135. Recommendations regarding the inspection timing and scope are expected by year-end 2014. If the recommended first inspection falls within the period specified in Section 5.1(b) of this Agreement, TRMC shall reimburse the Partnership Group in accordance with the terms and conditions of Section 5.1(b) . If the recommended first inspection does not fall within such period, TRMC shall reimburse the Partnership Group for any costs and expenses incurred by the Partnership Group for tank floor repairs or replacement to meet API 653 standards through the first API inspection cycle. If TRMC fails to timely renew the Storage Services Agreement – Anacortes, dated as of July 1, 2014, by and among TRMC, the General Partner, the Partnership and the Operating Company (the “ Storage Agreement ”), in accordance with the terms thereof, TRMC shall reimburse the Partnership Group for any costs and expenses incurred by the Partnership Group for floor replacement to meet API 653 standards if the Partnership Group chooses to accelerate API 653 inspections prior to the expiration of the Storage Agreement.

 

    TRMC shall reimburse the Partnership Group for any costs and expenses incurred by the Partnership Group for decommissioning and repair of sewer lines for Tanks 165 and 166.

 

Page 6 of 8 of

Schedule VI to Third Amended and Restated Omnibus Agreement


Schedule VI

Capital and Expense Projects

(continued)

 

4. Martinez Light Ends Rail Facility . TRMC shall reimburse the Partnership Group for any costs and expenses incurred by the Partnership Group:

 

    to determine the adequacy of fire water at the facility; and

 

    with respect to any modifications needed to be made to fire water system to provide adequate fire water.

5. Martinez Clean Products Truck Rack . TRMC shall reimburse the Partnership Group for any costs and expenses incurred by the Partnership Group:

 

    if required to supplement data currently available in the baseline inspections records in order to properly document corrosion, to carry out new tank corrosion inspections on Tanks 777, 778 and 890, as well as any repairs resulting from such inspections to meet API 653 standards; and

 

    with respect to Tank 777, the tank berm size and tank proximity evaluation scheduled to completed by year-end 2014, as well as any required adjustments resulting therefrom.

6. Martinez Light Ends Storage . If required to supplement data currently available in the baseline inspection records in order to properly document pipe integrity, TRMC shall reimburse the Partnership Group for any costs and expenses incurred by the Partnership Group for inspections and analyses conducted to confirm baseline pipe integrity by year-end 2014, as well as any repairs arising from defects identified through such inspections.

7. Tesoro Alaska Pipeline

 

    Tesoro shall reimburse the Partnership Group for any costs or expenses incurred by the Partnership Group to carry out the repairs and tests identified in the Coffman Engineers report dated May 8, 2014, including the planned hydro-test in 2015 and any resulting repairs therefrom.

 

    Tesoro shall reimburse the Partnership Group for any costs or expenses incurred by the Partnership Group to carry out repairs identified pursuant to the inspection on the Tesoro Alaska Pipeline as a result of the inspection scheduled to begin June 30, 2014.

Capital Projects

1. All capital costs related to AFE# 125100055 - Additive reservoir tank and pumping system for the Nikiski Terminal truck loading rack.

 

Page 7 of 8 of

Schedule VI to Third Amended and Restated Omnibus Agreement


Schedule VI

Capital and Expense Projects

(continued)

 

2. All capital costs related to AFE# 127100012 - Design, procure, and install Biodiesel Blending Facility at existing Martinez Tract 3 Truck Loading Rack.

3. All capital costs related to AFE# 132100017 – Martinez gasoline loading rack filtration.

4. All capital costs related to AFE# 125110005 - Fabrication and installation of a skid-mounted clay treatment system at the Tesoro Alaska Pipeline Port of Anchorage delivery facility.

5. All capital costs related to AFE# 125110007 – Provision of inline strainers upstream of the Kenai Pump station pipeline pumps and upstream of the Anchorage receiving station control valve.

6. All capital costs related to AFE# 124100034 - Purchase and installation of (5) IP CCTV Cameras, and security video monitoring station for Tesoro Alaska Pipeline Anchorage control room (located at the Port of Anchorage Industrial Park), MLV 7 on Northernlights Blvd, and the ASIG Filter Building located at Ted Stevens International Airport.

7. All capital costs related to AFE# 145110002 regarding the installation of semi-deep cathodic protection wells, a new rectifier and electrical service at the Tesoro Alaska Pipeline.

8. All capital costs related to AFE# 124100030 regarding new CCTV monitoring system at the Nikiski Terminal.

9. All capital costs related to AFE# 145120005 regarding a new cathodic protection anode bed and rectifier for the Nikiski Terminal.

10. All capital costs related to AFE# TBD regarding Fall Protection for Top Loading Tank Cars and Trucks.

11. All capital costs related to AFE# 132100017 regarding the installation of a new Tract 3 Gasoline Loading Rack Filtration System to replace the existing rental units.

12. All capital costs related to AFE# PTS 12475 regarding LPG Tank Car Loading Rack Improvements.

13. All capital costs related to AFE# TBD regarding the installation of a system to add ExxonMobil additives to gasoline at the Tr. 3 truck loading rack.

14. All capital costs related to AFE# 145110009 regarding the implementation of Tesoro Alaska Pipeline mainline delivery strainer.

 

Page 8 of 8 of

Schedule VI to Third Amended and Restated Omnibus Agreement


Schedule VII

Contribution Agreements and Applicable Terms

Initial Contribution Agreement

 

Contribution Agreement

  

Closing Date

  

First Deadline
Date

  

Second Deadline
Date

  

Tesoro
Indemnifying
Parties

  

Tesoro
Indemnified
Parties

  

Third Deadline
Date

  

Omnibus
Section 5.1(b)
Applies

Contribution, Conveyance and Assumption Agreement, dated as April 26, 2011, among the Partnership, the General Partner, the Operating Company, Tesoro, Tesoro Alaska, TRMC and Tesoro High Plains Pipeline Company LLC    April 26, 2011    April 26, 2013    April 26, 2016    TRMC and Tesoro Alaska    TRMC    April 26, 2021    Yes

 

Page 1 of 7 of

Schedule VII to Third Amended and Restated Omnibus Agreement


Schedule VII

Contribution Agreements and Applicable Terms

(continued)

 

Amorco Contribution Agreement

 

Contribution Agreement

  

Closing Date

  

First Deadline
Date

  

Second Deadline
Date

  

Tesoro
Indemnifying
Parties

  

Tesoro
Indemnified
Parties

  

Third Deadline
Date

  

Omnibus
Section 5.1(b)
Applies

Contribution, Conveyance and Assumption Agreement dated as of April 1, 2012, among the Partnership, the General Partner, the Operating Company, Tesoro and TRMC    April 1, 2012    April 1, 2014    April 1, 2017    TRMC    TRMC    April 1, 2022    Yes

 

Page 2 of 7 of

Schedule VII to Third Amended and Restated Omnibus Agreement


Schedule VII

Contribution Agreements and Applicable Terms

(continued)

 

Long Beach Contribution Agreement

 

Contribution Agreement

  

Closing Date

  

First Deadline
Date

  

Second Deadline
Date

  

Tesoro
Indemnifying
Parties

  

Tesoro
Indemnified
Parties

  

Third Deadline
Date

  

Omnibus
Section 5.1(b)
Applies

Contribution, Conveyance and Assumption Agreement executed as of September 14, 2012, among the Partnership, the General Partner, the Operating Company, Tesoro and TRMC    Execution Date is September 14, 2012, and various Effective Times are upon receipt of the Long Beach Approval, the CDFG Approval and the Other Approvals as set forth in the agreement, as applicable    September 14, 2014    September 14, 2017    TRMC    TRMC    September 14, 2022    Yes

 

Page 3 of 7 of

Schedule VII to Third Amended and Restated Omnibus Agreement


Schedule VII

Contribution Agreements and Applicable Terms

(continued)

 

Anacortes Rail Facility Contribution Agreement

 

Contribution Agreement

  

Closing Date

  

First Deadline
Date

  

Second Deadline
Date

  

Tesoro
Indemnifying
Parties

  

Tesoro
Indemnified
Parties

  

Third Deadline
Date

  

Omnibus
Section 5.1(b)
Applies

Contribution, Conveyance and Assumption Agreement executed as of November 15, 2012, among the Partnership, the General Partner, the Operating Company, Tesoro and TRMC    November 15, 2012    November 15, 2014    November 15, 2017    TRMC    TRMC    November 15, 2022    No

 

Page 4 of 7 of

Schedule VII to Third Amended and Restated Omnibus Agreement


Schedule VII

Contribution Agreements and Applicable Terms

(continued)

 

BP Carson Tranche 1 Contribution Agreement

 

Contribution Agreement

  

Closing Date

  

First Deadline
Date

  

Second Deadline
Date

  

Tesoro
Indemnifying
Parties

  

Tesoro
Indemnified
Parties

  

Third Deadline
Date

  

Omnibus
Section 5.1(b)
Applies

Contribution, Conveyance and Assumption Agreement executed as of May 17, 2013, among the Partnership, the General Partner, the Operating Company, Tesoro and TRMC    June 1, 2013    Not Applicable    Not Applicable    Not Applicable    Not Applicable    Not Applicable    No

 

Page 5 of 7 of

Schedule VII to Third Amended and Restated Omnibus Agreement


Schedule VII

Contribution Agreements and Applicable Terms

(continued)

 

BP Carson Tranche 2 Contribution Agreement

 

Contribution Agreement

  

Closing Date

  

First Deadline
Date

  

Second Deadline
Date

  

Tesoro
Indemnifying
Parties

  

Tesoro
Indemnified
Parties

  

Third Deadline
Date

  

Omnibus
Section 5.1(b)
Applies

Contribution, Conveyance and Assumption Agreement executed as of November 18, 2013, among the Partnership, the General Partner, the Operating Company, Tesoro, TRMC and Carson Cogeneration Company    December 6, 2013    Not Applicable    Not Applicable    Not Applicable    Not Applicable    Not Applicable    No

 

Page 6 of 7 of

Schedule VII to Third Amended and Restated Omnibus Agreement


Schedule VII

Contribution Agreements and Applicable Terms

(continued)

 

West Coast Assets Contribution Agreement

 

Contribution Agreement

  

Closing Date

  

First Deadline
Date

  

Second Deadline
Date

  

Tesoro
Indemnifying
Parties

  

Tesoro
Indemnified
Parties

  

Third Deadline
Date

  

Omnibus
Section 5.1(b)
Applies

Contribution, Conveyance and Assumption Agreement executed as of June 23, 2014, among the Partnership, the General Partner, the Operating Company, Tesoro Logistics Pipelines LLC, Tesoro, TRMC and Tesoro Alaska   

First Closing Date: July 1, 2014

Second Closing Date has the meaning set forth in this Contribution Agreement

   The second (2 nd ) anniversary of the First Closing Date or the Second Closing Date, as applicable   

With respect to Section 3.1(a): Not applicable

With respect to Section 3.2: The fifth (5 th ) anniversary of the First Closing Date or the Second Closing Date, as applicable

   Tesoro, TRMC, Tesoro Alaska    Tesoro, TRMC, Tesoro Alaska    The tenth (10 th ) anniversary of the First Closing Date or the Second Closing Date, as applicable.    Yes

 

Page 7 of 7 of

Schedule VII to Third Amended and Restated Omnibus Agreement


Schedule VIII

Administrative Fee and Indemnification Deductibles

Monthly Administrative Fee

$475,000.00

Annual Environmental Deductible

$600,000

Annual ROW Deductible

$600,000

 

Page 1 of 1 of

Schedule VIII to Third Amended and Restated Omnibus Agreement


Schedule IX

Special Indemnification Provisions

For Initial Contribution Agreement listed on Schedule VII :

None.

For Amorco Contribution Agreement listed on Schedule VII :

Addition to Right of Way Indemnification . As of the Closing Date for the Amorco Contribution Agreement, TRMC shall own the leasehold rights in the “Wharf Lease” issued by the California State Lands Commission and the easements, rights of way and permits for the “SHPL,” all as defined in the Amorco Contribution Agreement, and the Partnership Group shall provide operational, maintenance and management services with respect to such Assets pursuant to the MTUTA. Title to Wharf Lease rights and the SHPL are scheduled to be contributed to the Partnership Group at a later date, as set forth in the Amorco Contribution Agreement. The Right of Way Indemnification set forth in Section 3.2 herein applies to the extent that a Loss arises with respect to a Partnership Group Member’s interests under the MTUTA before title to such Assets is contributed to the Partnership Group Member or with respect to a Partnership Group Member’s failure to become the owner of such valid and indefeasible easement rights or fee ownership or leasehold interests in such Assets after they are finally contributed to the Partnership Group as contemplated in the Amorco Contribution Agreement. The Closing Date provided for in this Agreement shall be as set forth above, without regard to when title to these Assets is finally contributed to a Partnership Group Member.

For Long Beach Contribution Agreement listed on Schedule VII :

Addition to Right of Way Indemnification . As of the Closing Date for the Long Beach Contribution Agreement, TRMC shall own the leasehold rights in the “Terminal Lease” issued by the Port of Long Beach and the easements, rights of way and permits for the “Terminal Pipelines,” all as defined in the Long Beach Contribution Agreement, and the Partnership Group shall provide operational, maintenance and management services with respect to such Assets pursuant to the Long Beach Operating Agreement, as defined in the Long Beach Contribution Agreement. Title to Terminal Lease rights and the Terminal Pipelines are scheduled to be contributed to the Partnership Group at a later date, as set forth in the Long Beach Contribution Agreement. The Right of Way Indemnification set forth in Section 3.2 herein applies to the extent that a Loss arises with respect to a Partnership Group Member’s interests under the BAUTA before title to such Assets is contributed to the Partnership Group Member or with respect to a Partnership Group Member’s failure to become the owner of such valid and indefeasible easement rights or fee ownership or leasehold interests in such Assets after they are finally contributed to the Partnership Group as contemplated in the Long Beach Contribution Agreement. The Closing Date provided for in this Agreement shall be as set forth above, without regard to when title to these Assets is finally contributed to a Partnership Group Member.

 

Page 1 of 4 of

Schedule IX to Third Amended and Restated Omnibus Agreement


Schedule IX

Special Indemnification Provisions

(continued)

 

For Anacortes Rail Facility Contribution Agreement listed on Schedule VII :

Other . Notwithstanding any other provisions of (i) the Third Amended and Restated Omnibus Agreement, (ii) the Anacortes Track Use and Throughput Agreement among the General Partner, the Partnership, the Operating Company and TRMC, (iii) the Anacortes Mutual Track Use Agreement among the General Partner, the Partnership, the Operating Company and TRMC, and (iv) the Ground Lease between TRMC and the Operating Company, all dated as of November 15, 2012, the parties hereto agree that the indemnification provisions of any of those agreements shall control over any of the other agreements to the extent the subject matter of the indemnification is specifically referenced or provided for in that agreement. For the avoidance of doubt, the indemnification provisions of the Third Amended and Restated Omnibus Agreement shall be subordinate to the respective indemnification provisions of each of the other agreements referenced above.

For BP Carson Tranche 1 Contribution Agreement listed on Schedule VII :

Other . Notwithstanding any other provisions of (i) the Third Amended and Restated Omnibus Agreement, (ii) the BP Carson Tranche 1 Contribution Agreement listed on Schedule VII , (iii) the Master Terminalling Services Agreement – Southern California among TRMC, the General Partner, the Partnership and the Operating Company dated as of June 1, 2013, as amended, and (iv) the Carson Storage Services Agreement among TRMC, the General Partner, the Partnership and the Operating Company dated as of June 1, 2013, the parties hereto agree that the indemnification provisions of any of those agreements shall control over any of the other agreements to the extent the subject matter of the indemnification is specifically referenced or provided for in that agreement. In the event of a conflict of provisions of any of the above-referenced agreements and the Carson Assets Indemnity Agreement, the provisions of the Carson Assets Indemnity Agreement shall prevail with respect to issues related to the contribution of the assets described therein, but not with respect to the ordinary operations of such assets as set forth in the above-referenced agreements. Notwithstanding anything to the contrary in the Third Amended and Restated Omnibus Agreement, the indemnification provisions of Sections 3.2 and 3.5 thereof shall not apply to the Assets as defined in the BP Carson Tranche 1 Contribution Agreement listed on Schedule VII .

 

Page 2 of 4 of

Schedule IX to Third Amended and Restated Omnibus Agreement


Schedule IX

Special Indemnification Provisions

(continued)

 

For BP Carson Tranche 2 Contribution Agreement listed on Schedule VII :

Other . Notwithstanding any other provisions of (i) the Third Amended and Restated Omnibus Agreement, (ii) the BP Carson Tranche 2 Contribution Agreement listed on Schedule VII , (iii) the Amended and Restated Master Terminalling Services Agreement – Southern California among TRMC, the General Partner, the Partnership and the Operating Company dated as of December 6, 2013, (iv) the Long Beach Storage Services Agreement among TRMC, the General Partner, the Partnership and the Operating Company dated as of December 6, 2013, (v) the Berth 121 Operating Agreement between the Operating Company and Carson Cogeneration Company, dated as of December 6, 2013, (vi) the Terminals 2 and 3 Operating Agreement among the Partnership, the General Partner, the Operating Company and TRMC, dated as of December 6, 2013, (vii) the Amended and Restated Long Beach Berth Access Use and Throughput Agreement among the Partnership, the General Partner, the Operating Company and TRMC, dated as of December 6, 2013, (viii) the Long Beach Berth Throughput Agreement among the Partnership, the General Partner, the Operating Company, TRMC and Carson Cogeneration Company, dated as of December 6, 2013, (ix) the SoCal Transportation Services Agreement between TRMC and Tesoro SoCal Pipeline Company LLC, dated as of December 6, 2013, (x) the Long Beach Pipeline Throughput Agreement among the Partnership, the General Partner, the Operating Company and TRMC, dated as of December 6, 2013, (xi) the Carson Coke Handling Services Agreement among the Partnership, the General Partner, the Operating Company and TRMC, dated as of December 6, 2013, (xii) the Coke Barn Lease Agreement between the Operating Company and TRMC, dated as of December 6, 2013 and (xiii) the Terminals 2 and 3 Ground Lease between the Operating Company and TRMC, dated as of December 6, 2013, the parties hereto agree that the indemnification provisions of any of those agreements shall control over any of the other agreements to the extent the subject matter of the indemnification is specifically referenced or provided for in that agreement. In the event of a conflict of provisions of any of the above-referenced agreements and the Carson Assets Indemnity Agreement, the provisions of the Carson Assets Indemnity Agreement shall prevail with respect to issues related to the contribution of the assets described therein, but not with respect to the ordinary operations of such assets as set forth in the above-referenced agreements.

 

Page 3 of 4 of

Schedule IX to Third Amended and Restated Omnibus Agreement


Schedule IX

Special Indemnification Provisions

(continued)

 

For West Coast Assets Contribution Agreement listed on Schedule VII:

Other . Notwithstanding any other provisions of (i) the Third Amended and Restated Omnibus Agreement, (ii) the Terminalling Services Agreement – Nikiski, among the General Partner, the Partnership, the Operating Company and Tesoro Alaska, (iii) the Terminalling Services Agreement – Anacortes, among the General Partner, the Partnership, the Operating Company and TRMC, (iv) the Terminalling Services Agreement – Martinez, among the General Partner, the Partnership, the Operating Company and TRMC, and (v) the Storage Services Agreement – Anacortes, the Terminalling Services Agreement – Anacortes, among the General Partner, the Partnership, the Operating Company and TRMC, the parties hereto agree that the indemnification provisions of any of those agreements shall control over any of the other agreements to the extent the subject matter of the indemnification is specifically referenced or provided for in that agreement. In the event of a conflict of provisions of any of the above-referenced agreements and the Third Amended and Restated Omnibus Agreement, the provisions of the Third Amended and Restated Omnibus Agreement shall prevail with respect to issues related to the contribution of the assets described therein, but not with respect to the ordinary operations of such assets as set forth in the above-referenced agreements.

 

Page 4 of 4 of

Schedule IX to Third Amended and Restated Omnibus Agreement

Exhibit 10.8

SECONDMENT AND LOGISTICS SERVICES AGREEMENT

THIS SECONDMENT AND LOGISTICS SERVICES AGREEMENT (this “ Agreement ”), dated as of July 1, 2014, is made and entered into by and among Tesoro Companies, Inc., a Delaware corporation (“ TCI ”), Tesoro Refining & Marketing Company LLC, a Delaware limited liability company (“ TRMC ”), Tesoro Alaska Company LLC, a Delaware limited liability company (“ TAC ” and, together with TCI and TRMC, the “ Tesoro Group ”), Tesoro Logistics GP, LLC, a Delaware limited liability company (the “ General Partner ”), Tesoro Logistics Operations LLC, a Delaware limited liability company (“ TLO ”), Tesoro Logistics Pipelines LLC, a Delaware limited liability company (“ TLP ”), Tesoro High Plains Pipeline Company LLC, a Delaware limited liability company (“ THPPC ”), Tesoro Logistics Northwest Pipeline LLC, a Delaware limited liability company (“ TLNP ”), and Tesoro Alaska Pipeline Company LLC, a Delaware limited liability company (“ TAPC ” and together with the General Partner, TLO, TLP, THPPC and TLNP, the “ Logistics Group ”). Each of TCI, TRMC, TAC, the General Partner, TLO, TLP, THPPC, TLNP and TAPC, is referred to herein as a “Party” and collectively as the “Parties.”

RECITALS:

WHEREAS , on April 1, 2012, certain of the Parties entered into that certain Amended and Restated Operational Services Agreement (the “ Operational Services Agreement ”) pursuant to which the Tesoro Group agreed to provide to the Logistics Group certain services necessary to operate, manage, maintain and report the operating results of the Logistics Group’s assets, including gathering pipelines, transportation pipelines, storage tanks, trucks, truck racks, terminal facilities, offices and related equipment, real estate and other assets or portions thereof of the Logistics Group;

WHEREAS , subsequent to April 1, 2012, the Logistics Group has expanded to include TLP, TLNP and TAPC, who are to become Parties to this Agreement;

WHEREAS , the Parties desire to supersede the Operational Services Agreement as of the date hereof and enter into this Agreement to allow, among other things, for the Tesoro Group to second certain of their personnel to the General Partner and the General Partner to second certain of its personnel to the Tesoro Group in addition to the provision of certain services previously covered by the Operational Services Agreement.

NOW, THEREFORE , in consideration of the premises and the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

 

1. DEFINITIONS

As used in this Agreement, the following capitalized terms have the meanings set forth below:

AFE ” shall mean an approval for expenditure.

Affiliate ” means, with respect to any Person, (a) any other Person directly or indirectly controlling, controlled by or under common control with such Person or (b) any Person owning or controlling fifty percent (50%) or more of the voting interests of such Person. For purposes of this definition, the term “controls,” “is controlled by” or “is under common control with” shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.


Agreement ” has the meaning set forth in the Preamble.

Allocation Percentage ” has the meaning set forth in Section 3(d) .

Applicable Law ” means any applicable statute, law, regulation, ordinance, rule, determination, judgment, rule of law, order, decree, permit, approval, concession, grant, franchise, license, requirement, or any similar form of decision of, or any provision or condition of any permit, license or other operating authorization issued by any Governmental Authority having or asserting jurisdiction over the matter or matters in question, whether now or hereafter in effect.

Assets ” means the Logistics Assets and the Tesoro Assets.

Benefit Plans ” means each employee benefit plan, as defined in Section 3(3) of ERISA, and any other material plan, policy, program, practice, agreement, understanding or arrangement (whether written or oral) providing compensation or other benefits to any Seconded Employee (or to any dependent or beneficiary thereof), including, without limitation, any stock bonus, stock ownership, stock option, stock purchase, stock appreciation rights, phantom stock, restricted stock or other equity-based compensation plans, policies, programs, practices or arrangements, and any bonus or incentive compensation plan, deferred compensation, profit sharing, holiday, cafeteria, medical, disability or other employee benefit plan, program, policy, agreement or arrangement sponsored, maintained, or contributed to by the Tesoro Group or the General Partner, as the case may be, or any of their ERISA Affiliates, or under which either the Tesoro Group or the General Partner, or any ERISA Affiliate may have any obligation or liability, whether actual or contingent, in respect of or for the benefit of any Seconded Employee (but excluding workers’ compensation benefits (whether through insured or self-insured arrangements) and directors and officers liability insurance).

Business Day ” means a day, other than a Saturday or Sunday, on which banks in New York, New York are open for the general transaction of business.

Claim ” means any existing or threatened future claim, including third-party claims, demand, suit, action, investigation, proceeding, governmental action or cause of action of any kind or character (in each case, whether civil, criminal, investigative or administrative), known or unknown, under any theory, including those based on theories of contract, tort, statutory liability, strict liability, employer liability, premises liability, products liability, breach of warranty or malpractice.

Confidential Information ” means all confidential, proprietary or non-public information of a Party, whether set forth in writing, orally or in any other manner, including all non-public information and material of such Party (and of companies with which such Party has entered into confidentiality agreements) that another Party obtains knowledge of or access to, including non-public information regarding products, processes, business strategies and plans, customer lists, research and development programs, computer programs, hardware configuration information, technical drawings, algorithms, know-how, formulas, processes, ideas, inventions (whether patentable or not), trade secrets, schematics and other technical, business, marketing and product development plans, revenues, expenses, earnings projections, forecasts, strategies, and other non-public business, technological, and financial information.

Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract, or otherwise.

 

2


ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

ERISA Affiliate ” means any entity that would be treated as a single employer with such other entity under Sections 414(b), (c) or (m) of the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder or Section 4001(b)(1) of ERISA.

Extension Period ” has the meaning set forth in Section 6 .

Facilities ” means the facilities related to each of the entities in the Logistics Group.

Force Majeure ” means circumstances not reasonably within the control of the Service Provider and which, by the exercise of due diligence, the Service Provider is unable to prevent or overcome that prevent performance of the Service Provider’s obligations, including: acts of God, strikes, work stoppages, lockouts or other industrial disturbances, wars, riots, fires, floods, storms, orders of courts or Governmental Authorities, explosions, terrorist acts, breakage, accident to machinery, storage tanks or lines of pipe and inability to obtain or unavoidable delays in obtaining material or equipment and similar events.

Force Majeure Notice ” has the meaning set forth in Section 12(a) .

General Partner ” means Tesoro Logistics GP, LLC, and its successors and assigns, who is the general partner of the Partnership.

Governmental Authority ” means any federal, state, local or foreign government or any provincial, departmental or other political subdivision thereof, or any entity, body or authority exercising executive, legislative, judicial, regulatory, administrative or other governmental functions or any court, department, commission, board, bureau, agency, instrumentality or administrative body of any of the foregoing.

Group ” shall mean either the Tesoro Group or the Logistics Group.

Initial Term ” shall have the meaning set forth in Section 6 .

Licensed Premises ” shall have the meaning set forth in Section 4(b) .

Licensee Group ” shall have the meaning set forth in Section 4(b) .

Licensor Group ” shall have the meaning set forth in Section 4(b) .

Logistics Assets ” means the assets owned by, leased by or necessary for the operation of the business, properties or assets of any entity in the Logistics Group, and any future expansions thereof.

Logistics Group ” has the meaning set forth in the Preamble.

Logistics Group Indemnified Parties ” has the meaning set forth in Section 11(a) .

Logistics Services ” means the Operational Services, Specialized Services and Other Services with respect to the Logistics Assets either as set forth on the Service Schedules or as agreed upon by the applicable Parties pursuant to a Service Order.

 

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Loss ” and “ Losses ” shall have the meaning set forth in Section 11(a) .

Operational Services ” means labor and other services performed for the purpose of providing operational and maintenance services related to the applicable Assets.

Operational Services Agreement ” has the meaning set forth in the Recitals.

Other Services ” means services that are provided to directly support the applicable Assets that may be agreed upon between the Parties from time to time pursuant to a Service Order, in addition to Operational Services and Specialized Services.

Partnership ” means Tesoro Logistics LP, a Delaware limited partnership.

Partnership Change of Control ” means Tesoro Corporation ceases to Control the General Partner.

Partnership Seconded Employees ” has the meaning set forth in Section 2(a)(ii) .

Periods of Secondment ” has the meaning set forth in Section 2(d) .

Person ” means any individual, partnership, limited partnership, joint venture, corporation, limited liability company, limited liability partnership, trust, unincorporated organization or Governmental Authority or any department or agency thereof.

Receiving Party Personnel ” has the meaning set forth in Section 15(d) .

Seconded Employees ” means the Tesoro Seconded Employees and the Partnership Seconded Employees.

Seconded Employee Expenses ” has the meaning set forth in Section 3(b) .

Seconded Services ” shall mean the Logistics Services and/or the Tesoro Services, as applicable, performed by the applicable Seconded Employees.

Secondment ” means each assignment of any Seconded Employees to a Secondment Recipient in accordance with the terms of this Agreement.

Secondment Provider ” has the meaning set forth in Section 3(a) .

Secondment Recipient ” has the meaning set forth in Section 3(a) .

Service Orders ” shall mean documents to be executed by the Parties with respect to the terms and conditions of professional and Logistics Services or Tesoro Services that may be agreed upon from time to time.

Services Reimbursement ” has the meaning set forth in Section 3(a) .

Service Schedules ” has the meaning set forth in Section 2(b)(i) .

Specialized Services ” means services requiring professional or other highly skilled and trained employees, which are provided to directly support the applicable Assets and repairs, replacements, improvements and expansions thereto, including engineering, procurement, environmental, safety and similar services.

 

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TAC ” has the meaning set forth in the Preamble.

TAPC ” has the meaning set forth in the Preamble.

TCI ” has the meaning set forth in the Preamble.

Term ” shall have the meaning set forth in Section 6 .

Terminated Service ” has the meaning set forth in Section 9(a) .

Tesoro Assets ” means the assets owned by, leased by or necessary for the operation of the business, properties or assets of any entity in the Tesoro Group.

Tesoro Group ” has the meaning set forth in the Preamble.

Tesoro Group Indemnified Parties ” has the meaning set forth in Section 11(b) .

Tesoro Seconded Employees ” has the meaning set forth in Section 2(a)(i) .

Tesoro Services ” means the Operational Services, Specialized Services and Other Services with respect to the Tesoro Assets either as set forth on the Service Schedules or as agreed upon by the applicable Parties pursuant to a Service Order.

Third Amended and Restated Omnibus Agreement ” means that certain Third Amended and Restated Omnibus Agreement, entered into concurrently herewith, among Tesoro Corporation, TRMC, TCI, TAC, the General Partner and the Partnership, as such agreement may be amended, supplemented or restated from time to time.

THPPC ” has the meaning set forth in the Preamble.

TLNP ” has the meaning set forth in the Preamble.

TLO ” has the meaning set forth in the Preamble.

TLP ” has the meaning set forth in the Preamble.

TRMC ” has the meaning set forth in the Preamble.

 

2. SECONDED EMPLOYEES

(a) Employees .

(i) Subject to the terms of this Agreement, the Tesoro Group agrees to second the Tesoro Seconded Employees to the General Partner, and the General Partner agrees to accept the Secondment of the Tesoro Seconded Employees for the purpose of performing the Logistics Services. When used herein, the term “ Tesoro Seconded Employees ” means those employees of any member of the Tesoro Group who are engaged in providing the Logistics Services to the General Partner from time to time. The Tesoro Seconded Employees will remain at all times the employees of their respective employer in the Tesoro Group, but shall work under the direction, supervision and control of the General Partner when they are serving as Tesoro Seconded Employees.

 

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(ii) Subject to the terms of this Agreement, the General Partner agrees to second the Partnership Seconded Employees to the Tesoro Group, and the Tesoro Group agrees to accept the Secondment of the Partnership Seconded Employees for the purpose of performing the Tesoro Services. When used herein, the term “ Partnership Seconded Employees ” means those employees of the General Partner who are engaged in providing the Tesoro Services to the Tesoro Group from time to time. The Partnership Seconded Employees will remain at all times the employees of the General Partner, but shall work under the direction, supervision and control of the Tesoro Group when they are serving as Partnership Seconded Employees.

(b) Services .

(i) The Tesoro Seconded Employees shall provide to the Logistics Group the Operational Services more particularly described in Schedule A attached to this Agreement for each respective Facility (the “ Service Schedules ”), which Operational Services, the Parties agree, shall be performed under the direction and control of the General Partner. In addition, the Parties acknowledge and agree that some Operational Services listed on the Service Schedules may be expanded, discontinued or modified in scope. These items will be negotiated in good faith by the Parties and the Service Schedules will be revised in writing by the Parties as required. Further, Tesoro Seconded Employees will provide assistance to the Logistics Group from time to time with respect to Specialized Services and Other Services. The terms applicable to Logistics Services will be negotiated in good faith by the applicable Parties and will be reflected in individual Service Orders executed by the applicable Parties identifying the specific Logistics Services to be provided, the timing of those Logistics Services, the method of compensation for those Logistics Services and other terms that may be applicable to those Logistics Services, in addition to the provisions of this Agreement and the other agreements among the Parties.

(ii) The Partnership Seconded Employees shall provide to the Tesoro Group the Tesoro Services more particularly described in the Service Schedules for each respective Facility, which Tesoro Services, the Parties agree, shall be performed under the direction and control of the Tesoro Group. The Parties may from time to time, by mutual agreement, agree on various Tesoro Services to be provided by the Partnership Seconded Employees. The Tesoro Services shall be exclusive of the primary services being provided by TLO to the Tesoro Group under the commercial agreements executed by the applicable Parties and the administrative services being provided under the Third Amended and Restated Omnibus Agreement. Specific terms applicable to Tesoro Services will be negotiated in good faith by the applicable Parties and will be reflected in individual Service Orders executed by the applicable Parties identifying the specific Tesoro Services to be provided, the timing of those Tesoro Services, the method of compensation for those Tesoro Services and other terms that may be applicable to those Tesoro Services, in addition to the provisions of this Agreement and the other agreements among the Parties.

(c) Authority; Former Seconded Employees . Tesoro Seconded Employees shall have no authority or apparent authority to act on behalf of the Tesoro Group while performing Logistics Services under Secondment to the General Partner, and Partnership Seconded Employees shall have no authority or apparent authority to act on behalf of the General Partner while performing Tesoro Services under the Secondment to the Tesoro Group. Those rights and obligations of the Parties under this Agreement that relate to individuals while performing as Seconded Employees will survive after such individuals are no longer serving as Seconded Employees, to the extent necessary to enforce such rights and obligations.

 

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(d) Periods of Secondment . The Seconded Employees will be seconded hereunder from time to time to the General Partner or the Tesoro Group, respectively, starting on the date hereof and continuing, during the periods (and only during the periods) that the Seconded Employees are performing Seconded Services for the General Partner or the Tesoro Group (as applicable), until the earliest of:

(i) the end of the term of this Agreement;

(ii) such end date for any Seconded Services as may be mutually agreed by the applicable Parties;

(iii) a withdrawal, departure, resignation or termination of such Seconded Employees performing Seconded Services hereunder; and

(iv) a termination of Secondment of such Seconded Employees under Section 2(f) .

The Parties acknowledge that the Seconded Employees will also provide services to their primary employer, and the Parties intend that such Seconded Employees shall only be seconded to the General Partner or the Tesoro Group, as the case may be, during those specific times when the Seconded Employees are performing Seconded Services hereunder for the Secondment Recipient, and that services performed for such Seconded Employees’ primary employer shall not be Seconded Services covered by this Agreement. The specific periods of time that any Seconded Employee is seconded by his or her employer to the General Partner or the Tesoro Group and is providing Logistics Services or Tesoro Services, as the case may be, is referred to herein as the “ Periods of Secondment .”

(e) Change of Seconded Employees . If any Seconded Employee tenders his or her resignation to his or her employer, or if the employment of any Seconded Employee is terminated by his or her employer, the employer will promptly replace such Seconded Employee with another Seconded Employee of equivalent skill and training as required to perform the Seconded Services. Unless otherwise specifically agreed in writing by the Parties, the Parties acknowledge and agree that multiple employees may be tasked to provide Seconded Services during any Periods of Secondment, and that the individual employees who provide such Seconded Services may change or rotate their assignments, and that the employees actually providing such Seconded Services shall be Seconded Employees during the period of time that they are actually providing such Seconded Services for the Secondment Recipient. Unless otherwise specifically agreed in writing by the Parties, the Secondment Provider shall have the right to designate which of its employees shall provide Seconded Services to the Secondment Recipient during any Periods of Secondment. The identification of Seconded Employees who may provide Specialized Services or Other Services shall be addressed in individual Service Orders covering such Seconded Services.

(f) Termination of Secondment . Subject to any restrictions contained in any collective bargaining agreement to which any member of the Tesoro Group is a party, the General Partner will have the right to terminate the Secondment of any Tesoro Seconded Employee for any reason at any time. The Tesoro Group will have the right to terminate the Secondment of any Partnership Seconded Employee for any reason at any time. Upon the termination of any Seconded Employee’s Periods of Secondment, the primary employer of such Seconded Employee will be solely liable for any costs or expenses associated with the termination of the Secondment, except as otherwise specifically set forth in this Agreement.

 

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(g) Supervision of Tesoro Seconded Employees .

During each of the Periods of Secondment for Tesoro Seconded Employees, the General Partner shall:

(i) be ultimately and fully responsible for the work assignments of the Tesoro Seconded Employees during those times that the Tesoro Seconded Employees are performing Logistics Services for the Logistics Group hereunder, including supervision of normal work activities and performance consistent with the job functions associated with the Logistics Services;

(ii) set the hours of work and schedules in collaboration with the Tesoro Group; and

(iii) have the right to determine training that should be received by the Tesoro Seconded Employees in order for them to properly perform their duties as Seconded Employees performing Logistics Services.

In the course and scope of performing any Tesoro Seconded Employee’s job functions, the Tesoro Seconded Employees will report into the General Partner’s management structure, and will be under the management and control of the General Partner during the Periods of Secondment in which such Seconded Employees are providing Logistics Services.

(h) Supervision of Partnership Seconded Employees .

During each of the Periods of Secondment for Partnership Seconded Employees, the applicable Tesoro Group entity shall:

(i) be ultimately and fully responsible for the work assignments of the Partnership Seconded Employees during those times that the Partnership Seconded Employees are performing services for a member of the Tesoro Group hereunder, including supervision of their normal work activities and performance consistent with the job functions associated with the Tesoro Services;

(ii) set the hours of work and schedules in collaboration with the General Partner; and

(iii) have the right to determine training that should be received by the Partnership Seconded Employees in order for them to properly perform their duties as Seconded Employees performing Tesoro Services.

In the course and scope of performing any Partnership Seconded Employee’s job functions, the Partnership Seconded Employees will report into such entity’s management structure, and will be under the management and control of the applicable Tesoro Group entity during the Periods of Secondment in which such Seconded Employees are providing Tesoro Services.

(i) Seconded Employees Qualifications; Approval . The Tesoro Group and the General Partner will each provide such suitably qualified and experienced Seconded Employees as they are reasonably able to make available to the General Partner and the Tesoro Group, respectively. To the extent that the Seconded Employees are required to undergo any training or certification to perform Seconded Services, the Secondment Provider shall be responsible for ensuring that such Seconded Employees have obtained such training and certifications, unless otherwise specified in a Service Order. The General Partner will have the right to approve such Tesoro Seconded Employees and the applicable entity in the Tesoro Group will have the right to approve such Partnership Seconded Employees.

 

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(j) Workers Compensation . At all times, the Seconded Employee’s employer will maintain workers’ compensation or similar insurance (either through an insurance company or self-insured arrangement) applicable to the Seconded Employees, as required by applicable state and federal workers’ compensation and similar laws, and will name the General Partner or the applicable Tesoro Group entity, as the case may be, as an additional named insured under each such insurance policy

(k) Benefit Plans .

(i) The Parties acknowledge that non-union represented employees of the Tesoro Group and employees of the Logistics Group are currently covered by a single Benefit Plan, and this Agreement and the Secondment is not intended to modify any existing matters related to such Benefit Plan or the application to individual employees. To the extent that the Tesoro Group and the Logistics Group should have separate Benefit Plans for any employees, then the Secondment of the Tesoro Seconded Employees shall not cause the General Partner or any member of the Logistics Group to be deemed to be a participating employer in any Benefit Plan of any member of the Tesoro Group during the Periods of Secondment. Subject to the General Partner’s reimbursement obligations hereunder, the Tesoro Group shall remain responsible for all obligations and liabilities arising under the express terms of the Benefit Plans of any member of the Tesoro Group as the employer of the Tesoro Seconded Employees, and the Tesoro Seconded Employees will be covered under the Benefit Plans of any member of the Tesoro Group subject to and in accordance with their respective terms and conditions, as they may be amended from time to time. The Tesoro Group and their ERISA Affiliates may amend or terminate any Benefit Plan of any member of the Tesoro Group in whole or in part at any time (subject to the applicable provisions of any collective bargaining agreement covering Tesoro Seconded Employees, if any). To the extent that the Tesoro Group and the Logistics Group should have separate Benefit Plans for any employees, then the Secondment of the Tesoro Seconded Employees shall not cause the General Partner or any member of the Logistics Group to assume any Benefit Plan of any member of the Tesoro Group or to have any obligations, liabilities or rights arising under the express terms of the Benefit Plans of any member of the Tesoro Group, in each case except for cost reimbursement pursuant to this Agreement.

(ii) The Secondment of the Partnership Seconded Employees, shall not cause the Tesoro Group entities to be deemed to be a participating employer in any Benefit Plan of the General Partner during the Periods of Secondment. Subject to the Tesoro Group’s reimbursement obligations hereunder, the General Partner shall remain responsible for all obligations and liabilities arising under the express terms of the Benefit Plans of the General Partner as the employer of the Tesoro Seconded Employees, and the Partnership Seconded Employees will be covered under their Benefit Plans subject to and in accordance with their respective terms and conditions, as they may be amended from time to time. The General Partner and its ERISA Affiliates may amend or terminate any Benefit Plan of the General Partner in whole or in part at any time. The Secondment of the Tesoro Seconded Employees shall not cause the Tesoro Group to assume any Benefit Plan of the General Partner or to have any obligations, liabilities or rights arising under the express terms of the Benefit Plans of the General Partner, in each case except for cost reimbursement pursuant to this Agreement.

(l) Represented Employees . The Parties acknowledge that certain employees of the Tesoro Group who may provide Logistics Services and certain employees of the General Partner who may provide Seconded Services hereunder are represented under one of more collective bargaining agreements with members of the Tesoro Group. This Agreement and the Secondment hereunder is not intended to interfere with or modify those collective bargaining agreements or the rights of the union represented employees or other parties thereto. To the extent that Seconded Services are provided hereunder by union represented employees, the Parties acknowledge that the terms of the collective employment agreements shall apply to such Seconded Services to the same extent that they would apply if such services were not

 

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being performed as Seconded Services, and that for purposes of any matters arising under the collective bargaining agreements with union represented employees, the members of the Tesoro Group who are parties to such collective bargaining agreements shall have the right to represent the interests of the Parties hereto.

 

3. SERVICES REIMBURSEMENT

(a) Operational Expenses . The Party providing the Logistics Services or the Tesoro Services (the “ Secondment Provider ”), as the case may be, shall invoice the recipient of Logistics Services or Tesoro Services performed by the Seconded Employees (the “ Secondment Recipient ”) on or before the tenth (10 th ) Business Day after the end of each month during the Period of Secondment. The itemized invoice (in a form mutually agreed upon by the Parties) shall list the flat monthly fees for Operational Services, as provided under Section 3(e) and detail all other reimbursable Seconded Services, as provided under Section 3(b) that are incurred by the Secondment Recipient with respect to the Seconded Employees in connection with the performance of the applicable Seconded Services during the preceding month (the “ Services Reimbursement ”). The Secondment Recipient shall, within ten (10) calendar days of receipt, pay such invoice, except for any amounts therein being disputed in good faith by the Secondment Provider. Any amounts that the Secondment Provider has disputed in good faith and that are later determined by any court or other competent authority having jurisdiction, or by agreement of the Parties, to be owing from the Secondment Provider to the Secondment Recipient shall be paid in full within ten (10) days of such determination.

(b) Services Reimbursement . Subject to Sections 3(c) and 3(d) , the Services Reimbursement shall include reimbursement for costs and expenses incurred by the Secondment Provider for the Seconded Employees, including the following (collectively, the “ Seconded Employee Expenses ”):

(i) salary and wages (including payroll and withholding taxes associated therewith);

(ii) cash bonuses;

(iii) costs of matching and other employer 401(k) contributions;

(iv) costs of pension benefit accruals;

(v) any cash expense associated with any deferred compensation plan;

(vi) vacation, sick leave, personal leave, maternity leave and any other federal or state mandated leave;

(vii) healthcare coverage, including medical, dental, vision and prescription drug coverage;

(viii) flexible benefits plan, including medical care and dependent care expense reimbursement programs;

(ix) short-term disability benefits and long-term disability insurance premiums;

(x) workers’ compensation insurance;

 

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(xi) premiums for life insurance, accidental death and dismemberment insurance and any other insurance provided to the Seconded Employees;

(xii) the vesting of any long-term incentive awards, whether granted before or during the Period of Secondment;

(xiii) business travel expenses and other business expenses reimbursed in the normal course by the Secondment Provider, such as subscriptions to business-related periodicals and dues to professional business organizations;

(xiv) any other employee benefit or compensation arrangement customarily provided to all employees by the Secondment Provider for which the Secondment Provider incurs costs with respect to Seconded Employees; and

(xv) any sales taxes imposed upon the provision of any taxable services provided under this Agreement; provided , however, that, the General Partner and the Tesoro Group contemplate that the services provided pursuant to this Agreement are not taxable services for sales and use tax purposes.

(c) Adjustments Based on Periods of Secondment . It is understood and agreed that the Secondment Recipient shall be liable for Seconded Employee Expenses to the extent, and only to the extent, they are attributable to the Seconded Services performed by such Seconded Employee.

(d) Adjustments . The Seconded Employee’s employer will determine in good faith the percentage of each Seconded Employee’s time spent providing services to a Secondment Recipient (the “ Allocation Percentage”) . The amount of the Services Reimbursement payable with respect to each Seconded Employee shall be determined by multiplying the Seconded Employee Expenses for such Seconded Employee times the Allocation Percentage for such Seconded Employee; provided, however, that certain Second Employee Expenses shall not be allocated based on the Allocation Percentage but rather shall be allocated as follows:

(i) travel expenses and other specific identifiable expenses incurred with respect to and/or reimbursable to a Seconded Employee shall be paid by the Tesoro Group or the Logistics Group for whom the Seconded Services related to such expenses were performed, except that expenses related to activities that benefit both the Tesoro Group and the Logistics Group shall be shared in accordance with the Allocation Percentage (or such other allocation as may be agreed between the affected Parties); and

(ii) the taxes described in Section 3(b)(xv)  shall be reimbursable in full by the Secondment Recipient.

(e) Allocations for Operational Services . The Parties shall determine an average amount of costs and expenses expected to be incurred for performance of Operational Services, (whether Logistics Services and Tesoro Services) based upon historical employee time spent on performing such services, the level of employees performing such Operational Services, the compensation factors outlined in Sections 3(b) , (c)  and (d)  above, any anticipated changes in the nature and level of Operational Services to be performed and any other reasonable factors used to determine the correct amount of reimbursement to cover the Secondment Provider’s costs of providing such Operational Services. Such amounts shall be fixed as a flat monthly fee for performance of each type of Operational Services at each Facility, and such flat monthly fee shall be invoiced and paid as provided in Section 3(a) above. The initial reimbursable fees payable for such Operational Services shall be as provided on the attached Service Schedules, which fees shall be increased on July 1 of each year of the Term, commencing on July 1, 2015, by a percentage

 

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equal to the greater of zero or the positive change, if any, in the CPI-U (All Urban Consumers) for the prior calendar year, as reported by the U.S. Bureau of Labor Statistics, and rounded to the nearest one-tenth (1/10) of one percent (1%). The Parties shall periodically, but not less than annually, review the existing fee structure for each Operational Service, to determine if it accurately reflects the actual costs and expenses incurred by the Secondment Provider in performing such Operational Services, and the Parties shall negotiate in good faith and make such adjustments as are appropriate to cause the fees for each such Operational Service to reflect the Secondment Provider’s actual costs and expenses in providing the Operational Services. In the event that the level of Operational Services are increased during any month above the anticipated levels used to determine the flat monthly fee, or if the Secondment Provider incurs any travel expense or other specific identifiable reimbursable expenses associated with providing Operational Services that are not included in the factors used to calculate flat monthly fees, then the Parties shall negotiate in good faith to determine an additional amount that the Secondment Provider may charge during such month to cover its increased costs of providing Operational Services during such month.

(f) Where it is not reasonably practicable to determine the amount of any such cost or expense described above, the Tesoro Group and the General Partner shall mutually agree on the method of determining or estimating such cost or expense, which may include the application of an agreed percentage benefit load to a Seconded Employee’s salary and wages in order to value certain of the benefits listed above. If the actual amount of any cost or expense, once known, varies from the estimate used for billing purposes hereunder, the difference, once determined, shall be reflected and adjusted in such manner as may be agreed upon between the Tesoro Group and the General Partner at the time such variance is identified.

 

4. FACILITIES, EQUIPMENT AND OFFICES

(a) Materials, Equipment and Supplies . Either Party may supply or provide materials, equipment and supplies associated with Logistics Services or Tesoro Services. In addition, a Party may incur costs and expenses relating to permits, licenses, utilities, communications, consultants, security, and similar matters that are related to Logistics Services or Tesoro Services. The Parties shall establish procedures whereby the costs and expenses of providing such items are allocated to and paid by the Parties in accordance with the extent to which each Party realizes the benefit of each such item. If one Party incurs the costs and expenses for any such item that is used solely for the benefit of another Party, then the Party that pays for such item shall be entitled to reimbursement from the Party who received the benefit of such item. If any items benefit both the Tesoro Group and the Logistics Group, then the Group who incurs the costs and expenses associated with such items shall be entitled to reimbursement from the other Group in proportion to the benefits received by each Group from the incurrence of such costs and expenses. The Parties shall negotiate such allocations in good faith with respect to each such item at the time the reimbursement is determined. For items that are associated with Operational Expenses, the allocation may be included in the flat monthly fees reflected on the Service Schedules.

(b) Use of Offices, Facilities and Equipment . The Parties may agree, pursuant to a Service Order, to allow employees and contractors of one Group (the “ Licensee Group ”) to have access to and utilize certain offices, facilities and equipment (the “ Licensed Premises ”) of the other Group (the “ Licensor Group ”) for purposes of conducting Operational Services. These Operational Services may include both Seconded Services and other services that are performed by employees of the Licensee Group related to its own Assets. In the event that the Parties so agree pursuant to a Service Order, the employees and contractors of the Licensee Group shall have a license to access and use those offices, facilities and equipment. All such access to and use of the Licensed Premises shall be subject to all rules, policies and procedures of the Licensor Party regarding access and use of the Licensed Premises and adjacent areas by its own employees and contractors, including all reasonable security requirements

 

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applicable to accessing the premises and any systems, technologies, or assets of the Licensor Group. The Licensor Group shall have the right to exclude access to any employee or contractor of the Licensee Group who is in violation of such rules, policies and procedures. The Licensor Group shall have the right to designate on the Service Order, the specific areas, facilities and equipment that are within the Licensed Premises, to restrict access to and use of any areas, facilities and equipment that are not included within the Licensed Premises, and to designate specific routes for ingress and egress to the Licensed Premises. Unless otherwise specified on such Service Order, access to office space shall include access to common parking areas, restrooms and break areas that are utilized by employees of the Licensor Group occupying areas included within or immediately adjacent to the Licensed Premises, together with use of computer servers, telephone lines, other communication equipment, copiers and similar office equipment that serve the Licensed Premises. The Licensor Group may charge the Licensee Group a fee for providing such access in amount to be mutually agreed upon between the Parties pursuant to the applicable Service Order. The identification of the Licensed Premises, the fees to be charged for use of such Licensed Premises and any other special provisions or restrictions regarding use and access of the Licensed Premises shall be set forth in Services Orders entered into between the Parties.

 

5. BOOKS AND RECORDS

The Parties shall keep books of account and other records, in reasonable detail and in accordance with generally accepted accounting principles and industry standards, consistently applied, with respect to the provision of the Seconded Services and the fees charged, as well as costs and expenses for materials, equipment, supplies, communications, utilities and other charges that are charged by one Group to the other Group, including support for allocations. Allocations of Seconded Employee Expenses that are payable other than through flat monthly fees shall be documented by AFEs, Service Orders or other standard documentation to establish an Allocation Percentage and the amount of any reimbursable Seconded Employee Expenses. Books of account and other records shall be open for the Secondment Recipient’s inspection during normal business hours upon at least five (5) Business Days’ prior written notice for twelve (12) months following the end of the calendar year in which such Seconded Services were rendered. This inspection right will include the right of the Secondment Recipient to have its accountants or auditors review such books and records. If an audit reveals that the Secondment Recipient paid more than the applicable fees for any applicable audited period or service, the Secondment Provider shall reimburse the Secondment Recipient for any amounts overpaid together with interest at a rate equal to the prime rate of interest on the original due date published by The Wall Street Journal , accruing from the date paid by the Secondment Recipient to the date reimbursed by the Secondment Provider.

 

6. TERM; RENEWAL

This Agreement shall have a term beginning on July 1, 2014, and shall terminate on July 1, 2024 (the “ Initial Term ”). This Agreement may be extended by the Tesoro Group for up to two (2) renewal terms of five (5) years each (each, an “ Extension Period ,” and together with the Initial Term, the “ Term ”). To commence an Extension Period, the Tesoro Group shall provide written notice of its intent to the Logistics Group no less than ninety (90) days prior to the end of the Initial Term or the then-current Extension Period.

 

7. COVENANTS

(a) Access to Premises . In addition to the access to the Licensed Premises provided in Section 4 above, each Party shall give the other Parties reasonable access to its premises as may be required for the Seconded Employees to provide or receive the Seconded Services, as applicable, hereunder. Unless otherwise agreed to in writing by the Parties or in connection with use of the Licensed Premises, the Seconded Employees shall: (i) use the premises of the other Parties solely for the purpose of

 

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providing or receiving the Seconded Services and not to provide goods or services to or for the benefit of any third party or for any unlawful purpose; (ii) comply with all policies and procedures governing access to and use of such premises made known to such Party in advance, including all reasonable security requirements applicable to accessing the premises and any systems, technologies, or assets of the other Parties; (iii) instruct its employees and personnel, when visiting the premises, not to photograph or record, duplicate, remove, disclose, or transmit to a third party any of the other Parties’ Confidential Information, except as necessary to perform or receive the Seconded Services; and (iv) return such space to the other Parties in the same condition it was in prior to such Party’s use of such space, ordinary wear and tear excepted.

(b) Data Back Up and Security . The Parties shall maintain industry standard data back up and recovery procedures, as well as an industry standard disaster avoidance and recovery plan, in connection with all of its systems used in performing the Seconded Services. The Parties shall maintain and enforce physical, technical and logical security procedures with respect to the access and maintenance of any Confidential Information of the other Parties that is in the Secondment Provider’s possession, which procedures shall: (i) be at least equal to industry standards; (ii) be in full compliance with Applicable Law; and (iii) provide reasonably appropriate physical, technical and organizational safeguards against accidental or unlawful destruction, loss, alteration, unauthorized disclosure, theft or misuse.

(c) Taxes . The Secondment Recipient shall pay or cause to be paid all taxes, levies, royalties, assessments, licenses, fees, charges, surcharges and sums due of any nature whatsoever (other than income taxes, gross receipt taxes and similar taxes) imposed by any federal, state or local government that the Secondment Provider incurs on its behalf for the Seconded Services provided by the Seconded Employees under this Agreement. If the Secondment Provider is required to pay any of the foregoing, the Secondment Recipient shall promptly reimburse the Secondment Provider in accordance with the payment terms set forth in this Agreement.

 

8. STANDARD OF PERFORMANCE

The Parties shall cause the Seconded Employees shall perform the Seconded Services, as applicable, using at least the same level of care, quality, timeliness, skill and adherence to applicable industry standards, in providing the Seconded Services, as applicable, as such Parties do in providing the Seconded Services to such Party’s subsidiaries and Affiliates.

 

9. TERMINATION

(a) Termination for Convenience . Any specific Operational Service provided by Seconded Employees from the Service Schedules may be terminated by the Secondment Recipient (each such specific Operational Service that has been terminated by the Secondment Recipient, a “ Terminated Service ”) upon ninety (90) days’ prior written notice to the Secondment Provider.

(b) Termination for Default .

A Party shall be in default under this Agreement if:

(i) the Party materially breaches any provision of this Agreement and such breach is not cured within fifteen (15) Business Days after notice thereof (which notice shall describe such breach in reasonable detail) is received by such Party;

 

14


(ii) the Party (A) files a petition or otherwise commences, authorizes or acquiesces in the commencement of a proceeding or cause of action under any bankruptcy, insolvency, reorganization or similar Applicable Law, or has any such petition filed or commenced against it, (B) makes an assignment or any general arrangement for the benefit of creditors, (C) otherwise becomes bankrupt or insolvent (however evidenced) or (D) has a liquidator, administrator, receiver, trustee, conservator or similar official appointed with respect to it or any substantial portion of its property or assets; or

(iii) If any of the Parties is in default as described above, then the non-defaulting Party may: (A) terminate this Agreement upon notice to the defaulting Parties; (B) withhold any payments due to the defaulting Parties under this Agreement; and/or (C) pursue any other remedy at law or in equity.

(c) Effect of Termination . Upon expiration or termination of this Agreement, all rights and obligations of the Parties under this Agreement shall terminate; provided, however , that such termination shall not affect or excuse the performance of any Party (i) for any breach of this Agreement occurring prior to such termination, (ii) the payment of any amounts due but not yet payable under this Agreement, or (iii) under any of the following provisions of this Agreement that survive the termination of this Agreement indefinitely: Section 11 ; Section 15 ; and Section 16 . Upon expiration or termination of this Agreement or any Operational Service, each Party shall return to the other Party any equipment or other property or materials of such other Party (including but not limited to any materials containing Confidential Information) that are in the possession or control of such Party or any Seconded Employees (except to the extent they are required for use in connection with any non-terminated Operational Services provided by Seconded Employees).

 

10. RELATIONSHIP OF THE PARTIES AND TO OTHER AGREEMENTS

(a) This Agreement does not form a partnership or joint venture between the Parties. This Agreement does not make any member of the Tesoro Group an agent or a legal representative of any member of the Logistics Group or any member of the Logistics Group an agent or a legal representative of any member of the Tesoro Group. No member of the Tesoro Group shall assume or create any obligation, liability, or responsibility, expressed or implied, on behalf of or in the name of any member of the Logistics Group in connection with the transactions contemplated by this Agreement. No member of the Logistics Group shall assume or create any obligation, liability or responsibility, expressed or implied, on behalf of or in the name of any member of the Tesoro Group in connection with the transactions contemplated by this Agreement.

(b) Except for the Operational Services Agreement, this Agreement does not amend or supersede any other agreements between the Parties that may relate to reimbursement or indemnities for costs and expenses, including the Third Amended and Restated Omnibus Agreement and the various commercial agreements between the Parties.

 

11. INDEMNIFICATION

(a) Indemnification by the Tesoro Group . The Tesoro Group, jointly and severally, shall indemnify and hold harmless the Logistics Group, and the officers, directors, employees, agents and representatives of each member of the Logistics Group (collectively, the “ Logistics Group Indemnified Parties ”) from and against all Claims, and upon demand by the Logistics Group, shall protect and defend the Logistics Group Indemnified Parties from the same, alleged, asserted or suffered by or arising in favor of any Person, and shall pay any and all judgments or settlements of any kind or nature (to include interest) as well as court costs, reasonable attorneys’ fees and expenses, and any expenses incurred in

 

15


enforcing this indemnity provision (each a “ Loss ” and collectively, “ Losses ”), incurred by, imposed upon or rendered against one or more of the Logistics Group Indemnified Parties, whether based on contract, or tort, or pursuant to any statute, rule or regulation, and regardless of whether the Claims are foreseeable or unforeseeable, all to the extent that such Losses are in respect of or arise from (i) breaches by the Tesoro Group of this Agreement, or (ii) Claims by a third-party relating to (A) breaches by the Tesoro Group of this Agreement or (B) the Tesoro Group’s negligence, willful misconduct or violation of law in connection with the performance of the Logistics Services, PROVIDED THAT THE TESORO GROUP SHALL NOT BE OBLIGATED TO INDEMNIFY OR HOLD HARMLESS THE LOGISTICS GROUP INDEMNIFIED PARTIES FROM AND AGAINST ANY CLAIMS TO THE EXTENT THEY RESULT FROM THE BREACH OF CONTRACT, STRICT LIABILITY OR THE NEGLIGENT ACTS, ERRORS, OMISSIONS OR WILLFUL MISCONDUCT OF ANY LOGISTICS GROUP INDEMNIFIED PARTY. THE INDEMNITIES UNDER THIS SECTION 11(a) SHALL NOT APPLY TO CLAIMS OR LOSSES THAT ARE CAUSED BY ACTIONS OR OMISSIONS OF TESORO SECONDED EMPLOYEES WHILE ACTING IN THE COURSE OF SECONDMENT TO THE LOGISTICS GROUP.

(b) Indemnification by the Logistics Group . The Logistics Group shall indemnify and hold harmless the Tesoro Group, and the officers, directors, employees, agents and representatives of the Tesoro Group (collectively, the “ Tesoro Group Indemnified Parties ”) from and against all Claims, and upon demand by the Tesoro Group, shall protect and defend the Tesoro Group Indemnified Parties from the same, alleged, asserted or suffered by or arising in favor of any Person, and shall pay any and all Losses incurred by, imposed upon or rendered against one or more of the Tesoro Group Indemnified Parties, whether based on contract, or tort, or pursuant to any statute, rule or regulation, and regardless of whether the Claims are foreseeable or unforeseeable, all to the extent that such Losses are in respect of or arise from (i) breaches by the Logistics Group of this Agreement or (ii) Claims by a third-party relating to (A) breaches by the Logistics Group of this Agreement or (B) the Logistics Group’s negligence, willful misconduct or violation of law in connection with the performance of the Tesoro Services, PROVIDED THAT THE LOGISTICS GROUP SHALL NOT BE OBLIGATED TO INDEMNIFY OR HOLD HARMLESS THE TESORO GROUP INDEMNIFIED PARTIES FROM AND AGAINST ANY CLAIMS TO THE EXTENT THEY RESULT FROM THE BREACH OF CONTRACT, STRICT LIABILITY OR THE NEGLIGENT ACTS, ERRORS, OMISSIONS OR WILLFUL MISCONDUCT OF ANY TESORO GROUP INDEMNIFIED PARTY. THE INDEMNITIES UNDER THIS SECTION 11(b) SHALL NOT APPLY TO CLAIMS OR LOSSES THAT ARE CAUSED BY ACTIONS OR OMISSIONS OF LOGISTICS SECONDED EMPLOYEES WHILE ACTING IN THE COURSE OF SECONDMENT TO THE LOGISTICS GROUP.

(c) The indemnifying Parties agree that, notwithstanding anything to the contrary contained in Sections 11(a) and 11(b):

(i) the Secondment Recipient shall indemnify and hold harmless the Secondment Provider and its officers, directors, employees, agents and representatives from and against any and all Losses and Claims brought or raised by any individual who is, or at one time was, a Seconded Employee relating to any act or omission of the Secondment Recipient, its officers, directors, employees, agents or representatives, including, without limitation, workers’ compensation, discrimination, harassment, constructive dismissal, wages paid and hours worked, or any other employment-related Claim; and

(ii) the Secondment Provider shall indemnify and hold harmless the Secondment Recipient and its officers, directors, employees, agents and representatives from and against any and all Losses and Claims brought or raised by any individual who is, or at one time was, a Seconded Employee relating to any act or omission of the Secondment Provider, its officers, directors,

 

16


employees, agents or representatives, including, without limitation, workers’ compensation, discrimination, harassment, constructive dismissal, wages paid and hours worked, or any other employment-related Claim.

(d) Indemnification Procedure . The indemnified Party agrees that within a reasonable period of time after it becomes aware of facts giving rise to a Claim for indemnification under this Section 11 , it will provide notice thereof in writing to the indemnifying Party, specifying the nature of and specific basis for such Claim.

(i) The indemnifying Party shall have the right to control all aspects of the defense of (and any counterclaims with respect to) any Claims brought against the indemnified Party that are covered by the indemnification under this Section 11 , including, without limitation, the selection of counsel, determination of whether to appeal any decision of any court and the settling of any such Claim or any matter or any issues relating thereto; provided, however , that no such settlement shall be entered into without the consent of the indemnified Party unless it includes a full release of the indemnified Party from such Claim.

(ii) The indemnified Party agrees to cooperate fully with the indemnifying Party, with respect to all aspects of the defense of any Claims covered by the indemnification under this Section 11 including, without limitation, the prompt furnishing to the indemnifying Party of any correspondence or other notice relating thereto that the indemnified Party may receive, permitting the name of the indemnified Party to be utilized in connection with such defense, the making available to the indemnifying Party of any files, records or other information of the indemnified Party that the indemnifying Party considers relevant to such defense and the making available to the indemnifying Party of any employees of the indemnified Party; provided, however , that in connection therewith the indemnifying Party agrees to use reasonable efforts to minimize the impact thereof on the operations of the indemnified Party and further agrees to maintain the confidentiality of all files, records, and other information furnished by the indemnified Party pursuant to this Section 11(d) . In no event shall the obligation of the indemnified Party to cooperate with the indemnifying Party as set forth in the immediately preceding sentence be construed as imposing upon the indemnified Party an obligation to hire and pay for counsel in connection with the defense of any Claims covered by the indemnification set forth in this Section 11 ; provided, however , that the indemnified Party may, at its own option, cost and expense, hire and pay for counsel in connection with any such defense. The indemnifying Party agrees to keep any such counsel hired by the indemnified Party informed as to the status of any such defense, but the indemnifying Party shall have the right to retain sole control over such defense.

(iii) In determining the amount of any loss, cost, damage or expense for which the indemnified Party is entitled to indemnification under this Agreement, the gross amount of the indemnification will be reduced by (i) any insurance proceeds realized by the indemnified Party, and such correlative insurance benefit shall be net of any incremental insurance premium that becomes due and payable by the indemnified Party as a result of such Claim and (ii) all amounts recovered by the indemnified Party under contractual indemnities from third Persons.

(e) Limitation on Liability . Notwithstanding anything to the contrary contained herein, neither Party shall be liable or responsible to the other Party or such other Party’s Affiliates for any consequential, incidental, or punitive damages, or for loss of profits or revenues (collectively referred to as “special damages”) incurred by such Party or its Affiliates that arise out of or relate to this Agreement, regardless of whether any such Claim arises under or results from contract, tort, or strict liability; provided that the foregoing limitation is not intended and shall not affect special damages imposed in favor of unaffiliated Persons that are not Parties to this Agreement.

 

17


12. FORCE MAJEURE

(a) Notice . The Secondment Provider’s obligations under this Agreement may be temporarily suspended during the occurrence of, and for the entire duration of, a Force Majeure. As soon as possible upon the occurrence of a Force Majeure, the Secondment Provider shall provide the Secondment Recipient with written notice of the occurrence of such Force Majeure (a “ Force Majeure Notice ”). The Secondment Provider shall identify in such Force Majeure Notice the approximate length of time that it reasonably believes in good faith such Force Majeure shall continue. During the period of the Force Majeure event, the Seconded Employees shall be excused from the performance with respect to its obligations related to the provision of the applicable Seconded Service(s) hereunder, but only to the extent that such Force Majeure event actually precludes such Seconded Employees from providing each Seconded Service. The Secondment Recipient shall not be required to pay fees for any affected Seconded Services during the period while its performance is precluded by the Force Majeure. The Secondment Provider shall use commercially reasonable efforts to mitigate and to overcome the effects of such event or circumstances and shall resume performance of its obligations as soon as practicable and shall continue to perform all Seconded Services that are not precluded by the Force Majeure.

(b) Continuation . If a Force Majeure preventing performance of any of the Seconded Services hereunder continues for twelve (12) consecutive months or more, either Party shall have the right to terminate its obligations under this Agreement with respect to the applicable Seconded Service suspended by such Force Majeure.

 

13. ASSIGNMENT; PARTNERSHIP CHANGE OF CONTROL

(a) Assignment . Neither the Logistics Group nor the Tesoro Group may assign this Agreement without the prior written consent of the other Party; provided, however, that either Party may subcontract any of the Seconded Services provided hereunder so long as such Seconded Services continue to be provided in a manner consistent with past practices and industry standards and in accordance with Section 8 above. Notwithstanding the foregoing, the Logistics Group shall be permitted to make a collateral assignment of this Agreement solely to secure working capital financing for TLO. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns.

(b) Partnership Change of Control . The Tesoro Group may terminate this Agreement upon a Partnership Change of Control. The Logistics Group shall provide the Tesoro Group with notice of any Partnership Change of Control at least sixty (60) days prior to the effective date thereof.

 

14. NOTICE

All notices, requests, demands, and other communications hereunder will be in writing and will be deemed to have been duly given: (i) if by transmission by hand delivery, when delivered; (ii) if mailed via the official governmental mail system, five (5) Business Days after mailing, provided said notice is sent first class, postage pre-paid, via certified or registered mail, with a return receipt requested; (iii) if mailed by an internationally recognized overnight express mail service such as Federal Express, UPS, or DHL Worldwide, one (1) Business Day after deposit therewith prepaid; or (iv) by e-mail one (1) Business Day after delivery with receipt confirmed. All notices will be addressed to the Parties at the respective addresses as follows:

If to the Tesoro Group, to:

c/o Tesoro Refining & Marketing Company LLC

19100 Ridgewood Parkway

San Antonio, Texas 78259

 

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For legal notices :

Attention: Charles A. Cavallo, III, Managing Attorney - Commercial

phone: (210) 626-4045

email: Charles.A.Cavallo@tsocorp.com

For all other notices and communications :

Attention: Brian S. Coffman

phone: (210) 626-6861

email: Brian.S.Coffman@tsocorp.com

If to the Logistics Group, to:

c/o Tesoro Logistics Operations LLC

19100 Ridgewood Parkway

San Antonio, Texas 78259

For legal notices :

Attention: Charles S. Parrish, General Counsel

phone: (210) 626-4280

email: Charles.S.Parrish@tsocorp.com

For all other notices and communications :

Attention: Rick D. Weyen, Vice President, Logistics

phone: (210) 626-4379

email: Rick.D.Weyen@tsocorp.com

or to such other address or to such other Person as either Party will have last designated by notice to the other Party.

 

15. CONFIDENTIAL INFORMATION

(a) Obligations . Each Party shall use reasonable efforts to retain the other Parties’ Confidential Information in confidence and not disclose the same to any third party nor use the same, except as authorized by the disclosing Party in writing or as expressly permitted in this Section 15 . Each Party further agrees to take the same care with the other Party’s Confidential Information as it does with its own, but in no event less than a reasonable degree of care. Excepted from these obligations of confidence and non-use is that information which:

(i) is available, or becomes available, to the general public without fault of the receiving Party;

(ii) was in the possession of the receiving Party on a non-confidential basis prior to receipt of the same from the disclosing Party (it being understood, for the avoidance of doubt, that this exception shall not apply to information of the Logistics Group that was in the possession of the Tesoro Group or any of its Affiliates as a result of their ownership or operation of the Logistics Assets prior to the date hereof);

 

19


(iii) is obtained by the receiving Party without an obligation of confidence from a third party who is rightfully in possession of such information and, to the receiving Party’s knowledge, is under no obligation of confidentiality to the disclosing Party; or

(iv) is independently developed by the receiving Party without reference to or use of the disclosing Party’s Confidential Information.

For the purpose of this Section 15 , a specific item of Confidential Information shall not be deemed to be within the foregoing exceptions merely because it is embraced by, or underlies, more general information in the public domain or in the possession of the receiving Party.

(b) Required Disclosure . Notwithstanding Section 15(a) above, if the receiving Party becomes legally compelled to disclose the Confidential Information by a court, Governmental Authority or Applicable Law, or is required to disclose by the listing standards of the New York Stock Exchange, any of the disclosing Party’s Confidential Information, the receiving Party shall promptly advise the disclosing Party of such requirement to disclose Confidential Information as soon as the receiving Party becomes aware that such a requirement to disclose might become effective, in order that, where possible, the disclosing Party may seek a protective order or such other remedy as the disclosing Party may consider appropriate in the circumstances. The receiving Party shall disclose only that portion of the disclosing Party’s Confidential Information that it is required to disclose and shall cooperate with the disclosing Party in allowing the disclosing Party to obtain such protective order or other relief.

(c) Return of Information . Upon written request by the disclosing Party, all of the disclosing Party’s Confidential Information in whatever form shall be returned to the disclosing Party upon termination of this Agreement or destroyed with destruction certified by the receiving Party, without the receiving Party retaining copies thereof except that one copy of all such Confidential Information may be retained by a Party’s legal department solely to the extent that such Party is required to keep a copy of such Confidential Information pursuant to Applicable Law and the receiving Party shall be entitled to retain any Confidential Information in the electronic form or stored on automatic computer back-up archiving systems during the period such backup or archived materials are retained under such Party’s customary procedures and policies; provided , however , that any Confidential Information retained by the receiving Party shall be maintained subject to confidentiality pursuant to the terms of this Section 15 , and such archived or back-up Confidential Information shall not be accessed except as required by Applicable Law.

(d) Receiving Party Personnel . The receiving Party will limit access to the Confidential Information of the disclosing Party to those of its employees, attorneys and contractors that have a need to know such information in order for the receiving Party to exercise or perform its rights and obligations under this Agreement (the “ Receiving Party Personnel ”). The Receiving Party Personnel who have access to any Confidential Information of the disclosing Party will be made aware of the confidentiality provision of this Agreement, and will be required to abide by the terms thereof. Seconded Employees who receive or access any Confidential Information of a Secondment Recipient shall be bound to protect such Confidential Information to the same extent and in the same manner as if they received or accessed such Confidential Information as direct employees of the Secondment Recipient, and they shall be representatives of the Secondment Recipient with respect to use or disclosure of the Confidential Information so received or accessed. Any third party contractors that are given access to Confidential Information of a disclosing Party pursuant to the terms hereof shall be required to sign a written agreement pursuant to which such Receiving Party Personnel agree to be bound by the provisions of this Agreement, which written agreement will expressly state that it is enforceable against such Receiving Party Personnel by the disclosing Party.

 

20


(e) Survival . The obligation of confidentiality under this Section 15 shall survive the termination of this Agreement for a period of two (2) years.

 

16. MISCELLANEOUS

(a) Modification; Waiver . This Agreement may be terminated, amended or modified only by a written instrument executed by the Parties. Any of the terms and conditions of this Agreement may be waived in writing at any time by the Party entitled to the benefits thereof. No waiver of any of the terms and conditions of this Agreement, or any breach thereof, will be effective unless in writing signed by a duly authorized individual on behalf of the Party against which the waiver is sought to be enforced. No waiver of any term or condition or of any breach of this Agreement will be deemed or will constitute a waiver of any other term or condition or of any later breach (whether or not similar), nor will such waiver constitute a continuing waiver unless otherwise expressly provided.

(b) Integration . This Agreement, together with the Service Orders, Service Schedules and the other agreements executed on the date hereof in connection with the other documents executed among the Parties on the date of the Third Amended and Restated Omnibus Agreement, constitutes the entire agreement among the Parties pertaining to the subject matter hereof and supersedes all prior agreements and understandings of the Parties in connection therewith. In the event of a conflict of provisions of this Agreement and the Third Amended and Restated Omnibus Agreement or amendments thereto, the provisions of the Third Amended and Restated Omnibus Agreement, as it may be amended, shall prevail with respect to issues related to the contribution of the assets described therein, but not with respect to the Seconded Services provided as set forth in this Agreement.

(c) Construction and Interpretation . In interpreting this Agreement, unless the context expressly requires otherwise, all of the following apply to the interpretation of this Agreement:

(i) Preparation of this Agreement has been a joint effort of the Parties and the resulting Agreement against one of the Parties as the drafting Party.

(ii) Plural and singular words each include the other.

(iii) Masculine, feminine and neutral genders each include the others.

(iv) The word “or” is not exclusive and includes “and/or.”

(v) The words “includes” and “including” are not limiting.

(vi) References to the Parties include their respective successors and permitted assignees.

(vii) The headings in this Agreement are included for convenience and do not affect the construction or interpretation of any provision of, or the rights or obligations of a Party under, this Agreement.

(d) Governing Law; Jurisdiction . This Agreement shall be governed by the laws of the State of Texas without giving effect to its conflict of laws principles. Each Party hereby irrevocably submits to the exclusive jurisdiction of any federal court of competent jurisdiction situated in the United States

 

21


District Court for the Western District of Texas, San Antonio Division, or if such federal court declines to exercise or does not have jurisdiction, in the district court of Bexar County, Texas. The Parties expressly and irrevocably submit to the jurisdiction of said Courts and irrevocably waive any objection which they may now or hereafter have to the laying of venue of any action, suit or proceeding arising out of or relating to this Agreement brought in such Courts, irrevocably waive any claim that any such action, suit or proceeding brought in any such Court has been brought in an inconvenient forum and further irrevocably waive the right to object, with respect to such Claim, action, suit or proceeding brought in any such Court, that such Court does not have jurisdiction over such Party. The Parties hereby irrevocably consent to the service of process by registered mail, postage prepaid, or by personal service within or without the State of Texas. Nothing contained herein shall affect the right to serve process in any manner permitted by law.

(e) Counterparts . This Agreement may be executed in one or more counterparts (including by facsimile or portable document format (pdf)) for the convenience of the Parties hereto, each of which counterparts will be deemed an original, but all of which counterparts together will constitute one and the same agreement.

(f) Severability . Whenever possible, each provision of this Agreement will be interpreted in such manner as to be valid and effective under Applicable Law, but if any provision of this Agreement or the application of any such provision to any person or circumstance will be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision hereof, and the Parties will negotiate in good faith with a view to substitute for such provision a suitable and equitable solution in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid, illegal or unenforceable provision.

(g) No Third Party Beneficiaries . Except as specifically provided herein, including as set forth in Section 11 , it is expressly understood that the provisions of this Agreement do not impart enforceable rights in anyone who is not a Party or successor or permitted assignee of a Party.

(h) WAIVER OF JURY TRIAL . EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY PROCEEDINGS RELATING TO THIS AGREEMENT OR ANY PERFORMANCE OR FAILURE TO PERFORM OF ANY OBLIGATION HEREUNDER.

(i) Schedules and Amendment of Schedules . Each of the Schedules attached hereto and referred to herein is hereby incorporated in and made a part of this Agreement as if set forth in full herein. The Parties may amend and restate the Schedules at any time without otherwise amending or restating this Agreement by the execution by all of the Parties of a cover page to the amended Schedules in the form attached hereto as Exhibit A . Such amended and restated Schedules shall replace the prior Schedules as of the date of execution of the cover page and shall be incorporated by reference into this Agreement for all purposes.

(j) Operational Services Agreement . This Agreement supersedes the Operational Services Agreement in its entirety and the Parties agree that the terms and provisions of this Agreement replace the terms and provisions of the Operational Services Agreement, which is no longer in effect, as of the date hereof. Any references in any other agreements between the Parties and any of their Affiliates that reference the Operational Services Agreement shall be deemed to refer to the Secondment Agreement as its successor.

[Signatures of the Parties follow on the next page.]

 

22


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

 

TESORO COMPANIES, INC.     TESORO LOGISTICS GP, LLC
By:  

/s/ G. Scott Spendlove

    By:  

/s/ Phillip M. Anderson

  G. Scott Spendlove       Phillip M. Anderson
  Senior Vice President and Chief Financial Officer       President
TESORO REFINING & MARKETING COMPANY LLC     TESORO LOGISTICS OPERATIONS LLC
By:  

/s/ G. Scott Spendlove

    By:  

/s/ Phillip M. Anderson

  G. Scott Spendlove       Phillip M. Anderson
  Senior Vice President and Chief Financial Officer       President
TESORO ALASKA COMPANY LLC     TESORO HIGH PLAINS PIPELINE COMPANY LLC
By:  

/s/ G. Scott Spendlove

    By:  

/s/ Phillip M. Anderson

  G. Scott Spendlove       Phillip M. Anderson
  Senior Vice President and Chief Financial Officer       President
TESORO ALASKA PIPELINE COMPANY LLC     TESORO LOGISTICS PIPELINES LLC
By:  

/s/ G. Scott Spendlove

    By:  

/s/ Phillip M. Anderson

  G. Scott Spendlove       Phillip M. Anderson
  Senior Vice President and Chief Financial Officer       President
      TESORO LOGISTICS NORTHWEST PIPELINE LLC
      By:  

/s/ Phillip M. Anderson

        Phillip M. Anderson
        President

Signature Page to Secondment and Services Agreement


SCHEDULE A-1 to A-32

SERVICE SCHEDULES

See below

Schedule A

Service Schedules


Schedule A-1

Mandan Rack, North Dakota

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

  Fees     Categories of
Seconded
Employees
  Activities of Seconded Employees

Communications

     

Electricity

  $ 32,342       

Environmental Compliance Maintenance

     

Facility Maintenance

     

Fire and Safety

     

Natural Gas

     

Water

     

Wastewater

     

Personnel Support – Operations, Supply & Trading, Marketing, Security and Maintenance

  $ 163,670       
 

 

 

     

Total

  $ 196,012       
 

 

 

     

 

Schedule A-1

Service Schedules


Schedule A-2

Anchorage Terminal, Alaska

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

   Fees    Categories of Seconded Employees

Communications

     

Environmental Compliance Maintenance

     

Facility Maintenance

     

Fire and Safety

     

 

Schedule A-2

Service Schedules


Schedule A-3

Salt Lake City Rack, Utah

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

   Fees    Categories of Seconded
Employees

Communications

     

Environmental Compliance Maintenance

     

Facility Maintenance

     

Fire and Safety

     

Plant Air

     

Steam

     

Water

     

Wastewater

     

 

Schedule A-3

Service Schedules


Schedule A-4

Salt Lake City Storage Facility, Utah

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

   Fees    Categories of Seconded
Employees
   Activities of Seconded Employees

Communications

        

Electricity

        

Environmental Compliance Maintenance

        

Facility Maintenance

        

Fire and Safety

        

Water

        

Wastewater

        

Unless otherwise noted below, the Partnership Seconded Employees will provide the following Tesoro Services to the Tesoro Group in accordance with Section 2 of the Agreement:

 

Service

  Fees     Categories of Seconded
Employees
  Activities of Seconded Employees

Partnership Seconded Employees to Tesoro Group (Personnel Support – Maintenance and Operations)

  $ 61,736 (annually   Operator   Operational support
provided for the SLC
remote tank farm
(TRMC).
 

 

 

     

Total

  $ 61,736       
 

 

 

     

 

Schedule A-4

Service Schedules


Schedule A-5

Vancouver Terminal, Washington

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

   Fees    Categories of Seconded
Employees

Communications

     

Environmental Compliance Maintenance

     

Facility Maintenance

     

Fire and Safety

     

 

Schedule A-5

Service Schedules


Schedule A-6

Boise Terminal, Idaho

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

   Fees    Categories of Seconded
Employees

Communications

     

Environmental Compliance Maintenance

     

Facility Maintenance

     

Fire and Safety

     

 

Schedule A-6

Service Schedules


Schedule A-7

Burley Terminal, Idaho

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

   Fees    Categories of Seconded
Employees

Communications

     

Environmental Compliance Maintenance

     

Facility Maintenance

     

Fire and Safety

     

Water

     

Wastewater

     

 

Schedule A-7

Service Schedules


Schedule A-8

Stockton Terminal, California

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

   Fees    Categories of Seconded
Employees

Communications

     

Environmental Compliance Maintenance

     

Facility Maintenance

     

Fire and Safety

     

Wastewater

     

 

Schedule A-8

Service Schedules


Schedule A-9

Wilmington Terminal, California

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

   Fees      Categories of Seconded
Employees
   Activities of Seconded Employees

Communications

        

Electricity

        

Environmental Compliance Maintenance

        

Facility Maintenance

        

Fire and Safety

        

Water

        

Wastewater

        

Tesoro Seconded Employee to Logistics Group

   $ 51,447       Sr. Project Engineer    Creation and review of
project documentation
  

 

 

       

Total

   $ 51,447         
  

 

 

       

 

Schedule A-9

Service Schedules


Schedule A-10

Salt Lake City Pipelines, Utah

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

   Fees    Categories of Seconded
Employees

Communications

     

Environmental Compliance Maintenance

     

Facility Maintenance

     

Fire and Safety

     

Water

     

Wastewater

     

 

Schedule A-10

Service Schedules


Schedule A-11

High Plains Pipeline System, North Dakota and Montana

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

   Fees    Categories of Seconded
Employees

Communications

     

Environmental Compliance Maintenance

     

Facility Maintenance

     

Fire and Safety

     

 

Schedule A-11

Service Schedules


Schedule A-12

Amorco Terminal, Suisan Bay, California

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

  Fees     Categories of Seconded
Employees
 

Activities of Seconded Employees

Booming

  $ 190,268       

Communications

     

Environmental Compliance Maintenance

     

Facility Maintenance

     

Fire and Safety

     

General Security

     

Internal Oil Spill Response Drill

  $ 11,967       

Personnel Support

     

Programmable Logic Control and Digital Control System

     

Routine Engineering Support

     

Routine support and repair of fiber optic line

     

Security at site of Wharf and Tankage

  $ 253,691       

Software Services

     

Wastewater Handling

     

 

Schedule A-12

Service Schedules


Service

  Fees     Categories of Seconded
Employees
 

Activities of Seconded Employees

Tesoro Seconded Employees to Logistics Group

  $ 740,729      Gas Rack Operator B

Tank Car Operator B

LPG -HLPR Operator B
LPG B Operator

LPG A Operator

Operator D (Over 6 Months)
Operator D (0-6 Months)

 

Locomotive Engineer – moves groups of tank cars on and off track

 

Track Switchman – works with Engineer and operates tank switches to direct tank car placement

 

Avon Wharf tram operator – drives tram back and forth between the dock and Land’s End

 

Ship Tie-Up and Release –Assists TPIC in tying up and releasing vessels at either Amorco or Avon

 

Wharf Helper – monitors the hoses and ship positions while cargo operations are underway at Avon and Amorco Wharves

 

 

 

     

Total

  $ 1,196,655       
 

 

 

     

 

Schedule A-12

Service Schedules


Schedule A-13

Long Beach Terminal, Port of Long Beach, California

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

   Fees      Categories of Seconded
Employees
  

Activities of Seconded Employees

Communications

        

Environmental Compliance Maintenance

        

Facility Maintenance

        

Fire and Safety

        

General Security

        

Tesoro Seconded Employee to Logistics Group

   $ 29,351       Fire Marshall    Review fire safety issues, processes and procedures

Programmable Logic Control and Digital Control System

        

Routine Engineering Support

        

Routine support and repair of fiber optic line

        

Software Services

        

Wastewater Handling

        

Wharf Support Personnel

        
  

 

 

       

Total

   $ 29,351         
  

 

 

       

 

Schedule A-13

Service Schedules


Note that the following services shall be direct billed to TLO from third parties and shall not be part of the Agreement:

 

  a) Electricity (SoCal Edison);

 

  b) Gas (City of Long Beach);

 

  c) Water (Long Beach Water);

 

  d) Right-of-Way Payments (SoCal Edison); and

 

  e) Outside services (e.g., Environmental and Engineering Consulting) through direct bill work orders.

 

Schedule A-13

Service Schedules


Schedule A-14

Anacortes Rail Facility, Anacortes, Washington

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

   Fees     Categories of Seconded
Employees

Communications

    

Environmental Compliance Maintenance

    

Facility Maintenance

    

Fire and Safety

    

General Security

    

Personnel Support

    

Programmable Logic Control and Digital Control System

    

Routine Engineering Support

    

Routine support and repair of fiber optic line

    

Software Services

    

Wastewater Handling (Anacortes Refinery)

    

Electricity (PSE)

   $ 365,273     

Water (City of Anacortes, including potable, non-potable and fire water)

    
  

 

 

   

Total

   $ 365,273  
  

 

 

   

 

* This amount is applicable until separate metering is installed pursuant to the ground lease executed in connection with the Contribution, Conveyance and Assumption Agreement related to the Anacortes Rail Facility.

 

Schedule A-14

Service Schedules


Note that the following services shall be direct billed to TLO from third parties and shall not be part of the Agreement: Outside services (e.g., Environmental and Engineering Consulting) through direct bill work orders.

 

Schedule A-14

Service Schedules


Schedule A-15

San Diego Terminal

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

   Fees    Categories of Seconded
Employees

Fire and Safety

     

Wastewater Handling (occasional use of the refinery vacuum truck and refinery processing of terminal wastewater)

     

Unless otherwise noted below, the Partnership Seconded Employees will provide the following Tesoro Services to the Tesoro Group in accordance with Section 2 of the Agreement:

 

Service

   Fees    Categories of Seconded
Employees

Personnel Support (Management support provided from Partnership Seconded Employees to Tesoro Group to support fleet operations)

     

Note that the following services shall be direct billed to TLO from third parties and shall not be part of this Agreement:

 

  a) Electricity: SDG&E

 

  b) Gas: SDG&E

 

  c) Water & Sewer: City of San Diego

 

  d) Telephone: Sprint

 

Schedule A-15

Service Schedules


Schedule A-16

Colton Terminal

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

   Fees    Categories of Seconded
Employees

Fire and Safety

     

Wastewater Handling (occasional use of the refinery vacuum truck and refinery processing of terminal wastewater)

     

Unless otherwise noted below, the Partnership Seconded Employees will provide the following Tesoro Services to the Tesoro Group in accordance with Section 2 of the Agreement:

 

Service

   Fees    Categories of Seconded
Employees

Personnel Support (Management support provided from Partnership Seconded Employees to Tesoro Group to support fleet operations)

     

Note that the following services shall be direct billed to TLO from third parties and shall not be part of this Agreement:

 

  a) Electricity: Southern California Edison

 

  b) Water: West Valley Water District Sewage/ - City of Rialto

 

  c) Telephone: AT&T

 

Schedule A-16

Service Schedules


Schedule A-17

Hathaway Terminal

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

   Fees    Categories of Seconded
Employees

Fire and Safety

     

Wastewater Handling (occasional use of the refinery vacuum truck and refinery processing of terminal wastewater)

     

Note that the following services shall be direct billed to TLO from third parties and shall not be part of this Agreement:

 

  a) Electricity: Southern California Edison

 

  b) Gas: Southern California Gas Co.

 

  c) Telephone: Verizon & AT&T

 

Schedule A-17

Service Schedules


Schedule A-18

Hynes Terminal

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

   Fees    Categories of Seconded
Employees

Fire and Safety

     

Wastewater Handling (occasional use of the refinery vacuum truck and refinery processing of terminal wastewater)

     

Note that the following services shall be direct billed to TLO from third parties and shall not be part of this Agreement:

 

  a) Electricity: Southern California Edison

 

  b) Gas: Southern California Gas Co.

 

Schedule A-18

Service Schedules


Schedule A-19

Vinvale Terminal

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

   Fees    Categories of Seconded
Employees

Fire and Safety

     

Wastewater Handling (occasional use of the refinery vacuum truck and refinery processing of terminal wastewater)

     

Note that the following services shall be direct billed to TLO from third parties and shall not be part of this Agreement:

 

  a) Electricity: Southern California Edison

 

  b) Gas: Southern California Gas Co.

 

  c) Water/Sewer: City of South Gate

 

  d) Telephone: Verizon/AT&T

 

Schedule A-19

Service Schedules


Schedule A-20

Carson Crude Terminal

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

   Fees    Categories of Seconded
Employees

Fire and Safety

     

Wastewater Handling (occasional use of the refinery vacuum truck and refinery processing of terminal wastewater)

     

Note that the following services shall be direct billed to TLO from third parties and shall not be part of this Agreement:

 

  a) Electricity: Southern California Edison

 

Schedule A-20

Service Schedules


Schedule A-21

City of Los Angeles, Port of Long Beach, Berth 121

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

   Fees    Categories of Seconded
Employees

Fire and Safety

     

Wastewater Handling (occasional use of the refinery vacuum truck and refinery processing of terminal wastewater)

     

 

Schedule A-21

Service Schedules


Schedule A-22

City of Los Angeles, Port of Long Beach, Terminal 2 and associated tank farms

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

   Fees    Categories of Seconded
Employees

Fire and Safety

     

Wastewater Handling (occasional use of the refinery vacuum truck and refinery processing of terminal wastewater)

     

 

Schedule A-22

Service Schedules


Schedule A-23

Storage facilities at City of Los Angeles, Port of Long Beach, Terminal 3

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

   Fees    Categories of Seconded
Employees

Fire and Safety

     

Wastewater Handling (occasional use of the refinery vacuum truck and refinery processing of terminal wastewater)

     

 

Schedule A-23

Service Schedules


Schedule A-24

Tesoro SoCal Pipeline System

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

   Fees    Categories of Seconded
Employees

Fire and Safety

     

Wastewater Handling (occasional use of the refinery vacuum truck and refinery processing of terminal wastewater)

     

 

Schedule A-24

Service Schedules


Schedule A-25

Carson Products Terminal

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

   Fees    Categories of Seconded
Employees

Fire and Safety

     

General Security

     

Wastewater Handling (occasional use of the refinery vacuum truck and refinery processing of terminal wastewater)

     

 

Schedule A-25

Service Schedules


Schedule A-26

Coke Handling Warehouse

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

   Fees    Categories of Seconded
Employees

Fire and Safety

     

General Security

     

Wastewater Handling (removal of runoff from retention locations, use of the refinery vacuum truck as needed and disposal according to documented procedures)

     

 

Schedule A-26

Service Schedules


Schedule A-27

Carson Overhead Support

Unless otherwise noted, the Partnership Seconded Employees will provide the following Tesoro Services to the Tesoro Group in accordance with Section 2 of the Agreement:

 

Service

   Fees    Categories of Seconded
Employees

Environmental, Health and Safety Management Support (in support of retail fleet and transportation business)

     

Planning and Optimization Management Support (in support of retail fleet and transportation business)

     

Other Fleet Management Support

     

 

Schedule A-27

Service Schedules


Schedule A-28

Martinez Terminal and Rail Facility

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

  Fees     Categories of Seconded
Employees
 

Activities of Seconded Employees

Electricity

  $ 190,000       

Water

     

Communications

     

General Security

  $ 105,000       

Fire and Safety

     

Wastewater Handling

     

Tesoro Seconded Employees to Logistics Group

  $ 290,051      Operator Helper Trainee
(0-12 Months); (24-36
Months); (over 36
Months)
 

Truck and Trailer –in charge of incoming propane stream from refinery and loading propane trucks

 

Tankcars –in charges of loading/unloading tankcars and tracking movements of the two propylene tanks 646/7

 

Gas Rack – in charge of unloading ethanol and biodiesel trucks and certifying drivers

 

 

 

     

Total

  $ 585,051       
 

 

 

     

Unless otherwise noted below, the Partnership Seconded Employees will provide the following Tesoro Services to the Tesoro Group in accordance with Section 2 of the Agreement.

 

Service

  Fees     Categories of Seconded
Employees
 

Activities of Seconded Employees

Partnership Seconded Employees to Tesoro Group

  $ 1,352,006      Gas Rack Operator B
Tank Car Operator B

LPG - HLPR Operator B

LPG B Operator

LPG A Operator
Operator D (Over 6
Months)

 

Locomotive Engineer – moves groups of tank cars on and off track

 

Track Switchman – works with Engineer and operates tank switches to direct tank car placement

 

Avon Wharf tram operator – drives tram back and forth between the dock and Land’s End

 

Schedule A-28

Service Schedules


Service

  Fees     Categories of Seconded
Employees
 

Activities of Seconded Employees

    Operator D
(0-6 Months)
 

Ship Tie-Up and Release –Assists TPIC in tying up and releasing vessels at either Amorco or Avon

 

Wharf Helper – monitors the hoses and ship positions while cargo operations are underway at Avon and Amorco Wharves

 

 

 

     

Total

  $ 1,352,006       
 

 

 

     

 

Schedule A-28

Service Schedules


Schedule A-29

Anacortes Truck and Propane Terminal

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

  Fees     Categories of Seconded
Employees
 

Activities of Seconded Employees

Electricity

  $ 60,000       

Water

     

Communications

     

General Security

  $ 100,000       

Fire and Safety

     

Wastewater Handling

     

Tesoro Seconded Employees to Logistics Group

     
  $ 411,923      Operator 1 – Loader/
Gauger on Tank Car
Rack (TCR):
  Does all loading and unloading of tank cars.
  $ 47,557      Operator 1 – Asphalt   Responds to truck rack as needed for alarms, bill of lading, and operational problems
  $ 102,437      Operator 1 Special
Logistics Board
Operator:
  Monitors shore tanks as part of board duties including: Deals with propane truck drivers at the truck rack to address issues; Directs other operators to address shore tanks, tank car rack and truck rack as needed based on board readings, alarms and notifications.
  $ 128,600      Shift Supervisor:   Directs and supervises all operators; Addresses issues that are beyond the operators experience or authority to address on equipment; May direct response during an emergency situation.
    Temporary Supervisor:   Fills in for Shift Supervisor when needed due to vacation or illness.
 

 

 

     

Total

  $ 850,517       
 

 

 

     

 

Schedule A-29

Service Schedules


Schedule A-30

Anacortes Marine Crude Storage

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

  Fees     Categories of Seconded
Employees
 

Activities of Seconded Employees

Electricity

  $ 10,000       

Water

     

Communications

     

General Security

  $ 28,000       

Fire and Safety

     

Wastewater Handling

     

Tesoro Seconded Employees to Logistics Group

     
  $ 45,769      Operator 1 – Tank
Farm
  Deals with issues on shore tank including lineups, gauging and water draining; Also walks the shore tanks for visual inspections as part of rounds.
  $ 51,218      Operator 1 special –
Logistics Board
Operator
  Monitors shore tanks as part of board duties including; Deals with propane truck drivers at the truck rack to address issues; Directs other operators to address shore tanks, tank car rack and truck rack as needed based on board readings, alarms and notifications.
  $ 32,150      Shift Supervisor   Directs and supervises all operators; Addresses issues that are beyond the operator’s experience or authority to address on equipment; May direct response during an emergency situation.
    Temporary Supervisor   Fills in for Shift Supervisor when needed due to vacation or illness.
 

 

 

     

Total

  $ 167,137       
 

 

 

     

 

Schedule A-30

Service Schedules


Schedule A-31

Tesoro Alaska Pipeline

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

  Fees     Categories of Seconded
Employees
 

Activities of Seconded Employees

Electricity

  $ 365,000       

Water

     

Security

  $ 95,000       

Communications

     

General Security

  $ 5,000       

Fire and Safety

     

Wastewater Handling

     

Tesoro Seconded Employees to Logistics Group

     
  $ 141,156      Pumper I  
  $ 292,640      Operations/Oil
Movements Supervisor
 
  $ 80,420      Manager Oil Movements  
 

 

 

     

Total

  $ 979,216       
 

 

 

     

Unless otherwise noted below, the Partnership Seconded Employees will provide the following Tesoro Services to the Tesoro Group in accordance with Section 2 of the Agreement.

 

Service

   Fees      Categories of Seconded
Employees
  

Activities of Seconded Employees

Partnership Seconded Employees to Tesoro Group

        
   $ 102,524       Area Manager    Management oversight

 

Schedule A-31

Service Schedules


Service

   Fees      Categories of Seconded
Employees
  

Activities of Seconded Employees

   $ 21,528       Oil Movement, Staff
Assistant
   Clerical work
   $ 93,150       Control Center
Operator
   Monitoring of tank movement, vessel loading and offloading, direct Pumpers on tasks performed for KPL and Refinery tank farm.
   $ 42,850       E/I Technician    Maintain electrical and instrumentation equipment
  

 

 

       

Total

   $ 260,052         
  

 

 

       

 

Schedule A-31

Service Schedules


Schedule A-32

Nikiski Alaska Truck Terminal

Unless otherwise noted below, the Tesoro Seconded Employees will provide the following Operational Services to the Logistics Group in accordance with Section 2 of the Agreement:

 

Service

   Fees      Categories of Seconded
Employees
  

Activities of Seconded Employees

Communications

        

Water

        

Security

   $ 48,000         

General Security

   $ 15,000         

Fire and Safety

        

Wastewater Handling

        

Tesoro Seconded Employees to Logistics Group

        
   $ 141,156       Pumper I   
   $ 126,659       Pumper II   
   $ 48,773       Operations/Oil
Movements
Supervisor
   Supervision of day to day operations
   $ 13,403       Manager Oil
Movements
   Management Oversight
  

 

 

       

Total

   $ 392,991         
  

 

 

       

Unless otherwise noted below, the Partnership Seconded Employees will provide the following Tesoro Services to the Tesoro Group in accordance with Section 2 of the Agreement.

 

Service

   Fees      Categories of Seconded
Employees
  

Activities of Seconded Employees

Partnership Seconded Employees to Tesoro Group

        
   $ 51,262       Area Manager    Management oversight

 

Schedule A-32

Service Schedules


Service

   Fees      Categories of Seconded
Employees
  

Activities of Seconded Employees

   $ 7,176       Oil Movement, Staff
Assistant
   Clerical work
   $ 93,150       Control Center
Operator
   Monitoring of tank movement, vessel loading and offloading, direct Pumpers on tasks performed for KPL and Refinery tank farm.
   $ 42,850       E/I Technician    Maintain electrical and instrumentation equipment
  

 

 

       

Total

   $ 194,438         
  

 

 

       

 

Schedule A-32

Service Schedules


EXHIBIT A

FORM OF COVER PAGE FOR

AMENDMENT AND RESTATEMENT OF SERVICE SCHEDULES

TO SECONDMENT AND SERVICES AGREEMENT

A Secondment and Services Agreement was executed as of July 1, 2014 (the “Secondment Agreement”), among Tesoro Companies, Inc., Tesoro Refining & Marketing Company LLC, Tesoro Alaska Company LLC, Tesoro Alaska Pipeline Company LLC, Logistics GP, LLC, Tesoro Logistics Operations LLC, Tesoro Logistics Pipelines LLC, Tesoro High Plains Pipeline Company LLC and Tesoro Logistics Northwest Pipeline LLC. Capitalized terms not otherwise defined in this document shall have the terms set forth in the Secondment Agreement.

The Parties agree that the Service Schedules are hereby amended and restated in their entirety as of the date hereof to be as attached hereto. Pursuant to Section 16(j) of the Secondment Agreement, such amended and restated Service Schedules shall replace the prior Service Schedules as of the date hereof and shall be incorporated by reference into the Secondment Agreement for all purposes.

Executed as of             , 20    .

 

TESORO COMPANIES, INC.     TESORO LOGISTICS GP, LLC
By:  

 

    By:  

 

Name:       Name:  
Title:       Title:  

TESORO REFINING & MARKETING COMPANY LLC

   

TESORO LOGISTICS OPERATIONS LLC

By:  

 

    By:  

 

Name:       Name:  
Title:       Title:  

Exhibit A


TESORO ALASKA COMPANY LLC     TESORO HIGH PLAINS PIPELINE COMPANY LLC
By:  

 

    By:  

 

Name:       Name:  
Title:       Title:  
TESORO ALASKA PIPELINE COMPANY LLC     TESORO LOGISTICS PIPELINES LLC
By:  

 

    By:  

 

Name:       Name:  
Title:       Title:  
      TESORO LOGISTICS NORTHWEST PIPELINE LLC
      By:  

 

      Name:  
      Title:  

Exhibit 99.1

 

LOGO

Tesoro Logistics Closes Acquisition of Certain Tesoro Corporation Terminalling and Storage Assets

SAN ANTONIO – July 1, 2014— Tesoro Corporation (NYSE:TSO) (“Tesoro”) and Tesoro Logistics LP (NYSE:TLLP) (the “Partnership” or “TLLP”) today announced that they have closed TLLP’s acquisition of certain terminalling and storage assets (the “West Coast Logistics Assets”) owned by Tesoro and certain of its subsidiaries. TLLP acquired three marketing terminals and a storage facility for total consideration of $241 million, and expects to close the acquisition of the refined products pipeline at a later date.

Consideration for this portion of the transaction included cash proceeds of $214.4 million and Partnership equity valued at approximately $27 million. The equity consideration was based on the average daily closing price of TLLP’s common units for the 10 trading days prior to closing, or $71.11 per unit, with 370,843 units in the form of common units and 8,856 units in the form of general partner units. TLLP expects to close and fund the remaining $29 million portion of this acquisition in the third quarter or early in the fourth quarter of 2014.

Tesoro Corporation, a Fortune 100 company, is an independent refiner and marketer of petroleum products. Tesoro, through its subsidiaries, operates six refineries in the western United States with a combined capacity of over 850,000 barrels per day and ownership in a logistics business which include a 34% interest in Tesoro Logistics LP (NYSE: TLLP) and ownership of its general partner. Tesoro’s retail-marketing system includes over 2,200 retail stations under the ARCO ® , Shell ® , Exxon ® , Mobil ® , USA Gasoline™ and Tesoro ® brands.

This press release contains certain statements that are “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 concerning our expectations regarding the closing date for the remainder of the transaction. For more information concerning factors that could affect these statements see our annual report on Form 10-K and quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission. We undertake no obligation to publicly release the result of any revisions to any such forward-looking statements that may be made to reflect events or circumstances that occur, or which we become aware of, after the date hereof.

Contact:

Investors:

Brian Randecker, Senior Director, Investor Relations, (210) 626-4757

Media:

Tesoro Media Relations, media@tsocorp.com, (210) 626-7702