Exhibit 10.3

KENAI

STORAGE SERVICES AGREEMENT

This Kenai Storage Services Agreement (the “Agreement”) is effective as of the
Commencement Date (as defined below), by and between Tesoro Alaska Company LLC,
a Delaware limited liability company (“TAC”), Tesoro Logistics Operations LLC, a
Delaware limited liability company (“TLO”), and for purposes of Section 25(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, TAC contributed a storage facility as further
described in Schedule A, which includes the Tanks and Pipelines (each defined
below), located at TAC’s refinery in Kenai, Alaska, related equipment and
ancillary facilities used for the operation thereof, and all permits and
licenses related to such storage facility, to the extent assignable and to the
extent used in connection with the ownership and operation of such assets
described above (the “Storage Facility”), to the General Partner, the General
Partner contributed the Storage Facility to the Partnership and the Partnership
contributed the Storage Facility to TLO pursuant to the Contribution, Conveyance
and Assumption Agreement dated on the date hereof (the “Contribution
Agreement”);

WHEREAS, as a result of the series of contributions under the Contribution
Agreement, TLO is the owner of the Storage Facility;

WHEREAS, TLO desires to provide storage, handling, blending and other services
with respect to Products (as defined below) owned by TAC and stored in one or
more of the Tanks (as defined below);

WHEREAS, the Tanks at the Storage Facility have an aggregate Shell Capacity (as
defined below) of approximately 3,500,000 Barrels (as defined below); and

WHEREAS, TAC 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.

“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 7(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 through one or more
intermediaries, 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.

“Extension Period” has the meaning set forth in Section 4.

“First Offer Period” has the meaning set forth in Section 22(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 TAC’s ability to make effective use of the Operating
Capacity of the Storage Facility, 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,
excluding circumstances due to market conditions.

“Force Majeure Notice” has the meaning set forth in Section 23(a).

“Force Majeure Period” has the meaning set forth in Section 23(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.

 

2

--------------------------------------------------------------------------------

“Month” means a calendar month.

“Omnibus Agreement” means that certain Third Amended and Restated Omnibus
Agreement, dated as of July 1, 2014, by and among Tesoro, Tesoro Companies,
Inc., TAC, the General Partner and the Partnership, as amended by Amendment
No. 1 dated as of February 20, 2015 by and among Tesoro, Tesoro Refining &
Marketing Company LLC, a Delaware limited liability company, Tesoro Companies,
Inc., TAC, the General Partner and the Partnership, and Amendment No. 2 dated as
of August 3, 2015 by and among Tesoro, Tesoro Companies, Inc., TAC, the General
Partner and the Partnership, as such agreement (and the schedules thereto) may
be further amended, supplemented or restated from time to time.

“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 15(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 20(b).

“Party” or “Parties” means that each of TAC 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 the Storage Facility that
connect the Tanks to one another and to the receiving and delivery flanges of
the Storage Facility.

“Product” or “Products” means crude oil, refinery feedstocks, refined products,
and other materials stored in the Tanks in the ordinary course of business.

“Receiving Party Personnel” has the meaning set forth in Section 29(d).

“Refinery” means TAC’s refining facility located in Kenai, Alaska.

“Replacement Customer” has the meaning set forth in Section 25(c).

“Restoration” has the meaning set forth in Section 7(a).

“Right of First Refusal” has the meaning set forth in Section 22(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 B
attached hereto and in applicable Terminal Service Orders.

 

3

--------------------------------------------------------------------------------

“Storage Facility” has the meaning set forth in the Recitals.

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

“Surcharge” has the meaning set forth in Section 8(b)(i).

“TAC” has the meaning set forth in the Preamble.

“TAC Group” has the meaning set forth in Section 20(a).

“TAC Termination Notice” has the meaning set forth in Section 23(b).

“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 B attached hereto,
each of which is used for the storage of Products and located at the Storage
Facility.

“Term” and “Initial Term” each have the meaning set forth in Section 4.

“Terminal Service Order” has the meaning set forth in Section 6(a).

“Termination Notice” has the meaning set forth in Section 23(a).

“Tesoro” has the meaning set forth in the Recitals.

“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 TAC at the Storage Facility (the “Commitment”).

(b) Dedicated Storage. The Tanks shall be dedicated and used exclusively for the
storage of TAC’s Products or Products of Replacement Customers. TAC 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. TAC
shall pay the fees specified in the applicable Terminal Service Order for the
dedication of the Tanks.

 

3. COMMENCEMENT DATE

The “Commencement Date” will be July 1, 2016.

 

4

--------------------------------------------------------------------------------

4. TERM

The initial term of this Agreement shall commence on the Commencement Date and
shall continue through July 1, 2026 (the “Initial Term”); provided, however,
that TAC 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 twenty-four (24) calendar months prior
to the end of the Initial Term or the then-current Extension Period. The Initial
Term, together with each Extension Period, shall be referred to herein as the
“Term.” Without limitation on the provisions of Section 22, upon expiration of
the Term the parties shall meet and use good faith efforts to reach agreement
(without any obligation on the part of either party to reach such agreement)
regarding a new agreement for storage services at the Storage Facility.

 

5. STORAGE SERVICES FEE

(a) Storage Services Fee. TAC 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, blending and trans-shipment between and among the Tanks. Such fee shall
be payable by TAC on a Monthly basis throughout the Term of the Agreement,
regardless of the actual volumes of Products stored by TLO on behalf of TAC. The
Parties shall from time to time negotiate an appropriate adjustment to such fee
if the following conditions are met: (i) TAC requires the full Operating
Capacity of the Tanks, (ii) the full Operating Capacity of the Tanks is not
available to TAC for any reason (other than any reason resulting from or
relating to actions or inactions by TAC), and (iii) TLO is unable to otherwise
accommodate the actual volumes of Products required to be stored by TAC 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 TAC’s Storage Services Fee
for the affected Tank during the period in which the full Operating Capacity of
such Tank is not available to TAC for any reason (other than any reason
resulting from or relating to actions or inactions by TAC) 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 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.

 

5

--------------------------------------------------------------------------------

6. TERMINAL SERVICE ORDERS

(a) Description. TLO and TAC 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 Exhibit 1 (each, a “Terminal
Service Order”). Upon a request by TAC 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 TAC.

(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 5;

(iii) any reimbursement pursuant to Section 8(a);

(iv) any Surcharge pursuant to Section 8(b);

(v) any modification, cleaning, or conversion of a Tank as requested by TAC
pursuant to Section 9(a);

(vi) any agreements with respect to the Storage Service Fee during periods of
repair or maintenance pursuant to Section 9(b);

(vii) any reimbursement related to newly imposed taxes and regulations pursuant
to Section 10; and

(viii) any other services that may be agreed upon by the Parties pursuant to
Section 16.

(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, 2017 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.

 

7. 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 TAC’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 TAC’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 7(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 TAC, its employees, agents or customers. Notwithstanding the
foregoing, TLO shall schedule maintenance to minimize the opportunity cost and
disruption to TAC’s business and shall minimize the number of Tanks taken out of
service during any such scheduled maintenance. Prior to January 1 of each year
of the Term of this Agreement, the Parties shall mutually agree upon the
maintenance plan and schedule for the Tanks for the following calendar year
(e.g., prior to January 1, 2018, the Parties shall mutually agree on such plan
and schedule for 2019).

(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 TAC’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 TAC’s requirements concerning its refining
and marketing operations. TLO shall use commercially reasonable efforts to
continue to provide storage of TAC’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 TAC’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, TAC may require TLO to expedite the
Restoration to the extent reasonably possible, subject to TAC’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 TAC’s use. In the event
the Parties agree to an expedited Restoration plan in which TAC 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) TAC’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 TAC within the period set forth in
Section 7(b), (ii) fails to agree to perform a Capacity Resolution in accordance
with the standards set forth in Section 7(b), or (iii) fails to perform its
obligations in compliance with the terms of a Capacity Resolution, TAC may, as
its sole remedy for any breach by TLO of any of its obligations under
Section 7(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 7(b) above, to account for the reduced Operating Capacity available for
TAC’s use until such Restoration is completed. Any such Restoration

 

7

--------------------------------------------------------------------------------

required under this Section 7(c) shall be completed by TLO at TAC’s cost. TLO
shall use commercially reasonable efforts to continue to provide storage and
throughput of TAC’s Products at the affected Tank or Pipeline while such
Restoration is being completed. Any work performed by TLO pursuant to this
Section 7(c) shall be performed and completed in a good and workmanlike manner
consistent with applicable pipeline industry standards and in 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, TAC 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.

 

8. REIMBURSEMENT; SURCHARGES

(a) Reimbursement. TAC shall reimburse TLO for all of the following: (i) the
actual cost of any expenditures that TLO agrees to make upon TAC’s request, and
(ii) any cleaning, degassing or other preparation of the Tanks at the expiration
of this Agreement.

(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
the Storage Facility or with respect to the services provided hereunder, TLO
may, subject to the terms of this Section 8(b) impose a surcharge to increase
the applicable service fee (a “Surcharge”) to cover TAC’s pro rata share of the
cost of complying with these laws or regulations, based upon the percentage of
TAC’s use of the services or facilities impacted by such new laws or
regulations.

(ii) TLO shall notify TAC of any proposed Surcharge to be imposed pursuant to
Section 8(b)(i) sufficient to cover the cost of any required capital projects
and any ongoing increased operating costs. TLO and TAC 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 ten percent
(10%) as a Surcharge, with the understanding that TLO and TAC 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, TAC 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.

 

8

--------------------------------------------------------------------------------

(iv) In the event any Surcharge results in a fifteen percent (15%) or more
increase in the applicable service fee, TLO shall notify TAC 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.

(A) If within thirty (30) days of such notification provided in
Section 8(b)(iv), TAC does not agree to pay such Surcharge or to reimburse TLO
up front for its costs, TLO may elect to either:

(1) require TAC 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
TAC.

(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 8, 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, TAC may, at its option, elect to pay the full cost of the substantial
and unanticipated expenditures upon completion of a project.

 

9. 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 TAC may request that a Tank be changed for
storage of a different grade or type of Product. In such an instance, TLO shall
change 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 TAC, TAC 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 TAC 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, TAC 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 the 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 TAC. Unless a Tank is removed specifically at TAC’s request,
or as otherwise agreed pursuant to a Terminal Service Order, TAC 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.

 

9

--------------------------------------------------------------------------------

(c) Removal of Product. Materials stored in or removed from the Storage Facility
shall at all times remain owned by TAC 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 the
Storage Facility, making appropriate arrangements to receive custody at the
Storage Facility in a manner acceptable to TLO, and disposal of such material
after custody is returned to the owner. TAC 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 the Storage Facility.

 

10. NEWLY IMPOSED TAXES AND REGULATIONS

TAC 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 TAC’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, TAC 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.

 

11. PAYMENTS

TLO shall invoice TAC on a Monthly basis, and TAC shall pay all amounts due
under this Agreement and any Terminal Service Order no later than ten (10) days
after TAC’s receipt of TLO’s invoice. Any past due payments owed by TAC 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.

 

12. SCHEDULING

All scheduling of delivery into and redelivery out of the Tanks shall be decided
by mutual agreement of the Parties. TAC shall identify to TLO prior to the
delivery of any Product to the Storage Facility, the specific Tanks to be used
for receiving and storing such Product.

 

13. SERVICES; VOLUME LOSSES; MEASUREMENT

(a) Services. The services provided by TLO pursuant to this Agreement or any
applicable Terminal Service Order shall consist of storage, pumping, blending
and trans-shipment 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.

 

10

--------------------------------------------------------------------------------

(ii) TLO shall be responsible to TAC 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 TAC for any Product losses and/or shortages
for which TAC is compensated by its cargo/inventory insurance carrier, including
through the cargo/inventory insurance coverage required by Section 27. If TAC
fails to maintain the cargo/inventory insurance coverage required by Section 27,
then TLO shall also not be responsible to TAC for any Product losses and/or
shortages to the extent TAC would have been compensated by its insurance carrier
had TAC maintained the cargo/inventory insurance coverage required by
Section 27.

(iii) TAC shall be responsible for all Product losses and/or shortages it may
suffer other than those covered by Section 13(b)(ii).

(c) Storage Tank Measurement. Storage Tank gauging shall be performed by TLO’s
personnel. TAC 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 TAC requests an independent gauger, such gauger must be acceptable
to TLO and such gauging shall be at TAC’s sole expense.

 

14. 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. TAC 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 TAC’s account, TAC 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 TAC’s Products received in the Storage Facility shall remain with
TAC at all times. Both Parties acknowledge that this Agreement and any Terminal
Service Order represent a bailment of Products by TAC 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 TAC. TAC 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. TAC acknowledges that, notwithstanding anything to the contrary contained
in this Agreement or in any Terminal Service Order, TAC 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.

 

15. OPERATING PROCEDURES; SERVICE INTERRUPTIONS

(a) Operating Procedures for TAC. TAC 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 TAC with a current copy of its Operating Procedures
and shall provide TAC 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.

(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 TAC’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, TAC of any such matters except to the
extent TAC has been materially prejudiced or damaged by such failure or delay.

 

11

--------------------------------------------------------------------------------

(d) Additional Storage Facilities for Maintenance of the Tanks and Pipelines: In
connection with TLO’s maintenance and operation of each Tank and/or any of the
associated Pipeline(s), TAC shall grant TLO reasonable commercial use of
additional designated sites at the Refinery as may be required for (i) storage
of spare parts, pipes, pumps and other equipment; (ii) a laydown yard for
construction activities in the event of any major repair or replacement of
Tanks; or (iii) any additional commercially reasonable storage
requirement. Notwithstanding the foregoing, TAC shall retain the right to
designate where and when any sites can be used by TLO for such additional
storage facilities and TLO’s use of such sites shall not interfere with TAC’s
normal operation of the Refinery.

 

16. OTHER SERVICES AND USE OF FACILITIES

To facilitate the operation of the Storage Facility, the Parties shall enter
into Terminal Service Orders that set forth the applicable terms and fees
associated with TLO’s (a) provision of ancillary services related to storage,
handling, blending or other services; and (b) use of sites, facilities and
utilities at the Refinery related to operation, maintenance and repair of the
Storage Facility.

 

17. 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 TAC
and its lender(s) (if applicable), and to cooperate with TAC in assuring and
demonstrating that Product titled in TAC’s name shall not be subject to any lien
on the Storage Facility or TLO’s Product stored there.

 

18. 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, unless otherwise agreed to
by the Parties.

(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.

 

12

--------------------------------------------------------------------------------

(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 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.

 

19. 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 TAC for
lost or damaged Product unless TAC notifies TLO in writing within ninety
(90) days of the report of any incident or the date TAC learns of any such loss
or damage to the Product. TLO’s maximum liability to TAC 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 TAC (copies of TAC’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 TAC 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.

 

20. 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 TAC, 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 “TAC
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 TAC, 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 TAC, 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

 

13

--------------------------------------------------------------------------------

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 (other than TAC), representatives, and
agents, or those of their respective employees with respect to such matters, and
(iv) any losses incurred by TAC due to violations of this Agreement or any
Terminal Service Order by TLO, or, as applicable, its customers (other than
TAC), representatives, and agents; PROVIDED THAT TLO SHALL NOT BE OBLIGATED TO
RELEASE, INDEMNIFY OR HOLD HARMLESS TAC OR ANY MEMBER OF THE TAC 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 TAC
OR ANY MEMBER OF THE TAC GROUP.

(b) TAC Indemnities. Notwithstanding anything else contained in this Agreement
or any Terminal Service Order, TAC 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, TAC, 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, TAC, 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 TAC, in connection with TAC’s use of the Pipelines or the Storage
Facility and the services provided hereunder and TAC’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 TAC, or, as applicable, its carriers, customers,
representatives, and agents; PROVIDED THAT TAC 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 20 are independent of any insurance
requirements as set out in Section 27, 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.

 

14

--------------------------------------------------------------------------------

(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.

(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.

 

21. 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 TAC is in default,
TLO may or (ii) if TLO is in default, TAC 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.

 

15

--------------------------------------------------------------------------------

(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.

(c) Obligations at Termination. Unless otherwise mutually agreed by the Parties,
within thirty (30) days of the termination or expiration of this Agreement,
(i) TAC 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 TAC or TAC’s designee. In the event all of the Product is not
removed within such thirty (30) day period, TAC 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 TAC’s entire Product is removed
from the Tanks and the Storage Facility; provided, however, that TAC shall not
be assessed any storage fees associated with the removal of Product to the
extent that TAC’s ability to remove such Product is delayed or hindered by TLO,
its agents, or contractors for any reason.

 

22. RIGHT TO ENTER INTO A NEW STORAGE AGREEMENT

(a) Right to Enter New Agreement. Within two (2) years of termination of this
Agreement for reasons other than (x) a default by TAC and (y) any other
termination of this Agreement initiated by TLO pursuant to Section 21, TAC shall
have the right to require TLO to enter into a new storage services agreement
(with ancillary Terminal Service Orders, as appropriate) with TAC 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 TLO shall not be required to enter into any such new
storage services agreement with a term that extends beyond 2036.

(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
TAC and (y) any other termination of this Agreement initiated by TAC pursuant to
Section 21, TLO shall give TAC 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 TAC’s receipt of such written notice)
(the “First Offer Period”) in which TAC may make a good faith offer to enter
into a new storage services agreement with TLO (the “Right of First Refusal”).
If TAC 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 TAC on the terms set forth in TAC’s offer to TLO. If TAC 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 22(b) shall again
become effective.

 

23. FORCE MAJEURE

(a) Force Majeure Notice. As soon as possible upon the occurrence of a Force
Majeure, TLO shall provide TAC 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 TAC 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

 

16

--------------------------------------------------------------------------------

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 7 above, at 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 23(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 7.

(b) Termination Notice. Notwithstanding the foregoing, if TAC delivers a
Termination Notice to TLO (the “TAC Termination Notice”) and, within thirty
(30) days after receiving such TAC Termination Notice, TLO notifies TAC 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 TAC mutually agrees, which agreement shall not be
unreasonably withheld, then the TAC 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 TAC Termination Notice had never
been given.

 

24. SUSPENSION OF REFINERY OPERATIONS

This Agreement shall continue in full force and effect regardless of whether TAC
decides to permanently or temporarily suspend refining operations at the
Refinery. TAC 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 TAC shall remain
liable for Storage Services Fees under this Agreement or any Terminal Service
Order for the duration of the suspension. TAC 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.

 

25. 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) TAC Assignment to Third Party. TAC 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 TAC may assign this Agreement without TLO’s consent in connection
with a sale by TAC of the Refinery so long as the transferee: (i) agrees to
assume all of TAC’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 TAC in its reasonable judgment.

 

17

--------------------------------------------------------------------------------

(c) Subcontract. Should TAC desire to subcontract to a third party (“Replacement
Customer”) any dedicated storage subject to a Terminal Service Order, TAC 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 TAC and TLO, and between Replacement Customer and TLO, TAC 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. TAC
shall be responsible for collection of any fees due to TAC from the Replacement
Customer. TAC 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 TAC’s prior written consent; provided, however, that TLO
shall be permitted to make a collateral assignment of this Agreement solely to
secure 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. TAC’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, TAC shall have the option
to extend the Term of this Agreement as provided in Section 4. TLO shall provide
TAC with notice of any Partnership Change of Control at least sixty (60) days
prior to the effective date thereof.

 

26. ACCOUNTING PROVISIONS AND DOCUMENTATION; AUDIT

(a) Storage Services Fee Documentation. Within ten (10) Business Days following
the end of each Month, TLO shall furnish TAC with a statement showing, by Tank,
a calculation of all of TAC’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.

 

27. 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, TAC 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 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

 

18

--------------------------------------------------------------------------------

business in the State of Alaska 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 TAC may procure worker’s compensation insurance from
the State of Alaska. All limits listed below are required MINIMUM LIMITS:

 

  (i) Workers Compensation and Occupational Disease Insurance which fully
complies with Applicable Law of the State of Alaska, 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 TAC;

 

  (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 TAC 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 TAC 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 TAC, TAC 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.

 

19

--------------------------------------------------------------------------------

(d) Self-Insurance. TAC shall be solely responsible for any deductibles or
self-insured retention.

 

28. 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 28.

If to TAC, to:

Tesoro Alaska Company LLC

19100 Ridgewood Parkway

San Antonio, Texas 78259

For legal notices:

Attention: Charles A. Cavallo III, VP & Associate General Counsel

phone: (210) 626-4045

email: Charles.A.Cavallo@tsocorp.com

If to TLO, to:

Tesoro Logistics Operations LLC

19100 Ridgewood Parkway

San Antonio, Texas 78259

For legal notices:

Attention: Barron Dowling, Associate General Counsel

phone: (210) 626-4415

email: Barron.W.Dowling@tsocorp.com

For all other notices and communications:

Attention: Don J. Sorensen, Senior Vice President, Operations

phone: (210) 626-6195

email: Don.J.Sorensen@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.

 

29. 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 29. 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;

 

20

--------------------------------------------------------------------------------

(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 TAC 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 29, 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 29(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 29, and such archived or back-up Confidential Information shall not
be accessed except as required by Applicable Law.

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

 

21

--------------------------------------------------------------------------------

(e) Survival. The obligation of confidentiality under this Section 29 shall
survive the termination of this Agreement for a period of two (2) years.

 

30. 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 Omnibus Agreement, the provisions of the 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 shall not be interpreted 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.

 

22

--------------------------------------------------------------------------------

(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 20, 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.

[REMAINDER OF PAGE INTENTIONALLY BLANK]

 

23

--------------------------------------------------------------------------------

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/ Gregory J. Goff   Phillip M. Anderson       Gregory J.
Goff   President       President Solely with respect to Section 25(a):    
Solely with respect to Section 25(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

Kenai Storage Services Agreement

--------------------------------------------------------------------------------

SCHEDULE A

Storage Facility

Crude and black-oils storage tanks with a total shell capacity of 650,000
barrels, petroleum product storage tanks with a total shell capacity of
2,850,000 barrels, and pipelines and other appurtenances that allow the
transport of the crude oil and petroleum products to and from the nearby dock
and to and from other facilities located at TAC’s refinery in Kenai, Alaska.

Schedule A –

Kenai Storage Services Agreement

--------------------------------------------------------------------------------

SCHEDULE B

TANKS

 

     Shell Capacity   Tank #    (Barrels)  

04C

     2,548   

10

     43,750   

11

     50,000   

12

     300,000   

13

     300,000   

14

     300,000   

20

     223,000   

22

     100,000   

23

     316,855   

24

     50,000   

25

     425,000   

30

     10,000   

31

     15,000   

32

     70,000   

33

     15,000   

35

     100,000   

36

     200,000   

37

     100,000   

40

     36,000   

41

     40,000   

42

     40,000   

45

     100,000   

51

     20,000   

60

     15,000   

61

     10,000   

62

     50,000   

63

     50,000   

64

     100,000   

65

     100,000   

66

     100,000   

67

     180,571   

70

     20,000   

80

     5,000   

Schedule B –

Kenai Storage Services Agreement

--------------------------------------------------------------------------------

EXHIBIT 1

FORM OF TERMINAL SERVICE ORDER

(KENAI [ ]-       , 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 Kenai Storage Services Agreement dated as of
                    , 2016, 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 6 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 5;

(iii) any reimbursement pursuant to Section 8(a);

(iv) any Surcharge pursuant to Section 8(b);

(v) any modification, cleaning, or conversion of a Tank as requested by TAC
pursuant to Section 9(a);

(vi) any agreements with respect to the Storage Service Fee during periods of
repair or maintenance pursuant to Section 9(b);

(vii) any reimbursement related to newly imposed taxes and regulations pursuant
to Section 10; and

(viii) any other services or use of facilities that may be agreed upon by the
Parties pursuant to Section 16.

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 –

Kenai Storage Services Agreement

--------------------------------------------------------------------------------

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

 

TESORO ALASKA COMPANY LLC By:     Name:   Title:   TESORO LOGISTICS OPERATIONS
LLC By:    

Name:

 

Title:

 

Exhibit 1 –

Kenai Storage Services Agreement