Document:

exv10w3

 

Exhibit 10.3

WAIVER AND AMENDMENT

THIS WAIVER AND AMENDMENT (this “Amendment”) is made as of August 9, 2006, among Infinity Energy
Resources, Inc., a Delaware corporation (including as successor to Infinity, Inc., “Infinity”),
HFTP Investment L.L.C. (“HFTP”), Gaia Offshore Master Fund, Ltd. (“Gaia”), AG Offshore
Convertibles, Ltd. (“AG Offshore”), Leonardo, L.P. (“Leonardo”) and Portside Growth & Opportunity
Fund (“Portside” and collectively with HFTP, Gaia and AG Offshore, the “Buyers”), and Consolidated
Oil Well Services, Inc., a Kansas corporation and wholly-owned subsidiary of Infinity
(“Consolidated”), CIS-Oklahoma, Inc., a Kansas corporation and wholly-owned subsidiary of Infinity
(“CIS”), Infinity Oil & Gas of Wyoming, Inc., a Wyoming corporation and wholly-owned subsidiary of
Infinity (“Infinity-Wyoming”), Infinity Oil & Gas of Kansas, a Kansas corporation and wholly-owned
subsidiary of Infinity (“Infinity-Kansas”), and Infinity Oil and Gas of Texas, Inc., a Delaware
corporation and wholly-owned subsidiary of Infinity (“Infinity-Texas,” and together with
Consolidated, CIS, Infinity-Wyoming, Infinity-Kansas and Infinity-Delaware, the “Subsidiaries).
Unless otherwise indicated or defined herein, capitalized terms used herein shall have the meanings
ascribed to them in the Securities Purchase Agreement (as defined below).

W I T N E S S E T H:

     WHEREAS, Infinity, HFTP, AG Offshore and AG Domestic Convertibles, L.P. (“AG Domestic”)
entered into that certain Securities Purchase Agreement, dated as of January 13, 2005 (as amended,
restated, supplemented or otherwise modified and in effect from time to time, the “Securities
Purchase Agreement”);

     WHEREAS, pursuant to the Securities Purchase Agreement, Infinity issued to HFTP, AG Domestic
and AG Offshore senior secured notes (such notes, together with any promissory notes issued in
exchange or substitution therefor or replacement thereof, and as any of the same may be amended,
restated, modified, supplemented or otherwise modified and in effect from time to time, the
“January 2005 Notes”), dated January 13, 2005, in an initial aggregate principal amount of
$30,000,000 and warrants (such warrants, together with any warrants or other securities issued in
exchange or substitution thereof or replacement thereof and as any of the same may be amended,
restated, supplemented or otherwise modified and in effect from time to time, the “January 2005
Warrants”), dated January 13, 2005, to purchase shares of the common stock, par value $0.0001 per
share (the “Common Stock”), of the Company;

     WHEREAS, AG Domestic subsequently assigned to AG Offshore the January 2005 Notes and January
2005 Warrants held by AG Domestic and AG Domestic’s rights and obligations with respect to any and
all future sales of Additional Notes and Additional Warrants by the Company pursuant to the
Securities Purchase Agreement;

     WHEREAS, Infinity, HFTP, Gaia, AG Offshore, the Subsidiaries and Agent entered into that
certain First Additional Closing Agreement, dated as of September 7, 2005 (the “First Additional
Closing Agreement”), pursuant to which, among things, the January 2005 Notes were amended and Gaia
was made a Buyer under the Securities Purchase Agreement;

 

 

     WHEREAS, pursuant to the Securities Purchase Agreement and the First Closing Agreement, the
Company issued to HFTP, Gaia and AG Offshore senior secured notes (such notes, together with any
promissory notes issued in exchange or substitution therefor or replacement thereof, and as any of
the same may be amended, restated, modified, supplemented or otherwise modified and in effect from
time to time, the “September 2005 Notes”), dated September 7, 2005, in an initial aggregate
principal amount of $9,500,000 and warrants (such warrants, together with any warrants or other
securities issued in exchange or substitution thereof or replacement thereof and as any of the same
may be amended, restated, supplemented or otherwise modified and in effect from time to time, the
“September 2005 Warrants”), dated September 7, 2005, to purchase shares of Common Stock;

     WHEREAS, Infinity, HFTP, Gaia, AG Domestic, AG Offshore, the Subsidiaries and Agent entered
into that certain Master Assumption and Reaffirmation of Transaction Documents dated as of
September 9, 2005, pursuant to which, among other things, Infinity assumed all of the obligations
of Infinity, Inc. under the Securities Purchase Agreement, the January 2005 Notes, the January 2005
Warrants, the September 2005 Notes, the September 2005 Warrants and the other Transaction
Documents;

     WHEREAS, pursuant to the Securities Purchase Agreement, the Company issued to HFTP, Gaia and
AG Offshore senior secured notes (such notes, together with any promissory notes issued in exchange
or substitution therefor or replacement thereof, and as any of the same may be amended, restated,
modified, supplemented or otherwise modified and in effect from time to time, the “December 2005
Notes”), dated December 9, 2005, in an initial aggregate principal amount of $5,500,000 and
warrants (such warrants, together with any warrants or other securities issued in exchange or
substitution thereof or replacement thereof and as any of the same may be amended, restated,
supplemented or otherwise modified and in effect from time to time, the “December 2005 Warrants”),
dated December 9, 2005, to purchase shares of Common Stock;

     WHEREAS, Infinity, HFTP, Gaia, AG Offshore, Leonardo the Subsidiaries and Agent entered into
that certain Third Additional Closing Agreement, dated as of March 17, 2006, (the “Third Additional
Closing Agreement”), pursuant to which, among other things, Leonardo was made a Buyer under the
Securities Purchase Agreement;

     WHEREAS, pursuant to the Securities Purchase Agreement and the Third Additional Closing
Agreement, the Company issued to Gaia and Leonardo senior secured notes (such notes, together with
any promissory notes issued in exchange or substitution therefor or replacement thereof, and as any
of the same may be amended, restated, modified, supplemented or otherwise modified and in effect
from time to time, the “March 2006 Notes” and, collectively with the January 2005 Notes, the
September 2005 Notes and the December 2005 Notes, the “Notes”), dated March 17, 2006, in an initial
aggregate principal amount of $8,000,000 and warrants (such warrants, together with any warrants or
other securities issued in exchange or substitution thereof or replacement thereof and as any of
the same may be amended, restated, supplemented or otherwise modified and in effect from time to
time, the “March 2006 Warrants” and, collectively with the January 2005 Warrants, the September
2005 Warrants, and the December 2005 Warrants, the “Warrants”), dated March 17, 2006, to purchase
shares of Common Stock;

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     WHEREAS, Portside currently holds a portion of the Notes and the Warrants; and

     WHEREAS, the Company has incurred Indebtedness (as defined in the Notes) in the form of (i)
obligations issued, undertaken or assumed as the deferred purchase price of property or services
consisting of unsecured account trade payables (“Accounts Payable") in the oil and gas production
segment of the Company’s business (the Accounts Payable in such segment, the “O & G Accounts
Payable”) exceeding an aggregate among the Company and its Subsidiaries of $5,000,000 and (ii)
Accounts Payable unpaid in excess of 90 days beyond invoice due date (collectively, the “Accounts
Payable Default”), resulting in the breach of Section 4(n) of the Securities Purchase Agreement and
Section 12 of each of the Notes and the occurrence of a Triggering Event (as defined in the Notes)
under Sections 3(b)(vii) and 3(b)(viii) of each of the Notes and an Event of Default (as defined in
the Notes) under Section 11(a)(iii) of each of the Notes.

     NOW, THEREFORE, in consideration of the agreements, provisions and covenants contained herein
and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each of the undersigned agrees as follows:

     1. Company Alternative Conversion Notice.

          a. For purposes of this Section 1, each capitalized term used herein, and not otherwise
defined, shall have the meaning ascribed thereto in the Notes.

          b. The Company hereby elects to cause the conversion of an aggregate of $2,500,000 in
principal amount (the “Aggregate Conversion Amount”) of the Notes (together with the aggregate
Interest Amount with respect thereto), as if the Company had delivered a Company Alternative
Conversion Notice pursuant to each of the Notes with respect thereto, and this Section 1(b) shall
be deemed a Company Alternative Conversion Notice pursuant to Section 8(a) of each of the Notes
(which, for the avoidance of doubt, means each Note of each Series) and the conversion elected by
the foregoing shall be deemed a Company Alternative Conversion pursuant to Section 8 of each of the
Notes (the “August 2006 Company Conversion”). The August 2006 Company Conversion elected by the
Company pursuant to this Section 1(b) shall be irrevocable by the Company. With respect to each
Buyer, its aggregate Pro Rata Conversion Amount of the Aggregate Conversion Amount shall be as set
forth on Exhibit A attached hereto (such holder’s “Aggregate Conversion Amount”), and such
Aggregate Conversion Amount shall apply on an aggregate basis to the Notes held by such Buyer.
Each of the Buyers shall convert its Aggregate Pro Rata Conversion Amount with respect to the Notes
held by such Buyer, together with the Interest Amount with respect to the allocable portion of the
principal represented by such Aggregate Pro Rata Conversion Amount accruing through and including
the applicable Conversion Date, in accordance with, and subject to the terms and conditions of
Section 8 of each such Note (including the satisfaction (or waiver in writing by such Buyer) of the
Conditions to Company Alternative Conversion and the compliance with the provisions of Sections
8(d) and 8(e) thereof), with such Buyer selecting the one or more Notes (of any one or more Series)
held by such Buyer as to which the August 2006 Company Conversion shall apply.

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          c. Each of the Buyers, severally and not jointly, hereby waives, solely with respect to the
August 2006 Company Conversion, the requirement that the Company Alternative
Conversion Notice deemed to be delivered pursuant to Section 1(b) be delivered at least five
(5) Business Days prior to the first Trading Day of the Company Alternative Conversion Period.
Notwithstanding anything to the contrary in the Notes, each of the Buyers, severally and not
jointly, hereby agrees with the Company that the Company Alternative Conversion Period with respect
to the August 2006 Company Conversion shall be the period commencing on and including August 10,
2006 through and including September 15, 2006.

          d. In the event that any of a Buyer’s Aggregate Pro Rata Conversion Amount is not converted by
such Buyer due to a failure to satisfy the Conditions to Company Alternative Conversion (unless
waived in writing by such Buyer) or due to the provisions of Section 8(d) or 8(e) of the Notes
(each, a “Conversion Prohibition Event”), then, notwithstanding anything to the contrary in the
Notes, the August 2006 Company Conversion shall be null and void with respect to any such
unconverted Aggregate Pro Rata Conversion Amount, the Company shall be deemed to have given a
Company Alternative Redemption Notice with respect to such unconverted Aggregate Pro Rata
Conversion Amount (and, for purposes of Section 7(a) of the Notes held by such Buyer, shall be
entitled to give such Company Alternative Redemption Notice), and the principal represented by such
unconverted Aggregate Pro Rata Conversion Amount (together with the Interest Amount with respect
thereto) shall be redeemed by the Company in accordance with the terms of this Amendment and
Section 7 of the Notes by wire transfer of immediately available funds to such Buyer no later than
the first Business Day following such Conversion Prohibition Event (an “Unconverted Amount Company
Redemption”). Each of the Buyers, severally and not jointly, hereby waives, solely with respect to
the Unconverted Amount Company Redemption, (i) the requirement that the Company Alternative
Redemption Notice deemed to be delivered pursuant to this Section 1(d) be delivered at least five
(5) Business Days prior to the Company Alternative Redemption Date, and (ii) the Conditions to
Company Alternative Redemption.

     2. Amendment to the Notes.

          a. Each of the Buyers, severally and not jointly, hereby agrees with the Company that each of
the Notes held by such Buyer be amended by adding a new Section 6.1 thereto that shall read in its
entirety as follows:

     “6.1 Installment Conversion or Redemption.

     (a) Convertible Installment. With respect to each Convertible
Installment Date (as defined in Section 6.1(c)), the Company shall either (i)
require conversion of the Convertible Installment Amount (as defined in Section
6.1(c)), in whole or in part, in accordance with this Section 6.1 and Section 8 and
the corresponding sections of the Other Notes held by the Holder, at the applicable
Conversion Price, and subject to the satisfaction of the Conditions to Company
Alternative Conversion (as defined in Section 8(c)) (a “Convertible Installment
Conversion”), or (ii) redeem the Convertible Installment Amount, in whole or in
part, in accordance with this Section 6.1 and Section 7 and the corresponding
provisions of the Other Notes held by the Holder (a “Convertible Installment
Redemption”); provided that all of the outstanding Convertible Installment Amount
must be converted or redeemed by the Company, subject to

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the provisions of this Section 6.1 and the corresponding provisions of the Other
Notes held by the Holder; and provided further that the Company may elect more than
one of the Convertible Installment Conversion and the Convertible Installment
Redemption, if each such election is with respect to at least $500,000 of the
aggregate principal amount of the Notes comprising the aggregate Convertible
Installment Amount with respect to all of the Notes. At least five (5) Business
Days prior to each Convertible Installment Date, the Company shall deliver to the
Holder written notice (each a “Convertible Installment Notice”), which Convertible
Installment Notice shall state (i) the portion, if any, of the applicable
Convertible Installment Amount which the Company elects to convert pursuant to a
Convertible Installment Conversion (the “Convertible Installment Conversion
Amount”), (ii) the portion, if any, of the applicable Convertible Installment Amount
which the Company elects to redeem pursuant to a Convertible Installment Redemption
(the “Convertible Installment Redemption Amount”), and which amount when added to
the Convertible Installment Conversion Amount must equal the Convertible Installment
Amount, and (iii) if the Company has elected, in whole or in part, a Convertible
Installment Conversion, then the Convertible Installment Notice shall certify that
the Conditions to Company Alternative Conversion are satisfied as of the date of the
Convertible Installment Notice (except to the extent waived in writing by the
Holder); provided that, notwithstanding anything to the contrary in Section 8, the
Condition to Company Alternative Conversion set forth in Section 8(c)(iv) shall not
apply to any Convertible Installment Conversion pursuant to this Section 6.1. If
the Company does not deliver a Convertible Installment Notice in accordance with
this Section 6.1(a) in connection with any Convertible Installment Date, then the
Convertible Installment Redemption Amount shall mean the Convertible Installment
Amount with respect to such Convertible Installment Date and the Company shall be
deemed to have given a Company Alternative Redemption Notice with respect to the
Convertible Installment Amount (and, for purposes of Section 7(a), shall be entitled
to give such Company Alternative Redemption Notice). Each Convertible Installment
Notice shall be irrevocable. The Company shall elect to redeem and convert the
Convertible Installment Amount of this Note pursuant to this Section 6.1(a) and the
corresponding Convertible Installment Amounts of the Other Notes pursuant to the
corresponding provisions of the Other Notes in the same ratio of principal amount
being redeemed and principal amount being converted, and each holder shall elect the
one or more Notes (of this or any other Series) held by such holder to which such
Convertible Installment Redemption and/or Convertible Installment Conversion shall
apply. That portion of the Principal of this Note and the Other Notes held by the
Holder constituting the Convertible Installment Conversion Amount shall be converted
in accordance with the provisions of this Section 6.1(a) and Sections 2 and 8 and
the corresponding provisions of the Other Notes held by the Holder at the applicable
Conversion Rate. That portion of the Principal of this Note and the Other Notes
held by the Holder constituting the Convertible Installment Redemption Amount
(whether set forth in the Convertible Installment Notice or by operation of this
Section 6.1(a)) shall be redeemed in accordance with the provisions of this

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Section 6.1 and Section 7 at the applicable Company Alternative Redemption Rate.
For purposes of this Section 6.1(a) and notwithstanding anything to the contrary
contained in Section 8(a), (A) a Convertible Installment Conversion shall constitute
a Company Alternative Conversion; (B) a Convertible Installment Notice containing a
Convertible Installment Conversion Amount shall constitute a Company Alternative
Conversion Notice; (C) the Pro Rata Conversion Amount with respect to a Convertible
Installment Conversion shall be the Convertible Installment Conversion Amount; (D)
the Company Alternative Conversion Period (as defined in Section 8(a)) with respect
to a Convertible Installment Conversion shall be all of the Trading Days of the
month containing the applicable Convertible Installment Date; and (E) the “Final
Company Alternative Conversion Date” shall be the final Trading Day of the month
containing the applicable Convertible Installment Date. For purposes of this
Section 6.1(a) and notwithstanding anything to the contrary contained in Section
7(a), (V) a Convertible Installment Redemption shall constitute a Company
Alternative Redemption; (W) a Convertible Installment Notice containing a
Convertible Installment Redemption Amount shall constitute a Company Alternative
Redemption Notice; (X) the Company Alternative Redemption Date with respect to a
Convertible Installment Redemption shall be the applicable Convertible Installment
Date; (Y) the Pro Rata Redemption Amount with respect to a Convertible Installment
Redemption shall be the Convertible Installment Redemption Amount; and (Z) the
Conditions to Company Alternative Redemption set forth in Section 7(c) shall be
deemed to have been satisfied.

     (b) Cash Installment. With respect to each Cash Installment Date (as
defined in Section 6.1(c)), the Company shall be deemed to have given a Company
Alternative Redemption Notice with respect to the Cash Redemption Amount (and, for
purposes of Section 7(a), shall be entitled to give such Company Alternative
Redemption Notice) and shall redeem the Cash Installment Amount (as defined in
Section 6.1(c)) in accordance with this Section 6.1 and Section 7 and the
corresponding provisions of the Other Notes held by the Holder (a “Cash Installment
Redemption”). Each holder shall elect the one or more Series of Notes held by such
holder to which such Cash Installment Redemption shall apply. That portion of the
Principal of this Note and the Other Notes held by the Holder constituting the Cash
Installment Amount shall be redeemed in accordance with the provisions of this
Section 6.1 and Section 7 and the corresponding provisions of the Other Notes held
by the Holder at the applicable Company Alternative Redemption Rate. For purposes
of this Section 6.1(b) and notwithstanding anything to the contrary contained in
Section 7(a), (i) a Cash Installment Redemption shall constitute a Company
Alternative Redemption; (ii) the Company Alternative Redemption Date with respect to
a Cash Installment Redemption shall be the applicable Cash Installment Date; (iii)
the Pro Rata Redemption Amount with respect to a Cash Installment Redemption shall
be the Cash Installment Redemption Amount; and (iv) the Conditions to Company
Alternative Redemption set forth in Section 7(c) shall be deemed to have been
satisfied.

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     (c) Definitions.

          (i) For purposes of this Section 6.1, “Cash Installment Amount” means the
portion of the Principal of this Note and the Other Notes held by the Holder equal
to the lesser of (A) the product of $9,000,000, multiplied by the Holder’s
Allocation Percentage, together with the Interest Amount with respect thereto, and
(B) the aggregate outstanding Principal of all of the Notes held by the Holder,
together with the Interest Amount with respect thereto.

          (ii) For purposes of this Section 6.1, “Cash Installment Date” means each of
January 15, 2007, April 15, 2007 and July 15, 2007, or if any such date is not a
Business Day, the first Business Day thereafter.

          (iii) For purposes of this Section 6.1, “Convertible Installment Amount” means
a portion of the Principal of this Note and the Other Notes held by the Holder equal
to the lesser of (A) the product of $2,000,000, multiplied by the Holder’s
Allocation Percentage, together with the Interest Amount with respect thereto, and
(B) the aggregate outstanding Principal of all of the Notes held by the Holder,
together with the Interest Amount with respect thereto.

          (iv) For purposes of this Section 6.1, “Convertible Installment Date” means the
first Business Day of each calendar month, beginning on and including October 1,
2006 through and including June 1, 2007.”

          b. Each of the Buyers, severally and not jointly, hereby agrees with the Company that Section
8(b) of all of the Notes be amended by adding the phrase “, a Convertible Installment Conversion
Amount” in the third sentence of such Section immediately following the phrase “Mandatory
Compliance Amount”.

          c. Each of the Buyers, severally and not jointly, hereby agrees with the Company that Section
8(b) of all of the Notes be amended by adding the phrase “, a Convertible Installment Conversion”
in the fourth sentence of such Section immediately following the phrase “Interest Conversion”.

          d. Each of the Buyers, severally and not jointly, hereby agrees with the Company that Section
8(d) of all of the Notes be amended by adding the phrase “, a Convertible Installment Conversion
Amount” in the final sentence of such Section immediately following the phrase “Mandatory
Compliance Amount”.

          e. Each of the Buyers, severally and not jointly, hereby agrees with the Company that Section
8(e) of all of the Notes be amended by adding the phrase “, a Convertible Installment Conversion
Amount” in the final sentence of such Section immediately following the phrase “Mandatory
Compliance Amount”.

          f. Each of the Buyers, severally and not jointly, hereby agrees with the Company that the
definition of Triggering Event set forth in Section 3(b)(viii) of each of the Notes be amended by
adding the following at the end of such Section:

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“or Section 6.1 hereof, or the Company breaches or otherwise fails to comply with
any representation, warranty, covenant or other term or condition of that certain
Amendment and Waiver, dated as of August 9, 2006, by and among the Company, the
Buyers and the Company’s Subsidiaries.”

          g. The Notes, except as amended pursuant to this Section 2, shall remain unmodified, unamended
and in full force and effect. In the event of any conflict between the terms and provisions of the
Notes and the terms and provisions of this Section 2, the terms and provisions of this Section 2
shall prevail.

     3. Amendment to the Warrants.

          a. Each of the Buyers, severally and not jointly, hereby agrees with the Company that the
definition of Warrant Exercise Price set forth in Section 1(b)(xv) of each of the Warrants be
amended to read in its entirety as follows:

“Warrant Exercise Price” shall be equal to, with respect to any Warrant Share $5.00,
subject to adjustment and hereinafter provided.”

          b. Each of the Buyers, severally and not jointly, hereby agrees with the Company that the
amendment of the definition of Warrant Exercise Price as provided in Section 3(a) (the “Warrant
Amendment”) shall be deemed for purposes of the second sentence of Section 8(a) of each of the
Warrants to be an adjustment to the Warrant Exercise Price of the Warrants pursuant to the first
sentence of Section 8(a) thereof (i.e., as having resulted from an issuance or sale of shares of
Common Stock for a consideration per share less than the Applicable Price in effect immediately
prior to such issuance or sale), and that upon such deemed adjustment to the Warrant Exercise
Price, the number of Warrant Shares (as defined in such Warrant) acquirable upon exercise of such
Warrant shall be amended and adjusted in accordance with the provisions of the second sentence of
Section 8(a) of such Warrant (i.e., the number of shares of Common Stock acquirable upon exercise
of such Warrant shall be increased to the number of shares determined by multiplying the Warrant
Exercise Price of such Warrant in effect immediately prior to the Warrant Amendment by the number
of shares of Common Stock acquirable upon exercise of such Warrant immediately prior to the Warrant
Amendment and dividing the product thereof by $5.00).

          c. The Warrants, except as amended pursuant to this Section 3, shall remain unmodified,
unamended and in full force and effect. In the event of any conflict between the terms and
provisions of the Warrants and the terms and provisions of this Section 3, the terms and provisions
of this Section 3 shall prevail.

     4. Limited Waivers.

          a. Subject to Section 4(c), each of the Buyers, severally and not jointly, hereby waives (i)
the occurrence of a Triggering Event under Section 3(b)(vii) and (viii) of each of the Notes and an
Event of Default under Section 11(a)(iii) and (viii) of each of the Notes, the breach of Section 12
of each of the Notes and the breach of Section 4(n) of the Securities Purchase Agreement resulting
solely from the Accounts Payable Default, and (ii) the Accounts Payable Default’s constituting a
failure to satisfy any Condition to Company Alternative

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Conversion with respect to the August 2006 Company Conversion pursuant to this Amendment or
any Convertible Installment Conversion pursuant to this Amendment and Section 6.1 of each of the
Notes, as amended by this Amendment; provided that such waivers are subject to, and conditioned
upon, (A) the aggregate outstanding amount of the O & G Accounts Payable not exceeding $12,500,000
on the date of this Amendment and not having exceeded $13,500,000 at any time prior to the date of
this Amendment, (B) the aggregate amount of the Accounts Payable unpaid in excess of 90 days beyond
invoice due date not exceeding $1,500,000 on the date of this Amendment and not having exceeded
$1,500,000 at any time prior to the date of this Amendment, and (C) none of the Accounts Payable
being unpaid in excess of 127 days beyond invoice due date on the date of this Amendment or having
been unpaid in excess of 162 days beyond invoice due date at any time prior to the date of this
Amendment; and provided, further, that the waivers contained in this Section 4(a) shall be null and
void and of no force or effect, and there shall be an immediate breach of the Securities Purchase
Agreement and each of the Notes and a Triggering Event under each of the Notes, in the event that
(V) the aggregate amount of the O & G Accounts Payable exceeds $12,500,000 at any time following
the date of this Amendment, or (W) the aggregate amount of the O & G Accounts Payable exceeds
$5,000,000 as of January 1, 2007 or at any time thereafter, (X) the aggregate amount of the
Accounts Payable unpaid in excess of 90 days beyond invoice due date exceeds $2,500,000 at any time
following the date of this Amendment through (and including) September 15, 2006 or exceeds
$1,500,000 at any time after September 15, 2006; (Y) any Accounts Payable are unpaid in excess of
150 days beyond invoice due date at any time following the date of this Amendment or (Z) any
Accounts Payable are unpaid in excess of 90 days beyond invoice due date on December 31, 2006 or at
any time thereafter.

          b. Subject to Section 4(c), each of the Buyers, severally and not jointly, hereby waives (i)
the occurrence of a Triggering Event (if any) under Section 3(b)(vii) of each of the Notes and an
Event of Default (if any) under Section 11(a)(viii) of each of the Notes, and the breach of
Sections 2(f) and 4.5(a) of the Security Agreement, resulting solely from the Company’s
establishment of a Deposit Account (as defined in the Security Agreement) at Cornerstone Bank
(“Cornerstone”) that is not subject to an Account Control Agreement (the “Cornerstone Deposit
Account”), and deposit of $852,000 in Company funds therein, solely for purposes of securing
reimbursement obligations under a letter of credit issued by Cornerstone Bank (such establishment
and deposit for such purposes being collectively referred to as the “Cornerstone Collateral
Deposit”), and (ii) the Cornerstone Collateral Deposit’s constituting a failure to satisfy any
Condition to Company Alternative Conversion with respect to the August 2006 Company Conversation
pursuant to this Amendment or any Convertible Installment Conversion pursuant to this Amendment and
Section 6.1 of each of the Notes; provided that the waivers contained in this Section 4(b) shall be
null and void and of no force and effect, and there shall be an immediate breach of the Security
Agreement, in the event that (i) the aggregate funds in the Cornerstone Deposit Account at any time
exceed $852,000 or (ii) the Cornerstone Collateral Deposit would constitute a breach of Section 12
of any of the Notes.

          c. The limited waivers set forth in Sections 4(a) and 4(b) are conditioned upon, and subject
to, the Company’s performance of its commitments and obligations under this Amendment, the breach
or non-performance of which shall render such waivers null and void and of no force and effect,
each Buyer being entitled thereafter to exercise all remedies at law or in equity under the
Transaction Documents as if Sections 4(a) and 4(b) had not been part of this

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Amendment, as executed. The limited waivers set forth in Sections 4(a) and 4(b) are not, and
shall not be deemed to be, a waiver under any other circumstance or a waiver of any other
condition, requirement, provision or breach of any of the Transaction Documents or any other
agreement or instrument.

     5. Additional Note Issuance Prohibition. The Company hereby agrees with each of the
Buyers, severally and not jointly, that as of and after the date of this Amendment, the Company
shall not have the right to sell any Additional Notes or Additional Warrants to the Buyers pursuant
to Section 1(b) of the Securities Purchase Agreement, and any Additional Sale Election Notice
delivered pursuant thereto as of and after the date of this Amendment shall be null and void and of
no force or effect.

     6. Company Alternative Conversion Limitation. The Company hereby agrees with each of
the Buyers, severally and not jointly, that as of and after the date of this Amendment, (a) the
Company shall not have the right to effect any Company Alternative Conversion pursuant to Section 8
of the Notes other than pursuant to the August 2006 Company Conversion in accordance with this
Amendment or a Convertible Installment Conversion (as defined in Section 6.1 of the Notes, as
amended by this Amendment) in accordance with this Amendment and Section 6.1 of the Notes, as
amended by this Amendment, and (b) any Company Alternative Conversion Notice delivered pursuant to
any of the Notes (other than a Company Alternative Conversion Notice with respect to the August
2006 Company Conversion deemed delivered pursuant to Section 1(b) of this Amendment or a Company
Alternative Conversion Notice deemed delivered pursuant to Section 6.1 of any of the Notes, as
amended by this Amendment) as of and after the date of this Amendment shall be null and void and of
no force or effect.

     7. Covenants.

          a. Prior to 9:00 a.m., New York time, on August 10, 2006, but in no event no later than the
earlier of (i) the filing by the Company of its Quarterly Report on Form 10-Q for the quarter ended
June 30, 2006 (the “Form 10-Q”) or (ii) the issuance by the Company of a press release disclosing
the Company’s operating results with respect to the quarter ended June 30, 2006, the Company shall
file a Form 8-K or the Form 10-Q (the “Amendment SEC Filing”) with the Securities and Exchange
Commission (the “SEC”) describing the terms of this Amendment, any information reasonably requested
to be disclosed therein by any Buyer and any material non-public information previously provided by
the Company, any of its Subsidiaries or any of their respective officers, directors, employees or
agents to any of the Buyers and not subsequently disclosed on a Form 8-K or other
publicly-available filing with the SEC prior to the filing of the Amendment SEC Filing, and
including as an exhibit to such Amendment SEC Filing this Amendment, all in the form required by
the 1934 Act. The Company shall provide each Buyer with a reasonably opportunity to review and
comment upon such disclosure prior to the filing of the Amendment SEC Filing with the SEC. The
Company hereby represents and warrants to each of the Buyers that, from and after the filing of the
Amendment SEC Filing with the SEC, no Buyer shall be in possession of any material nonpublic
information received from the Company, any of its Subsidiaries or any of their respective officers,
directors, employees or agents.

10

 

          b. Within two (2) Business Days following the execution of this Amendment by the Company and
the Buyers, the Company shall promptly reimburse each Buyer for all of the out-of-pocket fees,
costs and expenses (including, but not limited to, attorneys’ fees, costs and expenses) incurred by
such Buyer in connection with the negotiation and documentation of this Amendment. Following the
date hereof, the Company shall promptly reimburse each Buyer for all of the out-of-pocket fees,
costs and expenses (including, without limitation, attorneys’ fees, costs and expenses) incurred by
such Buyer in connection with any amendment, modification or waiver of any of the Transaction
Documents and/or the enforcement of such Buyer’s rights and remedies under any of the Transaction
Documents.

     8. Representations and Warranties of the Company. The Company represents and warrants
to each of the Buyers that:

          a. Authorization; Enforcement; Validity. Each of the Company and its Subsidiaries has the
requisite corporate power and authority to enter into and perform its obligations under this
Amendment, the Notes, as amended hereby, and the Warrants, as amended hereby. The execution and
delivery of this Amendment by each of the Company and its Subsidiaries and the consummation of the
transactions contemplated hereby (including the issuance of the Conversion Shares upon conversion
of the Notes (as amended hereby) and the issuance of Warrant Shares upon the issuance of the
Warrants (as amended hereby)) have been duly authorized by the respective boards of directors of
the Company and its Subsidiaries, and no further consent or authorization is required of any of the
Company, its Subsidiaries or their respective Boards of Directors or shareholders (under applicable
law, the rules and regulations of the Principal Market or otherwise). This Amendment has been duly
executed and delivered by each of the Company and its Subsidiaries, and each of this Amendment, the
Notes (as amended hereby) and the Warrants (as amended hereby) constitutes a valid and binding
obligation of each of the Company and its Subsidiaries, enforceable against each of the Company and
its Subsidiaries in accordance with its terms.

          b. Issuance of Securities. Upon issuance in accordance with the Notes (as amended hereby) and
the Warrants (as amended hereby), the Conversion Shares and the Warrant Shares will be validly
issued, fully paid and nonassessable and free from all taxes and Liens with respect to the issue
thereof, with the holders being entitled to all rights accorded to a holder of the Common Stock.

          c. No Conflicts. The execution and delivery of this Amendment by each of the Company and its
Subsidiaries, the performance by each of the Company and its Subsidiaries of its obligations
hereunder and the consummation by each of the Company and its Subsidiaries of the transactions
contemplated hereby and by the Notes (as amended hereby) and the Warrants (as amended hereby) will
not (i) result in a violation of the Articles of Incorporation or the Bylaws or the organizational
documents of any Subsidiary; (ii) conflict with, or constitute a breach or default (or an event
which, with the giving of notice or lapse of time or both, constitutes or would constitute a breach
or default) under, or give to others any right of termination, amendment, acceleration or
cancellation of, or other remedy with respect to, any agreement, indenture or instrument to which
the Company or any of its Subsidiaries is a party; or (iii) result in a violation of any law,
rule, regulation, order, judgment or decree (including federal and state securities laws and
regulations and the rules and regulations of the Principal Market)

11

 

applicable to the Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected. None of the Company nor any of its
Subsidiaries is required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency, the Principal Market or any other regulatory
or self-regulatory authority in order for it to execute, deliver or perform any of its obligations
under or contemplated by this Amendment in accordance with the terms hereof, or under the Notes (as
amended hereby) or the Warrants (as mended hereby), including, the issuance of the Conversion
Shares and the Warrant Shares in accordance with the terms of the Notes (as amended hereby) and the
Warrants (as amended hereby).

          d. No Default. Other than the Accounts Payable Default, there exists no Triggering Event,
Event of Default or breach or failure to comply by the Company or any of its Subsidiaries with any
representation, warranty, covenant or other term or condition of any of the Transaction Documents,
or an event which, with the giving of notice or lapse of time or both and without being cured,
constitutes or would constitute such a Triggering Event, Event of Default or breach or failure.

     9. Representation and Warranties of the Buyers. Each of the Buyers represents and
warrants to the Company that (a) such Buyer is a validly existing corporation, partnership, limited
liability company or other entity and has the requisite corporate, partnership, limited liability
or other organizational power and authority to enter into and perform its obligations under this
Amendment, and (b) this Amendment has been duly and validly authorized, executed and delivered on
behalf of such Buyer and is a valid and binding agreement of such Buyer enforceable against such
Buyer in accordance with its terms.

     10. Avoidance of Doubt. The parties hereto hereby agree, for the avoidance of doubt,
that the terms “Notes” and “Warrants” as used in the Transaction Documents shall mean the Notes and
the Warrants as amended by this Amendment, and each of the parties hereto agrees not to take any
contrary positions.

     11. Independent Nature of the Buyers. The obligations of each of the Buyers hereunder
are several and not joint with the obligations of the other, and none of the Buyers shall be
responsible in any way for the performance of the obligations of any of the other Buyers hereunder
or under any of the Transaction Documents. Each of the Buyers shall be responsible only for its
own agreements and covenants hereunder and under the Transaction Documents. The decision of each
of the Buyers to enter into this Amendment has been made by such party independently of any of the
other Buyers and independently of any information, materials, statements or opinions as to the
business, affairs, operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or any of its Subsidiaries which may have been
made or given by any of the other Buyers or by any agent or employee of any of the other Buyers,
and none of the Buyers nor any of their respective agents or employees shall have any liability to
any of the other Buyers (or any other person or entity) relating to or arising from any such
information, materials, statements or opinions. Nothing contained herein or in any of the
Transaction Documents, and no action taken by any of the Buyers pursuant hereto or thereto, shall
be deemed to constitute any of the Buyers as a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that any of the Buyers are in any way acting in
concert or as a group with respect to such

12

 

obligations or the transactions contemplated hereby or thereby. Each of the Buyers shall be
entitled to independently protect and enforce its rights, including the rights arising out of this
Amendment, the Notes, the Warrants and the other Transaction Documents, and it shall not be
necessary for any of the other Buyers to be joined as an additional party in any proceeding for
such purpose.

     12. Successors and Assigns. This Amendment shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and permitted assigns. The
successors and assigns of such entities shall include their respective receivers, trustees or
debtors-in-possession.

     13. Further Assurances. The Company hereby agrees from time to time, as and when
requested by any Buyer, to execute and deliver or cause to be executed and delivered, all such
documents, instruments and agreements, including financing statements, secretary’s certificates,
stock powers and irrevocable transfer agent instructions, and to take or cause to be taken such
further or other action, as such Buyer may reasonably deem necessary or desirable in order to carry
out the intent and purposes of this Amendment and the Transaction Documents.

     14. Rules of Construction. All words in the singular or plural include the singular
and plural and pronouns stated in either the masculine, the feminine or neuter gender shall include
the masculine, feminine and neuter, and the use of the word “including” in this Amendment shall be
by way of example rather than limitation.

     15. Governing Law; Jurisdiction; July Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Amendment shall be governed by the
internal laws of the State of New York, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding
is improper. Each party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy thereof to such party
at the address for such notices to it under this Amendment and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL
FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AMENDMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

13

 

     16. Severability. Wherever possible, each provision of this Amendment shall be
interpreted in such manner as to be effective and valid under applicable law, but if any provision
of this Amendment shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity without invalidating the remainder of
such provision or the remaining provisions of this Amendment.

     17. Merger. This Amendment and the Transaction Documents, as amended hereby,
represent the final agreement of each of the parties hereto with respect to the matters contained
herein and may not be contradicted by evidence of prior or contemporaneous agreements, or prior or
subsequent oral agreements, among any of the parties hereto.

     18. Execution in Counterparts. This Amendment may be executed in two or more
identical counterparts, all of which shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each party and delivered to each other
party. In the event that any signature to this Amendment or any amendment hereto is delivered by
facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall
create a valid and binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile or “.pdf” signature page were an
original thereof. No party hereto shall raise the use of a facsimile machine or e-mail delivery of
a “.pdf” format data file to deliver a signature to this Amendment or any amendment hereto or the
fact that such signature was transmitted or communicated through the use of a facsimile machine or
e-mail delivery of a “.pdf” format data file as a defense to the formation or enforceability of a
contract, and each party hereto forever waives any such defense.

     19. Section Headings. The section headings herein are for convenience of reference
only, and shall not affect in any way the interpretation of any of the provisions hereof.

     20. No Strict Construction. The language used in this Amendment will be deemed to be
the language chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.

     21. Ratification by Guarantors. By execution hereof, each of the Subsidiaries hereby
acknowledges and agrees that it has reviewed this Amendment and hereby ratifies and confirms its
respective obligations under the Transaction Documents, in each case as amended hereby.

[Remainder of page intentionally left blank; Signature page follows]

14

 

     IN WITNESS WHEREOF, this Amendment has been duly executed by each of the undersigned as of the
day and year first set forth above.

	 	 	 	 	 
	 	 	INFINITY ENERGY RESOURCES, INC.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ J.A. Tuell
	 

	 	 	 	 
	 

	 	Name:
	 	J.A. Tuell
	 

	 	 	 	 
	 

	 	Title:
	 	President and CEO
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	CONSOLIDATED OIL WELL SERVICES, INC.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Timothy A. Ficker
	 

	 	 	 	 
	 

	 	Name:
	 	Timothy A. Ficker
	 

	 	 	 	 
	 

	 	Title:
	 	Vice President, CFO
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	CIS-OKLAHOMA, INC.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Stanton E. Ross
	 

	 	 	 	 
	 

	 	Name:
	 	Stanton E. Ross
	 

	 	 	 	 
	 

	 	Title:
	 	President
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	INFINITY OIL & GAS OF WYOMING, INC.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ J.A. Tuell
	 

	 	 	 	 
	 

	 	Name:
	 	J.A. Tuell
	 

	 	 	 	 
	 

	 	Title:
	 	President
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	INFINITY OIL & GAS OF KANSAS, INC.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ J.A. Tuell
	 

	 	 	 	 
	 

	 	Name:
	 	J.A. Tuell
	 

	 	 	 	 
	 

	 	Title:
	 	President
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	INFINITY OIL AND GAS OF TEXAS, INC.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ J.A. Tuell
	 

	 	 	 	 
	 

	 	Name:
	 	J.A. Tuell
	 

	 	 	 	 
	 

	 	Title:
	 	President
	 

	 	 	 	 

 

 

	 	 	 	 	 	 	 
	 	 	HFTP INVESTMENT L.L.C.
	 
	 	 	 	 	 	 
	 	 	By: Promethean Asset Management L.L.C.
	 	 	Its: Investment Manager
	 
	 	 	 	 	 	 
	 

	 	 
	 	By:
	 	/s/ Robert J. Brantman
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Robert J. Brantman
	 

	 	 	 	Title:
	 	Partner and Authorized Signatory
	 
	 	 	 	 	 	 
	 	 	GAIA OFFSHORE MASTER FUND, LTD.
	 
	 	 	 	 	 	 
	 	 	By: Promethean Asset Management L.L.C.
	 	 	Its: Investment Manager
	 
	 	 	 	 	 	 
	 

	 	 
	 	By:
	 	/s/ Robert J. Brantman
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Robert J. Brantman
	 

	 	 	 	Title:
	 	Partner and Authorized Signatory

 

 

	 	 	 	 	 	 	 	 	 
	 	 	AG OFFSHORE CONVERTIBLES, LTD.
	 
	 	 	 	 	 	 	 	 
	 	 	By: Angelo, Gordon & Co. L.P.
	 	 	Its: Director
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	/s/ Michael L. Gordon
	 	 	 	 	 	 	 
	 	 	 	 	Name:	 	Michael L. Gordon
	 	 	 	 	 	 	 
	 	 	 	 	Title:	 	Chief Operating Officer
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	LEONARDO, L.P.
	 
	 	 	 	 	 	 	 	 
	 	 	By: Leonardo Capital Management, Inc.
	 	 	Its: General Partner
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	By: Angelo, Gordon & Co., L.P.
	 	 	 	 	Its: Director
	 
	 	 	 	 	 	 	 	 
	 

	 	 
	 	 
	 	By:
	 	/s/ Michael L. Gordon
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:
	 	Michael L. Gordon
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Title:
	 	Chief Operating Officer
	 

	 	 	 	 	 	 	 	 

 

 

	 	 	 	 	 	 	 
	 	 	PORTSIDE GROWTH & OPPORTUNITY FUND
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 	 	 	 	 
	 

	 	Its:	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 
	 	By:
	 	/s/ Jeffrey C. Smith
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Jeffrey C. Smith
	 

	 	 	 	 	 	 
	 

	 	 	 	Title:
	 	Authorized Signatory
	 

	 	 	 	 	 	 

 

 

Exhibit A

August 2006 Company Conversion

	 	 	 	 	 
	Buyer	 	Aggregate Pro Rata Conversion Amount
	HFTP Investment L.L.C.
	 	$	934,437.16	 
	Gaia Offshore Master Fund, Ltd.
	 	$	315,562.84	 
	AG Offshore Convertibles, Ltd.
	 	$	519,736.84	 
	Leonardo, L.P.
	 	$	205,263.16	 
	Portside Growth & Opportunity Fund
	 	$	525,000.00exv10w1

 

EXHIBIT 10.1

TESORO CORPORATION RESTORATION

RETIREMENT PLAN

ARTICLE 1. General Provisions

     1.1 Establishment and Purpose.

     Tesoro Corporation hereby establishes the Tesoro Corporation Restoration Retirement Plan (the
“Plan”) on the terms and conditions hereinafter set forth. The Plan is designed primarily for the
purpose of providing benefits for a select group of management and highly compensated employees of the Company and its Subsidiaries and is intended to qualify as a “top hat” plan under
Sections 201(2), 301(a)(3) and 401(a)(l) of the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”).

     1.2 Definitions.

     “Beneficiary” means the person or persons designated by a Participant as his beneficiary
hereunder in accordance with the provisions of Article 5.

     “Board” means the Board of Directors of the Company.

     “Change in Control” means (i) there shall be consummated (A) any consolidation or merger of
Company in which Company is not the continuing or surviving corporation or pursuant to which shares
of Company’s Common Stock would be converted into cash, securities or other property, other than a
merger of Company where a majority of the Board of Directors of the surviving corporation are, and
for a one-year period after the merger continue to be, persons who were directors of Company
immediately prior to the merger or were elected as directors, or nominated for election as
director, by a vote of at least two-thirds of the directors then still in office who were directors
of Company immediately prior to the merger, or (B) any sale, lease, exchange or transfer (in one
transaction or a series of related transactions) of all or substantially all of the assets of
Company, or (ii) the shareholders of Company shall approve any plan or proposal for the liquidation
or dissolution of Company, or (iii) (A) any “person” (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Act), other than Company or a subsidiary thereof or any employee benefit
plan sponsored by Company or a subsidiary thereof, shall become the beneficiary owner (within the
meaning of Rule 13c-3 under the Securities Act) of securities of Company representing 35 percent or
more of the combined voting power of Company’s then outstanding securities ordinarily (and apart
from rights accruing in special circumstances) having the right to vote in the election of
directors, as a result of a tender or exchange offer, open market purchases, privately negotiated
purchases or otherwise, and (B) at any time during a period of one-year thereafter, individuals who
immediately prior to the beginning of such period constituted the Board of Directors of Company
shall cease for any reason to constitute at least a majority thereof, unless election or the
nomination by the Board of Directors for election by Company’s shareholders of each new director
during such period was approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of such period.

1

 

     “Code” means the Internal Revenue Code of 1986, as amended, and any successor code
or law.

     “Committee” means the Employee Benefits Committee appointed by the Board of Directors, or such
other committee designated by the Board to discharge the duties of the Committee hereunder.

     “Company” means Tesoro Corporation, a Delaware Corporation, or any successor thereto.

     “Compensation” shall, unless otherwise determined by the Committee, have the meaning assigned
thereto in the Retirement Plan (determined without regard to any limits imposed on Compensation by
the Internal Revenue Code).

     “Disability” means disability as determined under the Retirement Plan.

     “Distribution Date” means the date on which distributions to a Participant are to commence.
Distribution Dates are determined as otherwise provided under the terms of the Plan.

     “Distribution Option” means the form in which payments to a Plan Participant are to be paid.
Distribution Options are determined according to Article 3 of the Plan.

     “Insolvency” means, with respect to the Company: (1) an adjudication of bankruptcy; (2) the assignment for the benefit of creditors of or by the Company; (3) a material
part or all of the property of the Company becomes subject to the control and direction of a receiver, which receivership is not dismissed within sixty (60) days of such receiver’s
appointment; or (4) the filing by the Company of a petition for relief under any federal or other bankruptcy or other insolvency law or for an arrangement with creditors.

     “Participant” means any employee who has satisfied the eligibility requirements set forth in Section 1.4 of the Plan.

     “Person” means any individual, corporation, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

     “Plan Year” means the twelve-month period beginning each January 1.

     “Restoration Retirement Benefit” means the annual benefit payable to the Participant pursuant to Article 2.

     “Retirement” means a Participant’s termination of employment with the Company as a retiree as determined under the provisions of the Retirement Plan.

     “Retirement Benefit” means the monthly benefit payable to a Participant under the Retirement Plan.

2

 

     “Retirement Plan” means The Tesoro Corporation Retirement Plan, as amended.

     “Subsidiary” means any entity in which the Company owns or otherwise controls, directly or indirectly, stock or other ownership interests having the voting power to elect a
majority of the board of directors, or other governing group having functions similar to a board of
directors, as determined by the Committee.

     1.3 Administration.

          (a) The Committee shall administer the Plan and have sole and absolute authority and
discretion to decide all matters relating to the administration of the Plan, including, without
limitation, determining the rights and status of Participants or their beneficiaries under the
Plan. The Committee is authorized to interpret the Plan, to adopt administrative rules,
regulations, and guidelines for the Plan, and may correct any defect, supply any omission or
reconcile any inconsistency or conflict in the Plan. The Committee’s determinations under the Plan
need not be uniform among all Participants, or classes or categories of Participants, and may be
applied to such Participants, or classes or categories of Participants, as the Committee, in its
sole and absolute discretion, considers necessary, appropriate or desirable. All determinations by
the Committee shall be final, conclusive and binding on the Company, the Participant and any and
all interested parties.

          (b) The Committee may delegate such of its powers and authority under the Plan to the
Company’s officers or such other person(s) as it deems necessary or appropriate. In the event of
such delegation, all references to the Committee in this Plan shall be deemed references to such
officers or such other person(s) as it relates to those aspects of the Plan that have been
delegated.

          (c) Any action taken by the Committee with respect to the rights or benefits under the Plan of
any Participant shall be subject to correction by the Committee as to payments not yet made to such
person, and acceptance of any deferred compensation benefits under the Plan constitutes acceptance
of and agreement to the Committee’s or the Company’s making any appropriate adjustments in future payments to such person (or to recover from such person) any excess payment or
underpayment previously made to him.

          (d) Notwithstanding any provision of the Plan to the contrary, if any benefit provided under
this Plan is subject to the provisions of Section 409A of the Code and the regulations issued
thereunder, the provisions of the Plan shall be administered, interpreted and construed in a manner
necessary to comply with Section 409A and the regulations issued thereunder (or disregarded to the
extent such provision cannot be so administered, interpreted or construed).

     1.4 Eligibility and Participation.

          (a) Participation in the Plan is limited to those individuals who are within the category of a
select group of management and highly compensated employees as referred to in Sections 201(2),
301(a)(3) and 401(a)(l) of the Employee Retirement Income Security Act of

3

 

1974, as amended (“ERISA”), and who are within those classifications of officers and key
management employees of the Company and its Subsidiaries which are nominated by the Chief Executive
Officer and approved by the Compensation Committee of the Board as eligible to participate in the
Plan. Those employee classifications initially selected for participation in the Plan are set
forth on Exhibit 1 attached hereto. This Exhibit will be modified from time to time as recommended
by the Chief Executive Officer and approved by the Compensation Committee of the Board to include
or exclude certain employee classifications as deemed appropriate.

          (b) A Participant shall cease to be a Participant upon receiving payment for the full amount
of benefits to which the Participant is entitled under the Plan or becomes ineligible to
participate based on eligibility status as determined in Section 1.4(a) of this Plan. Once a
Participant is no longer eligible to actively participate in the Plan, he shall not be entitled to
accrue additional Restoration Retirement Benefit accruals under Article 2 of the Plan.

ARTICLE 2. Restoration Retirement Benefits

     2.1 Benefit Determination

     Subject to the full vesting of the Participant’s Restoration Retirement Benefit resulting from
a Change in Control set forth in Section 3.4, upon his termination of employment for any reason
(including death) with a vested interest in his Restoration Retirement Benefit, a Participant shall
receive upon his Retirement or attainment of his earliest Retirement age should he terminate
employment prior to Retirement, a Restoration Retirement Benefit in the event the Retirement
Benefit for the Participant under the Retirement Plan is limited by the application of Section
401(a)(17) or Section 415 of the Code. The Restoration Retirement Benefit payable to the
Participant upon his Retirement shall be equal to the difference between: (1) the Retirement
Benefit actually made to the Participant; and (2) the Retirement Benefit that would have been paid
to the Participant if the limitations of Section 401(a)(17) and Section 415 of the Code were not
contained therein. Further, the amount payable will be the amount determined after the offset by
any qualified and non-qualified retirement benefits from a predecessor employer of the Participant
if said predecessor employer or employer facility was acquired by or merged into the Company or any
Affiliate at any time and benefit service with the predecessor employer is recognized by the
Company for any retirement plan, qualified or non-qualified, per the acquisition agreement. Any
amount payable will be subject to the same early retirement discounts as are specified in the
Retirement Plan. In the event of the Participant’s Disability, the Participant shall be deemed to
remain in employment with the Company at the same rate of Compensation until his or her Disability
Retirement Date. The Restoration Retirement Benefit described above shall be payable to the
Participant upon his Retirement. In addition, the Restoration Retirement Benefit shall be
actuarially reduced for commencement prior to age 62 in accordance with actuarial equivalencies
under the Retirement Plan.

     2.2 Additional Time Recognition

     If an event occurs for a Participant who has an employment agreement or a management stability
agreement with the Company that causes the recognition of additional service credit under the terms
of such agreement, the additional service will be recognized for purposes of the

4

 

benefit calculation only. The additional service will not be reorganized for purposes of
vesting, retirement eligibility or classification as a retiree.

ARTICLE 3. Distributions

     3.1 Distribution Dates.

     Except in the event of death, distribution of the Participant’s Restoration Retirement Benefit
shall commence effective as of the first of the month following the Participant’s Retirement,
however, no payments will be made until six (6) months following the Participant’s Retirement. In
the event of a Participant whose employment terminates prior to Retirement with a vested interest
in his Restoration Retirement Benefit, distribution of the Participant’s Restoration Retirement
Benefit shall commence effective as of the first of the month following the Participant’s earliest
Retirement date under the Retirement Plan, so long as such date is at least six (6) months
following the Participant’s termination of employment. Regardless of the form of payment received
by the Participant of his Restoration Retirement Benefit, there shall be no crediting of earnings
resulting from the six (6) month waiting period set forth in the Section 3.1.

     3.2 Distribution Option/Manner of Payment.

     The Distribution Option for the Restoration Retirement Benefit shall be determined in
accordance with such election procedures as are established by the Committee and distributions
shall, at the Participant’s option, be paid in any annuity form of payment permitted under the
Retirement Plan, as elected by the Participant with regard to his Restoration Retirement Benefit;
provided, however, that the Distribution Option must be established at the time of initial
deferral, and may not be elected in the form of a lump sum distribution. Distribution of the
Participant’s Restoration Retirement Benefit shall be made in the annuity form elected by the
Participant but may be modified into any other actuarially equivalent life annuity form without
such election being treated as a modification for purposes of the Plan. In the absence of an
affirmative election to the contrary, the Participant’s Restoration Retirement Benefit shall be
made in a form of a straight life annuity in the case of an unmarried Participant and in the form
of joint and fifty percent (50%) survivor annuity in the case of a married Participant. Provided,
however, if the commuted lump sum value of the Participant’s Restoration Retirement Benefit is less
than $100,000, the Restoration Retirement Benefit will be paid in a single-lump sum. All payments
under the Plan shall be made in cash.

     3.3 Vesting.

     Subject to the full vesting of a Participant’s Restoration Retirement Benefit following a
Change in Control as set forth in Section 3.4, Restoration Retirement Benefits will only be paid to
a Participant who terminates employment or retires from the Company (other than as a result of
death or Disability) following completion of the five (5) years of vesting service (determined in
accordance with the Retirement Plan). Failure to complete the requisite vesting service will
result in no Restoration Retirement Benefit being payable, even if following Retirement.

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     3.4 Change in Control.

     Notwithstanding the foregoing provisions of Article 3, upon a Change in Control the
Participant will become fully vested in his Restoration Retirement Benefit accrued as of the Change
in Control. Restoration Retirement Benefits will not be accelerated following a Change in Control
and will only be paid in accordance with Section 3.1 to the Participant following Retirement. If a
Participant terminates employment prior to Retirement following a Change in Control, the Supplement
Retirement Benefit accrued through the Change in Control Date will be payable to the Participant at
the earliest possible Retirement date, in accordance with Section 3.1. All Restoration Retirement
Benefits payable to a Participant following a Change in Control will, subject to the mandatory lump
sum distribution provisions in Section 3.2 regarding benefits of less than $100,000, be paid in
accordance with Section and 3.2.

     3.5 Death.

     In the event that a Participant dies following completion of three (3) years of vesting
service (determined in accordance with the Retirement Plan) and prior to the commencement of his
Restoration Retirement Benefit, his Beneficiary (or Beneficiaries) will receive a monthly
retirement benefit, payable for ten (10) years certain and life thereafter, subject to the
mandatory lump sum distribution provisions in Section 3.2 regarding benefits of less than $100,000,
effective as of the first day of the month following the date of the Participant’s death, with
payment to commence as soon as administratively practicable following death. The death benefit
shall be equal to the amount which can be provided on an actuarially equivalent basis (as
determined under the Retirement Plan) by the single-sum value of the Restoration Retirement Benefit
to which the deceased Participant was entitled as of the date of death. Provided, however, in lieu
of payment of such Restoration Retirement Benefit in the form of monthly income described above,
the single-sum value of such benefit may be paid on an actuarially equivalent basis (as determined
under the Retirement Plan) to the Participant’s designated Beneficiary (or Beneficiaries) in such
other manner and form as the Participant may elect in accordance with Section 3.2. Death prior to
completion of the requisite three (3) years of vesting service will result in no Restoration
Retirement Benefit being payable to the Beneficiary(ies).

     3.6 Disability. In the event of a Participant’s Disability prior to his or her Retirement,
for purposes of determining the Participant’s Restoration Retirement Benefit, the Participant shall
be deemed to have remained in active employment at the same rate of Compensation until the
Participant’s actual Retirement, at which point the Participant’s Restoration Retirement Benefit
shall be paid as set forth in Section 3.1.

ARTICLE 4. Funding By Company

     4.1 Unsecured Obligation of Company.

          (a) Any benefit payable pursuant to this Plan shall be paid from the general assets of the
Company. Nothing contained in this Plan and no action taken pursuant to the provisions of this
Plan shall create a trust of any kind or a fiduciary relationship between any Participant (or any
other interested person) and the Company or the Committee, or require the

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Company to maintain or set aside any specific funds for the purpose of paying any benefit
hereunder. To the extent that a Participant or any other person acquires a right to
receive payments from the Company under this Plan, such right shall be no greater than the right of
any unsecured general creditor of the Company.

          (b) If the Company maintains a separate fund or makes specific investments, including the
purchase of insurance insuring the life of the a Participant, to assure its ability to pay any
benefits due under this Plan, neither the Participant nor the Participant’s Beneficiary shall have
any legal or equitable ownership interest in, or lien on, such fund, policy, investment or any
other asset of the Company. The Company, in its sole discretion, may determine the exact nature
and method of informal funding (if any) of the obligations under this Plan. If the Company elects
to maintain a separate fund or makes specific investments to fund its obligations under this Plan,
the Company reserves the right, in its sole discretion, to terminate such method of funding at any
time, in whole or in part.

     4.2 Cooperation of Participant.

     If the Company, in its sole discretion, elects to invest in a life insurance, disability
or annuity policy on the life of Participant to assist it with the informal funding of its obligations under this Plan, Participant shall assist the Company, from time to
time, promptly upon the request of the Company, in obtaining such insurance policy by supplying any
information necessary to obtain such policy as well as submitting to any physical examinations
required therefore. The Company shall be responsible for the payment of all premiums with respect
to any whole life, variable, or universal life insurance policy purchased in connection with this
Plan unless otherwise expressly agreed.

ARTICLE 5. Beneficiaries

     5.1 Beneficiary Designations.

     A designation of a Beneficiary hereunder may be made only by an instrument (in form
acceptable to the Committee) signed by the Participant and filed with the Committee prior to
the Participant’s death. In the absence of such a designation and at any other time when there is
no existing Beneficiary designated hereunder, the unpaid value of the Participant’s Restoration
Retirement Benefit to which the Participant was entitled at his death shall be distributed to the
Participant’s estate. A Beneficiary who dies or which ceases to exist shall not be entitled to any
part of any payment thereafter to be made to the Participant’s Beneficiary unless the Participant’s
designation specifically provides to the contrary. If two or more persons designated as a
Participant’s Beneficiary are in existence with respect to a Restoration Retirement Benefit, the
amount of any payment to the Beneficiary under this Plan shall be divided equally among such
persons, unless the Participant’s designation specifically provides to the contrary.

     5.2 Change in Beneficiary.

     A Participant may, at any time and from time to time, change a Beneficiary designation
hereunder without the consent of any existing Beneficiary or any other person. Any change in

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Beneficiary shall be made only by an instrument (in form acceptable to the Committee) signed
by the Participant, and any change shall be effective only if received by the Committee prior to
the death of the Participant.

ARTICLE 6. Claims Procedures

     6.1 Claims for Benefits.

     The Committee shall determine the rights of any Participant to any deferred compensation
benefits hereunder. Any Participant who believes that he has not received the deferred
compensation benefits to which he is entitled under the Plan may file a claim in writing with the
Committee. The Committee shall, no later than 90 days after the receipt of a claim (plus an
additional period of 90 days if required for processing, provided that notice of the extension of
time is given to the claimant within the first 90-day period), either allow or deny the
claim in writing. If a claimant does not receive written notice of the Committee’s decision on his
claim within the above-mentioned period, the claim shall be deemed to have been denied in full.

     A denial of a claim by the Committee, wholly or partially, shall be written in a
manner calculated to be understood by the claimant and shall include:

          (a) the specific reasons for the denial;

          (b) specific reference to pertinent Plan provisions on which the denial is based;

          (c) a description of any additional material or information necessary for the claimant to
perfect the claim and an explanation of why such material or information is necessary; and

          (d) an explanation of the claim review procedure and the time limits applicable to such
procedures, including a statement of the claimant’s right to bring a civil action under Section
502(a) of ERISA.

     6.2 Appeal Provisions.

     A claimant whose claim is denied (or his duly authorized representative) may within 60 days
after receipt of denial of a claim file with the Committee a written request for a review of such
claim. If the claimant does not file a request for review of his claim within such 60-day period,
the claimant shall be deemed to have acquiesced in the original decision of the Committee on his claim, the decision shall become final and the claimant will not be entitled to
bring a civil action under Section 502(a) of ERISA. If such an appeal is so filed within such
60-day period) the Company (or its delegate) shall conduct a full and fair review of such claim.
During such review, the claimant (or the claimant’s authorized representative) shall be given the
opportunity to review all documents that are pertinent to his claim and to submit issues and
comments in writing.

8

 

     The Company shall mail or deliver to the claimant a written decision on the matter based on
the facts and the pertinent provisions of the Plan within 60 days after the receipt of
the request for review (unless special circumstances require an extension of up to 60 additional
days, in which case written notice of such extension shall be given to the claimant prior to the
commencement of such extension). Such decision shall be written in a manner calculated to be
understood by the claimant, shall state the specific reasons for the decision and the specific Plan
provisions on which the decision was based and shall, to the extent permitted by law, be final and
binding on all interested persons. If the decision on review is not furnished to the claimant
within the above-mentioned time period, the claim shall be deemed to have been denied on review.

ARTICLE 7. Miscellaneous

     7.1 Withholding.

     The Company shall have the right to withhold from any Restoration Retirement Benefits payable
under the Plan or other wages payable to a Participant an amount sufficient to satisfy all federal,
state and local tax withholding requirements, if any, arising from or in connection with the
Participant’s receipt or vesting of deferred compensation benefits under the Plan.

     7.2 No Guarantee of Employment.

     Nothing in this Plan shall be construed as guaranteeing future employment to any Participant.
Without limiting the generality of the preceding sentence, except as otherwise set forth in a
written agreement, a Participant continues to be an employee of the Company solely at the will of
the Company subject to discharge at any time, with or without cause. The benefits provided for
herein for a Participant shall not be deemed to modify, affect or limit any salary or salary increases, bonuses, profit sharing or any other type of compensation of a Participant in any
manner whatsoever. Nothing contained in this Plan shall affect the right of a Participant to
participate in or be covered by or under any qualified or nonqualified pension, profit sharing,
group, bonus or other supplemental compensation, retirement or fringe benefit Plan constituting any
part of the Company’s compensation structure whether now or hereinafter existing.

     7.3 Payment to Guardian.

     If a benefit payable hereunder is payable to a minor, to a person declared incompetent or to a
person incapable of handling the disposition of his property, the Committee may direct payment of
such benefit to the guardian, legal representative or person having the care and custody of such
minor, incompetent or person. The Committee may require such proof of incompetency, minority,
incapacity or guardianship, as it may deem appropriate prior to distribution of the benefit. Such
distribution shall completely discharge the Company from all liability with respect to such
benefit.

9

 

     7.4 Assignment.

     No right or interest under this Plan of any Participant or Beneficiary shall be assignable or
transferable in any manner or be subject to alienation, anticipation, sale, pledge,
encumbrance or other legal process or in any manner be liable for or subject to the debts or
liabilities of the Participant or Beneficiary.

     7.5 Severability.

     If any provision of this Plan or the application thereof to any circumstance(s) or person(s)
is held to be invalid by a court of competent jurisdiction, the remainder of the Plan and the
application of such provision to other circumstances or persons shall not be affected
thereby.

     7.6 Amendment and Termination.

     The Company may at any time (without the consent of any Participant) modify, amend or
terminate any or all of the provisions of this Plan; provided, however, that no modification,
amendment or termination of this Plan shall adversely affect the rights of a Participant under the
Plan without the consent of such Participant. Notwithstanding the foregoing or any provision of
the Plan to the contrary, the Company may at any time (without the consent of any Participant)
modify, amend or terminate any or all of the provisions of this Plan to the extent necessary to
conform the provisions of the Plan with Section 409A of the Code regardless of whether such
modification, amendment or termination of this Plan shall adversely affect the rights of a
Participant under the Plan.

     7.7 Exculpation and Indemnification.

     The Company shall indemnify and hold harmless the members of the Committee from and against
any and all liabilities, costs and expenses incurred by such persons as a result of any act, or
omission to act, in connection with the performance of such person’s duties, responsibilities and
obligations under the Plan, other than such liabilities, costs and expenses as may result from the
gross negligence, willful misconduct, and/or criminal acts of such persons.

     7.8 Leave of Absence.

     The Company may, in its sole discretion, permit a Participant to take a leave of absence for a
period not to exceed one year. Any such leave of absence must be approved by the Company. During
this time, the Participant will still be considered to be in the employ of the Company for purposes
of this Plan.

     7.9 Gender and Number.

     For purposes of interpreting the provisions of this Plan, the masculine gender shall be deemed
to include the feminine, the feminine gender shall be deemed to include the masculine, and the
singular shall include the plural unless otherwise clearly required by the context.

10

 

     7.10 Governing Law.

     Except as otherwise preempted by the laws of the United States, this Plan shall be governed by
and construed in accordance with the laws of the State of Texas, without giving effect to its
conflict of law provisions.

     7.11 Effective Date.

     The effective date of the Plan, as signed this ninth day of August 2006, is July 1, 2006.

	 	 	 	 	 
	 	 	TESORO COPORATION
	 
	 	 	 	 
	 

	 	By:	 	/s/ Susan A Lerette
	 

	 	 	 	 
	 

	 	Name:
	 	Susan A Lerette
	 

	 	 	 	 
	 

	 	Title:
	 	Vice President, Human Resources
	 

	 	 	 	 

11

 

TESORO CORPORATION RESTORATION

RETIREMENT PLAN

Exhibit 1

Effective as of July 1, 2006, the following are the classifications of officers and key management
employees of the Company eligible to participate in the Tesoro Corporation Restoration Retirement
Plan:

Employees eligible for the Tesoro Corporation Retirement Plan classified as being included
in salary grades 43 and above with a base salary of $170,000 per year or more but excluding
any such person designated as included in the Tesoro Corporation Executive Security Plan or
who is provided a separate supplemental retirement benefit as a part of an employment
agreement with the Company.

12

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