Document:

exv10w2

Exhibit 10.2

Execution Copy

CONTRIBUTION, CONVEYANCE AND ASSUMPTION

AGREEMENT

by and among

TESORO LOGISTICS LP

TESORO LOGISTICS GP, LLC

TESORO LOGISTICS OPERATIONS LLC

TESORO CORPORATION

TESORO ALASKA COMPANY

TESORO REFINING AND MARKETING COMPANY

and

TESORO HIGH PLAINS PIPELINE COMPANY LLC

Dated as of April 26, 2011

 

 

CONTRIBUTION, CONVEYANCE AND ASSUMPTION

AGREEMENT

     This Contribution, Conveyance and Assumption Agreement, dated as of April 26, 2011 (this
“Agreement”), is by and among Tesoro Logistics LP, a Delaware limited partnership (the
“Partnership”), Tesoro Logistics GP, LLC, a Delaware limited liability company and the
general partner of the Partnership (the “General Partner”), Tesoro Logistics Operations
LLC, a Delaware limited liability company (the “Operating Company”), Tesoro Corporation, a
Delaware corporation (“Tesoro”), Tesoro Alaska Company, a Delaware corporation
(“Tesoro Alaska”), Tesoro Refining and Marketing Company, a Delaware corporation
(“TRMC”), and Tesoro High Plains Pipeline Company LLC, a Delaware limited liability company
(“High Plains”). The above-named entities are sometimes referred to in this Agreement
individually as a “Party” and collectively as the “Parties.” Capitalized terms
used herein shall have the meanings assigned to such terms in Article I.

RECITALS

     WHEREAS, the General Partner and Tesoro have formed the Partnership, pursuant to the Delaware
Revised Uniform Limited Partnership Act (the “Delaware Partnership Act”), for the purpose
of owning and operating crude oil and refined products logistics assets and providing related
logistics services, as well as engaging in any other business activity that is approved by the
General Partner and that lawfully may be conducted by a limited partnership organized under the
Delaware Partnership Act.

     WHEREAS, in order to accomplish the objectives and purposes in the preceding recital, each of
the following actions has been taken prior to the date hereof:

	 	1.	 	Tesoro formed the General Partner under the terms of the Delaware Limited
Liability Act (the “Delaware LLC Act”) and contributed $1,000 in exchange for
all of the limited liability company interests in the General Partner;
	 
	 	2.	 	Tesoro and the General Partner formed the Partnership under the terms of the
Delaware Partnership Act and contributed $980 and $20, respectively, in exchange for a
98% limited partner interest (the “Initial LP Interest”) and a 2% general
partner interest, respectively, in the Partnership;
	 
	 	3.	 	TRMC formed the Operating Company under the Delaware LLC Act and contributed
$1,000 in exchange for all of the limited liability company interests in the Operating
Company;
	 
	 	4.	 	Tesoro Alaska formed Tesoro Alaska Logistics LLC, a Delaware limited liability
company (“TAL”), under the Delaware LLC Act and contributed $1,000 in exchange
for all of the limited liability company interests in TAL;
	 
	 	5.	 	Tesoro High Plains Pipeline Company, a Delaware corporation and the predecessor
to High Plains (“THPPC”), formed Tesoro Trucking Operations LLC, a Delaware
limited liability company (“Tesoro Trucking”), under the Delaware

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	 	 	 	LLC Act and contributed $1,000 in exchange for all of the limited liability company
interests in Tesoro Trucking;
	 
	 	6.	 	THPPC filed a certificate of conversion under the Delaware LLC Act and
converted from a Delaware corporation to a Delaware limited liability company;
	 
	 	7.	 	Pursuant to that certain Bill of Sale and Assignment, dated as of December 7,
2010, High Plains contributed certain logistics assets to Tesoro Trucking;
	 
	 	8.	 	Pursuant to that certain Contribution Agreement, dated as of April 26, 2011, by
and between Tesoro Alaska and TAL, Tesoro Alaska contributed certain logistics assets
(the “Tesoro Alaska Assets”) to TAL;
	 
	 	9.	 	Pursuant to that certain Contribution Agreement, dated as of April 26, 2011, by
and between TRMC and the Operating Company, TRMC conveyed certain logistics assets (the
“TRMC Assets”) to the Operating Company;
	 
	 	10.	 	Pursuant to that certain Assignment and Assumption Agreement, dated as of April
26, 2011, by and between TRMC and the Operating Company, TRMC agreed to assign, subject
to the consent of the Port Authority, all of its right, title and interest in, to and
under the Vancouver Lease to the Operating Company;

     WHEREAS, immediately prior to the consummation of the transactions contemplated hereby (the
“Closing”), Tesoro will convey a portion of its limited liability company interest in High
Plains (the “HP Interest”) to the General Partner as a capital contribution with a value
equal to (a) 2% of the equity value of the Partnership immediately after the Closing plus (b) $50
million;

     WHEREAS, concurrently with the Closing, each of the matters provided for in Article II
will occur in accordance with its respective terms;

     WHEREAS, if the Over-Allotment Option is exercised, each of the matters provided for in
Article III will occur in accordance with its respective terms; and

     WHEREAS, the stockholders, members or partners of the Parties have taken all corporate,
limited liability company and partnership action, as the case may be, required to approve the
transactions contemplated by this Agreement.

     NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and
agreements herein contained, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

     Capitalized terms used but not otherwise defined herein shall have the respective meanings
ascribed to such terms below:

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     “Common Unit” means a common unit representing a limited partner interest in the
Partnership having the rights set forth in the Partnership Agreement.

     “Effective Time” means 8:00 a.m. Central Time on the date of the Closing.

     “Master Terminalling Agreement” means that certain Master Terminalling Agreement,
dated as of April 26, 2011, among TRMC, Tesoro Alaska and the Operating Company, as such agreement
may be amended, supplemented or restated from time to time.

     “Offering” means the initial public offering of the Partnership’s Common Units.

     “Omnibus Agreement” means that certain Omnibus Agreement, dated as of April 26, 2011,
among Tesoro, TRMC, Tesoro Companies, Inc., a Delaware corporation, Tesoro Alaska, the General
Partner and the Partnership, as such agreement may be amended, supplemented or restated from time
to time.

     “Option Units” means the Common Units that the Partnership will agree to issue upon an
exercise of the Over-Allotment Option.

     “Original Partnership Agreement” means that certain Agreement of Limited Partnership
of the Partnership, dated as of December 3, 2010.

     “Over-Allotment Option” has the meaning assigned to it in the Partnership Agreement.

     “Partnership Agreement” means the First Amended and Restated Agreement of Limited
Partnership of the Partnership, dated as of the date of this Agreement.

     “Partnership Group” has the meaning set forth in the Omnibus Agreement.

     “Port Authority” means the Port of Vancouver, U.S.A.

     “Registration Statement” means the Registration Statement on Form S-1 filed by the
Partnership with the United States Securities and Exchange Commission (Registration No.
333-171525), as amended.

     “Subordinated Units” means a subordinated unit representing a limited partner interest
in the Partnership having the rights set forth in the Partnership Agreement.

     “Underwriters” means the underwriting syndicate listed in the Underwriting Agreement.

     “Underwriting Agreement” means a firm commitment underwriting agreement to be entered
into between the Partnership and the underwriters named in the Registration Statement.

     “Vancouver Lease” means that certain Lease Agreement dated October 22, 1996 by and
between the Port of Vancouver, U.S.A., and Tesoro Refining and Marketing Company
(successor-in-interest to Tesoro Alaska Petroleum Company), as amended.

     “Vancouver Property” means the real property and personal property, if any, leased by
TRMC pursuant to the Vancouver Lease.

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ARTICLE II

CONTRIBUTIONS, ACKNOWLEDGEMENTS AND DISTRIBUTIONS

     The following shall be completed immediately following the Effective Time in the order set
forth herein:

     Section 2.1 Execution of the Partnership Agreement. The Partnership, the General
Partner and Tesoro shall amend and restate the Original Partnership Agreement by executing the
Partnership Agreement in substantially the form included in Appendix A to the Registration
Statement, with such changes as the Partnership, the General Partner and Tesoro may agree.

     Section 2.2 Conveyance of the HP Interest to the General Partner. Tesoro hereby
grants, contributes, bargains, conveys, assigns, transfers, sets over and delivers to the General
Partner, its successors and its assigns, for its and their own use forever, all right, title and
interest in and to the HP Interest, and the General Partner hereby accepts the HP Interest as a
contribution to the capital of the General Partner. Notwithstanding any provision of the High
Plains Agreement (as defined below), contemporaneously with the assignment described above, the
General Partner is hereby admitted to High Plains as an additional member of High Plains and hereby
agrees that it is bound by the Limited Liability Company Agreement of High Plains, dated as of
December 2, 2010 (the “High Plains Agreement”) as a member of High Plains.

     Section 2.3 Conveyance of the HP Interest by the General Partner to the Partnership.
The General Partner hereby grants, contributes, bargains, conveys, assigns, transfers, sets over
and delivers to the Partnership, its successors and its assigns, for its and their own use forever,
all right, title and interest in and to the HP Interest in exchange for (a) a continuation of the
General Partner’s 2% general partner interest in the Partnership, (b) the issuance to the General
Partner of all of the equity interests in the Partnership classified as “Incentive Distribution
Rights” under the Partnership Agreement and (c) the right to receive a $50.0 million distribution
from borrowings under the Partnership’s new credit facility (the “Borrowed Funds”), and the
Partnership hereby accepts the HP Interest as a contribution to the capital of the Partnership.
Notwithstanding any provision of the High Plains Agreement, contemporaneously with the assignment
described above, the Partnership is hereby admitted to High Plains as a member of High Plains, and
hereby agrees that it is bound by the High Plains Agreement as a member of High Plains. Immediately
following the admission of the Partnership as a member of High Plains, the General Partner shall
and does hereby cease to be a member of High Plains and shall thereupon cease to have or exercise
any right or power as a member of High Plains.

     Section 2.4 Conveyance of the Tesoro HP Interest by Tesoro to the Partnership. Tesoro
hereby grants, contributes, bargains, conveys, assigns, transfers, sets over and delivers to the
Partnership, its successors and its assigns, for its and their own use forever, all right, title
and interest in and to Tesoro’s remaining limited liability company interest in High
Plains (the “Tesoro HP Interest”) in exchange for (a) 1,002,938 Common Units
representing a 3.2% limited partner interest in the Partnership, (b) 6,785,124 Subordinated Units
representing a 21.8% limited partner interest in the Partnership, and (c) the right to receive
$107.4 million in proceeds from the Offering, of which $0.2 million is to reimburse Tesoro for
certain capital expenditures incurred by Tesoro with respect to High Plains, and the Partnership
hereby accepts the Tesoro

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HP Interest as a contribution to the capital of the Partnership.
Notwithstanding any provision of the High Plains Agreement, contemporaneously with the assignment
described above, the Partnership hereby continues as a member of High Plains with respect to the
Tesoro HP Interest and Tesoro shall and does hereby cease to be a member of High Plains and shall
thereupon cease to have or exercise any right or power as a member of High Plains. The applicable
parties hereto agree that the assignment of the HP Interest and the Tesoro HP Interest, the
admission of the Partnership as a member of High Plains and the cessation of Tesoro as a member of
High Plains shall not dissolve High Plains and that the business of High Plains shall continue.

     Section 2.5 Conveyance of the Operating Company Interest by TRMC to the Partnership.
TRMC hereby grants, contributes, bargains, conveys, assigns, transfers, sets over and delivers to
the Partnership, its successors and its assigns, for its and their own use forever, all right,
title and interest in and to all of the limited liability company interests in the Operating
Company (the “Operating Company Interest”) in exchange for (a) 1,169,195 Common Units
representing a 3.8% limited partner interest in the Partnership, (b) 7,909,891 Subordinated Units
representing a 25.4% limited partner interest in the Partnership, and (c) the right to receive
$125.3 million in proceeds from the Offering, of which $2.3 million is to reimburse TRMC for
certain capital expenditures incurred by TRMC with respect to the TRMC Assets, and the Partnership
hereby accepts the Operating Company Interest as a contribution to the capital of the Partnership.
Notwithstanding any provision of the Operating Company Agreement (as defined below),
contemporaneously with the assignment described above, the Partnership is hereby admitted to the
Operating Company as a member of the Operating Company, and hereby agrees that it is bound by the
Limited Liability Company Agreement of the Operating Company, dated as of December 2, 2010 (the
“Operating Company Agreement”), as a member of the Operating Company. Immediately following
the admission of the Partnership as a member of the Operating Company, TRMC shall and does hereby
cease to be a member of the Operating Company and shall thereupon cease to have or exercise any
right or power as a member of the Operating Company. The applicable parties hereto agree that the
assignment of the Operating Company Interest, the admission of the Partnership as a member of the
Operating Company and the cessation of TRMC as a member of the Operating Company shall not dissolve
the Operating Company and that the business of the Operating Company shall continue.

     Section 2.6 Conveyance of the TAL Interest by Tesoro Alaska to the Partnership.
Tesoro Alaska hereby grants, contributes, bargains, conveys, assigns, transfers, sets over and
delivers to the Partnership, its successors and its assigns, for its and their own use forever, all
right, title and interest in and to all of the limited liability company interests in TAL (the
“TAL Interest”) in exchange for (a) 82,757 Common Units representing a 0.3% limited partner
interest in the Partnership, (b) 559,875 Subordinated Units representing a 1.8% limited
partner interest in the Partnership, and (c) the right to receive $8.9 million in proceeds
from the Offering, of which $0.1 million is to reimburse Tesoro Alaska for certain capital
expenditures incurred by Tesoro Alaska with respect to the Tesoro Alaska Assets, and the
Partnership hereby accepts the TAL Interest as a contribution to the capital of the Partnership.
Notwithstanding any provision of the TAL Agreement (as defined below), contemporaneously with the
assignment described above, the Partnership is hereby admitted to TAL as a member of TAL, and
hereby agrees that it is bound by the Limited Liability Company Agreement of TAL, dated as of
December 2, 2010 (the “TAL Agreement”), as a member of TAL. Immediately following the
admission of the Partnership as a member of TAL, Tesoro Alaska shall and does hereby cease to be a
member of

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TAL and shall thereupon cease to have or exercise any right or power as a member of TAL.
The applicable parties hereto agree that the assignment of the TAL Interest, the admission of the
Partnership as a member of TAL and the cessation of Tesoro Alaska as a member of TAL shall not
dissolve TAL and that the business of TAL shall continue.

     Section 2.7 Public Cash Contribution. The Parties acknowledge that, in connection
with the Offering, the public, through the Underwriters, has made a capital contribution to the
Partnership of $273,000,000 in cash in exchange for 13,000,000 Common Units (the “Firm
Units”) representing a 41.8% limited partner interest in the Partnership and new limited
partners are being admitted to the Partnership in connection therewith.

     Section 2.8 Payment of Transaction Expenses and Contribution of Proceeds by the
Partnership. The Parties acknowledge (a) the payment by the Partnership, in connection with
the Closing, of transaction expenses in the amount of approximately $9.3 million, excluding
underwriting discounts of $17,062,500 in the aggregate but including a structuring fee of 0.25% of
the gross proceeds of the Offering payable to one of the Underwriters (the “Structuring
Fee”) and an advisory fee of $2.0 million payable to a third party advisor, (b) the
distribution of approximately $107.4 million to Tesoro, in part as a reimbursement of qualified
capital expenditures, (c) the distribution of approximately $125.3 million to TRMC, in part as a
reimbursement of qualified capital expenditures, (d) the distribution of approximately $8.9 million
to Tesoro Alaska, in part as a reimbursement of qualified capital expenditures, and (e)
the contribution by the Partnership of approximately $3.0 million to the Operating Company to be
used for working capital purposes.

     Section 2.9 Contribution of Member Interests in High Plains and TAL to the Operating
Company. The Partnership hereby grants, contributes, bargains, conveys, assigns, transfers,
sets over and delivers to the Operating Company, its successors and its assigns, for its and their
own use forever, all right, title and interest in and to the Partnership’s limited liability
company interests in each of High Plains and TAL, as a capital contribution, and the Operating
Company hereby accepts such limited liability company interests. The Parties acknowledge that,
after such contribution, the Operating Company will own all of the limited liability company
interests in High Plains and TAL. Notwithstanding any provision of the High Plains Agreement or
the TAL
Agreement, contemporaneously with the contribution described above, the Operating Company is
hereby admitted to High Plains and TAL as a member of High Plains and TAL, respectively, and hereby
agrees that it is bound by the High Plains Agreement and the TAL Agreement, respectively, as a
member of each of High Plains and TAL. Immediately following the admission of the Operating Company
as a member of High Plains and TAL, respectively the Partnership shall and does hereby cease to be
a member of each of High Plains and TAL and shall thereupon cease to have or exercise any right or
power as a member of each of High Plains and TAL. The applicable parties hereto agree that the
contribution of the limited liability company interests in High Plains and TAL, the admission of
the Operating Company as a member of each of High Plains and TAL and the cessation of the
Partnership as a member of each of High Plains and TAL shall not dissolve High Plains or TAL and
that the business of High Plains and TAL shall continue.

     Section 2.10 Distribution of Member Interest in Tesoro Trucking to the Operating
Company. High Plains hereby grants, distributes, bargains, conveys, assigns, transfers, sets
over

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and delivers to the Operating Company, its successors and its assigns, for its and their own
use forever, all right, title and interest in and to all of the limited liability company interest
in Tesoro Trucking, and the Operating Company hereby accepts such limited liability company
interest. Notwithstanding any provision of the Tesoro Trucking Agreement (as defined below),
contemporaneously with the distribution described above, the Operating Company is hereby admitted
to Tesoro Trucking as a member of Tesoro Trucking, and hereby agrees that it is bound by the
Limited Liability Company Agreement of Tesoro Trucking, dated as of December 2, 2010 (the
“Tesoro Trucking Agreement”), as a member of Tesoro Trucking. Immediately following the
admission of the Operating Company as a member of Tesoro Trucking, High Plains shall and does
hereby cease to be a member of Tesoro Trucking and shall thereupon cease to have or exercise any
right or power as a member of Tesoro Trucking. The applicable parties hereto agree that the
distribution of the limited liability company interests in Tesoro Trucking, the admission of the
Operating Company as a member of Tesoro Trucking and the cessation of High Plains as a member of
Tesoro Trucking shall not dissolve Tesoro Trucking and that the business of Tesoro Trucking shall
continue.

     Section 2.11 Merger of TAL and Tesoro Trucking with the Operating Company. The
Parties acknowledge that TAL and Tesoro Trucking will merge with and into the Operating Company in
accordance with Delaware law, with the Operating Company continuing as the surviving company.

     Section 2.12 Delivery of 10-Year Note by Tesoro. The Parties acknowledge that (a)
the Partnership (i) has entered into a $150.0 million credit facility guaranteed by the Operating
Company and High Plains, (ii) will use $2.0 million of proceeds from the Offering to pay debt
finance costs associated with the credit facility and (iii) has distributed the Borrowed Funds to
the General Partner, and (b) the General Partner has loaned the Borrowed Funds to Tesoro pursuant
to a 10-year note in the form attached as Exhibit A to this Agreement.

     Section 2.13 Redemption of the Initial LP Interest from Tesoro and Return of Initial
Capital Contribution. The Partnership hereby redeems the Initial LP Interest held by Tesoro
and hereby refunds and distributes to Tesoro the initial contribution, in the amount of $980, made
by Tesoro in connection with the formation of the Partnership, along with any interest or other
profit that resulted from the investment or other use of such initial contribution.

ARTICLE III

EXERCISE OF OVER-ALLOTMENT OPTION

     If the Over-Allotment Option is exercised in whole or in part, the Underwriters will
contribute additional cash to the Partnership in exchange for Option Units on the basis of the
Offering price per Common Unit set forth in the Registration Statement, net of underwriting
discounts and the Structuring Fee. The Partnership hereby agrees to redeem a number of Common
Units from Tesoro, TRMC and Tesoro Alaska, in a proportionate amount to their respective ownership
percentages of Common Units immediately prior to the exercise of the Over-Allotment Option, equal
to the number of Option Units sold by the Partnership pursuant to the exercise of the
Over-Allotment Option on the basis of the Offering price per Common Unit set forth in the
Registration Statement, net of underwriting discounts and the Structuring Fee.

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ARTICLE IV

FURTHER ASSURANCES

     From time to time after the Effective Time, and without any further consideration, the Parties
agree to execute, acknowledge and deliver all such additional deeds, assignments, bills of sale,
conveyances, instruments, notices, releases, acquittances and other documents, and to do all such
other acts and things, all in accordance with applicable law, as may be necessary or appropriate
(a) more fully to assure that the applicable Parties own all of the properties, rights, titles,
interests, estates, remedies, powers and privileges granted by this Agreement, or which are
intended to be so granted, (b) more fully and effectively to vest in the applicable Parties and
their respective successors and assigns beneficial and record title to the interests contributed
and assigned by this Agreement or intended to be so and (c) more fully and effectively to carry out
the purposes and intent of this Agreement.

ARTICLE V

ORDER OF COMPLETION AND EFFECTIVE TIME

     Section 5.1 Order of Completion of Transactions. The transactions provided for in
Article II and Article III of this Agreement shall be completed immediately
following the Effective Time in the following order: first, the transactions provided for in
Article II shall be completed in the order set forth therein; and second, following the
completion of the transactions provided for in Article II, the transactions provided for in
Article III, if they occur, shall be completed.

     Section 5.2 Effective Time.
Notwithstanding anything contained in this Agreement to the contrary, none of the
provisions of Article II, Article III or Article IV shall be operative or
have any effect until the Effective Time, at which time all such provisions shall be effective and
operative in accordance with Section 5.1 without further action by any Party.

ARTICLE VI

LICENSE TO USE LEASED PROPERTY

     Section 6.1 License.

          (a) To the extent that the Port Authority has not consented to the assignment of the Vancouver
Lease to the Operating Company by the Closing, subject to Section 6.2, TRMC hereby grants a
license (the “License”) to the Operating Company to enter upon, access, use, expand,
maintain, alter, repair, replace and/or operate (“Operate”) the Vancouver Property for the
purpose of operating the Partnership Group’s business as described in the Registration Statement.

          (b) The Operating Company hereby agrees to operate the Vancouver Property with the same
standard of care as used by TRMC in the use and operation of the Vancouver Property as of the
Closing, and agrees to comply with all applicable legal, regulatory and permit requirements in
conducting its operations.

          (c) Each of the Operating Company and TRMC shall cooperate with the other Party in connection
with the Operating Company’s use of the Vancouver Property so as to avoid

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unreasonable interference
with the use and enjoyment of the Vancouver Property by the other Party. From and after the
Closing, the Operating Company shall exclusively Operate the Vancouver Property and the Operating
Company’s use of the Vancouver Property shall be subject to the terms of the Master Terminalling
Agreement.

          (d) The Operating Company shall pay TRMC a license fee equal to thirteen thousand dollars
($13,000.00) per month during the term of the License. The Operating Company shall also reimburse
TRMC for any actual and reasonable costs incurred by TRMC related to or arising out of Operating
Company’s use of the Vancouver Property subject to the Vancouver Lease, excluding rent payable
under the Vancouver Lease. For any partial month during the term of the License, the license fee
shall be prorated.

     Section 6.2 Termination. The License granted pursuant to Section 6.1(a) will
terminate upon the earlier of (a) the effective date of the Port Authority’s consent to, and the
assignment of, the Vancouver Lease and (b) the termination or expiration of the Vancouver Lease (as
such may be extended from time to time) in accordance with its terms. TRMC shall not have any
obligation to preserve and maintain the Operating Company’s right to Operate the Vancouver Property
following the termination or expiration of the Vancouver Lease.

     Section 6.3 Indemnification.

          (a) The Operating Company hereby agrees to indemnify, defend and hold harmless TRMC from and
against any losses suffered or incurred by TRMC by reason of or arising out of any act or omission
of the Operating Company, as applicable, in contravention of the Vancouver Lease and occurring
after the Closing. For the avoidance of doubt, the foregoing indemnification is intended to be in
addition to and not in limitation of any indemnification to which TRMC is entitled under Sections
3.1(b) or 3.5(b) of the Omnibus Agreement.

          (b) The Parties acknowledge and agree that the Operating Company, as a member of the
Partnership Group, is entitled to certain indemnification with respect to the Vancouver Property
under the terms of the Omnibus Agreement and nothing in this Section 6.3 shall be construed
to limit such indemnification.

     Section 6.4 Cooperation on Assignment. The Parties shall cooperate and use
commercially reasonable efforts to have the assignment of the Vancouver Lease approved by the Port
Authority at the earliest practicable time. In this regard, the Operating Company shall provide
such forms of financial security and meet other requirements as may be reasonably required by the
Port Authority, consistent with the terms of the Vancouver Lease.

     Section 6.5 Operating Agreement. In the event that each of the following conditions
is satisfied: (i) The Port Authority concludes that the License or the Operating Company’s
occupancy of the Vancouver Property pursuant thereto is a breach of the Vancouver Lease and (ii)
the Port Authority has not granted its consent for the assignment of the Lease, and the Lease has
not been assigned, to the Operating Company, then the Operating Company shall vacate the Vancouver
Property promptly upon receipt of a written revocation of the License from TRMC, and TRMC hereby
agree to enter into an operating agreement upon the following terms:

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          (a) TRMC will appoint the Operating Company as its agent and operator of the Vancouver
Property, and the Operating Company will agree to Operate the Vancouver Property;

          (b) As operator of the Vancouver Property, the Operating Company will Operate the Vancouver
Property and will exercise exclusive supervision and control over the Operation of the Vancouver
Assets; and

          (c) As consideration for the Operating Company’s agreement to Operate the Vancouver Property,
TRMC will pay the Operating Company an amount equal to (i) the sum of (A) the same consideration
and fees the Operating Company would have been entitled to under the Master Terminalling Agreement
with respect to the Vancouver Property as would otherwise have been due and payable to the
Operating Company had the Lease been assigned to the Operating Company pursuant to the Assignment
and Assumption Agreement, and (B) any revenues due and payable to TRMC under any third party
terminalling services (or similar) agreements with respect to the Vancouver Property, less (ii) any
reasonable costs and expenses (including capital costs) incurred by TRMC in connection with its
continued performance under the Lease with respect to the Vancouver Property.

ARTICLE VII

MISCELLANEOUS

     Section 7.1 Costs. Except for the transaction expenses set forth in Section
2.8, the Operating Company shall pay all expenses, fees and costs, including, but not limited
to, all sales, use and similar taxes arising out of the contributions, conveyances and deliveries
to be made under Article II and shall pay all documentary, filing, recording, transfer,
deed and conveyance taxes and fees required in connection therewith. In addition, the Operating
Company shall be responsible for all costs, liabilities and expenses (including court costs and
reasonable attorneys’ fees) incurred in connection with the implementation of any conveyance or
delivery pursuant to Article IV (to the extent related to any of the contributions,
conveyances and deliveries to be made under Article II).

     Section 7.2 Headings; References; Interpretation. All Article and Section headings in
this Agreement are for convenience only and shall not be deemed to control or affect the meaning or
construction of any of the provisions hereof. The words “hereof,” “herein” and “hereunder” and
words of similar import, when used in this Agreement, shall refer to this Agreement as a whole,
including, without limitation, all Schedules and Exhibits attached hereto, and not to any
particular provision of this Agreement. All references herein to Articles, Sections, Schedules and
Exhibits shall, unless the context requires a different construction, be deemed to be references to
the Articles and Sections of this Agreement and the Schedules and Exhibits attached hereto, and all
such Schedules and Exhibits attached hereto are hereby incorporated herein and made a part hereof
for all purposes. All personal pronouns used in this Agreement, whether used in the masculine,
feminine or neuter gender, shall include all other genders, and the singular shall include the
plural and vice versa. The use herein of the word “including” following any general statement,
term or matter shall not be construed to limit such statement, term or matter to the specific items
or matters set forth immediately following such word or to similar items or matters, whether or not
non-limiting language (such as “without limitation,” “but

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not limited to” or words of similar
import) is used with reference thereto, but rather shall be deemed to refer to all other items or
matters that could reasonably fall within the broadest possible scope of such general statement,
term or matter.

     Section 7.3 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the Parties and their respective successors and assigns.

     Section 7.4 No Third Party Rights. The provisions of this Agreement are intended to
bind the Parties as to each other and are not intended to and do not create rights in any other
person or confer upon any other person any benefits, rights or remedies, and no person is or is
intended to be a third party beneficiary of any of the provisions of this Agreement.

     Section 7.5 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all Parties had signed the same document. All counterparts
shall be construed together and shall constitute one and the same instrument.

     Section 7.6 Applicable Law; Forum, Venue and Jurisdiction. This Agreement shall be
construed in accordance with and governed by the laws of the State of Texas, without regard to the
principles of conflicts of law. Each of the Parties (a) irrevocably agrees that any claims, suits,
actions or proceedings arising out of or relating in any way to this Agreement shall be exclusively
brought in any federal court of competent jurisdiction situated in the United States District Court
for the Western District of Texas, San Antonio Division, or if such federal court declines to
exercise or does not have jurisdiction, in the district court of Bexar County, Texas, in each case
regardless of whether such claims, suits, actions or proceedings sound in contract, tort, fraud or
otherwise, are based on common law, statutory, equitable, legal or other grounds, or are derivative
or direct claims; (b) irrevocably submits to the exclusive jurisdiction of the United States
District Court for the Western District of Texas, San Antonio Division, or if such federal court
declines to exercise or does not have jurisdiction, of the district court of Bexar County, Texas in
connection with any such claim, suit, action or proceeding; (c) agrees not to, and waives any right
to, assert in any such claim, suit, action or proceeding that (i) it is not personally subject to
the jurisdiction of the United States District Court for the Western District of Texas, San Antonio
Division, or the district court of Bexar County, Texas, or of any other court to which proceedings
in such courts may be appealed, (ii) such claim, suit, action or proceeding is brought in an
inconvenient forum, or (iii) the venue of such claim, suit, action or proceeding is improper; (d)
expressly waives any requirement for the posting of a bond by a party bringing such claim, suit,
action or proceeding; and (e) consents to process being served in any such claim, suit, action or
proceeding by mailing, certified mail, return receipt requested, a copy thereof to such party at
the address in effect for notices hereunder or by personal service within or without the State of
Texas, and agrees that service in such forms shall constitute good and sufficient service of
process and notice thereof; provided, however, that nothing in clause (e) hereof shall
affect or limit any right to serve process in any other manner permitted by law.

     Section 7.7 Severability. If any of the provisions of this Agreement are held by any
court of competent jurisdiction to contravene, or to be invalid under, the laws of any political
body having jurisdiction over the subject matter hereof, such contravention or invalidity shall not
invalidate the entire Agreement. Instead, this Agreement shall be construed as if it did not

11

 

contain the particular provision or provisions held to be invalid and an equitable adjustment shall
be made and necessary provision added so as to give effect to the intention of the Parties as
expressed in this Agreement at the time of execution of this Agreement.

     Section 7.8 Amendment or Modification. This Agreement may be amended or modified from
time to time only by the written agreement of all the Parties. Each such instrument shall be
reduced to writing and shall be designated on its face as an amendment to this Agreement.
Notwithstanding anything in the foregoing to the contrary, any amendment executed by the
Partnership or any of its subsidiaries shall not be effective unless and until the execution of
such amendment has been approved by the conflicts committee of the General Partner’s board of
directors.

     Section 7.9 Integration. THIS AGREEMENT AND THE INSTRUMENTS REFERENCED HEREIN
SUPERSEDE ALL PREVIOUS UNDERSTANDINGS OR AGREEMENTS AMONG THE PARTIES, WHETHER ORAL OR WRITTEN,
WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT AND SUCH INSTRUMENTS. THIS AGREEMENT AND SUCH
INSTRUMENTS CONTAIN THE ENTIRE UNDERSTANDING OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER
HEREOF AND THEREOF. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NO UNDERSTANDING,
REPRESENTATION, PROMISE OR AGREEMENT, WHETHER ORAL OR WRITTEN, IS INTENDED TO BE OR SHALL BE
INCLUDED IN OR FORM PART OF THIS AGREEMENT UNLESS IT IS CONTAINED IN A WRITTEN AMENDMENT HERETO
EXECUTED BY THE PARTIES HERETO AFTER THE DATE OF THIS AGREEMENT.

     Section 7.10 Deed; Bill of Sale; Assignment. To the extent required and permitted by
applicable law, this Agreement shall also constitute a “deed,” “bill of sale” or “assignment” of
the assets and interests referenced herein.

[Signature Page Follows]

12

 

     IN WITNESS WHEREOF, the parties to this Agreement have caused it to be duly executed as of the
date first above written.

	 	 	 	 	 	 	 	 	 	 	 

	TESORO LOGISTICS LP	 	 	 	TESORO CORPORATION	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	Tesoro Logistics GP, LLC, its
	 	 	 	By:
	 	/s/ Gregory J. Goff	 	 
	 

	 	general partner
	 	 	 	 	 	 

Gregory J. Goff
	 	 
	 

	 	 	 	 	 	 	 	President	 	 
	By:

	 	/s/ Phillip M. Anderson	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	Phillip M. Anderson	 	 	 	 	 	 	 	 
	 	 	President	 	 	 	TESORO ALASKA COMPANY	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Gregory J. Goff	 	 
	TESORO LOGISTICS GP, LLC	 	 	 	 	 	Gregory J. Goff	 	 
	 

	 	 	 	 	 	 	 	President	 	 
	By:

	 	/s/ Phillip M. Anderson	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 	 	Phillip M. Anderson	 	 	 	TESORO REFINING AND MARKETING	 	 
	 	 	President	 	 	 	COMPANY	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Gregory J. Goff	 	 
	TESORO LOGISTICS OPERATIONS LLC	 	 	 	 	 	Gregory J. Goff	 	 
	 

	 	 	 	 	 	 	 	President	 	 
	By:

	 	/s/ Phillip M. Anderson	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	Phillip M. Anderson	 	 	 	 	 	 	 	 
	 	 	President	 	 	 	TESORO HIGH PLAINS PIPELINE	 	 
	 	 	 	 	 	 	COMPANY LLC	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Phillip M. Anderson	 	 
	 

	 	 	 	 	 	 	 	 

Phillip M. Anderson
	 	 
	 

	 	 	 	 	 	 	 	President	 	 

Signature Page to Contribution, Conveyance and Assumption Agreement

 

 

EXHIBIT A

Form of 10-Year Note

 

 

INTERCOMPANY NOTE

			
	 	 	 
	$50,000,000
	 	San Antonio, Texas

April 26, 2011

(the “Note Date”)

     FOR VALUE RECEIVED, TESORO CORPORATION, a Delaware corporation, having an address at 19100
Ridgewood Pkwy, San Antonio, Texas 78259 (“Maker”) promises to pay to the order of TESORO
LOGISTICS GP, LLC, a Delaware limited liability company, having an address at 19100 Ridgewood Pkwy,
San Antonio, Texas 78259 (“Payee”) the principal sum of FIFTY MILLION DOLLARS
($50,000,000). Maker also promises to pay to Payee interest on the outstanding principal amount of
this Note, from time to time, at the rate equal to the greater of (i) 4.19% and (ii) the short-term
“Applicable Federal Rate” (as defined in and determined under Section 1274(d) of the Internal
Revenue Code of 1986, as amended, in effect on the date hereof. Interest shall be computed on the
basis of a year of 365 (or 366) days and shall be due and payable in arrears on a quarterly basis
within five business days of the last day of each fiscal quarter.

     Maker shall pay all obligations in lawful money of the United States in immediately available
funds, free and clear of, and without deduction or offset for, any present or future taxes, levies,
imposts, charges, withholdings, or liabilities with respect thereto; or any other defenses,
offsets, set-offs, claims, counterclaims, credits, or deductions of any kind. Maker’s obligations
under this Note are completely independent of all circumstances whatsoever other than as this Note
expressly states.

     1. Maturity; Prepayment. The principal and accrued but unpaid interest on this Note shall be
due and payable on demand, and if no demand has been made prior thereto, on April 26, 2021. Maker
may prepay this Note at any time, in whole or in part, without notice, penalty, or premium,
provided only that Maker simultaneously pays interest to the date of such prepayment.

     2. Post-Maturity Interest; Etc. Any amount of principal or interest which is not paid when
due, whether at maturity or otherwise, shall bear interest from the date when due until said
principal or interest amount is paid in full, payable on demand, at the per annum rate of six
percent (6.0%).

     3. Waivers. Maker and any endorsers and guarantors of this Note, and all others who may
become liable for all or any part of the obligations evidenced by this Note, severally waive
presentment for payment, protest, notice of protest, dishonor, notice of dishonor, demand, notice
of non-payment, and the benefit of all statutes, ordinances, judicial rulings, and other legal
principles of any kind, now or hereafter enacted or in force, affording any right of cure or any
right to a stay of execution or extension of time for payment or exempting any property of such
person from levy and sale upon execution of any judgment obtained by the holder in respect of this
Note. THE PARTIES WAIVE JURY TRIAL IN ANY ACTION TO ENFORCE OR INTERPRET, OR OTHERWISE ARISING
FROM, THIS NOTE.

 

 

     4. GOVERNING LAW. THIS NOTE AND THE PARTIES’ RIGHTS UNDER THIS NOTE SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK NOTWITHSTANDING ANY
PRINCIPLES OF CONFLICTS OF LAW.

     5. Severability. If any provision of this Note is invalid or unenforceable, then the other
provisions shall remain in full force and effect and shall be liberally construed in favor of
Payee.

	 	 	Maker has executed and delivered this Note as of the Note Date.

	 	 	 	 	 
	 	TESORO CORPORATION

 	 
	 	By:  	 	 
	 	 	[Name] 	 
	 	 	[Title]exv10w3

Exhibit 10.3

Execution Copy

      

OMNIBUS AGREEMENT

among

TESORO CORPORATION,

TESORO REFINING AND MARKETING COMPANY,

TESORO COMPANIES, INC.,

TESORO ALASKA COMPANY,

TESORO LOGISTICS LP,

and

TESORO LOGISTICS GP, LLC

 

 

 

OMNIBUS AGREEMENT

          This OMNIBUS AGREEMENT (“Agreement”) is entered into on, and effective as of, the
Closing Date (as defined herein) among Tesoro Corporation, a Delaware corporation
(“Tesoro”), on behalf of itself and the other Tesoro Entities (as defined herein), Tesoro
Refining and Marketing Company, a Delaware corporation (“Tesoro Refining and Marketing”),
Tesoro Companies, Inc., a Delaware corporation (“Tesoro Companies”), Tesoro Alaska Company,
a Delaware company (“Tesoro Alaska”), Tesoro Logistics LP, a Delaware limited partnership
(the “Partnership”), and Tesoro Logistics GP, LLC, a Delaware limited liability company
(the “General Partner”). The above-named entities are sometimes referred to in this
Agreement each as a “Party” and collectively as the “Parties.”

R E C I T A L S:

     1. The Parties desire by their execution of this Agreement to evidence their understanding, as
more fully set forth in Article II, with respect to certain business opportunities that the
Tesoro Entities (as defined herein) will not engage in for so long as the Partnership is an
Affiliate of Tesoro.

     2. The Parties desire by their execution of this Agreement to evidence their understanding, as
more fully set forth in Article III, with respect to certain indemnification obligations of
the Parties to each other.

     3. The Parties desire by their execution of this Agreement to evidence their understanding, as
more fully set forth in Article IV, with respect to the amount to be paid by the
Partnership for the centralized corporate services to be performed by the General Partner and its
Affiliates (as defined herein) for and on behalf of the Partnership Group (as defined herein).

     4. The Parties desire by their execution of this Agreement to evidence their understanding, as
more fully set forth in Article V, with respect to certain maintenance capital and other
expenditures to be reimbursed by Tesoro Refining and Marketing to the Partnership Group.

     5. The Parties desire by their execution of this Agreement to evidence their understanding, as
more fully set forth in Article VI, with respect to the Partnership Group’s right of first
offer with respect to the ROFO Assets (as defined herein).

     6. The Parties desire by their execution of this Agreement to evidence their understanding, as
more fully set forth in Article VII, with respect to the granting of a license from Tesoro
to the Partnership Group and the General Partner.

     7. The Parties desire by their execution of this Agreement to evidence their understanding, as
more fully set forth in Article VIII, with respect to the transfer of the Represented
Employees (as defined herein) from Tesoro Refining and Marketing to the General Partner and the
Partnership Group’s right to use certain vehicles leased by the General Partner.

 

 

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

ARTICLE I

Definitions

     1.1 Definitions. As used in this Agreement, the following terms shall have the
respective meanings set forth below:

          “Administrative Fee” is defined in Section 4.1.

          “Affiliate” is defined in the Partnership Agreement.

          “Annual Environmental Deductible” is defined in Section 3.7.

          “Annual ROW Deductible” is defined in Section 3.7.

          “Assets” means all gathering pipelines, transportation pipelines, storage tanks,
trucks, truck racks, terminal facilities, offices and related equipment, real estate and other
assets, or portions thereof, conveyed, contributed or otherwise transferred or intended to be
conveyed, contributed or otherwise transferred pursuant to the Contribution Agreement to any member
of the Partnership Group, or owned by, leased by or necessary for the operation of the business,
properties or assets of any member of the Partnership Group, prior to or as of the Closing Date.

          “Closing Date” means April 26, 2011.

          “Common Units” is defined in the Partnership Agreement.

          “Conflicts Committee” is defined in the Partnership Agreement.

          “Contribution Agreement” means that certain Contribution, Conveyance and Assumption
Agreement, dated as of the Closing Date, among the General Partner, the Partnership, Tesoro
Logistics LLC, Tesoro High Plains Pipeline Company LLC and certain other Tesoro Entities, together
with the additional conveyance documents and instruments contemplated or referenced thereunder.

          “control” means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether through ownership of voting
securities, by contract, or otherwise.

          “Covered Environmental Losses” is defined in Section 3.1.

          “Environmental Laws” means all federal, state, and local laws, statutes, rules,
regulations, orders, judgments, ordinances, codes, injunctions, decrees, Environmental Permits and
other legally enforceable requirements and rules of common law now or hereafter in effect, relating
to pollution or protection of human health and the environment including, without limitation, the
federal Comprehensive Environmental Response, Compensation, and Liability

2

 

Act, the Superfund Amendments Reauthorization Act, the Resource Conservation and Recovery Act,
the Clean Air Act, the Federal Water Pollution Control Act, the Toxic Substances Control Act, the
Oil Pollution Act, the Safe Drinking Water Act, the Hazardous Materials Transportation Act, and
other environmental conservation and protection laws, each as amended from time to time.

          “Environmental Permit” means any permit, approval, identification number, license,
registration, consent, exemption, variance or other authorization required under or issued pursuant
to any applicable Environmental Law.

          “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          “Hazardous Substance” means (a) any substance that is designated, defined or
classified as a hazardous waste, solid waste, hazardous material, pollutant, contaminant or toxic
or hazardous substance, or terms of similar meaning, or that is otherwise regulated under any
Environmental Law, including, without limitation, any hazardous substance as defined under the
Comprehensive Environmental Response, Compensation, and Liability Act, as amended, and (b)
petroleum, oil, gasoline, natural gas, fuel oil, motor oil, waste oil, diesel fuel, jet fuel, and
other refined petroleum hydrocarbons.

          “Identification Deadline” means the later of (a) April 26, 2013, and (b) the earlier
of (i) April 26, 2016 and (ii) the occurrence of a Partnership Change of Control.

          “Indemnified Party” means the Partnership Group or the Tesoro Entities, as the case
may be, in its capacity as the party entitled to indemnification in accordance with Article
III.

          “Indemnifying Party” means either the Partnership Group, Tesoro Refining and Marketing
or Tesoro Alaska, as the case may be, in its capacity as the party from whom indemnification may be
sought in accordance with Article III.

          “License” is defined in Section 7.1.

          “Limited Partner” is defined in the Partnership Agreement.

          “Losses” means any losses, damages, liabilities, claims, demands, causes of action,
judgments, settlements, fines, penalties, costs and expenses (including, without limitation, court
costs and reasonable attorney’s and expert’s fees) of any and every kind or character, known or
unknown, fixed or contingent.

          “Marks” is defined in Section 7.1.

          “Name” is defined in Section 7.1.

          “NuStar Agreement” means that certain Pipeline Control Center Services Agreement dated
December 24, 2002 between Kaneb Pipe Line Operating Partnership, L.P., a Delaware limited
partnership, and Tesoro High Plains Pipeline Company, a Delaware corporation.

3

 

          “Offer” is defined in Section 2.3.

          “Partnership Agreement” means the First Amended and Restated Agreement of Limited
Partnership of Tesoro Logistics LP, dated as of the Closing Date, as such agreement is in effect on
the Closing Date, to which reference is hereby made for all purposes of this Agreement.

          “Partnership Change of Control” means Tesoro ceases to control the general partner of
the Partnership.

          “Partnership Group” means the Partnership and any of its Subsidiaries, treated as a
single consolidated entity.

          “Partnership Group Member” means any member of the Partnership Group.

          “Partnership Security” is defined in the Partnership Agreement.

          “Party” and “Parties” are defined in the introduction to this Agreement.

          “Permitted Exceptions” is defined in Section 2.2.

          “Person” means an individual or a corporation, limited liability company, partnership,
joint venture, trust, unincorporated organization association, government agency or political
subdivision thereof or other entity.

          “Proposed Transaction” is defined in Section 6.2(a).

          “Prudent Industry Practice” means such practices, methods, acts, techniques, and
standards as are in effect at the time in question that are consistent with the higher of (a) the
standards generally followed by the United States pipeline and terminalling industries and (b) the
standards applied or followed by Tesoro or its Affiliates in the performance of similar tasks or
projects, or by the Partnership Group or its Affiliates in the performance of similar tasks or
projects.

          “Registration Statement” means the Registration Statement on Form S-1 filed by the
Partnership with the United States Securities and Exchange Commission (Registration No.
333-171525), as amended.

          “Represented Employees” is defined in Section 8.1(a).

          “Restricted Activities” is defined in Section 2.1.

          “Retained Assets” means all gathering pipelines, transportation pipelines, storage
tanks, trucks, truck racks, terminal facilities, offices and related equipment, real estate and
other related assets, or portions thereof owned by any of the Tesoro Entities that were not
directly or indirectly conveyed, contributed or otherwise transferred to the Partnership Group
pursuant to the Contribution Agreement or the other documents referred to in the Contribution
Agreement, including, for the avoidance of doubt, all gathering pipelines, transportation
pipelines, storage

4

 

tanks, trucks, truck racks, terminal facilities, offices and related equipment, real estate
and other related assets, or portions thereof owned by any of the Tesoro Entities and located in
Hawaii.

          “ROFO Asset Owner” means, with respect to a ROFO Asset, the applicable Tesoro Entity
set forth opposite such ROFO Asset on Schedule V to this Agreement.

          “ROFO Assets” means the assets listed on Schedule V to this Agreement.

          “ROFO Notice” is defined in Section 6.2(a).

          “ROFO Period” is defined in Section 6.1(a).

          “ROFO Response” is defined in Section 6.2(a).

          “Subject Assets” is defined in Section 2.2(c).

          “Tesoro Entities” means Tesoro and any Person controlled, directly or indirectly, by
Tesoro other than the General Partner or a member of the Partnership Group; and “Tesoro
Entity” means any of the Tesoro Entities.

          “Transfer” means to, directly or indirectly, sell, assign, lease, convey, transfer or
otherwise dispose of, whether in one or a series of transactions.

          “Subsidiary” means, with respect to any Person, (a) a corporation of which more than
50% of the voting power of shares entitled (without regard to the occurrence of any contingency) to
vote in the election of directors or other governing body of such corporation is owned, directly or
indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such
Person or a combination thereof, (b) a partnership (whether general or limited) in which such
Person or a Subsidiary of such Person is, at the date of determination, a general or limited
partner of such partnership, but only if more than 50% of the partnership interests of such
partnership (considering all of the partnership interests of the partnership as a single class) is
owned, directly or indirectly, at the date of determination, by such Person, by one or more
Subsidiaries of such Person, or a combination thereof, or (c) any other Person (other than a
corporation or a partnership) in which such Person, one or more Subsidiaries of such Person, or a
combination thereof, directly or indirectly, at the date of determination, has (i) at least a
majority ownership interest or (ii) the power to elect or direct the election of a majority of the
directors, managers or other governing body of such Person.

          “Voting Stock” means securities of any class of a Person entitling the holders thereof
to vote on a regular basis in the election of members of the board of directors or other governing
body of such Person.

ARTICLE II

Business Opportunities

     2.1 Restricted Activities. Except as permitted by Section 2.2, the General
Partner and each of the Tesoro Entities shall be prohibited from owning, operating, engaging in,
acquiring, or

5

 

investing in any business that owns or operates crude oil or refined products pipelines,
terminals or storage facilities in the United States (“Restricted Activities”).

     2.2 Permitted Exceptions. Notwithstanding any provision of Section 2.1 to the
contrary, the Tesoro Entities may engage in the following activities under the following
circumstances (collectively, the “Permitted Exceptions”):

          (a) the ownership and/or operation of any of the Retained Assets (including replacements or
expansions of the Retained Assets);

          (b) the acquisition, ownership or operation of any logistics asset, including, without
limitation, any crude oil or refined products pipeline, terminal or storage facility, that is
acquired or constructed by a Tesoro Entity and that is (i) within, directly connected to,
substantially dedicated to, or an integral part of, any refinery owned, acquired or constructed by
a Tesoro Entity or (ii) acquired or constructed by a Tesoro Entity to replace an Asset of the
Partnership Group that no longer provides services to any Tesoro Entity due to the occurrence of a
force majeure event under a commercial contract between one or more Tesoro Entities and one or more
members of the Partnership Group that prevents the Partnership Group from providing services under
such commercial contract;

          (c) the acquisition, ownership or operation of any asset or group of related assets used in
the activities described in Section 2.1 that are acquired or constructed by a Tesoro Entity
after the date of this Agreement (the “Subject Assets”) if:

               (i) the fair market value of the Subject Assets (as determined in good faith by the Board of
Directors, or other governing body, of the Tesoro Entity that will own the Subject Assets) is less
than $5 million at the time of such acquisition by the Tesoro Entity or completion of construction,
as the case may be; or

               (ii) in the case of an acquisition or the construction of Subject Assets with a fair market
value (as determined in good faith by the Board of Directors, or other governing body, of the
Tesoro Entity that will own the Subject Assets) equal to or greater than $5 million at the time of
such acquisition by a Tesoro Entity or the completion of construction, as applicable, the
Partnership has been offered the opportunity to purchase the Subject Assets in accordance with
Section 2.3 and the Partnership has elected not to purchase the Subject Assets; and

          (d) the ownership of equity interests in the General Partner and the Partnership Group.

     2.3 Procedures.

          (a) If a Tesoro Entity acquires or constructs Subject Assets as described in Section
2.2(c)(ii), then not later than six months after the consummation of the acquisition or the
completion of construction by such Tesoro Entity of the Subject Assets, as the case may be, the
Tesoro Entity shall notify the General Partner in writing of such acquisition or construction and
offer the Partnership Group the opportunity to purchase such Subject Assets in accordance with this
Section 2.3 (the “Offer”). The Offer shall set forth the terms relating to the
purchase of the

6

 

Subject Assets and, if any Tesoro Entity desires to utilize the Subject Assets, the Offer will
also include the terms on which the Partnership Group will provide services to the Tesoro Entity to
enable the Tesoro Entity to utilize the Subject Assets. As soon as practicable, but in any event
within 60 days after receipt of such written notification, the General Partner shall notify the
Tesoro Entity in writing that either (i) the General Partner has elected not to cause a Partnership
Group Member to purchase the Subject Assets, in which event the Tesoro Entity shall be forever free
to continue to own or operate such Subject Assets, or (ii) the General Partner has elected to cause
a Partnership Group Member to purchase the Subject Assets, in which event the procedures outlined
in the remainder of this Section 2.3 shall apply.

          (b) If the Tesoro Entity and the General Partner are able to agree on the fair market value of
the Subject Assets that are subject to the Offer and the other terms of the Offer including,
without limitation, the terms, if any, on which the Partnership Group will provide services to the
Tesoro Entity to enable the Tesoro Entity to utilize the Subject Assets, within 60 days after
receipt by the General Partner of the Offer, a Partnership Group Member shall purchase the Subject
Assets for the agreed upon fair market value as soon as commercially practicable after such
agreement has been reached and, if applicable, enter into an agreement with the Tesoro Entity to
provide services in a manner consistent with the Offer.

          (c) If the Tesoro Entity and the General Partner are unable to agree on the fair market value
of the Subject Assets that are subject to the Offer or the other terms of the Offer including, if
applicable, the terms on which the Partnership Group will provide services to the Tesoro Entity to
enable the Tesoro Entity to utilize the Subject Assets, within 60 days after receipt by the General
Partner of the Offer, the Tesoro Entity and the General Partner will engage a mutually agreed upon,
nationally recognized investment banking firm to determine the fair market value of the Subject
Assets and any other terms on which the Partnership Group and the Tesoro Entity are unable to
agree. The investment banking firm will determine the fair market value of the Subject Assets and
any other terms on which the Partnership Group and the Tesoro Entity are unable to agree within 30
days of its engagement and furnish the Tesoro Entity and the General Partner its determination.
The fees of the investment banking firm will be split equally between the Tesoro Entity and the
Partnership Group. Once the investment banking firm has submitted its determination of the fair
market value of the Subject Assets and any other terms on which the Partnership Group and the
Tesoro Entity are unable to agree, the General Partner will have the right, but not the obligation
to cause a Partnership Group Member to purchase the Subject Assets pursuant to the Offer, as
modified by the determination of the investment banking firm. If the General Partner elects to
cause a Partnership Group Member to purchase the Subject Assets, then the Partnership Group Member
shall purchase the Subject Assets under the terms of the Offer, as modified by the determination of
the investment banking firm as soon as commercially practicable after such determination and, if
applicable, enter into an agreement with the Tesoro Entity to provide services in a manner
consistent with the Offer, as modified by the determination of the investment banking firm.

     2.4 Scope of Prohibition. Except as provided in this Article II and the
Partnership Agreement, each Tesoro Entity shall be free to engage in any business activity,
including those that may be in direct competition with any Partnership Group Member.

7

 

     2.5 Enforcement. The Tesoro Entities agree and acknowledge that the Partnership Group
does not have an adequate remedy at law for the breach by the Tesoro Entities of the covenants and
agreements set forth in this Article II, and that any breach by the Tesoro Entities of the
covenants and agreements set forth in this Article II would result in irreparable injury to
the Partnership Group. The Tesoro Entities further agree and acknowledge that any Partnership
Group Member may, in addition to the other remedies which may be available to the Partnership
Group, file a suit in equity to enjoin the Tesoro Entities from such breach, and consent to the
issuance of injunctive relief under this Agreement.

ARTICLE III

Indemnification

     3.1 Environmental Indemnification.

          (a) Subject to Section 3.2 and Section 3.7, each of Tesoro Refining and
Marketing and Tesoro Alaska, severally and not jointly, shall indemnify, defend and hold harmless
the Partnership Group from and against any Losses suffered or incurred by the Partnership Group,
directly or indirectly, or as a result of any claim by a third party, by reason of or arising out
of:

               (i) any violation or correction of violation of Environmental Laws;

               (ii) any event, condition or environmental matter associated with or arising from the
ownership or operation of the Assets (including, without limitation, the presence of Hazardous
Substances on, under, about or migrating to or from the Assets or the disposal or release of
Hazardous Substances generated by operation of the Assets at non-Asset locations) including,
without limitation, (A) the cost and expense of any investigation, assessment, evaluation,
monitoring, containment, cleanup, repair, restoration, remediation, or other corrective action
required or necessary under Environmental Laws, (B) the cost or expense of the preparation and
implementation of any closure, remedial, corrective action, or other plans required or necessary
under Environmental Laws, and (C) the cost and expense of any environmental or toxic tort
pre-trial, trial, or appellate legal or litigation support work;

               (iii) any event, condition or environmental matter or currently pending legal action against
the Tesoro Entities, a true and correct summary of which is described on Schedule I
attached hereto; and

               (iv) any event, condition or environmental matter associated with or arising from the Retained
Assets, whether occurring before or after the Closing Date;

provided, however, that with respect to any violation under Section 3.1(a)(i) or any event,
condition or environmental matter included under Section 3.1(a)(ii) that is associated with
the ownership or operation of the Assets, Tesoro Refining and Marketing and Tesoro Alaska will be
obligated to indemnify the Partnership Group only to the extent that such violation, event,
condition or environmental matter (x) occurred before the Closing Date under then-applicable
Environmental Laws and (y)(i) such violation, event, condition or environmental matter is set forth
on Schedule II attached hereto or (ii) Tesoro is notified in writing of such violation,
event,

8

 

condition or environmental matter prior to the Identification Deadline (clauses (i) through
(iv) collectively, “Covered Environmental Losses”).

          (b) The Partnership Group shall indemnify, defend and hold harmless the Tesoro Entities from
and against any Losses suffered or incurred by the Tesoro Entities, directly or indirectly, or as a
result of any claim by a third party, by reason of or arising out of:

               (i) any violation or correction of violation of Environmental Laws associated with or arising
from the ownership or operation of the Assets; and

               (ii) any event, condition or environmental matter associated with or arising from the
ownership or operation of the Assets (including, but not limited to, the presence of Hazardous
Substances on, under, about or migrating to or from the Assets or the disposal or release of
Hazardous Substances generated by operation of the Assets at non-Asset locations) including,
without limitation, (A) the cost and expense of any investigation, assessment, evaluation,
monitoring, containment, cleanup, repair, restoration, remediation, or other corrective action
required or necessary under Environmental Laws, (B) the cost or expense of the preparation and
implementation of any closure, remedial, corrective action, or other plans required or necessary
under Environmental Laws, and (C) the cost and expense for any environmental or toxic tort
pre-trial, trial, or appellate legal or litigation support work;

and regardless of whether such violation under Section 3.1(b)(i) or such event, condition
or environmental matter included under Section 3.1(b)(ii) occurred before or after the
Closing Date, in each case, to the extent that any of the foregoing are not Covered Environmental
Losses for which the Partnership Group is entitled to indemnification from Tesoro under this
Article III without giving effect to the Annual Environmental Deductible.

     3.2 Right of Way Indemnification. Subject to Section 3.7, each of Tesoro
Refining and Marketing and Tesoro Alaska, severally and not jointly, shall indemnify, defend and
hold harmless the Partnership Group from and against any Losses suffered or incurred by the
Partnership Group by reason of or arising out of (a) the failure of the applicable Partnership
Group Member to be the owner of such valid and indefeasible easement rights or fee ownership or
leasehold interests in and to the lands on which any crude oil or refined products pipeline or
related pump station, storage tank, terminal or truck rack or any related facility or equipment
conveyed or contributed to the applicable Partnership Group Member on the Closing Date is located
as of the Closing Date, and such failure renders the Partnership Group liable to a third party or
unable to use or operate the Assets in substantially the same manner that the Assets were used and
operated by the applicable Tesoro Entity immediately prior to the Closing Date as described in the
Registration Statement; (b) the failure of the applicable Partnership Group Member to have the
consents, licenses and permits necessary to allow any such pipeline referred to in clause
(a) of this Section 3.2 to cross the roads, waterways, railroads and other areas upon
which any such pipeline is located as of the Closing Date, and such failure renders the Partnership
Group liable to a third party or unable to use or operate the Assets in substantially the same
manner that the Assets were used and operated by the applicable Tesoro Entity immediately prior to
the Closing Date as described in the Registration Statement; and (c) the cost of curing any
condition set forth in clause (a) or (b) of this Section 3.2 that does not
allow any

9

 

Asset to be operated in accordance with Prudent Industry Practice, in each case to the extent
that Tesoro is notified in writing of any of the foregoing prior to the Identification Deadline.

     3.3 Pipeline Control Center Services Indemnification and Related Matters. Tesoro
Refining and Marketing shall indemnify, defend and hold harmless the Partnership Group from and
against any Losses suffered or incurred by the Partnership Group during the period commencing on
the Closing Date and ending on April 26, 2016, in excess of $15,000 per month as a result of (a)
the non-renewal or failure to extend the terms of the NuStar Agreement beyond December 31, 2012,
(b) an increase in the service fee described in Section 2.1 of the Nustar Agreement or (c) the cost
and expense of any third-party service provider or operator or any Tesoro Entity providing control
and monitoring functions (including, but not limited to pipeline scheduling, leak detection,
reconciliation of oil transfer tickets, data reporting, customer support, SCADA systems support,
satellite communication, compliance and regulatory services, general technical support and
operations, maintenance and emergency response manuals) on or for the High Plains pipeline system,
provided, however, that Tesoro Refining and Marketing shall not be required to indemnify, defend
and hold harmless the Partnership Group from and against any Losses suffered or incurred by the
Partnership Group pursuant to this Section 3.3 in excess of $2,500,000. If the Partnership
Group fails to extend the term of the NuStar Agreement beyond December 31, 2012 or is unable to
procure the services of a third-party service provider or operator or any Tesoro Entity to provide
control and monitoring services, the Partnership Group may request in writing that Tesoro Refining
and Marketing construct a control room that is adequate to enable the Partnership Group to control
and monitor the High Plains pipeline system in accordance with Prudent Industry Practice for the
sole purposes of providing such services. In the event of such request, Tesoro Refining and
Marketing shall, within 30 days of receipt of such request, notify the Partnership Group of (i) its
intent to, and shall use commercially reasonable efforts to, promptly construct or (ii) its intent
to, and shall, bear the cost of constructing, a control room, subject to a maximum amount of
$2,500,000 less any amounts previously paid to the Partnership Group under this Section 3.3.

     3.4 Represented Employees. The General Partner shall indemnify, defend and hold
harmless Tesoro Refining and Marketing from and against any Losses suffered or incurred by Tesoro
Refining and Marketing by reason of or arising out of the transfer of the Represented Employees to
the General Partner pursuant to Section 8.1 and the employment of the Represented Employees
by the General Partner, including any Losses suffered or incurred resulting from actions taken, or
liabilities incurred by Tesoro Refining and Marketing with respect to the Represented Employees in
connection with applicable collective bargaining agreements covering such Represented Employees.

     3.5 Additional Indemnification.

          (a) In addition to and not in limitation of the indemnification provided under Sections
3.1(a), 3.2, and 3.3, each of Tesoro Refining and Marketing and Tesoro Alaska,
severally and not jointly, shall indemnify, defend, and hold harmless the Partnership Group from
and against any Losses suffered or incurred by the Partnership Group by reason of or arising out of
(i) events and conditions associated with the ownership or operation of the Assets and occurring
before the Closing Date (other than Covered Environmental Losses, which are provided for under
Sections 3.1, and those Losses provided for under Section 3.2) to the extent

10

 

that Tesoro is notified in writing of any of the foregoing prior to April 26, 2021, (ii) any
currently pending legal actions against the Tesoro Entities set forth on Schedule III
attached hereto, (iii) events and conditions associated with the Retained Assets and whether
occurring before or after the Closing Date, (iv) the failure to obtain any necessary consent from
the North Dakota Public Service Commission or the Federal Energy Regulatory Commission for the
conveyance to the Partnership Group of any pipelines located in North Dakota, Montana and Utah, if
applicable, and (v) all federal, state and local income tax liabilities attributable to the
ownership or operation of the Assets prior to the Closing Date, including under Treasury Regulation
Section 1.1502-6 (or any similar provision of state or local law), and any such income tax
liabilities of the Tesoro Entities that may result from the consummation of the formation
transactions for the Partnership Group and the General Partner occurring on or prior to the Closing
Date.

          (b) In addition to and not in limitation of the indemnification provided under Section
3.1(b) or 3.4 or the Partnership Agreement, the Partnership Group shall indemnify,
defend, and hold harmless the Tesoro Entities from and against any Losses suffered or incurred by
the Tesoro Entities by reason of or arising out of events and conditions associated with the
ownership or operation of the Assets and occurring after the Closing Date (other than Covered
Environmental Losses which are provided for under Section 3.1), unless such indemnification
would not be permitted under the Partnership Agreement by reason of one of the provisos contained
in Section 7.7(a) of the Partnership Agreement.

     3.6 Indemnification Procedures.

          (a) The Indemnified Party agrees that within a reasonable period of time after it becomes
aware of facts giving rise to a claim for indemnification under this Article III, it will
provide notice thereof in writing to the Indemnifying Party, specifying the nature of and specific
basis for such claim.

          (b) The Indemnifying Party shall have the right to control all aspects of the defense of (and
any counterclaims with respect to) any claims brought against the Indemnified Party that are
covered by the indemnification under this Article III, including, without limitation, the
selection of counsel, determination of whether to appeal any decision of any court and the settling
of any such claim or any matter or any issues relating thereto; provided, however, that no such
settlement shall be entered into without the consent of the Indemnified Party unless it includes a
full release of the Indemnified Party from such claim.

          (c) The Indemnified Party agrees to cooperate in good faith and in a commercially reasonable
manner with the Indemnifying Party, with respect to all aspects of the defense of any claims
covered by the indemnification under this Article III, including, without limitation, the
prompt furnishing to the Indemnifying Party of any correspondence or other notice relating thereto
that the Indemnified Party may receive, permitting the name of the Indemnified Party to be utilized
in connection with such defense, the making available to the Indemnifying Party of any files,
records or other information of the Indemnified Party that the Indemnifying Party considers
relevant to such defense, the making available to the Indemnifying Party of any employees of the
Indemnified Party and the granting to the Indemnifying Party of reasonable access rights to the
properties and facilities of the Indemnified Party; provided,

11

 

however, that in connection therewith the Indemnifying Party agrees to use reasonable efforts
to minimize the impact thereof on the operations of the Indemnified Party and further agrees to
maintain the confidentiality of all files, records, and other information furnished by the
Indemnified Party pursuant to this Section 3.6. In no event shall the obligation of the
Indemnified Party to cooperate with the Indemnifying Party as set forth in the immediately
preceding sentence be construed as imposing upon the Indemnified Party an obligation to hire and
pay for counsel in connection with the defense of any claims covered by the indemnification set
forth in this Article III; provided, however, that the Indemnified Party may, at its own
option, cost and expense, hire and pay for counsel in connection with any such defense. The
Indemnifying Party agrees to keep any such counsel hired by the Indemnified Party informed as to
the status of any such defense, but the Indemnifying Party shall have the right to retain sole
control over such defense.

          (d) In determining the amount of any loss, cost, damage or expense for which the Indemnified
Party is entitled to indemnification under this Agreement, the gross amount of the indemnification
will be reduced by (i) any insurance proceeds realized by the Indemnified Party, and such
correlative insurance benefit shall be net of any incremental insurance premium that becomes due
and payable by the Indemnified Party as a result of such claim and (ii) all amounts recovered by
the Indemnified Party under contractual indemnities from third Persons.

     3.7 Limitations Regarding Indemnification.

          (a) Neither Tesoro Refining and Marketing nor Tesoro Alaska shall, in any calendar year, be
obligated to indemnify, defend and hold harmless the Partnership Group for a Covered Environmental
Loss under Section 3.1(a)(ii) until such time as the aggregate amount of all Covered
Environmental Losses in such calendar year exceeds $250,000 (the “Annual Environmental
Deductible”), at which time Tesoro Refining and Marketing and Tesoro Alaska shall be obligated
to indemnify the Partnership Group for the amount of Covered Environmental Losses under Section
3.1(a)(ii) that are in excess of the Annual Environmental Deductible that are incurred by the
Partnership Group in such calendar year. Neither Tesoro Refining and Marketing nor Tesoro Alaska
shall, in any calendar year, be obligated to indemnify, defend and hold harmless the Partnership
Group for any individual Loss under Section 3.2 until such time as the aggregate amount of
all Losses under Section 3.2 that are in such calendar year exceeds $250,000 (the
“Annual ROW Deductible”), at which time Tesoro Refining and Marketing and Tesoro Alaska
shall be obligated to indemnify the Partnership Group for all Losses under Section 3.2 in
excess of the Annual ROW Deductible that are incurred by the Partnership Group in such calendar
year.

          (b) With respect to Sections 3.1, 3.2 and 3.5(a), Tesoro Alaska shall
only be required to indemnify the Partnership Group for Covered Environmental Losses under
Section 3.1, Losses under Section 3.2 or Losses under Section 3.5(a)
incurred in connection with or related to Assets conveyed, contributed or otherwise transferred to
the Partnership Group by Tesoro Alaska, and Tesoro Refining and Marketing shall be required to
indemnify the Partnership Group for all other Covered Environmental Losses under Section
3.1 or Losses under Section 3.2 and Section 3.5(a).

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          (c) For the avoidance of doubt, there is no monetary cap on the amount of indemnity coverage
provided by any Indemnifying Party under this Article III.

          (d) NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IN NO EVENT SHALL ANY PARTY’S
INDEMNIFICATION OBLIGATION HEREUNDER COVER OR INCLUDE CONSEQUENTIAL, INDIRECT, INCIDENTAL,
PUNITIVE, EXEMPLARY, SPECIAL OR SIMILAR DAMAGES OR LOST PROFITS SUFFERED BY ANY OTHER PARTY
ENTITLED TO INDEMNIFICATION UNDER THIS AGREEMENT.

ARTICLE IV

Corporate Services

     4.1 General.

          (a) Tesoro agrees to provide, and agrees to cause its Affiliates to provide, on behalf of the
General Partner, for the Partnership Group’s benefit of all the centralized corporate services that
Tesoro and its Affiliates have traditionally provided in connection with the Assets including,
without limitation, the general and administrative services listed on Schedule IV to this
Agreement. As consideration for such services, the Partnership will pay Tesoro an administrative
fee (the “Administrative Fee”) of $2.5 million per year, payable in equal monthly
installments on or before the tenth business day of each month, commencing in the first month
following the Closing Date. The Administrative Fee for the 2011 fiscal year will be prorated based
on the number of days from the Closing Date to December 31, 2011. Tesoro may increase or decrease
the Administrative Fee on each anniversary of the Closing Date, commencing on the second
anniversary date of the Closing Date, by a percentage equal to the change in the Consumer Price
Index — All Urban Consumers, U.S. City Average, Not Seasonally Adjusted over the previous 12
calendar months or to reflect any increase in the cost of providing centralized corporate services
to the Partnership Group due to changes in any law, rule or regulation applicable to Tesoro or the
Partnership Group, including any interpretation of such laws, rules or regulations.

          (b) At the end of each calendar year, the Partnership will have the right to submit to Tesoro
a proposal to reduce the amount of the Administrative Fee for that year if the Partnership
believes, in good faith, that the centralized corporate services performed by Tesoro and its
Affiliates for the benefit of the Partnership Group for the year in question do not justify payment
of the full Administrative Fee for that year. If the Partnership submits such a proposal to
Tesoro, Tesoro agrees that it will negotiate in good faith with the Partnership to determine if the
Administrative Fee for that year should be reduced and, if so, the amount of such reduction. If
the Parties agree that the Administrative Fee for that year should be reduced, then Tesoro shall
promptly pay to the Partnership the amount of any reduction for that year.

          (c) The Partnership Group shall reimburse Tesoro for all other direct or allocated costs and
expenses incurred by Tesoro and its Affiliates on behalf of the Partnership Group including, but
not limited to:

               (i) salaries of employees of the General Partner, Tesoro or its Affiliates, to the extent, but
only to the extent, such employees perform services for the

13

 

Partnership Group, provided that for employees that do not devote all of their business time
to the Partnership Group, such expenses shall be based on the annual weighted average of time spent
and number of employees devoting services to the Partnership Group;

               (ii) the cost of employee benefits relating to employees of the General Partner, Tesoro or
its Affiliates, including 401(k), pension, bonuses and health insurance benefits (but excluding
Tesoro stock-based compensation expense), to the extent, but only to the extent, such employees
perform services for the Partnership Group, provided that for employees that do not devote all of
their business time to the Partnership Group, such expenses shall be based on the annual weighted
average of time spent and number of employees devoting their services to the Partnership Group;

               (iii) any expenses incurred or payments made by Tesoro or its Affiliates for insurance
coverage with respect to the Assets or the business of the Partnership Group;

               (iv) all expenses and expenditures incurred by Tesoro or its Affiliates as a result of the
Partnership becoming and continuing as a publicly traded entity, including, but not limited to,
costs associated with annual and quarterly reports, independent auditor fees, partnership
governance and compliance, registrar and transfer agent fees, tax return and Schedule K-1
preparation and distribution, legal fees and independent director compensation; and

               (v) all sales, use, excise, value added or similar taxes, if any, that may be applicable from
time to time with respect to the services provided by Tesoro and its Affiliates to the Partnership
Group pursuant to Section 4.1(a).

     Such reimbursements shall be made on or before the tenth business day of the month following
the month such costs and expenses are incurred, other than reimbursements solely related to bonuses
for employees of the General Partner, which shall be reimbursed on or prior to the last business
day of the month that such bonuses are paid. For the avoidance of doubt, the costs and expenses set
forth in Section 4.1(c)shall be paid by the Partnership Group in addition to, and not as a
part of or included in, the Administrative Fee.

ARTICLE V

Capital and Other Expenditures

     5.1 Reimbursement of Maintenance Capital and Other Expenditures. Tesoro Refining and
Marketing will reimburse the Partnership Group on a dollar-for-dollar basis, without duplication,
for each of the following:

          (a) during the period commencing on the Closing Date and ending on April 26, 2016, expenses
incurred by the Partnership Group solely in order to comply with vapor recovery or combustion and
spill containment requirements associated with the Assets;

          (b) expenses incurred by the Partnership Group for repairs and maintenance to storage tanks
included as part of the Assets and expenses that are made solely in order to comply with current
minimum standards under (i) the U.S. Department of Transportation’s Pipeline Integrity Management
Rule 49 CFR 195.452 and (ii) American Petroleum Institute (API)

14

 

Standard 653 for Aboveground Storage Tanks, but only if and to the extent that such repairs
and maintenance are identified before, during or as a result of the first scheduled API 653
inspections that occur after the Closing Date; and

          (c) those certain capital projects related to the Assets and described on Schedule VI
attached hereto.

ARTICLE VI

Right of First Offer

     6.1 Right of First Offer to Purchase Certain Assets retained by Tesoro Entities.

          (a) Each ROFO Asset Owner hereby grants to the Partnership Group a right of first offer for a
period of 10 years from the Closing Date (the “ROFO Period”) on any ROFO Asset set forth
next to such ROFO Asset Owner’s name on Schedule V to the extent that such ROFO Asset Owner
proposes to Transfer any ROFO Asset (other than to an Affiliate who agrees in writing that such
ROFO Asset remains subject to the provisions of this Article VI and such Affiliate assumes the
obligations under this Article VI with respect to such ROFO Asset) or enter into any agreement to
do any of the foregoing during the ROFO Period.

          (b) The Parties acknowledge that any Transfer of ROFO Assets pursuant to the Partnership
Group’s right of first offer is subject to the terms of all existing agreements with respect to the
ROFO Assets; provided, however, that Tesoro represents and warrants that, to its knowledge after
reasonable investigation, there are no terms in such agreements that would materially impair the
rights granted to the Partnership Group pursuant to this Article VI with respect to any ROFO Asset.

     6.2 Procedures.

          (a) In the event a ROFO Asset Owner proposes to Transfer any applicable ROFO Asset (other than
to an Affiliate) during the ROFO Period (a “Proposed Transaction”), such ROFO Asset Owner
shall, prior to entering into any such Proposed Transaction, first give notice in writing to the
Partnership Group (the “ROFO Notice”) of its intention to enter into such Proposed
Transaction. The ROFO Notice shall include any material terms, conditions and details as would be
necessary for a Partnership Group Member to make a responsive offer to enter into the Proposed
Transaction with the applicable ROFO Asset Owner, which terms, conditions and details shall at a
minimum include any terms, condition or details that such ROFO Asset Owner would propose to provide
to non-Affiliates in connection with the Proposed Transaction. The Partnership Group shall have 60
days following receipt of the ROFO Notice to propose an offer to enter into the Proposed
Transaction with such ROFO Asset Owner (the “ROFO Response”). The ROFO Response shall set
forth the terms and conditions (including, without limitation, the purchase price the applicable
Partnership Group Member proposes to pay for the ROFO Asset and the other terms of the purchase
including, if requested by a Tesoro Entity, the terms on which the Partnership Group Member will
provide services to the Tesoro Entity to enable the Tesoro Entity to utilize the applicable ROFO
Asset) pursuant to which the Partnership Group would be willing to enter into a binding agreement
for the Proposed Transaction. The decision to issue the ROFO Response and the terms of the ROFO
Response shall be subject to approval

15

 

by the Conflicts Committee. If no ROFO Response is delivered by the Partnership Group within
such 60-day period, then the Partnership Group shall be deemed to have waived its right of first
offer with respect to such ROFO Asset.

          (b) Unless the ROFO Response is rejected pursuant to written notice delivered by the
applicable ROFO Asset Owner to the applicable Partnership Group Member within 60 days of the
delivery of the ROFO Response, such ROFO Response shall be deemed to have been accepted by the
applicable ROFO Asset Owner and such ROFO Asset Owner shall enter into an agreement with the
applicable Partnership Group Member providing for the consummation of the Proposed Transaction upon
the terms set forth in the ROFO Response and, if applicable, the Partnership Group Member will
enter into an agreement with the Tesoro Entity setting forth the terms on which the Partnership
Group Member will provide services to the Tesoro Entity to enable the Tesoro Entity to utilize the
ROFO Asset. Unless otherwise agreed between the applicable Tesoro Entity and Partnership Group
Member, the terms of the purchase and sale agreement will include the following:

               (i) the Partnership Group Member will deliver the agreed purchase price (in cash, Partnership
Securities, an interest-bearing promissory note, or any combination thereof);

               (ii) the applicable ROFO Asset Owner will represent that it has title to the ROFO Assets that
is sufficient to operate the ROFO Assets in accordance with their intended and historical use,
subject to all recorded matters and all physical conditions in existence on the closing date for
the purchase of the applicable ROFO Asset, plus any other such matters as the Partnership Group
Member may approve. If the Partnership Group Member desires to obtain any title insurance with
respect to the ROFO Asset, the full cost and expense of obtaining the same (including but not
limited to the cost of title examination, document duplication and policy premium) shall be borne
by the Partnership Group Member;

               (iii) the applicable ROFO Asset Owner will grant to the Partnership Group Member the right,
exercisable at the Partnership Group Member’s risk and expense prior to the delivery of the ROFO
Response, to make such surveys, tests and inspections of the ROFO Asset as the Partnership Group
Member may deem desirable, so long as such surveys, tests or inspections do not damage the ROFO
Asset or interfere with the activities of the applicable ROFO Asset Owner;

               (iv) the closing date for the purchase of the ROFO Asset shall occur no later than 180 days
following receipt by Tesoro of the ROFO Response pursuant to Section 6.2(a);

               (v) the applicable ROFO Asset Owner and Partnership Group Member shall use commercially
reasonable efforts to do or cause to be done all things that may be reasonably necessary or
advisable to effectuate the consummation of any transactions contemplated by this Section
6.2(b), including causing its respective Affiliates to execute, deliver and perform all
documents, notices, amendments, certificates, instruments and consents required in connection
therewith; and

16

 

               (vi) neither the applicable ROFO Asset Owner nor the applicable Partnership Group Member shall
have any obligation to sell or buy the applicable ROFO Asset if any of the consents referred to in
Section 6.1(b) has not been obtained.

          (c) If the Partnership Group has not timely delivered a ROFO Response as specified above with
respect to a Proposed Transaction that is subject to a ROFO Notice, the applicable ROFO Asset Owner
shall be free to enter into a Proposed Transaction with any third party on terms and conditions no
more favorable to such third party than those set forth in the ROFO Notice. If a ROFO Response with
respect to any Proposed Transaction is rejected by the applicable ROFO Asset Owner, such ROFO Asset
Owner shall be free to enter into a Proposed Transaction with any third party (i) on terms and
conditions (excluding those relating to price) that are not more favorable in the aggregate to such
third party than those proposed in respect of the Partnership Group in the ROFO Response and (ii)
at a price equal to no less than 100% of the price offered by the applicable Partnership Group
Member in the ROFO Response to such ROFO Asset Owner.

ARTICLE VII

License of Name and Mark

     7.1 Grant of License. Upon the terms and conditions set forth in this Article
VII, Tesoro hereby grants and conveys to each of the entities currently or hereafter comprising
a part of the Partnership Group a nontransferable, nonexclusive, royalty-free right and license
(“License”) to use the name “Tesoro” (the “Name”) and any other trademarks owned by
Tesoro which contain the Name (collectively, the “Marks”).

     7.2 Ownership and Quality. The Partnership agrees that ownership of the Name and the
Marks and the goodwill relating thereto shall remain vested in Tesoro both during the term of this
License and thereafter, and the Partnership further agrees, and agrees to cause the other members
of the Partnership Group, never to challenge, contest or question the validity of Tesoro’s
ownership of the Name and Marks or any registration thereto by Tesoro. In connection with the use
of the Name and the Mark, the Partnership and any other member of the Partnership Group shall not
in any manner represent that they have any ownership in the Name and the Marks or registration
thereof except as set forth herein, and the Partnership, on behalf of itself and the other members
of the Partnership Group, acknowledge that the use of the Name and the Marks shall not create any
right, title or interest in or to the Name and the Mark, and all use of the Name and the Marks by
the Partnership or any other member of the Partnership Group, shall inure to the benefit of Tesoro.
The Partnership agrees, and agrees to cause the other members of the Partnership Group, to use the
Name and Marks in accordance with such quality standards established by Tesoro and communicated to
the Partnership from time to time, it being understood that the products and services offered by
the members of the Partnership Group immediately before the Closing Date are of a quality that is
acceptable to Tesoro and justifies the License.

     7.3 Termination. The License shall terminate upon a termination of this Agreement
pursuant to Section 9.4.

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ARTICLE VIII

Represented Employees; Vehicle Leases

     8.1 Transfer of Represented Employees. The Parties acknowledge and agree that certain
Tesoro Refining and Marketing employees currently covered by existing collective bargaining
agreements with Tesoro Refining and Marketing (the “Represented Employees”) have been or
will be transferred to and become employees of the General Partner on or before December 31, 2011.
The Parties agree to cooperate and shall take all action necessary to effectuate such transfer and
shall comply with the terms of the applicable collective bargaining agreements with respect to the
Represented Employees.

     8.2 Vehicle Leases. The Parties acknowledge and agree that the members of the
Partnership Group shall have the right to use any vehicles leased by the General Partner for use in
the operation of the Partnership Group’s business.

ARTICLE IX

Miscellaneous

     9.1 Choice of Law; Submission to Jurisdiction. This Agreement shall be subject to and
governed by the laws of the State of Texas, excluding any conflicts-of-law rule or principle that
might refer the construction or interpretation of this Agreement to the laws of another state.
Each Party hereby submits to the jurisdiction of the state and federal courts in the State of Texas
and to venue in San Antonio, Texas.

     9.2 Notice. All notices or requests or consents provided for by, or permitted to be
given pursuant to, this Agreement must be in writing and must be given by depositing same in the
United States mail, addressed to the Person to be notified, postpaid, and registered or certified
with return receipt requested or by delivering such notice in person or by facsimile to such Party.
Notice given by personal delivery or mail shall be effective upon actual receipt. Notice given by
facsimile shall be effective upon actual receipt if received during the recipient’s normal business
hours or at the beginning of the recipient’s next business day after receipt if not received during
the recipient’s normal business hours. All notices to be sent to a Party pursuant to this
Agreement shall be sent to or made at the address set forth below such Party’s signature to this
Agreement or at such other address as such Party may stipulate to the other Parties in the manner
provided in this Section 9.2.

If to the Tesoro Entities:

Tesoro Corporation

19100 Ridgewood Parkway

San Antonio, Texas 78259-1828

Attn: Charles S. Parrish

Facsimile: (210) 745-4494

If to the Partnership Group:

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Tesoro Logistics LP

c/o Tesoro Logistics GP, LLC, its General Partner

19100 Ridgewood Parkway

San Antonio, Texas 78259-1828

Attn: Charles S. Parrish

Facsimile: (210) 745-4494

     9.3 Entire Agreement. This Agreement constitutes the entire agreement of the Parties
relating to the matters contained herein, superseding all prior contracts or agreements, whether
oral or written, relating to the matters contained herein.

     9.4 Termination of Agreement. This Agreement, other than the provisions set forth in
Article III hereof, may be terminated by Tesoro or the Partnership upon a Partnership
Change of Control. For the avoidance of doubt, the Parties’ indemnification obligations under
Article III shall survive the termination of this Agreement in accordance with their
respective terms.

     9.5 Amendment or Modification. This Agreement may be amended or modified from time to
time only by the written agreement of all the Parties hereto. Each such instrument shall be
reduced to writing and shall be designated on its face an “Amendment” or an “Addendum” to this
Agreement.

     9.6 Assignment. No Party shall have the right to assign its rights or obligations
under this Agreement without the consent of the other Parties hereto; provided, however, that the
Partnership may make a collateral assignment of this Agreement solely to secure working capital
financing for the Partnership.

     9.7 Counterparts. This Agreement may be executed in any number of counterparts with
the same effect as if all signatory parties had signed the same document. All counterparts shall
be construed together and shall constitute one and the same instrument. Delivery of an executed
signature page of this Agreement by facsimile transmission or in portable document format (.pdf)
shall be effective as delivery of a manually executed counterpart hereof.

     9.8 Severability. If any provision of this Agreement shall be held invalid or
unenforceable by a court or regulatory body of competent jurisdiction, the remainder of this
Agreement shall remain in full force and effect.

     9.9 Further Assurances. In connection with this Agreement and all transactions
contemplated by this Agreement, each signatory party hereto agrees to execute and deliver such
additional documents and instruments and to perform such additional acts as may be necessary or
appropriate to effectuate, carry out and perform all of the terms, provisions and conditions of
this Agreement and all such transactions.

     9.10 Rights of Limited Partners. The provisions of this Agreement are enforceable
solely by the Parties to this Agreement, and no Limited Partner of the Partnership shall have the
right, separate and apart from the Partnership, to enforce any provision of this Agreement or to
compel any Party to this Agreement to comply with the terms of this Agreement.

19

 

          IN WITNESS WHEREOF, the Parties have executed this Agreement on, and effective as of, the
Closing Date.

	 	 	 	 	 
	 	TESORO CORPORATION.

 	 
	 	By:  	/s/ Gregory J. Goff
 	 
	 	 	Gregory J. Goff 	 
	 	 	President 	 
	 

	 	 	 	 	 
	 	TESORO REFINING AND MARKETING COMPANY

 	 
	 	By:  	/s/ Gregory J. Goff
 	 
	 	 	Gregory J. Goff 	 
	 	 	President 	 
	 

	 	 	 	 	 
	 	TESORO COMPANIES, INC.

 	 
	 	By:  	/s/ Gregory J. Goff
 	 
	 	 	Gregory J. Goff 	 
	 	 	President 	 
	 

	 	 	 	 	 
	 	TESORO ALASKA COMPANY

 	 
	 	By:  	/s/ Gregory J. Goff
 	 
	 	 	Gregory J. Goff 	 
	 	 	President 	 
	 

[Signature page to Omnibus Agreement]

 

 

	 	 	 	 	 
	 	TESORO LOGISTICS LP

 	 
	 	By:   	 Tesoro Logistics GP, LLC,
its general partner 	 

	 	 	 	 	 
	 	 	 
	 	By:  	                        /s/ Phillip M. Anderson
 	 
	 	 	Phillip M. Anderson 	 
	 	 	President 	 
	 

	 	 	 	 	 
	 	TESORO LOGISTICS GP, LLC

 	 
	 	By:  	/s/ Phillip M. Anderson
 	 
	 	 	Phillip M. Anderson 	 
	 	 	President 	 
	 

[Signature page to Omnibus Agreement]

 

 

Schedule I

Pending Environmental Litigation

None.

 

 

Schedule II

Environmental Matters

1. Anchorage #1 Terminal soil and groundwater have been impacted by gasoline and diesel releases
from previously buried pipelines. The site is considered characterized and is currently undergoing
removal of product from the water table, groundwater treatment, and long-term monitoring.

2. Anchorage #2 Terminal soil and groundwater have been impacted by gasoline releases occurring
prior to Tesoro’s purchase of the facility. The site is considered characterized and is currently
undergoing groundwater monitoring and treatment. Off-site groundwater investigations are scheduled
for 2012.

3. Stockton Terminal soil and groundwater have been impacted by gasoline and diesel releases from
pipelines and/or product storage tanks. The site is considered substantially characterized and is
undergoing groundwater treatment and groundwater monitoring. Off-site groundwater impacts are
commingled with neighboring petroleum storage terminals.

4. Burley Terminal groundwater was impacted by gasoline releases occurring prior to Tesoro’s
purchase of the facility. Groundwater impacts were commingled with neighboring petroleum storage
terminals. Hydrocarbon concentrations in groundwater samples do not exceed previously established
target levels for groundwater and surface water protection. Regulatory closure is pending.

5. Wilmington Sales Terminal soil and groundwater have been impacted by gasoline releases occurring
prior to Tesoro’s purchase of the facility. Groundwater investigation and monitoring is on-going.
Tesoro is indemnified by the previous owner for Investigation and remediation obligations.

6. Salt Lake City Terminal soil and groundwater have been impacted by gasoline and diesel releases
from pipelines and/or product storage tanks occurring prior to Tesoro’s purchase of the facility.
The site is considered characterized and is currently undergoing removal of product from the water
table and long-term monitoring. There are no known soil or groundwater impacts at the Northwest
Crude Oil tank farm.

7. The Stockton Terminal emits volatile organic compounds (VOCs) below “major source” emission
criteria. In 2010, the San Joaquin Air Quality Management District announced it is reducing its
major source threshold. When the Stockton Terminal expands its operations or increases throughput,
the potential to emit VOC will increase and the Stockton terminal will become subject to regulation
as a major source. This will require a Title V Air Operating Permit. In addition, the Stockton
facility will be required to install an automated continuous emission monitor at a cost of
approximately $75,000.

 

 

Schedule III

Pending Litigation

None.

 

 

Schedule IV

General and Administrative Services

	(1)	 	Executive management services of Tesoro employees who devote less than 50% of their business
time to the business and affairs of the Partnership, including stock based compensation
expense
	 
	(2)	 	Financial and administrative services (including, but not limited to, treasury and
accounting)
	 
	(3)	 	Information technology services
(4) Legal services
	 
	(5)	 	Health, safety and environmental services
(6) Human resources services
	 
	(7)	 	Insurance coverage under Tesoro insurance policies

 

 

Schedule V

ROFO Assets

	 	 	 
	Asset	 	Owner
	Golden Eagle Refined Products Terminal
(Martinez, California). A terminal located
at the Golden Eagle Refinery consisting of a
truck loading rack with three loading bays
supplied by pipeline from storage tanks
located at the Golden Eagle Refinery. The
terminal does not have refined product
storage capacity.

	 	Tesoro Refining and Marketing
	 
	 	 
	Golden Eagle Marine Terminal (Martinez,
California). A marine terminal located on
the Sacramento River near the Golden Eagle
Refinery consisting of a single-berth dock,
five crude oil storage tanks with a combined
425,000 barrels of capacity and related
pipelines. The terminal receives crude oil
through marine vessel deliveries for
delivery to the Golden Eagle Refinery and
Tesoro Refining and Marketing’s Martinez
terminal.

	 	Tesoro Refining and Marketing
	 
	 	 
	Golden Eagle Wharf Facility (Martinez,
California). A wharf facility located on the
Sacramento River near the Golden Eagle
Refinery consisting of a single-berth dock
and related pipelines. The facility does
not have crude oil or refined products
storage capacity and receives refined
products from the Golden Eagle Refinery
through interconnecting pipelines for
delivery into marine vessels. The facility
can also receive refined products and
intermediate feedstocks from marine vessels
for delivery to the Golden Eagle Refinery.

	 	Tesoro Refining and Marketing
	 
	 	 
	Tesoro Alaska Pipeline (Nikiski, Alaska). A
common carrier pipeline consisting of
approximately 69 miles of 10-inch pipeline
with capacity to transport approximately
48,000 bpd of refined products from the
Kenai Refinery to Anchorage International
Airport and to a receiving station at the
Port of Anchorage that is connected to the
Partnership Group’s Anchorage terminal as
well as third party terminals.

	 	Tesoro Alaska
	 
	 	 
	Nikiski Dock and Storage Facility (Nikiski,
Alaska). A single-berth dock and storage
facility located at the Kenai Refinery that
includes five crude oil storage tanks with a
combined capacity of approximately 930,000
barrels, ballast water treatment capability
and associated pipelines, pumps and metering
stations. The dock and storage facility
receives crude oil from marine tankers and
from local production fields via pipeline
and truck, and also delivers refined
products from the refinery to marine
vessels.

	 	Tesoro Alaska

 

 

	 	 	 
	Asset	 	Owner
	Nikiski Refined Products Terminal (Nikiski,
Alaska). A terminal located at the Kenai
Refinery consisting of a truck loading rack
with two loading bays supplied by pipeline
from the Kenai Refinery and six refined
product storage tanks with a combined
capacity of 211,000 barrels.

	 	Tesoro Alaska
	 
	 	 
	Los Angeles Crude Oil and Refined Products
Pipeline System (Los Angeles, California). A
pipeline system located in the Los Angeles,
California metropolitan area consisting of
nine separate U.S. Department of
Transportation-regulated pipelines totaling
approximately 17 miles in length that
transport crude oil, feedstocks and refined
products between Tesoro Refining and
Marketing’s Los Angeles Refinery and Long
Beach terminal and various third party
facilities.

	 	Tesoro Refining and Marketing
	 
	 	 
	Anacortes Refined Products Terminal
(Anacortes, Washington). A terminal located
at the Anacortes Refinery consisting of a
truck loading rack with two loading bays
that receive diesel fuel from storage tanks
located at the Anacortes Refinery. The
terminal does not have refined product
storage capacity

	 	Tesoro Refining and Marketing
	 
	 	 
	Anacortes Marine Terminal and Storage
Facility (Anacortes, Washington). A marine
terminal and storage facility located at the
Anacortes Refinery consisting of a crude oil
and refined products wharf facility and four
storage tanks for crude oil and heavy
products with a combined storage capacity of
1.4 million barrels. The marine terminal and
storage facility receive crude oil and other
feedstocks from marine vessels and
third-party pipelines for delivery to the
Anacortes Refinery. The facility also
delivers refined products from the Anacortes
Refinery to marine vessels.

	 	Tesoro Refining and Marketing
	 
	 	 
	Long Beach Marine Terminal (Long Beach,
California). A marine terminal leased from
the Port of Long Beach, California
consisting of a dock with two vessel berths.
The terminal receives crude oil and other
feedstocks from marine vessels for delivery
to the Los Angeles Refinery and other
third-party refineries and terminals, and
receives refined and intermediate products
from the Los Angeles Refinery for delivery
to marine vessels.

	 	Tesoro Refining and Marketing

 

 

Schedule VI

Existing Capital Projects

Capital Projects

That certain project related to AFE # 102120001, which provides for side stream ethanol blending
into all gasoline at the Salt Lake City terminal by adding truck ethanol unloading capability,
utilizing the existing premium day tank for ethanol and delivering premium direct from the Salt
Lake City refinery tankage. New ethanol truck unloading facilities will be installed. New Pumps
will also be installed for delivering higher volumes of premium gasoline from the Salt Lake City
refinery to the Salt Lake City terminal. An ethanol injection skid will be installed along with
piping changing to the existing Salt Lake City terminal to allow the ethanol to be injected in the
gasoline stream.

That certain project number 2010113058 at the Mandan refinery, to update additive equipment to
allow the offering of Shell additized gasoline.

That certain project related to AFE # 107120005, which provides for ratio ethanol blending into
gasoline on the rack at the Burley, Idaho Terminal by adding truck ethanol unloading capability,
adding tankage for ethanol storage and installing new ethanol meters associated with each gasoline
loading arm. New ethanol truck unloading facilities will also be installed.

That certain project number 2007000263 at the Mandan refinery, to update the truck rack sprinkler
system.

That certain project number 2010113017 at the Mandan refinery, to upgrade the rack blending
hydraulic system to reduce/eliminate inaccurate blends at the load rack.

That certain project number 2011433001 at the Mandan refinery, to move the JP8 to new bay and have
three bays for loading product across the rack.

That certain project number 2011432602 at the Stockton terminal, install a continuous vapor
emission monitor on the vapor recovery unit for compliance with air quality regulations.

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