Document:

TSO EX. 10.2 11-15-2012

Exhibit 10.2

SECOND AMENDED AND RESTATED OMNIBUS AGREEMENT
This SECOND AMENDED AND RESTATED OMNIBUS AGREEMENT (the “Agreement”) is entered into on, and effective as of, November 15, 2012, 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 executed that certain Amended and Restated Omnibus Agreement dated as of April 1, 2012, and amended by that certain Amendment No. 1 to Amended and Restated Omnibus Agreement dated as of September 14, 2012 (together, the “Original Agreement”).
2.    The Parties desired by their execution of the Original Agreement to evidence their understanding, as more fully set forth in Article II, with respect to certain business opportunities that the Tesoro Entities (as defined herein) will not engage in for so long as the Partnership is an Affiliate of Tesoro.  
3.    The Parties desired by their execution of the Original Agreement to evidence their understanding, as more fully set forth in Article III, with respect to certain indemnification obligations of the Parties to each other.  
4.    The Parties desired by their execution of the Original 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).  
5.    The Parties desired by their execution of the Original 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.  
6.    The Parties desired by their execution of the Original Agreement to evidence their understanding, as more fully set forth in Article VI, with respect to the Partnership Group’s right of first offer with respect to the ROFO Assets (as defined herein).  
7.    The Parties desired by their execution of the Original Agreement to evidence their understanding, as more fully set forth in Article VII, with respect to the granting of a license from Tesoro to the Partnership Group and the General Partner.  
8.    The Parties desired by their execution of the Original 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.  
9.     The Parties desire to amend and restate the Original Agreement to allow, among other items, for the application of the terms hereof to additional contributions of assets from the Tesoro Entities to the Partnership Group.
In consideration of the premises and the covenants, conditions, and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto hereby agree as follows: 
ARTICLE I
DEFINITIONS 
1.1    Definitions.  As used in this Agreement, the following terms shall have the respective meanings set forth below: 
“Administrative Fee” is defined in Section 4.1.  
“Affiliate” is defined in the Partnership Agreement.  
“Annual Environmental Deductible” is defined in Section 3.7.  
“Annual ROW Deductible” is defined in Section 3.7.  
“Assets” means all logistics assets, including, but not limited to, all gathering pipelines, transportation pipelines, storage tanks, trucks, truck racks, terminal facilities, wharves, rail tracks, offices and related equipment, real estate and other assets, or portions thereof, conveyed, contributed or otherwise transferred or intended to be conveyed, contributed or otherwise transferred pursuant to a Contribution Agreement to any member of the Partnership Group, or, with respect to a Contribution Agreement, owned by, leased by or necessary for the operation of the business, properties or assets of any member of the Partnership Group, prior to or as of the applicable Closing Date.  
“Closing Date” means the applicable date for each Contribution Agreement as set forth on Schedule VII to this Agreement.  
“Conflicts Committee” is defined in the Partnership Agreement.  
“Contribution Agreement” means the applicable contribution agreement identified on Schedule VII to this Agreement, together with the applicable additional conveyance documents and instruments contemplated or referenced thereunder.  
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether (a) through ownership of securities of any class of a Person entitling the holders thereof to vote on a regular basis in the election of  members of the board of directors or other governing body of such Person, (b) by contract, or (c) otherwise.

“Covered Environmental Losses” is defined in Section 3.1.  
“Environmental Laws” means all federal, state, and local laws, statutes, rules, regulations, orders, judgments, ordinances, codes, injunctions, decrees, Environmental Permits and other legally enforceable requirements and rules of common law now or hereafter in effect, relating to pollution or protection of human health and the environment including, without limitation, the federal Comprehensive Environmental Response, Compensation, and Liability Act, the Superfund Amendments Reauthorization Act, the Resource Conservation and Recovery Act, the Clean Air Act, the Federal Water Pollution Control Act, the Toxic Substances Control Act, the Oil Pollution Act, the Safe Drinking Water Act, the Hazardous Materials Transportation Act, and other environmental conservation and protection laws, each as amended from time to time.  
“Environmental Permit” means any permit, approval, identification number, license, registration, consent, exemption, variance or other authorization required under or issued pursuant to any applicable Environmental Law.  
“First Deadline Date” means the applicable date for each Contribution Agreement set forth on Schedule VII to this Agreement.  
“Hazardous Substance” means (a) any substance that is designated, defined or classified as a hazardous waste, solid waste, hazardous material, pollutant, contaminant or toxic or hazardous substance, or terms of similar meaning, or that is otherwise regulated under any Environmental Law, including, without limitation, any hazardous substance as defined under the Comprehensive Environmental Response, Compensation, and Liability Act, as amended, and (b) petroleum, oil, gasoline, natural gas, fuel oil, motor oil, waste oil, diesel fuel, jet fuel, and other refined petroleum hydrocarbons.  
“Identification Deadline” means either (a) the Second Deadline Date, or (b) if a Partnership Change of Control has occurred, the earlier of (i) the First Deadline Date and (ii) the date of the occurrence of a Partnership Change of Control.  
“Indemnified Party” means the Partnership Group or the Tesoro Entities, as the case may be, in its capacity as the party entitled to indemnification in accordance with Article III.
“Indemnifying Party” means with respect to a Contribution Agreement, the Partnership Group or the Tesoro Indemnifying Parties, as the case may be, in their respective capacity as the party from whom indemnification may be sought in accordance with Article III.  
“License” is defined in Section 7.1.  
“Limited Partner” is defined in the Partnership Agreement.  
“Losses” means any losses, damages, liabilities, claims, demands, causes of action, judgments, settlements, fines, penalties, costs and expenses (including, without limitation, court costs and reasonable attorney’s and expert’s fees) of any and every kind or character, known or unknown, fixed or contingent.  

“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.  
“Offer” is defined in Section 2.3.  
“Original Agreement” is defined in the recitals to this Agreement.
“Partnership Agreement” means the First Amended and Restated Agreement of Limited Partnership of Tesoro Logistics LP dated as of April 26, 2011.  
“Partnership Change of Control” means Tesoro ceases to Control the general partner of the Partnership.  
“Partnership Group” means the Partnership and any of its Subsidiaries, treated as a single consolidated entity.  
“Partnership Group Member” means any member of the Partnership Group.  
“Partnership Security” is defined in the Partnership Agreement.  
“Party” and “Parties” are defined in the introduction to this Agreement.  
“Person” means an individual or a corporation, limited liability company, partnership, joint venture, trust, unincorporated organization association, government agency or political subdivision thereof or other entity.  
“Pipeline Rate Regulatory Agencies” means the applicable federal, state and local governmental or regulatory agencies having jurisdiction over rates to be charged for services provided with respect to the Assets contributed under a Contribution Agreement.
“Proposed Transaction” is defined in Section 6.2(a).  
“Prudent Industry Practice” means such practices, methods, acts, techniques, and standards as are in effect at the time in question that are consistent with the higher of (a) the standards generally followed by the United States pipeline, terminalling and rail industries and (b) the standards applied or followed by 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).  

“Retained Assets” means with respect to a particular Contribution Agreement, all assets owned by any of the Tesoro Entities that were not directly or indirectly conveyed, contributed or otherwise transferred to the Partnership Group pursuant to that Contribution Agreement or the other documents referred to in that Contribution Agreement, including, for the avoidance of doubt, all gathering pipelines, transportation pipelines, storage tanks, trucks, truck racks, terminal facilities, offices and related equipment, real estate and other related assets, or portions thereof owned by any of the Tesoro Entities and located in Hawaii; provided, however, that once any such assets have been directly or indirectly conveyed, contributed or otherwise transferred to the Partnership Group pursuant to any other Contribution Agreement or the other documents referred to in any other Contribution Agreement, such assets shall not be included in the definition of “Retained Assets” for purposes of the first-referenced Contribution Agreement in this definition with respect to the period on or after the Closing Date under that other Contribution Agreement.  
“ROFO Asset Owner” means, with respect to a ROFO Asset, the applicable Tesoro Entity set forth opposite such ROFO Asset on Schedule V to this Agreement.  
“ROFO Assets” means the assets listed on Schedule V to this Agreement.  
“ROFO Notice” is defined in Section 6.2(a).  
“ROFO Period” is defined in Section 6.1(a).  
“ROFO Response” is defined in Section 6.2(a).  
“Second Deadline Date” means the applicable date for each Contribution Agreement as set forth on Schedule VII to this Agreement.  
“Schedules” means Schedules I through VII attached to this Agreement, as may be amended and restated pursuant to Section 9.2.
“Subject Assets” is defined in Section 2.2(c).  
“Subsidiary” means, with respect to any Person, (a) a corporation of which more than 50% of the voting power of shares entitled (without regard to the occurrence of any contingency) to vote in the election of directors or other governing body of such corporation is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person or a combination thereof, (b) a partnership (whether general or limited) in which such Person or a Subsidiary of such Person is, at the date of determination, a general or limited partner of such partnership, but only if more than 50% of the partnership interests of such partnership (considering all of the partnership interests of the partnership as a single class) is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person, or a combination thereof, or (c) any other Person (other than a corporation or a partnership) in which such Person, one or more Subsidiaries of such Person, or a combination thereof, directly or indirectly, at the date of determination, has (i) at least a majority ownership interest or (ii) the power to elect or direct the election of a majority of the directors, managers or other governing body of such Person.  

“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.  
“Tesoro Indemnifying Parties” is defined in Section 3.1(a).
“Tesoro Indemnified Parties” is defined in Section 3.4.
“Third Deadline Date” means the applicable date for each Contribution Agreement as set forth on Schedule VII to this Agreement.  
“Transfer” means to, directly or indirectly, sell, assign, lease, convey, transfer or otherwise dispose of, whether in one or a series of transactions.  
ARTICLE II
BUSINESS OPPORTUNITIES 
2.1    Restricted Activities.  Except as permitted by Section 2.2, the General Partner and each of the Tesoro Entities shall be prohibited from owning, operating, engaging in, acquiring, or investing in any business that owns or operates crude oil or refined products pipelines, terminals or storage facilities in the United States.  
2.2    Permitted Exceptions.  Notwithstanding any provision of Section 2.1 to the contrary, the Tesoro Entities may engage in the following activities under the following circumstances: 
(a)    the ownership and/or operation of any of the Retained Assets (including replacements or expansions of the Retained Assets); 
(b)    the acquisition, ownership or operation of any logistics asset, including, without limitation, any crude oil or refined products pipeline, terminal or storage facility, that is acquired or constructed by a Tesoro Entity and that is (i) within, directly connected to, substantially dedicated to, or an integral part of, any refinery owned, acquired or constructed by a Tesoro Entity or (ii) acquired or constructed by a Tesoro Entity to replace an Asset of the Partnership Group that no longer provides services to any Tesoro Entity due to the occurrence of a force majeure event under a commercial contract between one or more Tesoro Entities and one or more members of the Partnership Group that prevents the Partnership Group from providing services under such commercial contract; 
(c)    the acquisition, ownership or operation of any asset or group of related assets used in the activities described in Section 2.1 that are acquired or constructed by a Tesoro Entity after April 26, 2011 (the “Subject Assets”) if: 
(i)    the fair market value of the Subject Assets (as determined in good faith by the Board of Directors, or other governing body, of the Tesoro Entity that will own the Subject Assets) is less than $5 million at the time of such acquisition by the Tesoro Entity or completion of construction, as the case may be; or 

(ii)    in the case of an acquisition or the construction of Subject Assets with a fair market value (as determined in good faith by the Board of Directors, or other governing body, of the Tesoro Entity that will own the Subject Assets) equal to or greater than $5 million at the time of such acquisition by a Tesoro Entity or the completion of construction, as applicable, the Partnership has been offered the opportunity to purchase the Subject Assets in accordance with Section 2.3 and the Partnership has elected not to purchase the Subject Assets; and 
(d)    the ownership of equity interests in the General Partner and the Partnership Group.  
2.3    Procedures.  
(a)    If a Tesoro Entity acquires or constructs Subject Assets as described in Section 2.2(c)(ii), then not later than six months after the consummation of the acquisition or the completion of construction by such Tesoro Entity of the Subject Assets, as the case may be, the Tesoro Entity shall notify the General Partner in writing of such acquisition or construction and offer the Partnership Group the opportunity to purchase such Subject Assets in accordance with this Section 2.3 (the “Offer”).  The Offer shall set forth the terms relating to the purchase of the Subject Assets and, if any Tesoro Entity desires to utilize the Subject Assets, the Offer will also include the terms on which the Partnership Group will provide services to the Tesoro Entity to enable the Tesoro Entity to utilize the Subject Assets.  As soon as practicable, but in any event within 60 days after receipt of the Offer, the General Partner shall notify the Tesoro Entity in writing that either (i) the General Partner has elected not to cause a Partnership Group Member to purchase the Subject Assets, in which event the Tesoro Entity shall be forever free to continue to own or operate such Subject Assets, or (ii) the General Partner has elected to cause a Partnership Group Member to purchase the Subject Assets, in which event the procedures outlined in the remainder of this Section 2.3 shall apply.  
(b)    If the Tesoro Entity and the General Partner are able to agree on the fair market value of the Subject Assets that are subject to the Offer and the other terms of the Offer including, without limitation, the terms, if any, on which the Partnership Group will provide services to the Tesoro Entity to enable the Tesoro Entity to utilize the Subject Assets, within 60 days after receipt by the General Partner of the Offer, a Partnership Group Member shall purchase the Subject Assets for the agreed upon fair market value as soon as commercially practicable after such agreement has been reached and, if applicable, enter into an agreement with the Tesoro Entity to provide services in a manner consistent with the Offer.  
(c)    If the Tesoro Entity and the General Partner are unable to agree on the fair market value of the Subject Assets that are subject to the Offer or the other terms of the Offer including, if applicable, the terms on which the Partnership Group will provide services to the Tesoro Entity to enable the Tesoro Entity to utilize the Subject Assets, within 60 days after receipt by the General Partner of the Offer, the Tesoro Entity and the General Partner will engage a mutually agreed upon, nationally recognized investment banking firm to determine the fair market value of the Subject Assets and any other terms on which the Partnership Group and the Tesoro Entity are unable to agree.  The investment banking firm will determine the fair market value of the Subject Assets and any other terms on which the Partnership Group and the 

Tesoro Entity are unable to agree within 30 days of its engagement and furnish the Tesoro Entity and the General Partner its determination.  The fees of the investment banking firm will be split equally between the Tesoro Entity and the Partnership Group.  Once the investment banking firm has submitted its determination of the fair market value of the Subject Assets and any other terms on which the Partnership Group and the Tesoro Entity are unable to agree, the General Partner will have the right, but not the obligation to cause a Partnership Group Member to purchase the Subject Assets pursuant to the Offer, as modified by the determination of the investment banking firm.  If the General Partner elects to cause a Partnership Group Member to purchase the Subject Assets, then the Partnership Group Member shall purchase the Subject Assets under the terms of the Offer, as modified by the determination of the investment banking firm as soon as commercially practicable after such determination and, if applicable, enter into an agreement with the Tesoro Entity to provide services in a manner consistent with the Offer, as modified by the determination of the investment banking firm.  
2.4    Scope of Prohibition.  Except as provided in this Article II and the Partnership Agreement, each Tesoro Entity shall be free to engage in any business activity, including those that may be in direct competition with any Partnership Group Member.  
2.5    Enforcement.  The Tesoro Entities agree and acknowledge that the Partnership Group does not have an adequate remedy at law for the breach by the Tesoro Entities of the covenants and agreements set forth in this Article II, and that any breach by the Tesoro Entities of the covenants and agreements set forth in this Article II would result in irreparable injury to the Partnership Group.  The Tesoro Entities further agree and acknowledge that any Partnership Group Member may, in addition to the other remedies which may be available to the Partnership Group, file a suit in equity to enjoin the Tesoro Entities from such breach, and consent to the issuance of injunctive relief under this Agreement.  
ARTICLE III
INDEMNIFICATION 
		
	3.1
	Environmental Indemnification.  

(a)    Subject to Section 3.2 and Section 3.7 and with respect to Assets conveyed, contributed or otherwise transferred pursuant to a Contribution Agreement, each of the Tesoro Entities set forth on Schedule VII attached to this Agreement with respect to that Contribution Agreement (the “Tesoro Indemnifying Parties”), severally and not jointly, shall indemnify, defend and hold harmless the Partnership Group from and against any Losses suffered or incurred by the Partnership Group, directly or indirectly, or as a result of any claim by a third party, by reason of or arising out of: 
(i)    any violation or correction of violation of Environmental Laws; 
(ii)    any event, condition or environmental matter associated with or arising from the ownership or operation of the Assets (including, without limitation, the presence of Hazardous Substances on, under, about or migrating to or from the Assets or the disposal or release of Hazardous Substances generated by operation of the Assets at non-Asset locations) including, without limitation, (A) the cost and expense of any investigation, assessment, 

evaluation, monitoring, containment, cleanup, repair, restoration, remediation, or other corrective action required or necessary under Environmental Laws, (B) the cost or expense of the preparation and implementation of any closure, remedial, corrective action, or other plans required or necessary under Environmental Laws, and (C) the cost and expense of any environmental or toxic tort pre-trial, trial, or appellate legal or litigation support work; 
(iii)    any event, condition or environmental matter or legal action pending as of the Closing Date against the Tesoro Entities, a true and correct summary of which with respect to Assets conveyed, contributed or otherwise transferred pursuant to a particular Contribution Agreement is described on Schedule I to this Agreement; and 
(iv)    any event, condition or environmental matter associated with or arising from the Retained Assets, whether occurring before or after the Closing Date; 
provided, however, that with respect to any violation under Section 3.1(a)(i) or any event, condition or environmental matter included under Section 3.1(a)(ii) that is associated with the ownership or operation of the Assets conveyed, contributed or otherwise transferred pursuant to a particular Contribution Agreement, the Tesoro Indemnifying Parties will be obligated to indemnify the Partnership Group only to the extent that such violation, event, condition or environmental matter (x) occurred before the Closing Date for that Contribution Agreement under then-applicable Environmental Laws and (y)(i) such violation, event, condition or environmental matter is set forth on Schedule II to this Agreement or (ii) Tesoro is notified in writing of such violation, event, condition or environmental matter prior to the applicable Identification Deadline (Sections 3.1(a)(i) through (iv) collectively, with respect to that Contribution Agreement being “Covered Environmental Losses”).  
(b)    The Partnership Group shall indemnify, defend and hold harmless the Tesoro Entities from and against any Losses suffered or incurred by the Tesoro Entities, directly or indirectly, or as a result of any claim by a third party, by reason of or arising out of: 
(i)    any violation or correction of violation of Environmental Laws associated with or arising from the ownership or operation of the Assets; and 
(ii)    any event, condition or environmental matter associated with or arising from the ownership or operation of the Assets (including, but not limited to, the presence of Hazardous Substances on, under, about or migrating to or from the Assets or the disposal or release of Hazardous Substances generated by operation of the Assets at non-Asset locations) including, without limitation, (A) the cost and expense of any investigation, assessment, evaluation, monitoring, containment, cleanup, repair, restoration, remediation, or other corrective action required or necessary under Environmental Laws, (B) the cost or expense of the preparation and implementation of any closure, remedial, corrective action, or other plans required or necessary under Environmental Laws, and (C) the cost and expense for any environmental or toxic tort pre-trial, trial, or appellate legal or litigation support work; 
and regardless of whether such violation under Section 3.1(b)(i) or such event, condition or environmental matter included under Section 3.1(b)(ii) occurred before or after the Closing Date, in each case, to the extent that any of the foregoing are not Covered Environmental Losses for 

which the Partnership Group is entitled to indemnification from the Tesoro Indemnifying Parties under this Article III without giving effect to the Annual Environmental Deductible.  
3.2    Right of Way Indemnification.  Subject to Section 3.7 and any applicable limitations set forth in Schedule VII with respect to Assets conveyed, contributed or otherwise transferred pursuant to a particular Contribution Agreement, and with respect to Assets conveyed, contributed or otherwise transferred pursuant to a particular Contribution Agreement, each of the Tesoro Indemnifying Parties, severally and not jointly, shall indemnify, defend and hold harmless the Partnership Group from and against any Losses suffered or incurred by the Partnership Group by reason of or arising out of (a) the failure of the applicable Partnership Group Member (or other party specified on Schedule VII) to be the owner of such valid and indefeasible easement rights or fee ownership or leasehold interests in and to the lands on which any crude oil or refined products pipeline or related pump station, wharf, storage tank, terminal, rail tracks or truck rack or any related facility or equipment conveyed or contributed to the applicable Partnership Group Member on the applicable Closing Date is located as of 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; (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; and (c) the cost of curing any condition set forth in clause (a) or (b) of this Section 3.2 that does not allow any Asset to be operated in accordance with Prudent Industry Practice, in each case to the extent that Tesoro is notified in writing of any of the foregoing prior to the Identification Deadline.  
3.3    Pipeline Control Center Services Indemnification and Related Matters.  With respect to the Assets contributed pursuant to the “Initial Contribution Agreement” set forth on Schedule VII, 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.  At any time before April 26, 2016, 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.  With respect to Assets conveyed, contributed or otherwise transferred pursuant to a particular Contribution Agreement, and if applicable, the General Partner shall indemnify, defend and hold harmless each of the Tesoro Entities set forth on Schedule VII attached to this Agreement with respect to that Contribution Agreement (the “Tesoro Indemnified Parties”) from and against any Losses suffered or incurred by the Tesoro Indemnified Parties by reason of or arising out of the transfer of the Represented Employees to the General Partner pursuant to Section 8.1 and the employment of the Represented Employees by the General Partner, including any Losses suffered or incurred resulting from actions taken, or liabilities incurred by the Tesoro Indemnified Parties with respect to the Represented Employees in connection with applicable collective bargaining agreements covering such Represented Employees.  
		
	3.5
	Additional Indemnification.

(a)    In addition to and not in limitation of the indemnification provided under Sections 3.1(a), 3.2, and 3.3 and with respect to a respective Contribution Agreement, each of the Tesoro Indemnifying Parties, severally and not jointly, shall indemnify, defend, and hold harmless the Partnership Group from and against any Losses suffered or incurred by the Partnership Group by reason of or arising out of (i) events and conditions associated with the ownership or operation of the Assets and occurring before the applicable Closing Date (other than Covered Environmental Losses, which are provided for under Sections 3.1, and those Losses provided for under Section 3.2) to the extent that Tesoro is notified in writing of any of the foregoing prior to the Third Deadline Date, (ii) any pending (as of the applicable Closing Date) legal actions against the Tesoro Entities set forth on Schedule III to this Agreement, (iii) events and conditions associated with the Retained Assets and whether occurring before or after the Closing Date, (iv) the failure to obtain any necessary consent from the Pipeline Rate Regulatory Agencies, if applicable, and (v) all federal, state and local income tax liabilities attributable to the ownership or operation of the Assets prior to the 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, 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 Losses for which the Indemnified Party is entitled to indemnification under this Agreement, the gross amount of the indemnification will be reduced by (i) any insurance proceeds realized by the Indemnified Party, and such correlative insurance benefit shall be net of any incremental insurance premium that becomes due and payable by the Indemnified Party as a result of such claim and (ii) all amounts recovered by the Indemnified Party under contractual indemnities from third Persons.  

		
	3.7
	Limitations Regarding Indemnification.      

(a)    The Tesoro Indemnifying Parties shall not, in any calendar year, be obligated to indemnify, defend and hold harmless the Partnership Group for a Covered Environmental Loss under Section 3.1(a)(ii) until such time as the aggregate amount of all Covered Environmental Losses in such calendar year exceeds the amount listed on Schedule VIII under “Annual Environmental Deductible” (the “Annual Environmental Deductible”), at which time the Tesoro Indemnifying Parties shall be obligated to indemnify the Partnership Group for the amount of Covered Environmental Losses under Section 3.1(a)(ii) that are in excess of the Annual Environmental Deductible that are incurred by the Partnership Group in such calendar year.  The Tesoro Indemnifying Parties shall not, in any calendar year, be obligated to indemnify, defend and hold harmless the Partnership Group for any individual Loss under Section 3.2 until such time as the aggregate amount of all Losses under Section 3.2 that are in such calendar year exceeds the amount listed on Schedule VIII under “Annual ROW Deductible” (the “Annual ROW Deductible”), at which time the Tesoro Indemnifying Parties shall be obligated to indemnify the Partnership Group for all Losses under Section 3.2  in excess of the Annual ROW Deductible that are incurred by the Partnership Group in such calendar year. 
(b)    With respect to Sections 3.1, 3.2 and 3.5(a), each of the Tesoro Indemnifying Parties shall only be required to indemnify the Partnership Group for Covered Environmental Losses under Section 3.1, Losses under Section 3.2 or Losses under Section 3.5(a) incurred in connection with or related to Assets conveyed, contributed or otherwise transferred to the Partnership Group by such Tesoro Indemnifying Party .  
(c)    For the avoidance of doubt, there is no monetary cap on the amount of indemnity coverage provided by any Indemnifying Party under this Article III.  
(d)    NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IN NO EVENT SHALL ANY PARTY’S INDEMNIFICATION OBLIGATION HEREUNDER COVER OR INCLUDE CONSEQUENTIAL, INDIRECT, INCIDENTAL, PUNITIVE, EXEMPLARY, SPECIAL OR SIMILAR DAMAGES OR LOST PROFITS SUFFERED BY ANY OTHER PARTY ENTITLED TO INDEMNIFICATION UNDER THIS AGREEMENT. 
		
	3.8
	The Parties agree to the special indemnification provisions set forth on Schedule IX. 

ARTICLE IV
CORPORATE SERVICES 
		
	4.1
	General.  

(a)    Tesoro agrees to provide, and agrees to cause its Affiliates to provide, on behalf of the General Partner, for the Partnership Group’s benefit all of 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 April 26 of each subsequent year, commencing on April 26, 2013, 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 the following; provided, however, that the costs and expenses described in subsections (i) through (vi) below shall not apply with respect to employees of the General Partner, Tesoro or its Affiliates that are providing the services listed on Schedule IV:
(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 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)    except as otherwise provided in Section 4.1(c)(vi) below, 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; 
(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);
(vi)    any severance or similar amounts (“Severance Amounts”) due to the President of the General Partner or the Vice President, Operations of the General Partner in the event of a Change of Control (or similar term, in each case as defined in the applicable management stability agreement) of Tesoro under the terms of their respective management stability agreements with Tesoro, provided that such reimbursement shall be based on the percentage of time spent by such employee on the business of the Partnership Group during the last completed payroll period immediately preceding the date of such Change of Control. Notwithstanding anything in this Agreement to the contrary, in no event will the Partnership Group reimburse Tesoro for, or otherwise in any way be responsible for, (A) any Severance Amounts due to any employee of the General Partner, Tesoro or its Affiliates (other than the President of the General Partner or the Vice President, Operations of the General Partner) in the event of a Change of Control (or similar term, in each case as defined in the applicable Employment Agreement) of Tesoro, or (B) any Tesoro stock-based compensation expense related to accelerated vesting of Tesoro equity awards.  For the purposes of this Section 4.1(c)(vi), the term “Employment Agreement” shall include any employment agreement, management stability agreement or similar agreement between Tesoro and any employee of the General Partner, Tesoro or its Affiliates; and
(vii)    any other expenses listed on Schedule IV and identified as applicable to this clause (vii).
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 either reimburse the Partnership or reimburse the General Partner and the General Partner will reimburse the Partnership, as applicable, on a dollar-for-dollar basis, without duplication, for each of the following: 
(a)    during the period commencing on April 26, 2011 and ending on the Second Deadline Date, expenses incurred by the Partnership Group solely in order to comply with vapor recovery or combustion and spill containment requirements associated with the Assets; 

(b)    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) 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 this clause (b) shall apply only to the Initial Contribution Agreement, the Amorco Contribution Agreement and the Long Beach Contribution Agreement, all listed on Schedule VII); and 
(c)    those certain capital and expense projects related to the Assets and described on Schedule VI to this Agreement.  
ARTICLE VI
RIGHT OF FIRST OFFER 
		
	6.1
	Right of First Offer to Purchase Certain Assets retained by Tesoro Entities.  

(a)    Each ROFO Asset Owner hereby grants to the Partnership Group a right of first offer until April 26, 2021 (the “ROFO Period”) on any ROFO Asset set forth next to such ROFO Asset Owner’s name on Schedule V to this Agreement to the extent that such ROFO 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 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 ROFO Asset Owner of the ROFO Response pursuant to Section 6.2(a); 

(v)    the applicable ROFO Asset Owner and Partnership Group Member shall use commercially reasonable efforts to do or cause to be done all things that may be reasonably necessary or advisable to effectuate the consummation of any transactions contemplated by this Section 6.2(b), including causing its respective Affiliates to execute, deliver and perform all documents, notices, amendments, certificates, instruments and consents required in connection therewith; and 
(vi)    neither the applicable ROFO Asset Owner nor the applicable Partnership Group Member shall have any obligation to sell or buy the applicable ROFO Asset if any of the consents referred to in Section 6.1(b)(v) has not been obtained.  
(c)    If the Partnership Group has not timely delivered a ROFO Response as specified above with respect to a Proposed Transaction that is subject to a ROFO Notice, the applicable ROFO Asset Owner shall be free to enter into a Proposed Transaction with any third party on terms and conditions no more favorable to such third party than those set forth in the ROFO Notice.  If a ROFO Response with respect to any Proposed Transaction is rejected by the applicable ROFO Asset Owner, such ROFO Asset Owner shall be free to enter into a Proposed Transaction with any third party (i) on terms and conditions (excluding those relating to price) that are not more favorable in the aggregate to such third party than those proposed in respect of the Partnership Group in the ROFO Response and (ii) at a price equal to no less than 100% of the price offered by the applicable Partnership Group Member in the ROFO Response to such ROFO Asset Owner.  
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.  
ARTICLE VIII
REPRESENTED EMPLOYEES; VEHICLE LEASES 
8.1    Transfer of Represented Employees.  The Parties acknowledge and agree that certain Tesoro Refining and Marketing employees then covered by collective bargaining agreements with Tesoro Refining and Marketing existing as of a Closing Date (the “Represented Employees”) have been or will be transferred to and shall become employees of the General Partner on or before the end of the fiscal year in which that Closing Date occurred.   The Parties agree to cooperate and shall take all action necessary to effectuate such transfer and shall comply with the terms of the applicable collective bargaining agreements with respect to the Represented Employees.  
8.2    Vehicle Leases.  The Parties acknowledge and agree that the members of the Partnership Group shall have the right to use any vehicles leased by the General Partner for use in the operation of the Partnership Group’s business.  
ARTICLE IX
MISCELLANEOUS 
9.1    Choice of Law; Submission to Jurisdiction.  This Agreement shall be subject to and governed by the laws of the State of Texas, excluding any conflicts-of-law rule or principle that might refer the construction or interpretation of this Agreement to the laws of another state.  Each Party hereby submits to the jurisdiction of the state and federal courts in the State of Texas and to venue in San Antonio, Texas.  
9.2    Notice.  All notices or requests or consents provided for by, or permitted to be given pursuant to, this Agreement must be in writing and must be given by depositing same in the United States mail, addressed to the Person to be notified, postpaid, and registered or certified with return receipt requested or by delivering such notice in person or by facsimile to such Party.  Notice given by personal delivery or mail shall be effective upon actual receipt.  Notice given by facsimile shall be effective upon actual receipt if received during the recipient’s normal business hours or at the beginning of the recipient’s next business day after receipt if not received during the recipient’s normal business hours.  All notices to be sent to a Party pursuant to this Agreement shall be sent to or made at the address set forth below or at such other address as such Party may stipulate to the other Parties in the manner provided in this Section 9.2.  
If to the Tesoro Entities: 

Tesoro Corporation
19100 Ridgewood Parkway
San Antonio, Texas 78259-1828
Attn: Charles S.  Parrish

Facsimile: (210) 745-4494 

If to the Partnership Group: 

Tesoro Logistics LP
c/o Tesoro Logistics GP, LLC, its General Partner
19100 Ridgewood Parkway
San Antonio, Texas 78259-1828
Attn: Charles S.  Parrish
Facsimile: (210) 745-4494 

9.3    Entire Agreement.  This Agreement together with the Schedules attached hereto (which are incorporated herein by reference) constitute the entire agreement of the Parties relating to the matters contained herein, superseding all prior contracts or agreements, whether oral or written, relating to the matters contained herein.  
9.4    Termination of Agreement.  This Agreement, other than the provisions set forth in Article III hereof, may be terminated by Tesoro or the Partnership upon a Partnership Change of Control.  For the avoidance of doubt, the Parties’ indemnification obligations under Article III shall survive the termination of this Agreement in accordance with their respective terms.  
9.5    Amendment or Modification.  This Agreement may be amended or modified from time to time only by the written agreement of all the Parties hereto.  Each such instrument shall be reduced to writing and shall be designated on its face an “Amendment” or an “Addendum” to this Agreement.  
9.6    Assignment.  No Party shall have the right to assign its rights or obligations under this Agreement without the consent of the other Parties hereto; provided, however, that the Partnership may make a collateral assignment of this Agreement solely to secure working capital financing for the Partnership.  
9.7    Counterparts.  This Agreement may be executed in any number of counterparts with the same effect as if all signatory parties had signed the same document.  All counterparts shall be construed together and shall constitute one and the same instrument.  Delivery of an executed signature page of this Agreement by facsimile transmission or in portable document format (.pdf) shall be effective as delivery of a manually executed counterpart hereof.  
9.8    Severability.  If any provision of this Agreement shall be held invalid or unenforceable by a court or regulatory body of competent jurisdiction, the remainder of this Agreement shall remain in full force and effect.  
9.9    Further Assurances.  In connection with this Agreement and all transactions contemplated by this Agreement, each signatory party hereto agrees to execute and deliver such additional documents and instruments and to perform such additional acts as may be necessary or appropriate to effectuate, carry out and perform all of the terms, provisions and conditions of this Agreement and all such transactions.  

9.10    Rights of Limited Partners.  The provisions of this Agreement are enforceable solely by the Parties to this Agreement, and no Limited Partner of the Partnership shall have the right, separate and apart from the Partnership, to enforce any provision of this Agreement or to compel any Party to this Agreement to comply with the terms of this Agreement.  
9.11    Amendment and Restatement.  This Agreement amends and restates the Original Agreement in its entirety and the Parties agree that the terms and provisions of this Agreement replace the terms and provisions of the Original Agreement, which is no longer in force, as of the date hereof.
9.12    Amendment of Schedules.  The Parties may amend and restate the Schedules at any time without otherwise amending or restating this Agreement by the execution by all of the Parties of a cover page to the amended Schedules in the form attached hereto as Exhibit A.  Such amended and restated Schedules shall replace the prior Schedules as of the date of execution of the cover page and shall be incorporated by reference into this Agreement for all purposes.

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

		
	By:  
	/s/ Daniel R. Romasko                        

Daniel R. Romasko
Executive Vice President, Operations 

TESORO REFINING AND MARKETING COMPANY

		
	By:  
	/s/ Daniel R. Romasko                        

Daniel R. Romasko
Executive Vice President, Operations

TESORO COMPANIES, INC.

		
	By:  
	/s/ Daniel R. Romasko                        

Daniel R. Romasko
Executive Vice President, Operations

TESORO ALASKA COMPANY

		
	By:  
	/s/ Daniel R. Romasko                        

Daniel R. Romasko
Executive Vice President, Operations

[Signature page to Second Amended and Restated Omnibus Agreement]

TESORO LOGISTICS LP

		
	By:   
	Tesoro Logistics GP, LLC,

its general partner 

		
	By:  
	/s/ Phillip M. Anderson                        

Phillip M. Anderson 
President 

TESORO LOGISTICS GP, LLC

		
	By:  
	/s/ Phillip M. Anderson                        

Phillip M. Anderson 
President 

[Signature page to Second Amended and Restated Omnibus Agreement]

EXHIBIT A
FORM OF COVER PAGE FOR 
AMENDMENT AND RESTATEMENT OF SCHEDULES 
TO SECOND AMENDED AND RESTATED OMNIBUS AGREEMENT

A Second Amended and Restated Omnibus Agreement was executed as of November __, 2012 (the “Second Amended and Restated Omnibus Agreement”), among Tesoro Corporation, on behalf of itself and the other Tesoro Entities, Tesoro Refining and Marketing Company, Tesoro Companies, Inc., Tesoro Alaska Company, Tesoro Logistics LP and Tesoro Logistics GP, LLC.  Capitalized terms not otherwise defined in this document shall have the terms set forth in the Second Amended and Restated Omnibus Agreement. 
The Parties agree that the Schedules are hereby amended and restated in their entirety as of the date hereof to be as attached hereto.  Pursuant to Section 9.12 of the Second Amended and Restated Omnibus Agreement, such amended and restated Schedules shall replace the prior Schedules as of the date hereof and shall be incorporated by reference into the Second Amended and Restated Omnibus Agreement for all purposes.
Executed as of _______________, 20___.
	
				
	 
	TESORO CORPORATION
	 

	 
	 
	 
	 

	 
	By:
	 
	 

	 
	Name:
	 
	 

	 
	Title:
	 
	 

	
				
	 
	TESORO REFINING AND MARKETING COMPANY

	 
	 
	 
	 

	 
	By:
	 
	 

	 
	Name:
	 
	 

	 
	Title:
	 
	 

	
				
	 
	TESORO COMPANIES, INC.
	 

	 
	 
	 
	 

	 
	By:
	 
	 

	 
	Name:
	 
	 

	 
	Title:
	 
	 

	
				
	 
	TESORO ALASKA COMPANY
	 

	 
	 
	 
	 

	 
	By:
	 
	 

	 
	Name:
	 
	 

	 
	Title:
	 
	 

[Signature page to Schedules to Second Amended and Restated Omnibus Agreement]

	
				
	 
	TESORO LOGISTICS LP
	 

	 
	 
	 
	 

	 
	By:
	Tesoro Logistics GP, LLC,
	 

	 
	 
	its general partner
	 

	 
	 
	 
	 

	 
	By:
	 
	 

	 
	Name:
	 
	 

	 
	Title:
	 
	 

	
				
	 
	TESORO LOGISTICS GP, LLC
	 

	 
	 
	 
	 

	 
	By:
	 
	 

	 
	Name:
	 
	 

	 
	Title:
	 
	 

 [Signature page to Schedules to Second Amended and Restated Omnibus Agreement]

Schedule I
Pending Environmental Litigation 

For Initial Contribution Agreement listed on Schedule VII:
None.  

For Amorco Contribution Agreement listed on Schedule VII:
None.

For Long Beach Contribution Agreement listed on Schedule VII:
The soil and groundwater on the southern central portion of the site near the 24 inch crude oil line have been impacted with hydrocarbons from a release from the line first observed in September 2011. The California Regional Water Quality Control Board issued an Investigative Order dated September 30, 2011 and to date all requirements of the order have been met.  Additional investigative or remedial activities may be required.

For Anacortes Rail Facility Contribution Agreement listed on Schedule VII:
None.

Schedule II
Environmental Matters 
For Initial Contribution Agreement set forth on Schedule VII:
1.  Anchorage #1 Terminal soil and groundwater have been impacted by gasoline and diesel releases from previously buried pipelines.  The site is considered characterized and is currently undergoing removal of product from the water table, groundwater treatment, and long-term monitoring.  
2.  Anchorage #2 Terminal soil and groundwater have been impacted by gasoline releases occurring prior to Tesoro’s purchase of the facility.  The site is considered characterized and is currently undergoing groundwater monitoring and treatment.  Off-site groundwater investigations are scheduled for 2012.  
3.  Stockton Terminal soil and groundwater have been impacted by gasoline and diesel releases from pipelines and/or product storage tanks.  The site is considered substantially characterized and is undergoing groundwater treatment and groundwater monitoring.  Off-site groundwater impacts are commingled with neighboring petroleum storage terminals.  
4.  Burley Terminal groundwater was impacted by gasoline releases occurring prior to Tesoro’s purchase of the facility.  Groundwater impacts were commingled with neighboring petroleum storage terminals.  Hydrocarbon concentrations in groundwater samples do not exceed previously established target levels for groundwater and surface water protection.  Regulatory closure is pending.  
5.  Wilmington Sales Terminal soil and groundwater have been impacted by gasoline releases occurring prior to Tesoro’s purchase of the facility.  Groundwater investigation and monitoring is on-going.  Tesoro is indemnified by the previous owner for Investigation and remediation obligations.  
6.  Salt Lake City Terminal soil and groundwater have been impacted by gasoline and diesel releases from pipelines and/or product storage tanks occurring prior to Tesoro’s purchase of the facility.  The site is considered characterized and is currently undergoing removal of product from the water table and long-term monitoring.  There are no known soil or groundwater impacts at the Northwest Crude Oil tank farm.  
7.  The Stockton Terminal emits volatile organic compounds (VOCs) below “major source” emission criteria.  In 2010, the San Joaquin Air Quality Management District announced it is reducing its major source threshold.  When the Stockton Terminal expands its operations or increases throughput, the potential to emit VOC will increase and the Stockton terminal will become subject to regulation as a major source.  This will require a Title V Air Operating Permit.  In addition, the Stockton facility will be required to install an automated continuous emission monitor at a cost of approximately $75,000.  

Schedule II
Environmental Matters  
(continued)
For Amorco Contribution Agreement set forth on Schedule VII:

 1.     The soil and groundwater on the site of the Tankage, as defined in the Amorco Contribution Agreement, have been impacted by methyl tertiary butyl ether releases from previously buried pipelines.  The site is considered characterized and is currently undergoing removal of methyl tertiary butyl ether from the water table, groundwater treatment, and long-term monitoring.  
2.     Any environmental violation or contamination due to SHPL, as defined in the Amorco Contribution Agreement, being underground prior to the Closing Date.

For Long Beach Contribution Agreement listed on Schedule VII:

 1.     Any environmental violation or contamination, as defined in the Long Beach Contribution Agreement, prior to the Closing Date. 
2.     Any anomalies in the Pipeline System that require repair as discovered by the first internal line inspection of any portion of the Pipeline System for which TRMC is notified in writing prior to the First Deadline Date.

For Anacortes Rail Facility Contribution Agreement listed on Schedule VII:
None.

Schedule III
Pending Litigation 
For Initial Contribution Agreement listed on Schedule VII:
None.  

For Amorco Contribution Agreement listed on Schedule VII:
None.

For Long Beach Contribution Agreement listed on Schedule VII:
None.

For Anacortes Rail Facility Contribution Agreement listed on Schedule VII:
None.

Schedule IV
Section 4.1(a): General and Administrative Services 
		
	(1)
	Executive management services of Tesoro employees who devote less than 50% of their business time to the business and affairs of the Partnership, including stock based compensation expense

		
	(2)
	Financial and administrative services (including, but not limited to, treasury and accounting)

		
	(3)
	Information technology services 

		
	(4)  
	Legal services

		
	(5)
	Health, safety and environmental services 

		
	(6) 
	Human resources services

		
	(7)
	Insurance coverage under Tesoro insurance policies

		
	(8) 
	For the Assets included in the Initial Contribution Agreement and the Amorco Contribution Agreement, Tesoro shall pay the costs for oil spill response services provided by the Marine Preservation Association related to obligations for oil spill prevention response.

Section 4.1(c)(vii): Other Reimbursable Expenses
For Initial Contribution Agreement listed on Schedule VII:
None.  

For Amorco Contribution Agreement listed on Schedule VII:
None.

For Long Beach Contribution Agreement listed on Schedule VII:
Upon the effectiveness of the BAUTA (as defined in the Long Beach Contribution Agreement) and only to the extent actually paid by TRMC, all oil spill response costs, including, but not limited to, any costs for oil spill response services provided by the Marine Preservation Association or the Marine Spill Response Corporation that Tesoro incurs related to the Assets included in the Long Beach Contribution Agreement.
For Anacortes Rail Facility Contribution Agreement listed on Schedule VII:
None.

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

	 
	 

	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

	 
	 

	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

	 
	 

	 
	 

	 
	 

	
		
	Asset
	Owner

	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

	 
	 

Schedule VI
Existing Capital and Expense Projects 

For Initial Contribution Agreement listed on Schedule VII:

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

2.     That certain project number 2010113058 at the Mandan refinery, to update additive equipment to allow the offering of Shell additized gasoline.  
3.     That certain project related to AFE # 107120005, which provides for ratio ethanol blending into gasoline on the rack at the Burley, Idaho Terminal by adding truck ethanol unloading capability, adding tankage for ethanol storage and installing new ethanol meters associated with each gasoline loading arm.  New ethanol truck unloading facilities will also be installed.  
4.     That certain project number 2007000263 at the Mandan refinery, to update the truck rack sprinkler system.  
5.     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.  
6.     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.  
7.     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.  
For Amorco Contribution Agreement listed on Schedule VII:
1.     That certain project related to AFE# 097100014 and AFE# 107100014 at the Amorco terminal, which provide repairs and upgrades to the wharf regarding MOTEMS standards.

2.     That certain project related to AFE# 112100001 at the Amorco terminal, which installs a jet mixer system for crude lab testing.

3.     All other major expense projects that are within the scope of open Work Orders as of the Effective Date.

Schedule VI
Existing Capital and Expense Projects 
(continued) 
For Long Beach Contribution Agreement listed on Schedule VII:

1.      That certain project related to AFE# 072104079 titled “UG Piping – LBT” related to underground pipeline repairs at the Terminal. In addition, any subsequent new projects to address the same specific under-ground piping issues per AFE# 072104079 (i.e. a second phase UG Piping project) that would occur on or before the end of year 2015.

2     That certain project related to the TCM# 2009002129 titled “LBT, B84A & 86 Loading Arm Replacements” which repairs or replaces the loading arms at the Terminal and any related AFE project that will occur upon final project approval to substantial repair or replace the loading arms at the Terminal. 

3.     Any remaining costs of those certain projects related to the leak detection on the Terminal and Terminal Pipelines which are substantially complete and include AFE# 107110002, AFE# 117110001, AFE# 117110003, AFE# 117110002, and AFE# 125120002.
4.     Any cost that may be incurred to adjust diesel fuel tank vents near light fixtures after a review is conducted and if action is deemed necessary.
5.     Costs related to substantial repair or replacement project scheduled for 2012 and 2013 for the pipeline segments in the portion of the Southern California Edison right-of-way area immediately adjacent to the marine terminal to address corrosion. 

For Anacortes Rail Facility Contribution Agreement listed on Schedule VII: 

1.      Any capital costs or expenses that may be incurred for the installation of a custody transfer meter.
2.     Any remaining costs and commitments related to AFE #11210041 for the Anacortes Rail Facility.

Schedule VII
Contribution Agreements and Applicable Terms
Initial Contribution Agreement
	
							
	Contribution Agreement
	Closing Date
	First Deadline Date
	Second Deadline Date
	Tesoro Indemnifying Parties
	Tesoro Indemnified Parties
	Third Deadline Date

	Contribution, Conveyance and Assumption Agreement, dated as April 26, 2011, among the Partnership, the General Partner, Tesoro Logistics Operations LLC, Tesoro, Tesoro Alaska, Tesoro Refining and Marketing, and Tesoro High Plains Pipeline Company LLC
	April 26, 2011
	April 26, 2013
	April 26, 2016
	Tesoro Refining and Marketing and Tesoro Alaska
	Tesoro Refining and Marketing
	April 26, 2021

Schedule VII
Contribution Agreements and Applicable Terms 
(continued)
Amorco Contribution Agreement

	
							
	Contribution Agreement
	Closing Date
	First Deadline Date
	Second Deadline Date
	Tesoro Indemnifying Parties
	Tesoro Indemnified Parties
	Third Deadline Date

	Contribution, Conveyance and Assumption Agreement dated as of April 1, 2012, among the Partnership, the General Partner, Tesoro Logistics Operations LLC, Tesoro and Tesoro Refining and Marketing
	April 1, 2012
	April 1, 2014
	April 1, 2017
	Tesoro Refining and Marketing
	Tesoro Refining and Marketing
	April 1, 2022

Schedule VII
Contribution Agreements and Applicable Terms 
(continued)
Long Beach Contribution Agreement
	
							
	Contribution Agreement
	Closing Date
	First Deadline Date
	Second Deadline Date
	Tesoro Indemnifying Parties
	Tesoro Indemnified Parties
	Third Deadline Date

	Contribution, Conveyance and Assumption Agreement executed as of September 14, 2012, among the Partnership, the General Partner, Tesoro Logistics Operations LLC, Tesoro and Tesoro Refining and Marketing
	Execution Date is September 14, 2012, and various Effective Times are upon receipt of the Long Beach Approval, the CDFG Approval and the Other Approvals as set forth in the agreement, as applicable
	September 14, 2014
	September 14, 2017
	Tesoro Refining and Marketing
	Tesoro Refining and Marketing
	September 14, 2022

Schedule VII
Contribution Agreements and Applicable Terms 
(continued)
Anacortes Rail Facility Contribution Agreement
	
							
	Contribution Agreement
	Closing Date
	First Deadline Date
	Second Deadline Date
	Tesoro Indemnifying Parties
	Tesoro Indemnified Parties
	Third Deadline Date

	Contribution, Conveyance and Assumption Agreement executed as of November __, 2012, among the Partnership, the General Partner, Tesoro Logistics Operations LLC, Tesoro and Tesoro Refining and Marketing
	November 15, 2012
	November 15, 2014
	November 15, 2017
	Tesoro Refining and Marketing
	Tesoro Refining and Marketing
	November 15, 2022

Schedule VIII
Indemnification Deductibles

Annual Environmental Deductible 
$600,000

Annual ROW Deductible 
$600,000

Schedule IX
Special Indemnification Provisions
For Initial Contribution Agreement listed on Schedule VII:
None.  

For Amorco Contribution Agreement listed on Schedule VII:

Addition to Right of Way Indemnification.  As of the Closing Date for the Amorco Contribution Agreement, Tesoro Refining and Marketing shall own the leasehold rights in the “Wharf Lease” issued by the California State Lands Commission and the easements, rights of way and permits for the “SHPL,” all as defined in the Amorco Contribution Agreement, and the Partnership Group shall provide operational, maintenance and management services with respect to such Assets pursuant to the MTUTA.  Title to Wharf Lease rights and the SHPL are scheduled to be contributed to the Partnership Group at a later date, as set forth in the Amorco Contribution Agreement.  The Right of Way Indemnification set forth in Section 3.2 herein applies to the extent that a Loss arises with respect to a Partnership Group Member's interests under the MTUTA before title to such Assets is contributed to the Partnership Group Member or with respect to a Partnership Group Member's failure to become the owner of such valid and indefeasible easement rights or fee ownership or leasehold interests in such Assets after they are finally contributed to the Partnership Group as contemplated in the Amorco Contribution Agreement.  The Closing Date provided for in this Agreement shall be as set forth above, without regard to when title to these Assets is finally contributed to a Partnership Group Member. 
For Long Beach Contribution Agreement listed on Schedule VII:

Addition to Right of Way Indemnification.  As of the Closing Date for the Long Beach Contribution Agreement, Tesoro Refining and Marketing shall own the leasehold rights in the “Terminal Lease” issued by the Port of Long Beach and the easements, rights of way and permits for the “Terminal Pipelines,” all as defined in the Long Beach Contribution Agreement, and the Partnership Group shall provide operational, maintenance and management services with respect to such Assets pursuant to the Long Beach Operating Agreement, as defined in the Long Beach Contribution Agreement.  Title to Terminal Lease rights and the Terminal Pipelines are scheduled to be contributed to the Partnership Group at a later date, as set forth in the Long Beach Contribution Agreement.  The Right of Way Indemnification set forth in Section 3.2 herein applies to the extent that a Loss arises with respect to a Partnership Group Member's interests under the BAUTA before title to such Assets is contributed to the Partnership Group Member or with respect to a Partnership Group Member's failure to become the owner of such valid and indefeasible easement rights or fee ownership or leasehold interests in such Assets after they are finally contributed to the Partnership Group as contemplated in the Long Beach Contribution Agreement.  The Closing Date provided for in this Agreement shall be as set forth above, without regard to when title to these Assets is finally contributed to a Partnership Group Member. 

Schedule IX
Special Indemnification Provisions 
(continued)

For Anacortes Rail Facility Contribution Agreement listed on Schedule VII:

Other. Notwithstanding any other provisions of (i) this Second Amended and Restated Omnibus Agreement, (ii) the Anacortes Track Use and Throughput Agreement among the General Partner, the Partnership, Tesoro Logistics LP (the “Operating Company”) and Tesoro Refining and Marketing, (iii) the Anacortes Mutual Track Use Agreement among the General Partner, the Partnership, the Operating Company and Tesoro Refining and Marketing, and (iv) the Ground Lease between Tesoro Refining and Marketing and the Operating Company, all dated as of November 15, 2012, the parties hereto agree that the indemnification provisions of any of those agreements shall control over any of the other agreements to the extent the subject matter of the indemnification is specifically referenced or provided for in that agreement.  For the avoidance of doubt, the indemnification provisions of this Second Amended and Restated Omnibus Agreement shall be subordinate to the respective indemnification provisions of each of the other agreements referenced above.TSO EX. 10.3 11-15-2012

Exhibit 10.3

ANACORTES TRACK USE 
AND THROUGHPUT AGREEMENT
This ANACORTES TRACK USE AND THROUGHPUT AGREEMENT (this “Agreement”) is dated effective as of the Commencement Date (as defined below in Section 3), by and between Tesoro Logistics Operations LLC, a Delaware limited liability company (“TLO”), and for purposes of  Section 23 only, Tesoro Logistics GP, LLC, a Delaware limited liability company (“General Partner”) and Tesoro Logistics LP, a Delaware limited partnership (“Partnership”), on the one hand, and Tesoro Refining and Marketing Company, a Delaware corporation (“TRMC”), on the other hand. 
RECITALS
WHEREAS, TRMC owns a crude oil refinery located in Anacortes, Skagit County, Washington (the "Anacortes Refinery");
WHEREAS, TRMC sources its crude oil supply for the Anacortes Refinery from various suppliers and transports such supply through various modes of transportation, including marine vessel, pipeline, truck, and railcar; 
WHEREAS, TLO owns and operates a four-track rail unloading facility adjacent to the Anacortes Refinery, which includes (i) two receiving and two departing tracks capable of handling 100-railcar unit trains (collectively, “unit trains, and each individually, a “unit train”) and manifest railcars (as defined below); (ii) two short track spurs for storage and repair of railcars; (iii) pumps, piping and other ancillary equipment to allow for the direct offloading of crude oil (and other crude petroleum products, as agreed between the parties on a case-by-case basis) into TRMC’s pipelines connecting its storage facilities at the Anacortes Refinery; (iv) one flat bed pick up truck; and (v) gates and fencing surrounding the unloading facility (collectively, and as more specifically depicted on Schedule I attached hereto, the “Anacortes Rail Unloading Facility”);
WHEREAS, TRMC desires and has requested that TLO (i) use the Anacortes Rail Unloading Facility for the delivery of TRMC’s crude oil by unit train to the Anacortes Refinery, (ii) receive, switch, connect and disconnect, store and provide minor repairs to TRMC’s railcars, (iii) offload and throughput TRMC’s crude oil from TRMC’s unit trains into storage at the Anacortes Refinery, (iv) reassemble and return the unit trains to the location indicated by TRMC; and (v) provide TRMC with certain ancillary services with respect to the immediately foregoing, all subject to and upon the terms and conditions of this Agreement; and 
WHEREAS, TRMC and TLO desire to enter this Agreement to memorialize the terms of their commercial relationship.
NOW, THEREFORE, in consideration of the covenants and obligations contained herein, the Parties (as defined below) to this Agreement hereby agree as follows:
SECTION 1DEFINITIONS
Capitalized terms used throughout this Agreement shall have the meanings set forth below, unless otherwise specifically defined herein.
“Agreement” has the meaning set forth in the Preamble.
“Anacortes Rail Unloading Facility” has the meaning set forth in the Recitals.

“Anacortes Refinery” has the meaning set forth in the Recitals.
“API” means the American Petroleum Institute.
“Applicable Law” means any applicable statute, law, regulation, ordinance, rule, determination, judgment, rule of law, order, decree, permit, approval, concession, grant, franchise, license, requirement, or any similar form of decision of, or any provision or condition of any permit, license or other operating authorization issued by any Governmental Authority having or asserting jurisdiction over the matter or matters in question, whether now or hereafter in effect.
“ASTM” means the American Society for Testing and Materials.
“Barrel” means a volume equal to 42 U.S. gallons or 231 cubic inches, each at 60 degrees Fahrenheit under one atmosphere of pressure, net of basic sediment and water.
“BNSF” means the BNSF Railway Company.
“BNSF Agreements” means that certain (i) Locomotive and Telemetry Device Use and Liability Agreement by and between BNSF and TLO dated September 1, 2012 (“LULA”), as wholly assigned to TLO on the date hereof, and (ii) BNSF Railway Company Industry Track Agreement by and between BNSF and TLO dated August 31, 2012 (“ITA”), as partially assigned to TLO on the date hereof.
“Business Day” means a day, other than a Saturday or Sunday, on which banks in New York, New York are open for the general transaction of business.
“Commencement Date” has the meaning set forth in Section 3.
“Confidential Information” means all confidential, proprietary or non-public information of a Party, whether set forth in writing, orally or in any other manner, including all non-public information and material of such Party (and of companies with which such Party has entered into confidentiality agreements) that another Party obtains knowledge of or access to, including non-public information regarding products, processes, business strategies and plans, customer lists, research and development programs, computer programs, hardware configuration information, technical drawings, algorithms, know-how, formulas, processes, ideas, inventions (whether patentable or not), trade secrets, schematics and other technical, business, marketing and product development plans, revenues, expenses, earnings projections, forecasts, strategies, and other non-public business, technological, and financial information.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract, or otherwise.
“CPI-U” ” means Consumer Price Index for all Urban Consumers, Not Seasonally Adjusted, U.S. City Average, for All Items (Series ID CUUR0000SA0, CUUS0000SA0) as published by the Bureau of Labor Statistics of the United States Department of Labor.
“Crude Oil” means crude petroleum, synthetic crude oil, topped crude oil, condensate, and all associated blends thereof.
“Deemed Credit Amount” has the meaning set forth in Section 5(c).

2

“Environmental Liabilities” means all obligations, responsibilities, liabilities, costs and expenses caused by, arising from, incurred in connection with, relating in any way to or otherwise required or incurred to achieve or maintain compliance with, Health, Safety and Environmental Laws, as the same are in effect from time to time, including (A) fines and penalties or other criminal sanctions arising by reason of violations of Health, Safety and Environmental Laws; (B) any responsibility for any litigation, threatened litigation or claims arising under or by reason of actual or alleged violations of Health, Safety and Environmental Laws; (C) third party bodily injury or wrongful death claims arising under or by reason of actual or alleged violations of Health, Safety and Environmental Laws; (D) liabilities and obligations with respect to third party property damage claims relating to, arising under, or by reason of actual or alleged violations of Health, Safety and Environmental Laws; and (E) any and all obligations, responsibilities, liabilities, costs and expenses caused by, arising from, incurred in connection with or relating in any way to clean-up, restoration or remediation of any property under Health, Safety and Environmental Laws;  
“Excess Throughput Volume Fee” has the meaning set forth in Section 5(a)(ii).
“Extension Period” has the meaning set forth in Section 4.
“Force Majeure” means circumstances not reasonably within the control of TLO and which, by the exercise of due diligence, TLO is unable to prevent or overcome that prevent performance of TLO’s obligations, including: acts of God, strikes, lockouts or other industrial disturbances, wars, riots, fires, floods, storms, orders of courts or Governmental Authorities, explosions, terrorist acts, breakage, accident to machinery, storage tanks or lines of pipe and inability to obtain or unavoidable delays in obtaining material or equipment and similar events. A Party’s inability economically to perform its obligations hereunder does not constitute an event of Force Majeure. 
“Force Majeure Notice” has the meaning set forth in Section 21(a).
“Force Majeure Period” has the meaning set forth in Section 21(a).
“General Partner” has the meaning set forth in the Preamble.
“Governmental Authority” means any federal, state, local or foreign government or any provincial, departmental or other political subdivision thereof, or any entity, body, port authority, federal or state railroad administration or commission or other authority exercising executive, legislative, judicial, regulatory, administrative or other governmental functions or any court, department, commission, board, bureau, agency, instrumentality or administrative body of any of the foregoing.
“Health, Safety and Environmental Laws” means any and all past or present local, state, and federal laws, principles of common law, statutes, ordinances, regulations, rules, orders, permits, standards, or requirements (including consent decrees, judicial decisions, judgments, injunctions and administrative orders issued or approved thereunder), together with all related amendments and implementing regulations and all common law, pertaining to or regulating pollution, environmental protection, health and safety of persons, pipeline safety, natural resource damages, conservation of resources, wildlife, waste management, the use, storage, generation, production, treatment, emission, discharge, remediation, removal, disposal or transport or any other activity related to a toxic or hazardous substance, waste or material (including crude petroleum and its fractions or derivatives thereof), or any other environmental matter, including without limitation:  the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), 42 U.S.C. Section 9601 et. seq.; the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901 et. seq.; the Toxic Substances

3

Control Act, as amended, 15 U.S.C. Section 2601 et. seq.; the Clean Air Act, as amended, 42 U.S.C. Section 7401 et. seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251 et. seq.; the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. Section 3009(f) et. seq.; the Emergency Planning and Community Right-to-Know Act of 1986, as amended, 42 U.S.C. Section 11001 et seq.; the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. Section 651 et. seq.; and the Hazardous Liquid Pipeline Safety Act, as amended, 49 U.S.C. Section 60101 et. seq.
“manifest railcar” has the meaning set forth in Section 6.
“Minimum Throughput Volume” means an aggregate volume of 1,216,667 Barrels of Products per Month offloaded and throughput at the Anacortes Rail Unloading Facility (40,000 Barrels per day multiplied by 365 days divided by 12), provided, however, that the Minimum Throughput Volume during the Month in which the Commencement Date occurs shall be prorated in accordance with the ratio of the number of days, including and following the Commencement Date, in such Month to the total number of days in such Month.
“Month” means a calendar month, except that the first Month under this Agreement shall begin on the Commencement Date and end on the last day of that calendar month.
“MTVF” has the meaning set forth in Section 5(a)(i).
“Off-Spec Product” means Product that fails to meet TLO’s minimum specifications.
“Omnibus Agreement” means that certain Second Amended and Restated Omnibus Agreement dated as of November 15, 2012, as amended from time to time, by and among Tesoro Corporation, Tesoro Companies, Inc., TRMC, Tesoro Alaska Company, the General Partner, the Partnership and TLO.
“Partnership” has the meaning set forth in the Preamble. 
“Partnership Change of Control” means Tesoro Corporation ceases to Control the General Partner.
“Party” or “Parties” means that each of TLO and TRMC is a “Party” and collectively are the “Parties” to this Agreement. 
“Person” means any individual, partnership, limited partnership, joint venture, corporation, limited liability company, limited liability partnership, trust, unincorporated organization or Governmental Authority or any department or agency thereof. 
“Product” or “Products” means Crude Oil and such other refined petroleum products as are mutually agreed upon by the Parties.
“Purchase First Offer Period” has the meaning set forth in Section 23(e).
“Purchase Right of First Refusal” has the meaning set forth in Section 23(e).
“railcar” means a unit train railcar and/or a manifest railcar, as the particular context or situation requires.
“Receiving Party Personnel” has the meaning set forth in Section 27(d).

4

“Services” has the meaning set forth in Section 13(a).
“Shortfall Credit” has the meaning set forth in Section 9(a).
“Term” and “Initial Term” each have the meaning set forth in Section 4.
“Termination Notice” has the meaning set forth in Section 21(b).
“TLO” has the meaning set forth in the Preamble.
“TLO Indemnitee” and “TLO Indemnitees” have the meaning set forth in Section 19(b).
“TRMC” has the meaning set forth in the Preamble.
“TRMC Indemnitee” and “TRMC Indemnitees” have the meaning set forth in Section 19(a).
“TTA First Offer Period” has the meaning set forth in Section 22(e).
“TTA Right of First Refusal” has the meaning set forth in Section 22(e).
“unit train” has the meaning set forth in the Recitals.
“Waste” means any spent or remnant commercial chemical products, previously of beneficial use, or other inherently waste-like material; provided, however, that any residual Product that retains, in the judgment of the Parties, a beneficial use, including recycling, oil recovery and re-refining, is not Waste unless it is designated for disposal.
		
	SECTION 2
	GENERAL UNDERTAKINGS 

Subject to the terms and conditions of this Agreement, the BNSF Agreements, TLO’s operating permits, the limitations of the Anacortes Rail Unloading Facility and all Applicable Law, TLO shall use the Anacortes Rail Unloading Facility to provide Services for TRMC’s nominated unit trains for the unloading of Products to be delivered to the Anacortes Rail Unloading Facility by TRMC, and each Month during the Term, TRMC shall nominate and deliver for offload and throughput at the Anacortes Rail Unloading Facility the Minimum Throughput Volume, subject to reduction as set forth herein.
		
	SECTION 3
	COMMENCEMENT DATE

The “Commencement Date” will be November 15, 2012. 

		
	SECTION 4
	TERM

Commencing on the Commencement Date, the initial term of this Agreement shall be for a period of ten (10) years until the anniversary of the Commencement Date in 2022 (the “Initial Term”), provided, however, that TRMC may, at its sole option, extend the Initial Term for up to two (2) renewal terms of five (5) years each (each, an “Extension Period”) by providing written notice of its intent to TLO no less than ninety (90) days prior to the end of the Initial Term or the then-current Extension Period. The Initial Term and any extensions of this Agreement as provided above, shall be referred to herein as the “Term”.    

5

		
	SECTION 5
	OFFLOAD AND THROUGHPUT FEES

(a)    Offload and Throughput Fees.  TRMC agrees to pay to TLO the following fees for all Barrels of Product offloaded and throughput at Anacortes Rail Unloading Facility:
(i)    A Minimum Throughput Volume Fee (the “MTVF”) of $1,861,501 per Month (which is $1.53/Barrel multiplied by the Minimum Throughput Volume), subject to escalation as provided in Section 8 below; plus
(ii)    a $0.75 per Barrel offloading and throughput fee for Product volumes in excess of the Minimum Throughput Volume (“Excess Throughput Volume Fee”), subject to escalation as provided in Section 8 below.

(b)       MTVF Relief.  During any Month that the Anacortes Rail Unloading Facility is unavailable to receive any of TRMC’s unit trains on a day in which such unit train is scheduled to have access to the Anacortes Rail Unloading Facility, for any reason other than TRMC’s actions, including without limitation, TLO’s actions, Force Majeure, and the actions of a Governmental Authority, and such unavailability prevents TRMC from offloading and throughputting, then the Minimum Throughput Volume and the MTVF for such Month will be reduced in proportion to the number of days in such Month when TRMC’s unit trains were prevented from having access to the Anacortes Rail Unloading Facility as a result of the Anacortes Rail Unloading Facility being unavailable, divided by the total days in such Month; provided, however, that the foregoing reduction to the Minimum Throughput Volume and MTVF shall not exceed the actual reduction in volume of, and offload and throughput fees charged for, such Product handled by TLO.
(c)    Offset for Deemed Credit Amount.  During any Month where (i) TRMC does not schedule any railcars for the use of, or otherwise fails to offload and throughput Product at, the Anacortes Rail Unloading Facility, and/or (ii) TRMC has temporarily or permanently suspended operations at the Anacortes Refinery, such that in either or both cases, the number of railcars to be offloaded and throughput during such Month would be zero (0), then TRMC shall be credited $70,000 per month (the “Deemed Credit Amount”), and the Deemed Credit Amount shall be offset against the MTVF for such Month.
		
	SECTION 6
	MANIFEST RAILCARS

During any Month under the Term of this Agreement, TRMC may request that the Services include receipt of manifest railcars, in addition to, or in lieu of, unit train railcars nominated by TRMC for offload and throughput at the Anacortes Rail Unloading Facility; provided that all nominations made by TRMC are made in accordance with Annex B, including without limitation, providing sufficient advance notice.  For purposes of this Agreement, a “manifest railcar” means any single unit railcar in a shipment of Product to the Anacortes Rail Unloading Facility for which BNSF would owe payment to TLO under Section 1.3 of the ITA.  Upon receipt of such request, TLO may consent, such consent not to be unreasonably withheld, to accept such manifest railcars proposal by TRMC.  TLO shall not be required to consent to any requests that would require Services to be performed that are not authorized under existing agreements with BNSF or other third party contractors, provided that TLO shall make commercially reasonable efforts to negotiate suitable arrangements with such contractors to authorize such Services.  TLO shall also not be required to consent to any proposal that would require new, expanded or modified facilities and equipment.  Fees for any and all Product volumes received at the Anacortes Rail Unloading Facility via manifest railcars shall be at the same per barrel rate specified in Section 5(a)(i) above for the Minimum Throughput Volume (as escalated from time to time pursuant to Section 8), plus any applicable 

6

surcharge to reimburse TLO for any incremental costs or expenses incurred by TLO in connection with the offload and throughput of such manifest railcars and volumes.  Any and all Product volumes received during a Month at the Anacortes Rail Unloading Facility via manifest railcars shall be credited against TRMC’s Minimum Throughput Volume for such Month.  

		
	SECTION 7
	SURCHARGES, REIMBURSEMENTS AND PASS THROUGH COSTS

(a)    TRMC shall reimburse TLO for, or TLO shall be permitted to charge TRMC an additional per Barrel surcharge for any and all of the following: 
(i)    The actual cost of any capital expenditures that TLO agrees to make upon TRMC’s written request; 
(ii)    The costs that TLO incurs in complying with any new Applicable Laws that affect the Anacortes Rail Unloading Facility or services provided by TLO to TRMC hereunder; provided, that (A) compliance by TLO with any such new law or regulation requires substantial unanticipated capital expenditures by TLO, (B) TLO has made good faith efforts to mitigate the effect of any such law or regulation and (C) TLO has negotiated in good faith with TRMC in order to agree on the level of any such surcharge;
(iii)    All taxes (other than ad valorem taxes, property taxes, income taxes, gross receipt taxes, payroll taxes and similar taxes) that TLO specifically incurs on TRMC’s behalf for the services TLO provides to TRMC hereunder, if such reimbursement is not prohibited by law; 
(iv)    Subject to Sections 14(d) and 18(b), any demurrage assessed by BNSF or under Applicable Law and paid directly by TLO; 
(v)    All costs incurred in connection with (1) any laboratory tests or specific railcar sampling requested by TRMC under Section 10, and (2) the detention and storage of railcars, pursuant to Section 13 (d); 
(vi)    The actual cost of any surcharges incurred by TLO in connection with the offload of and throughput from manifest railcars pursuant to Section 6 above; and
(vii)    All incremental costs or surcharges incurred by TLO from third party contractors in connection with the unloading of and throughput from any unit train that is not comprised of the full complement of one (100) hundred railcars; provided that such incremental costs or surcharges may only be assessed when, in a given Month, TRMC nominates (A) three or more unit trains with less than ninety (90) railcars in each such unit train, or (B) one or more unit trains with less than eighty (80) railcars in each such unit train.
(b)    If TRMC objects to the level of any surcharge under items (i) through (iii) above, then TLO shall impose a surcharge for those expenditures as it deems, in its sole discretion, to be mandatory. The period of time over which such charges are recovered shall be determined by TLO in light of the remaining period in the Term of this Agreement and the projected future deliveries of Product to the Anacortes Rail Unloading Facility.   In such case, if TLO determines that all or some costs to which TRMC has objected could be reduced or mitigated by changes in operation of the Anacortes Rail Unloading Facility, including taking a portion of the Anacortes Rail Unloading Facility out of service, reducing the capacity of the Anacortes Rail Unloading Facility, or restricting use of the Anacortes Rail Unloading Facility, then TRMC may request that TLO do so, rather than imposing a surcharge to 

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maintain service at a particular level, and in that event, TLO shall make reasonable efforts to accommodate such request; provided that TLO shall not be required to take any actions that it believes in good faith might result in a violation of any operating requirement and such reduction in capacity shall not be a Force Majeure event or other basis for any reduction in TRMC’s Minimum Throughput Volume or for a reduction in any fees except surcharges avoided by such reduction in capacity.
		
	SECTION 8
	ADJUSTMENTS – FEES AND COSTS

Starting July 1, 2013, all fees in Section 5(a) and the Deemed Credit Amount in Section 5(c) above shall automatically be increased on the first day of July for each year of the Term, by a percentage equal to the greater of zero or the positive change in the CPI-U for the prior calendar year, rounded to the nearest one-tenth of one percent.    
		
	SECTION 9
	PAYMENTS

(a)    Monthly Shortfall Credit.  If, during any Month, the actual volume of Barrels offloaded and throughput by TRMC are less than the Minimum Throughput Volume, then TRMC shall nevertheless pay to TLO the MTVF. Upon Payment of the MTVF, TRMC shall receive a “Shortfall Credit” calculated as the difference between the Minimum Throughput Volume less the actual total volumes received during such month, multiplied by the sum of the MTVF, on a per Barrel basis.  

(b)     Monthly Reconciliation. Actual volumes of Barrels offloaded and throughput at the Anacortes Rail Unloading Facility are to be determined Monthly, based upon receipts during the Month (as measured by custody transfer meter) and credited towards the Minimum Throughput Volume in such Month; provided, however, that during the start-up period of the Anacortes Rail Unloading Facility and until custody transfer metering becomes fully operational, TLO will utilize TRMC’s loading ticket receipts to measure throughput and TLO will reconcile to actual railcars received at the Anacortes Rail Unloading Facility during that Month. The Shortfall Credit shall be credited as follows: 

 (i)    the dollar amount of any Shortfall Credit included in the Monthly invoice will be posted as a credit to TRMC’s account and may be applied against amounts owed by TRMC for throughput volumes in excess of the Minimum Throughput Volume during any of the succeeding three (3) Months; and

 (ii)     any portion of the Shortfall Credit that is not used by TRMC during the succeeding three (3) Months will expire at the end of said three (3) Month period relating to the respective credit and be reset to zero.

(c)    Fees & Costs Calculation. At the end of each Month, TLO will calculate the total fees and costs that TRMC incurred for offloading and throughput of Barrels at the Anacortes Rail Unloading Facility during such Month, as follows:

(i)    the MTVF; plus

(ii)     the Excess Throughput Volume Fees attributable to such Month; less

(iii)    any applicable Shortfall Credits to TRMC, but not to exceed the Excess Throughput Volume Fees for such Month; less

(iv)    the Deemed Credit Amount, if applicable; plus

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(v)    any surcharges, reimbursements or pass-through costs for such Month pursuant to Section 7.

(d)    Invoices.  TLO will invoice TRMC Monthly, providing its calculations of all applicable items set forth above.  All amounts set forth above shall be due and payable no later than ten (10) days after TRMC’s receipt of TLO’s invoice.  The invoiced amount shall be for the items described above and other charges during the prior Month.  Any past due payments owed by either Party shall accrue interest, payable on demand, at the lesser of (i) the rate of interest announced publicly by JPMorgan Chase Bank, in New York, New York, as JPMorgan Chase Bank’s prime rate (which Parties acknowledge and agree is announced by such bank and used by the Parties for reference purposes only and may not represent the lowest or best rate available to any of the customers of such bank or the Parties), plus four percent (4%), and (ii) the highest rate of interest (if any) permitted by Applicable Law, from the due date of the payment through the actual date of payment.

(e)    Disputed Amounts.  If TRMC reasonably disputes any amount invoiced by TLO, TRMC shall pay the amount of the invoice when due and provide TLO with written notice stating the nature of the dispute prior to ninety (90) days after the due date of the invoice.  TRMC and TLO shall use reasonable commercial diligence to resolve disputes in good faith and in a timely manner.  All portions of the disputed amount determined to be owed TRMC shall be refunded to the TRMC within ten (10) days of the dispute resolution.   

		
	SECTION 10
	PRODUCT SPECIFICATIONS

		
	(a)
	Product Quality.

(i)    Product Testing/Quality Analysis.  Upon request and at the sole expense of TRMC (such expense to be negotiated at the time of such request and to include applicable labor and fees), TLO shall provide TRMC a laboratory report for each Product delivery by TRMC or TRMC’s supplier.  TLO will not be obligated to receive Off-Spec Product for offload and throughput at the Anacortes Rail Unloading Facility, nor will TLO be obligated to accept Product that fails to meet the quality specifications set forth in any arrival notice.  Further, TLO will not perform any Product quality analysis on behalf of TRMC unless TRMC so requests in writing.  Any such quality analyses, including any costs for independent inspectors appointed by TRMC, are for TRMC’s account.  TRMC or its designated independent inspector may observe TLO in any measurement or sampling.

(ii)    Off-Spec Product.  TRMC at its sole cost and expense shall be responsible for all damages of any kind, in addition to commodity or Waste removal and cleaning costs resulting from the introduction of Off-Spec Product into the Anacortes Rail Unloading Facility.  TRMC shall remove any Off-Spec Product or reimburse TLO for any and all expenses incurred in removing any such Off-Spec Product received into the Anacortes Rail Unloading Facility.   

(iii)    Minimum Specifications.  TLO retains at all times under the Term of this Agreement the right to establish and/or change TLO’s minimum specifications for any Product introduced at the Anacortes Rail Unloading Facility with thirty (30) days advance notice to TRMC.  Changes will not affect previously accepted nominated volumes unless immediate action is required by Applicable Law.  TLO’s minimum specifications shall allow the throughput of the grades and approximate qualities of Product specified in Annex A.

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(iv)    Other Products.  If TRMC wishes to offload and throughput Products outside of the minimum specifications noted above, TRMC must send a written request evidencing such desire sixty (60) days prior to any such potential offload and throughput, and TLO may consent to such request in its discretion, such consent not to be unreasonably withheld.  

(b)    Product Warranty.  TRMC warrants to TLO that all Product tendered by or for the account of TRMC for offload and throughput at the Anacortes Rail Unloading Facility will conform to TLO’s minimum specifications for such Product.  TLO may rely upon the specifications and representations of TRMC as to Product quality.

(c)    Material Safety Data Sheet.  TRMC will provide TLO with a Material Safety Data Sheet and any other information required by any federal, state, or local authority for all Product offloaded and throughput at the Anacortes Rail Unloading Facility.  TRMC shall provide its customers with the appropriate information on all Products offloaded and throughput at the Anacortes Rail Unloading Facility.  

		
	SECTION 11
	PRODUCT QUANTITY; MEASURMENT

All quantities of Products received at the Anacortes Rail Unloading Facility via railcar shall be measured by custody transfer meter in net Barrels using the applicable API and ASTM or equivalent standards; provided, however, that during the start-up period of the Anacortes Rail Unloading Facility, and at any time thereafter that custody transfer metering is not operational, all quantities of Products received via railcar at the Anacortes Rail Unloading Facility shall be determined based upon the loading tickets received by TRMC at the place of loading for TRMC’s railcars. Such loading tickets shall then be reconciled with the volumes in the actual railcars, as applicable, received at the Anacortes Rail Unloading Facility.   All quantities shall be adjusted to net gallons at 60° F in accordance with ASTM D-1250 Petroleum Measurement Tables, or latest revisions thereof.  Meters and temperature probes shall be calibrated according to applicable API standards.  TRMC shall provide TLO with all reasonable documentation with respect to the volumes offloaded and throughput at the Rail Unloading Facility, including but not limited to, inspection reports, meter tickets or other similar documentation within three (3) Business Days of completion of unit train discharge.
		
	SECTION 12
	WASTE AND HAZARDOUS MATERIALS

(a)    Handling and Disposal of Waste. TLO and TRMC will comply with Applicable Law regarding the handling of Product and the disposal of any Waste.  TRMC shall pay or reimburse TLO for removal from the Anacortes Rail Unloading Facility of any Waste or residuals, including all costs associated with any liabilities arising from such Waste or residual, to the extent such Waste and/or residuals are introduced, created or caused by TRMC or its Crude Oil at the Anacortes Rail Unloading Facility.  TLO shall not be responsible whatsoever for any Waste or residuals caused or created in transit to the Anacortes Rail Unloading Facility.  During such removal, the fees and charges set forth in this Agreement will remain in effect.  Unless stated otherwise herein, TLO shall be responsible for any fines, penalties, claims, violations, or similar obligations related to TLO’s operation of the Anacortes Rail Unloading Facility.

(b)    Hazardous Materials—Reporting.  TLO will report its handling of all hazardous materials for TRMC as required by Applicable Law.  TRMC will accurately and properly represent the nature of all such materials to TLO.  TRMC agrees to reimburse TLO for any reasonable, direct charges that TLO may be required to pay for the handling of Product, excluding penalties, fines or excess charges resulting from material errors or omissions in TLO’s reporting as required by Applicable Law.

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	SECTION 13
	SERVICES; HOURS; VOLUME GAINS AND LOSSES

(a)    Services. Subject to and in accordance with prudent industry practices, TLO shall offload and throughput TRMC’s Products at the Anacortes Rail Unloading Facility and provide such other services set forth for in this Agreement as well as the following:  (i) unit train switching operations; (ii) connection and disconnection of unit train railcars; (iii) reassembly of unit trains; (iv) maintenance and repair of all offloading equipment; (v) provision and maintenance of the equipment necessary to perform the services contemplated by this Agreement; (vi) minor maintenance and repair of unit train railcars; and (vii) operation of the Anacortes Rail Unloading Facility (collectively, the “Services”).  TLO will timely provide TRMC with a copy of any regulatory compliance report filed by TLO regarding TRMC’s Product upon request by TRMC.  TLO will provide the labor and supervision necessary to perform the Services contemplated by this Agreement. TLO will maintain the Anacortes Rail Unloading Facility according to prudent industry practice and will use reasonable care in performing the Services consistent with customary industry practices.  
(b)    Hours.  The Anacortes Rail Unloading Facility will be available on 24/7/365 basis, as needed, except as provided for in Section 14(c) or in the event of a Force Majeure.

(c)    Volume Gains and Losses.  TLO shall have no obligation to measure volume gains and losses and shall have no liability whatsoever for normal course physical losses that may result from the offloading and throughput of the Products at the Anacortes Rail Unloading Facility, except if such losses are caused by the gross negligence or willful misconduct of TLO.  TRMC will bear any volume gains and losses that may result from the offloading and throughput of the Products at the Anacortes Rail Unloading Facility.

(d)    Major Damage to Unit Train Railcars.  To the extent railcars are damaged and require immediate and/or major repair, and cannot be safely unloaded at the Anacortes Rail Unloading Facility, such railcars will be moved to the bad order track at TRMC’s sole risk and expense.  TLO will notify TRMC in writing as soon as reasonably practical that damaged railcars have been moved to the bad order track.  Once on the bad order track, TLO will use commercially reasonable efforts to unload and repair or remove such damaged railcars at TRMC’s sole risk and expense.  Measurements, title, custody, Product quality and other data associated with the bad order railcars will be coordinated on between TLO and TRMC on a case-by-case basis.  If TRMC does not use commercially reasonable efforts to promptly unload and repair or remove damaged railcars on the bad order track, then thirty (30) days after notification has been provided to TRMC, TLO may (i) remove such railcars from the Anacortes Rail Unloading Facility to an alternate site at TRMC’s sole cost and expense, and (ii) assess TRMC a fee for any railcars remaining on the bad order track.  If, at any time the number of materially damaged railcars at the Anacortes Rail Unloading Facility should exceed the capacity of the bad order track, TLO shall promptly notify TRMC, and if TRMC does not immediately make suitable arrangements to have sufficient damaged railcars repaired or removed from the Anacortes Rail Unloading Facility, then remove such railcars from the Anacortes Rail Unloading Facility to an alternate site at TRMC’s sole cost and expense.

		
	SECTION 14
	OPERATIONS

(a)     Nominations and Scheduling.  TRMC shall nominate unit trains on a routine basis and in accordance with the procedures and railcar specifications outlined in Annex B.  TLO shall provide TRMC’s unit trains non-discriminatory, priority access rights to access Anacortes Rail Unloading Facility to offload and  throughput TRMC’s Products.

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(b)    Utilization.  TLO will not increase the total term commitments for utilization of the Anacortes Rail Unloading Facility or provide access to or use of the Anacortes Rail Unloading Facility to any third party without the prior written consent of TRMC, in TRMC’s sole discretion. 

(c)    Unavailability due to Maintenance.   The Anacortes Rail Unloading Facility may be unavailable for short periods of time due to routine maintenance and repair.  To the extent (i) such routine maintenance and/or repair shall be for a period of seven (7) days or less, TLO shall use reasonable commercial efforts to provide TRMC at least thirty (30) days advance written notice of such planned maintenance and/or repair of the Anacortes Rail Unloading Facility, to the extent practicable, and (ii) such routine maintenance and/or repair shall be for a period greater than seven (7) days, TLO shall use reasonable commercial efforts to provide TRMC at least ninety (90) days advance written notice of such planned maintenance and/or repair of the Anacortes Rail Unloading Facility, and consult and coordinate with TRMC regarding the same, to the extent practicable.  Notwithstanding any of the foregoing to the contrary, Section 5(b) hereof shall apply to any such unavailability.

(d)    Demurrage.  TLO will not pay demurrage, except (i) if such demurrage is the result of TLO’s gross negligence or willful misconduct, or (ii) to the extent caused by TLO’s contractors, subcontractors or agents, and then only up to the amounts TLO is able to recover  from its contractors, subcontractor and/or agents.

		
	SECTION 15
	TITLE AND RISK OF LOSS; CUSTODY AND CONTROL

Title and the risk of loss or damage to the Product shall remain at all times with TRMC, subject to any lien in favor of TLO under Applicable Laws.   TLO will have custody of Product from (a) the time a railcar containing Product enters the Anacortes Rail Unloading Facility and BNSF’s locomotive crew has disembarked from, and TLO’s or a TLO contractor’s locomotive crew has embarked onto, the locomotive used to transfer railcars to the Anacortes Rail Unloading Facility, until (b) the offloaded Products pass through the first pipeline flange connecting the delivery line to the Anacortes Refinery.  
		
	SECTION 16
	NEW TAXES AND ASSESSMENTS

(a)    New Taxes and Assessments.  Without duplication of matters addressed in Section 6, which shall control with respect to such matters, TRMC shall promptly pay or reimburse TLO for any newly imposed taxes, duties, import fees, assessments or other charges of any federal, state, or local Governmental Authority that TLO is required to pay or collect, including oil spill response fund assessments, spill taxes, pollution control taxes, emission fees, charges, excises, duties, tariffs, inspections, if any, now or during the Term of this Agreement that are hereafter imposed on Product and on the transfer, handling or disposal of Waste, or on any other use thereof.  Further, TRMC shall promptly pay or reimburse TLO for any additional or increased taxes levied upon TLO by reason of TRMC’s use of TLO’s leased premises or any equipment thereon.  Notwithstanding the foregoing, each Party shall pay its own personal property, ad valorem, income, profit, franchise, or similar tax.
(b)    Excise Taxes.  TRMC is responsible for the collecting and remitting of all applicable federal and state excise taxes on Product from its customers and accounts for which TRMC would ordinarily be responsible.  
(c)    Exemption.  If TRMC is exempt from the payment of any taxes allocated to TRMC under the foregoing provisions, TRMC shall furnish TLO with the proper exemption certificates.

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	SECTION 17
	COMPLIANCE WITH LAW AND GOVERNMENT REGULATIONS

(a)    Compliance with Applicable Law.  TRMC certifies that none of the Products covered by this Agreement will be derived from Crude Oil, petrochemical, or gas which was produced,  withdrawn from storage or imported in violation of any federal, state or other governmental law, nor in violation of any rule, regulation or promulgated by any governmental agency having jurisdiction in the premises.
(b)     Applicable Law.  The Parties are entering into this Agreement in reliance upon and shall fully comply with all Applicable Law which directly or indirectly affects the Products throughput hereunder, or any receipt, throughput delivery, transportation, or handling of Products hereunder or the ownership, operation or condition of the Anacortes Rail Unloading Facility.  Each Party shall be responsible for compliance with all Applicable Laws associated with such Party’s respective performance hereunder and the operation of such Party’s facilities.  In the event any action or obligation imposed upon a Party under this Agreement shall at any time be in conflict with any requirement of Applicable Law, then this Agreement shall immediately be modified to conform the action or obligation so adversely affected to the requirements of the Applicable Law, and all other provisions of this Agreement shall remain effective.  
(c)    New or Changed Applicable Law.  If during the Term, any new Applicable Law becomes effective or any existing Applicable Law or its interpretation is materially changed, which change is not addressed by another provision of this Agreement and which has a material adverse economic impact upon a Party, then either Party, acting in good faith, shall have the option to request renegotiation of the relevant provisions of this Agreement with respect to future performance.  The Parties shall then meet and negotiate in good faith amendments to this Agreement that will conform this Agreement to the new Applicable Law while preserving the Parties’ economic, operational, commercial and competitive arrangements in accordance with the understandings set forth herein.  
		
	SECTION 18
	LIMITATION ON LIABILITY

(a)    Waiver of Consequential and Other Damages.  In no event shall a Party be liable to the other party for any lost profits or indirect, special, incidental, consequential or punitive damages, no matter how characterized, relating to this Agreement and arising from any cause whatsoever, except with respect to indirect, special, incidental, consequential or punitive damages actually awarded to a third party or assessed by a Governmental Authority and for which a Party is properly entitled to indemnification from the other party Pursuant to the express provisions of this Agreement.   
(b)    Demurrage. TLO assumes no liability for demurrage (whether related to unit train movements or otherwise), except if such demurrage is the result of TLO’s gross negligence or willful misconduct and except as provided in Section 14(d).
(c)    No Guarantees or Warranties.  Except as expressly provided in this Agreement, neither TRMC nor TLO makes any guarantees or warranties of any kind, expressed or implied.  TLO specifically disclaims all implied warranties of any kind or nature, including any implied warranty of merchantability and/or any implied warranty of fitness for a particular purpose. 
		
	SECTION 19
	INDEMNIFICATION

(a)    Notwithstanding anything else contained in this Agreement, TLO shall release, defend, protect, indemnify, and hold harmless TRMC and each of its respective affiliates, officers, directors, shareholders, agents, employees, successors-in-interest and assignees (each individually, a “TRMC

13

Indemnitee”, and collectively, the “TRMC Indemnitees”), from and against any and all demands, claims (including third-party claims), losses, costs, suits, or causes of action (including, but not limited to, any judgments, losses, liabilities, fines, penalties, expenses, interest, reasonable legal fees, costs of suit, and damages, whether in law or equity and whether in contract, tort, or otherwise) for or relating to (i) personal or bodily injury to, or death of the employees of any TRMC Indemnitee and, as applicable, its carriers, customers, representatives, and agents, (ii) loss of or damage to any property, products, material, and/or equipment belonging to any TRMC Indemnitee and, as applicable, its carriers, customers, representatives, and agents, and each of their respective affiliates, contractors, and subcontractors (except for demurrage and volume losses, as provided for herein), (iii) loss of or damage to any other property, products, material, and/or equipment of any other description (except for demurrage and volume losses, as provided for herein), and/or personal or bodily injury to, or death of any other Person or Persons; and and (iv) Environmental Liabilities; and with respect to clauses (i) through (iv) above,  to the extent (x) caused by or resulting from the wrongful acts and omissions of TLO in connection with the ownership or operation of the Anacortes Rail Unloading Facility and the services provided hereunder, and, as applicable, its carriers, customers (other than the TRMC Indemnities), representatives, and agents, or those of their respective employees with respect to such matters, or (y) otherwise caused by violations of this Agreement by TLO or its carriers, customers (other than the TRMC Indemnitees), representatives, and agents.  NOTWITHSTANDING THE FOREGOING, TLO SHALL NOT BE OBLIGATED TO INDEMNIFY OR HOLD HARMLESS ANY TRMC INDEMNITEE FROM AND AGAINST ANY CLAIMS TO THE EXTENT THEY RESULT FROM THE BREACH OF CONTRACT, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH TRMC INDEMNITEE. Furthermore, with respect to any Product lost due to a spill at the Anacortes Rail Unloading Facility, to the extent recoverable from its contractors, subcontractors or agents pursuant to any indemnification obligations of such contractor, subcontractor or agent to TLO, TLO will pass through to TRMC any indemnification payment made by such contractor, subcontractor or agent to TLO in respect of the value of such Product lost.

(b)    Notwithstanding anything else contained in this Agreement, TRMC shall release, defend, protect, indemnify, and hold harmless TLO and each of its respective affiliates, officers, directors, shareholders, agents, employees, successors-in-interest and assignees (each individually, a “TLO Indemnitee”, and collectively, the “TLO Indemnitees”) from and against any and all demands, claims (including third-party claims), losses, costs, suits, or causes of action (including, but not limited to, any judgments, losses, liabilities, fines, penalties, expenses, interest, reasonable legal fees, costs of suit, and damages, whether in law or equity and whether in contract, tort, or otherwise) for or relating to (i) personal or bodily injury to, or death of the employees of any TLO Indemnitee and, as applicable, its carriers, customers, representatives, and agents; (ii) loss of or damage to any property, products, material, and/or equipment belonging to any TLO Indemnitee and, as applicable, its carriers, customers, representatives, and agents, and each of their respective affiliates, contractors, and subcontractors (except for demurrage and volume losses, as provided for herein); (iii) loss of or damage to any other property, products, material, and/or equipment of any other description (except for demurrage and volume losses, as provided for herein), and/or personal or bodily injury to, or death of any other Person or Persons; and (iv) Environmental Liabilities; and with respect to clauses (i) through (iv) above, to the extent (x) caused by or resulting from the wrongful acts and omissions of TRMC, in connection with TRMC’s use of the Anacortes Rail Unloading Facility and the services provided hereunder and TRMC’s Products stored hereunder, and, as applicable, its carriers, customers, representatives, and agents, or those of their respective employees with respect to such matters; or (y) or otherwise caused by violations of this Agreement by TRMC, or, as applicable, its carriers, customers, representatives, and agents.  NOTWITHSTANDING THE FOREGOING, TRMC SHALL NOT BE OBLIGATED TO INDEMNIFY OR HOLD HARMLESS ANY TLO INDEMNITEE FROM AND AGAINST ANY CLAIMS TO THE EXTENT THEY RESULT FROM THE BREACH OF CONTRACT, GROSS NEGLIGENCE OR 

14

WILLFUL MISCONDUCT OF SUCH TLO INDEMNITEE. For the avoidance of doubt, nothing herein shall constitute a release by TRMC of any demurrage or volume losses that are caused by the TLO’s gross negligence, breach of this Agreement or willful misconduct.

(c)    Notwithstanding any other provisions of (i) this Agreement, (ii) the Omnibus Agreement, (iii) the Anacortes Mutual Track Use Agreement among the General Partner, the Partnership, the TLO and TRMC, and (iv) that certain Ground Lease between TRMC and TLO, all dated as of the date hereof, the Parties hereto agree that the indemnification provisions of any of the agreements specified in items (i) through (iv) immediately above shall control over any of the other agreements to the extent the subject matter of the indemnification is specifically referenced or provided for in that agreement.  For the avoidance of doubt, the indemnification provisions of the Omnibus Agreement shall be subordinate to the respective indemnification provisions of each of the other agreements referenced above.

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

		
	SECTION 20
	TERMINATION; RIGHT TO ENTER INTO A NEW AGREEMENT; RIGHT

OF FIRST REFUSAL
(a)    Termination for Default.  A Party shall be in default under this Agreement if:

(i)    the Party materially breaches any provision of this Agreement and such breach is not cured within fifteen (15) Business Days after notice thereof (which notice shall describe such breach in reasonable detail) is received by such Party; or

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

If either Party is in default as described above, then the non-defaulting Party may: (1) terminate this Agreement upon notice to the defaulting Party; (2) withhold any payments due to the defaulting Party under this Agreement; and/or (3) pursue any other remedy at law or in equity.
(c)    Right to Enter New Agreement.  Upon termination of this Agreement for reasons other than (x) a default by TRMC, (y) any termination of this Agreement initiated by TRMC pursuant to 

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Section 21, or (z) a termination by reason of TRMC’s failure to exercise a renewal term option under Section 4, TRMC shall have the right to require TLO to enter into a track use and throughput agreement with TRMC that (i) is consistent with the terms set forth in this Agreement, (ii) relates to the Anacortes Rail Unloading Facility that are the subject matter of this Agreement, and (iii) has commercial terms that are, in the aggregate, equal to or more favorable to TLO than fair market value terms as would be agreed by similarly-situated parties negotiating at arm’s length; provided, however, that the term of any such new track use and throughput agreement shall not extend beyond April 30, 2032.  

(d)    Right of First Refusal.  In the event that TLO proposes to enter into a track use and throughput agreement with a third party upon the termination of this Agreement for reasons other than (x) by default by TRMC, (y) any termination of this Agreement initiated by TRMC pursuant to Section 21, or (z) a termination by reason of TRMC’s failure to exercise a renewal term option under Section 4, TLO shall give TRMC ninety (90) days prior written notice of any proposed new track use and throughput agreement with a third party, including (i) details of all of the material terms and conditions thereof and (ii) a thirty (30)-day period (beginning upon TRMC’s receipt of such written notice) (the “TTA First Offer Period”) in which TRMC may make a good faith offer to enter into a new track use and throughput agreement with TLO (the “TTA Right of First Refusal”).  If TRMC makes an offer on terms no less favorable to TLO than the third-party offer with respect to such track use and throughput agreement during the TTA First Offer Period, then TLO shall be obligated to enter into a track use and throughput agreement with TRMC on the terms set forth in subsection (c) above. If TRMC does not exercise its TTA Right of First Refusal in the manner set forth above, TLO may, for the next ninety (90) days, proceed with the negotiation of the third-party track use and throughput agreement.  If no third-party track use and throughput agreement is consummated during such ninety-day period, the terms and conditions of this Section 20(e) shall again become effective.  Notwithstanding anything contained in this Section 20(e) to the contrary, TRMC’s TTA Right of First Refusal shall only be available and exercisable for a period of one hundred twenty (120) days after termination of this Agreement for reasons other than (x) by default by TRMC, (y) any other termination of this Agreement initiated by TRMC pursuant to Section 21, or (z) a termination by reason of TRMC’s failure to exercise a renewal term option under Section 4.

		
	SECTION 21
	FORCE MAJEURE 

(a)    As soon as possible upon the occurrence of a Force Majeure, TLO shall provide TRMC with written notice of the occurrence of such Force Majeure (a “Force Majeure Notice”).  TLO shall identify in such Force Majeure Notice the approximate length of time that TLO reasonably believes in good faith such Force Majeure shall continue (the “Force Majeure Period”). If TLO is unable to perform or is delayed in performing, in whole or in part, its obligations hereunder as a result of such Force Majeure, then TLO’s obligations shall be suspended during, but no longer than, the continuance of such Force Majeure event.  If TLO advises in any Force Majeure Notice that it reasonably believes in good faith that the Force Majeure Period shall continue for more than twelve (12) consecutive Months, then at any time after TLO delivers such Force Majeure Notice, either Party may terminate this Agreement, but only upon delivery to the other Party of a notice (a “Termination Notice”) at least twelve (12) Months prior to the expiration of the Force Majeure Period; provided, however; that such Termination Notice shall be deemed cancelled and of no effect if the Force Majeure Period ends prior to the expiration of such twelve-Month period.  
(b)    Notwithstanding the foregoing, if  TRMC delivers a Termination Notice to TLO (the “TRMC Termination Notice”) and, within thirty (30) days after receiving such TRMC Termination Notice, TLO notifies TRMC that TLO reasonably believes in good faith that it shall be capable of fully performing its obligations under this Agreement within a reasonable period of time, then the TRMC 

16

Termination Notice shall be deemed revoked and this Agreement shall continue in full force and effect as if such TRMC Termination Notice had never been given.
		
	SECTION 22
	SUSPENSION OF REFINERY OPERATIONS

(a)    TRMC is not permitted to suspend or reduce its obligations under this Agreement in connection with a shutdown of the Anacortes Refinery for scheduled turnarounds or other regular servicing or maintenance.  If refining operations at the Anacortes Refinery are suspended for any reason (including Anacortes Refinery turnarounds and other scheduled maintenance), then TRMC shall remain liable for the MTFV and any reimbursements or surcharges under this Agreement for the duration of the suspension.  TRMC shall provide at least thirty (30) days’ prior written notice of any suspension of operations at the Refinery due to a planned turnaround or scheduled maintenance.

(b)     Further, in the event that TRMC decides to permanently or indefinitely suspend refining operations for any reason at the Anacortes Refinery, TRMC shall still remain liable for the MTVF and any reimbursements or surcharges under this Agreement for the duration of the suspension or the remaining Term, whichever is longer; provided, however, that TLO shall make commercially reasonable efforts to develop third party use of some or all of the Anacortes Rail Unloading Facility, and any net proceeds received from such development, net of costs (including without limitation any amortized capital costs for conversion of the Anacortes Rail Unloading Facility or the installation of new connections) shall be credited towards TRMC’s Minimum Throughout Volume obligations.  
		
	SECTION 23
	ASSIGNMENT; NEW TRACK USE AGREEMENT; PARTNERSHIP

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

(b)    Except as otherwise provided in this Section 23, TRMC shall not assign any of its rights or obligations under this Agreement without TLO’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that TRMC may assign this Agreement without TLO’s consent in connection with a sale by TRMC of the Anacortes Refinery so long as the transferee: (i) agrees to assume all of TRMC’s obligations under this Agreement and (ii) is financially and operationally capable of fulfilling the terms of this Agreement, which determination shall be made by TRMC in its reasonable judgment. 

(c)    TLO shall not assign any of its rights or obligations under this Agreement without TRMC’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that (i) subject to Section 23(d) below, TLO may assign this Agreement without TRMC’s consent in connection with a sale by TLO of all or substantially all of the Anacortes Rail Unloading Facility so long as the transferee: (A) agrees to assume all of TLO’s obligations under this Agreement; (B) is financially and operationally capable of fulfilling the terms of this Agreement, which determination shall be made by TLO in its reasonable judgment; and (C) is not a competitor of TRMC; and (ii) TLO shall be permitted to make a collateral assignment of this Agreement solely to secure working capital financing for TLO.

(d)    Any assignment that is not undertaken in accordance with the provisions set forth above shall be null and void ab initio.  A Party making any assignment shall promptly notify the other Party of such

17

assignment, regardless of whether consent is required.  This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns.

(e)    In the event that at any time during the Term hereof, as it may be extended under Section 4, TLO proposes to sell of all or substantially all of the Anacortes Rail Unloading Facility to a third party, TLO shall give TRMC ninety (90) days’ prior written notice of any such sale, including (i) details of all of the material terms and conditions thereof, including without limitation, a firm commitment by a capable third party purchaser to purchase all or substantially all of the the Anacortes Rail Unloading Facility at specified price, and (ii) a sixty (60)-day period (beginning upon TRMC’s receipt of such written notice) (the “Purchase First Offer Period”) in which TRMC may make a good faith offer to purchase all or substantially all of the Anacortes Rail Unloading Facility from TLO (the “Purchase Right of First Refusal”).  If TRMC makes an offer on terms no less favorable to TLO than the third-party offer with respect to such sale during the Purchase First Offer Period, then TLO shall be obligated to sell all or substantially all of the Rail Unloading Facility to TRMC on the same terms set forth in such offer to purchase by the third party. If TRMC does not exercise its Purchase Right of First Refusal in the manner set forth above, TLO may, for the next ninety (90) days, proceed with the negotiation of the sale of the Anacortes Rail Unloading Facility.  If such sale is not consummated during such ninety (90) period, the terms and conditions of this Section 23(e) shall again become effective.

(f)    TRMC’s obligations hereunder shall not terminate in connection with a Partnership Change of Control, provided, however, that in the case of any Partnership Change of Control or the sale of all or substantially all of the Anacortes Rail Unloading Facility to a purchaser other than TRMC, TRMC shall retain the option to extend the Term of this Agreement as provided in Section 4, and the Identification Date (as defined in the Omnibus Agreement) shall be deemed to have occurred, if it has not already occurred by reason of the passage of time.  TLO shall provide TRMC with notice of any Partnership Change of Control at least sixty (60) days prior to the effective date thereof.

		
	SECTION 24
	INSURANCE 

(a)    At all times during the Term of this Agreement and for a period of two (2) years after termination of this Agreement for any coverage maintained on a “claims-made” or “occurrence” basis, each Party shall maintain at its expense the below listed insurance in the amounts specified below which are minimum requirements. Such insurance shall provide coverage to each Party, as applicable, and such policies, other than Worker’s Compensation Insurance, shall include each Party as an Additional Insured, as applicable.  Each policy shall provide that it is primary to and not contributory with any other insurance, including any self-insured retention, maintained by either Party (which shall be excess) and each policy shall provide the full coverage required by this Agreement.  All such insurance shall be written with carriers and underwriters acceptable to both Parties, and eligible to do business in the State of Washington and having and maintaining an A.M. Best financial strength rating of no less than “A-“ and financial size rating no less than “VII”; provided that either Party may procure worker’s compensation insurance from the State of Washington. All limits listed below are required MINIMUM LIMITS:

(i)    Workers Compensation and Occupational Disease Insurance which fully complies with Applicable Law of the State of Washington, in limits not less than statutory requirements; 
(ii)    Employers Liability Insurance with a minimum limit of $1,000,000 for each accident, covering injury or death to any employee which may be outside the scope of the worker’s compensation statute of the jurisdiction in which the worker’s service is performed, and in the aggregate as respects occupational disease; 

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(iii)    Commercial General Liability Insurance, with minimum limits of $1,000,000 combined single limit per occurrence for bodily injury and property damage liability, or such higher limits as may be required by either Party or by Applicable Law from time to time.  This policy shall include Broad Form Contractual Liability insurance coverage which shall specifically apply to the obligations assumed in this Agreement by the Parties; 
(iv)    Automobile Liability Insurance covering all owned, non-owned and hired vehicles, with minimum limits of $1,000,000 combined single limit per occurrence for bodily injury and property damage liability, or such higher limit(s) as may be required by either Party or by Applicable Law from time to time.  Limits of liability for this insurance must be not less than $1,000,000 per occurrence;
(v)    Excess (Umbrella) Liability Insurance with limits not less than $4,000,000 per occurrence.  Additional excess limits may be utilized to supplement inadequate limits in the primary policies required in items (ii), (iii), and (iv) above; and
(vi)    Property Insurance, which property insurance shall be first-party property insurance to adequately cover the value of any property owned by a Party and related to such Party’s performance under this Agreement, including personal property of others.
(b)    All such policies must be endorsed with a Waiver of Subrogation endorsement, effectively waiving rights of recovery under subrogation or otherwise, against either Party, as applicable, and shall contain where applicable, a severability of interest clause and a standard cross liability clause. 
(c)    Upon execution of this Agreement and prior to the operation of any equipment by either Party, each Party will furnish to the other Party, and at least annually thereafter (or at any other times upon request by a Party) during the Term of this Agreement (and for any coverage maintained on a “claims-made” basis, for two (2) years after the termination of this Agreement), insurance certificates and/or certified copies of the original policies to evidence the insurance required herein.  Such certificates shall be in the form of the “Accord” Certificate of Insurance, and reflect that they are for the benefit of such Party and shall provide that there will be no material change in or cancellation of the policies unless such Party is given at least thirty (30) days prior written notice.  Certificates providing evidence of renewal of coverage shall be furnished to each Party prior to policy expiration. 
(d)    Each Party shall be solely responsible for any applicable deductibles or self-insured retention.  
		
	SECTION 25
	NOTICE

All notices, requests, demands, and other communications hereunder will be in writing and will be deemed to have been duly given: (i) if by transmission by facsimile or hand delivery, when delivered; (ii) if mailed via the official governmental mail system, five (5) business days after mailing, provided said notice is sent first class, postage pre-paid, via certified or registered mail, with a return receipt requested; (iii) if mailed by an internationally recognized overnight express mail service such as Federal Express, UPS, or DHL Worldwide, one (1) business day after deposit therewith prepaid; or (iv) by e-mail one (1) business day after delivery with receipt confirmed.  All notices will be addressed to the Parties at the respective addresses set forth on Schedule 25 attached hereto. Either Party may, at any time and from time to time may, modify and/or supplement Schedule 25 by providing the other Party with a substitute Schedule 25, changing the addresses for such Party, without requiring amendment of this Agreement.

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	SECTION 26
	REPORTS AND AUDIT 

(a)    Either Party shall have the right, at its sole cost and expense, upon forty-five (45) days prior written notice, to audit the books, accounts, and records of the other Party directly related to that Party and related to an invoice of the other Party to verify the accuracy of such invoice, or as otherwise appropriate to audit performance under this Agreement.  Under no circumstances shall the scope of such audit include the books, accounts or records of a third party.  All audited information shall be kept confidential pursuant to the terms of this Agreement.  The audited Party will not be required to divulge any information that identifies specific volumes attributable to any customer other than the auditing TRMC, or that is otherwise in violation of any applicable anti-competition laws, rules or regulations a third-party auditor may be required to enter into a confidentiality agreement if it is deemed necessary by the Party being audited.  Under no circumstances may an auditor disclose third-party information, including, but not limited to third-party TRMC identities and third-party pricing information, to the Party exercising its right for an audit without the written permission of the Party being audited.  The Party being audited will have sole discretion whether to permit such disclosure.

(b)    Within one-hundred and eighty (180) days of an audit commencing, all final audit findings must be presented to the Party being audited.  Subject to the time limitations set forth herein, the Parties will negotiate in good faith to verify and promptly settle claims pursuant to this clause; provided that any claim not filed with the appropriate court of law within twenty-four (24) Months of the date of the invoice in question shall be waived.

		
	SECTION 27
	CONFIDENTIAL INFORMATION

(a)    Obligations. Each Party shall use reasonable efforts to retain the other Parties’ Confidential Information in confidence and not disclose the same to any third party nor use the same, except as authorized by the disclosing Party in writing or as expressly permitted in this Section 27. Each Party further agrees to take the same care with the other Party’s Confidential Information as it does with its own, but in no event less than a reasonable degree of care. Excepted from these obligations of confidence and non-use is that information which:

(i)    is available, or becomes available, to the general public without fault of the receiving Party;
(ii)    was in the possession of the receiving Party on a non-confidential basis prior to receipt of the same from the disclosing Party;
(iii)    is obtained by the receiving Party without an obligation of confidence from a third party who is rightfully in possession of such information and, to the receiving Party’s knowledge, is under no obligation of confidentiality to the disclosing Party; or
(iv)    is independently developed by the receiving Party without reference to or use of the disclosing Party’s Confidential Information.
For the purpose of this Section 27, a specific item of Confidential Information shall not be deemed to be within the foregoing exceptions merely because it is embraced by, or underlies, more general information in the public domain or in the possession of the receiving Party.

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(b)    Required Disclosure. Notwithstanding Section 27(a) above, if the receiving Party becomes legally compelled to disclose the Confidential Information by a court, Governmental Authority or Applicable Law, or is required to disclose by the listing standards of any applicable securities exchange, any of the disclosing Party’s Confidential Information, the receiving Party shall promptly advise the disclosing Party of such requirement to disclose Confidential Information as soon as the receiving Party becomes aware that such a requirement to disclose might become effective, in order that, where possible, the disclosing Party may seek a protective order or such other remedy as the disclosing Party may consider appropriate in the circumstances. The receiving Party shall disclose only that portion of the disclosing Party’s Confidential Information that it is required to disclose and shall cooperate with the disclosing Party in allowing the disclosing Party to obtain such protective order or other relief.

(c)    Return of Information. Upon written request by the disclosing Party, all of the disclosing Party’s Confidential Information in whatever form shall be returned to the disclosing Party or destroyed with destruction certified by the receiving Party upon termination of this Agreement, without the receiving Party retaining copies thereof except that one copy of all such Confidential Information may be retained by a Party’s legal department solely to the extent that such Party is required to keep a copy of such Confidential Information pursuant to Applicable Law, and the receiving Party shall be entitled to retain any Confidential Information and accounting information in the electronic form or stored on automatic computer back-up archiving systems during the period such backup or archived materials are retained under such Party’s customary procedures and policies; provided, however, that any Confidential Information retained by the receiving Party shall be maintained subject to confidentiality pursuant to the terms of this Section 27, and such archived or back-up Confidential Information shall not be accessed except as required by Applicable Law.

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

(e)    Survival. The obligation of confidentiality under this Section 27 shall survive the termination of this Agreement for a period of two (2) years.

		
	SECTION 28
	MISCELLANEOUS

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

21

(b)    Entire Agreement.  This Agreement constitutes the entire agreement among the Parties pertaining to the subject matter hereof and supersedes all prior agreements and understandings of the Parties in connection therewith.

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

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

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

(f)    No Third Party Beneficiaries.  It is expressly understood that the provisions of this Agreement do not impart enforceable rights in anyone who is not a Party or successor or permitted assignee of a Party.

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

(h)    Schedules, Exhibits and Annexes.  Any schedules, exhibits and/or annexes attached hereto and referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]

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IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement, effective as of the Commencement Date.  
	
		
	 
	TESORO LOGISTICS OPERATIONS LLC

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

Solely in respect of Section 23 only:
TESORO LOGISTICS LP
By: TESORO LOGISTICS GP, LLC,
 its general partner

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

Solely in respect of Section 23 only:
TESORO LOGISTICS GP, LLC

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

	 
	TESORO REFINING AND MARKETING COMPANY

By: /s/ Daniel R. Romasko__      _      _________
Daniel R. Romasko
Executive Vice President, Operations

	 
	 

Signature Page to
Track Use and Throughput Agreement

SCHEDULE I
ANACORTES RAIL UNLOADING FACILITY

SCHEDULE 25
NOTICE ADDRESSES

If to TLO, to:

Tesoro Logistics Operations LLC
19100 Ridgewood Parkway
San Antonio, Texas 78259

For legal notices:

Attention:  Charles S. Parrish, General Counsel
phone:  (210) 626-4280
fax:  (210) 745-4494
email: charles.s.parrish@tsocorp.com

For all other notices and communications:

Attention:  Victoria R. Somers, Contracts Administrator – Logistics
phone:  (210) 626-6390
fax: (210) 745-4490
email: victoria.r.somers@tsocorp.com

If to TRMC, to:

Tesoro Refining and Marketing Company
19100 Ridgewood Parkway
San Antonio, Texas 78259

For legal notices:

Attention:  Charles S. Parrish, General Counsel
phone:  (210) 626-4280
fax:  (210) 745-4494
email: charles.s.parrish@tsocorp.com

For all other notices and communications:

Attention:  Rick D. Weyen, Vice President, Logistics
phone:  (210) 626-4433
fax:  (210) 745-4631
email: Rick.D.Weyen@tsocorp.com

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

ANNEX A
INITIALLY APPROVED PRODUCT GRADES AND QUALITIES

Product.  TLO will receive for TRMC at the Anacortes Rail Unloading Facility Product complying with the specifications ("Product Specifications") listed below:

	
		
	 
	Product Specifications

	Reid Vapor Pressure Maximum 11.5 psia per ASTM D-323

	Viscosity
	Maximum 100 CST at 60 degrees  F per ASTM  D-445

	Pour Point
	Maximum 30 degrees  F per ASTM  D-97

	BS&W
	Maximum of  1% by volume

   
Products with qualities outside these specifications may be approved at TLO’s discretion.  Additional costs required to support receipt of products outside these specifications will be at TRMC’s expense. 

Initial Crude Grades approved are*:

North Dakota Bakken Crude Oil
Canadian MSW
Canadian Syncrude
Eagle Ford Crude Oil
Permian Basin Crude Oil

* Crudes with hydrogen sulfide above 15 ppm in vapor space (D-5705) require prior notification and approval from TLO.

ANNEX B
NOMINATION AND SCHEDULING; RAILCAR SPECIFICATIONS

Nominations and Scheduling.
TRMC will nominate or cause to be nominated each Unit Train in writing to the Representative named by TLO at the Anacortes Rail Unloading Facility ("Terminal  Representative").    In a nomination, TRMC will provide:   (a) the estimated time of arrival ("ETA");  (b) number of railcars; and (c) the volume of Product to be delivered  in the Unit Train  and grade of crude oil TRMC intends to unload.  TRMC will ensure that it provides any and all information reasonably requested by the Terminal Representative related to any nomination.  
TRMC will update TLO on the schedule for the arrival of its Unit Train(s) by providing TLO with Unit Train's  name two (2) calendar days in advance of its scheduled departure at load point, the ETA at the  Unit Train Facility at least seven (7) calendar days (where applicable)  in advance of the ETA, three (3) calendar days in advance of the ETA, twenty-four (24) hours in advance of the ETA, and twelve (12) hours prior to the ETA.
Railcar Specifications.

The  following  specifications reflect  TLO’s minimum railcar  requirements, which  are not   intended   to  replace   original   manufacturer  requirements  or  other   basic   industry   regulations  or specifications.  Railcar variations that are outside of these specifications must be approved by TLO in advance of arrival of the  Unit Train  and,  if accepted  by TLO, may require TLO to break the Unit Train at additional points at TRMC's sole cost and expense.
	
		
	Design Item
	Parameter I Requirement

	Design Car Length- over coupler pulling faces- (ftlin)
	59'-4"

	

Minimum Car Length- over coupler pulling faces- (ftlin) For all cars having the same AlB orientation
	59'-3"  (this  is an absolute dimension, tolerances
and   coupling   connection   variances   must   be evaluated)

	

Maximum Car Length -over coupler pulling faces- (ftlin) For all cars having the same AlB orientation
	59'-6"  (this is an absolute dimension, tolerances
and   coupling   connection   variances   must   be evaluated)

	Minimum Car Length- over coupler pulling faces -(ftlin) For cars having varied AlB  orientations, with  maximum crash box centerline to tank centerline offset of24"
	59'-4"  (this is an absolute dimension, tolerances
and   coupling   connection   variances   must   be evaluated)

	Maximum Car Length- over coupler pulling faces- (ftlin)
For  cars having  varied  AlB  orientation,  with  maximum crash box centerline to tank centerline offset of24"
	59'-5    112"  (this   is   an   absolute   dimension, tolerances and coupling connection variances must be evaluated

	Maximum Crash Box Entry Centerline I Tank Centerline
Offset (in.)
	

24"

	Minimum Crash Box Entry Width (in)
	21"

	

Maximum Car Height - Top of Rail to Top of Crash Box
Handrail (ft)
	17' (17'  is limit for cars with crash box widths :::;:
7';    cars  with crash  box widths greater than 7' should be evaluated for maximum allowable car height)

	Bottom Connection (Cap Off I Empty Car) Height from Top of Rail (est.) (in)
	

16" Minimum

	BOY Axis (empty car) Height from Top of Rail (in)
	3I"Minimum

	Spring Travel - Loaded to Empty (in)
	2" Maximum

	BOY Size and Connection
	4" Ball Valve- Salco Cam Lock Cap Required
Must utilize either Type A or Type B.
Type         A.)         part         #         TE4ITUFIA Type B.) part# TE4IUTF1A

	
		
	BOY Internal Drain
	No Riser Pipe, Full Drainage

	

Air Inlet Connection
	1"  Minimum Connection,  use Salco Cam  Lock
Cap  part#  K201UMPIA.  Use full port valve.  Do
not use a l-in riser with 2-in adapter.

	

Required Air Inlet Capacity
	Estimated at 900 cfrn (air) minimum with 1 psi
differential (a} atmospheric pressure

	Pressure Safety Relief Device and Capacity
	Required, Sized Per Standard Industry Methods

	Pressure Safety Relief Device- Set Pressure
	Set at MA WP (Maximum of 165 psig)

	

Vacuum Relief Valve and Capacity
	Required, estimated at 230 cfrn (air)  with 4  psi differential @ atmospheric pressure

	Outage / Strapping Table
	Car specific gage table required per car

Rail Car Orientation.

All Rail cars must be orientated in the same direction.

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