EXHIBIT 4(k)
CALL OPTION AGREEMENT
Call Option Agreement dated February 9, 1994 between Tesoro
Petroleum Corporation ("Tesoro") and MetLife Security Insurance
Company of Louisiana ("MetLife Louisiana").
WHEREAS, there has been consummated on the date hereof a
recapitalization of Tesoro on the terms contemplated by the proxy
statement/prospectus/consent solicitation dated January 3, 1994;
WHEREAS, MetLife Louisiana is now the holder of 2,875,000 shares
of $2.20 Cumulative Convertible Preferred Stock ("Preferred Stock") of
Tesoro and 4,084,160 shares of Common Stock $.16 2/3 par value
("Common Stock") of Tesoro;
WHEREAS, the parties hereto wish to provide Tesoro with an option
to acquire the shares of Preferred Stock and shares of Common Stock
now held by MetLife Louisiana, as well as any additional shares of
Common Stock which may be issued by Tesoro to MetLife Louisiana to pay
dividends on the shares of Preferred Stock pursuant to Section 1 of
the Amended and Restated Memorandum of Understanding dated
December 14, 1993 (the "Memorandum of Understanding");
NOW, THEREFORE Tesoro and MetLife Louisiana desire to set forth
their understanding in this Agreement as follows:
1. CALL OPTION. Subject to the terms and conditions of this
Section 1, Tesoro shall have the option (the "Option") to acquire at
any time between the date hereof and the third anniversary of the date
hereof (the "Option Term") all shares of the Preferred Stock and
Common Stock owned by MetLife Louisiana on the date hereof and any
shares of Common Stock used to pay dividends on the Preferred Stock
issued to MetLife Louisiana by Tesoro pursuant to Section 1 of the
Memorandum of Understanding. References to Common Stock in Sections 1
and 2 hereof shall mean the Common Stock owned by MetLife Louisiana on
the date hereof and any shares of Common Stock used to pay dividends
on the Preferred Stock issued to MetLife Louisiana by Tesoro pursuant
to Section 1 of the Memorandum of Understanding.
(a) AGGREGATE OPTION PRICE. The aggregate price
payable in cash by Tesoro to exercise the Option in full
(the "Aggregate Option Price") at any time during the Option
Term shall be equal to the Base Option Price plus the
Accreted Amount. The "Base Option Price" at any date shall
be equal to (i) $53,045,000 less (ii) the sum of (x) all
cash dividends paid on shares of Preferred Stock owned by
MetLife Louisiana before such date, (y) the aggregate Sales
Amount with respect to all sales of Common Stock by MetLife
Louisiana after the date hereof and on or before the date of
such exercise and (z) the aggregate amounts paid upon prior
partial exercises of the Option. The "Sales Amount" with
respect to any sale of Common Stock shall be the cash amount
actually received by MetLife Louisiana upon such sale;
PROVIDED THAT, if Tesoro exercises the Option with respect
to all shares
subject thereto which have not theretofore been disposed of
by MetLife Louisiana, the Sales Amount shall be increased,
if MetLife Louisiana has theretofore effected any sale of
Common Stock other than in a transaction effected on the New
York Stock Exchange or such other exchange upon which the
Common Stock is then primarily traded or such other system
on which the Common Stock is then primarily quoted (a
"Private Sale") at a price per share (the "Private Sale
Price") which is less than 70% of the Current Market Price
(as defined below) at the date the agreement for sale is
entered into (the "Private Sale Date") (70% of the then
Current Market Price being referred to herein as the "Base
Price"), by an amount, if positive (the "Deficit Amount"),
equal to the sum of (A) the difference between the Private
Sale Price and the Base Price, multiplied by the number of
shares sold in such Private Sale (the "Deficit Sales
Amount"); PROVIDED FURTHER THAT the Deficit Amount shall be
reduced if MetLife Louisiana has at any time theretofore
effected any sale of Common Stock in a Private Sale at a
Private Sale Price which is greater than the Base Price, by
an amount equal to the difference between the Private Sale
Price and the Base Price, multiplied by the number of shares
sold in such Private Sale (the "Surplus Sales Amount") and
(B) the amount by which the Accreted Amount has been
increased as a result of the Base Option Price not being
reduced by the Deficit Sales Amount at the time a Private
Sale giving rise thereto occurred. The "Current Market
Price" means the average of the closing prices for the
Common Stock on the New York Stock Exchange or such other
exchange upon which the Common Stock is then primarily
traded or such other system on which the Common Stock is
then primarily quoted for the 10 trading days immediately
preceding the Private Sale Date. The "Accreted Amount" at
any date shall equal the sum of the Quarterly Accreted
Amounts for all calendar quarters beginning on or after
January 1, 1994 and ending on or before the date of
determination of the Accreted Amount. The "Quarterly
Accreted Amount" for any calendar quarter shall be the
product of (l) the Base Option Price at the end of the
immediately preceding calendar quarter plus the Accreted
Amount for all prior periods and (2) the Quarterly
Percentage for such quarter. The "Quarterly Percentage"
shall be (a) for any calendar quarter beginning on or after
January 1, 1994 through and including the calendar quarter
ending December 31, 1995, 3%, or (b) for any calendar
quarter thereafter, 3.5%.
(b) EXERCISE. The Option may be exercised in part at
any time during the Option Term, provided that the aggregate
exercise price payable upon such partial exercise shall be
at least $5,000,000. Upon any exercise, MetLife Louisiana
shall deliver to Tesoro (A) a number of shares of Preferred
Stock equal to the product of (1) the number of shares of
Preferred Stock held by MetLife Louisiana on the date hereof
and (2) the Exercise Fraction and (B) a number of shares of
Common Stock equal to the product of (1) the sum (the
"Subject Number of Common Shares") of the number of shares
of Common Stock owned by MetLife Louisiana on the date
hereof and any shares of Common Stock used to pay dividends
on the Preferred Stock pursuant to
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Section 1 of the Memorandum of Understanding prior to the
date of such exercise and (2) the Exercise Fraction. The
"Exercise Fraction" for any partial exercise shall be the
quotient obtained by dividing (a) the aggregate amount to be
paid upon such partial exercise by (b) $53,045,000 plus the
Accreted Amount less all cash dividends paid on shares of
Preferred Stock owned by MetLife Louisiana before such date
but after the date hereof, each determined as of the date of
exercise. In the event that the number of shares of Common
Stock to be delivered pursuant to the last two preceding
sentences exceeds the number of Common Shares then held by
MetLife Louisiana, then MetLife Louisiana shall deliver such
number of Common Shares as it then owns and the amount to be
paid by Tesoro upon such partial exercise shall be reduced
by the lowest aggregate Sales Amount which MetLife Louisiana
has received for a number of shares of Common Stock equal to
the number it would have been required to deliver pursuant
to such partial exercise but is unable to deliver because it
no longer owns such number of Common Shares. If the Option
is exercised in full, MetLife Louisiana will request that
Messrs. Ray C. Adam, Charles F. Luce, Steward G. Nagler,
James Q. Riordan and William S. Sneath resign from the Board
of Directors of Tesoro.
(c) MINIMUM PARTIAL EXERCISE TO CONTINUE OPTION.
Subject to the last sentence of this subparagraph (c), the
Option shall expire if prior to January 1, 1995, Tesoro has
not exercised the Option in an aggregate amount which is
equal to or greater than the 1995 Minimum Amount. In
addition, subject to the last sentence of this subparagraph
(c), the Option shall expire if prior to January 1, 1996,
Tesoro has not exercised the Option in a cumulative
aggregate amount which is equal to or greater than the 1996
Minimum Amount. The "1995 Minimum Amount" means $5,304,500
plus 10% of the Accreted Amount at the date of exercise.
The "1996 Minimum Amount" means $15,913,500 plus the
Accreted Amount at the date of exercise with respect to such
$15,913,500 minus the Accreted Amount which would have
accrued on the amount of any previous partial exercise from
the date of such exercise until the exercise which satisfies
the $15,913,500 requirement. Notwithstanding the foregoing
provisions of this subparagraph (c), the Option shall not
expire and shall remain in effect, if Tesoro pays all
regular quarterly dividends which become due and payable
after the date hereof in cash on the regular payment date in
February, May, August and November of each year.
(d) METHOD OF EXERCISING THE OPTION. Tesoro shall
exercise the Option in whole or in part by delivering
written notice to MetLife Louisiana at 70 Eagle Rock Avenue,
Eagle Rock Executive Offices, Second Floor, East Hanover,
New Jersey 07936, Attn: Chairman of the Board, or such
other address as MetLife Louisiana shall specify to Tesoro
in a writing stating that such writing is intended to change
the address for notice pursuant to this Section 1(d).
Notice may be given by hand delivery, transmission of a
facsimile or by deposit in the United States mail, postage
prepaid registered
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mail. Notice deposited in the United States mail shall be
deemed delivered five days after being so deposited. The
written notice of exercise shall specify (1) the dollar
amount being paid, (2) whether the Option is being exercised
in full or in part, (3) if the Option is being exercised in
part, a calculation of the Exercise Fraction based on the
information then available to Tesoro, and (4) a date and
time, which shall be no less than 10 days and no more than
30 days after the date of the notice, for the transfer of
the shares of Preferred Stock and Common Stock to be
delivered to Tesoro by MetLife Louisiana and the transfer of
the exercise price from Tesoro to MetLife Louisiana.
MetLife Louisiana shall deliver the certificates
representing the shares of Preferred Stock or Common Stock
to a place in New York City designated by Tesoro, or shall
cause such shares to be transferred to Tesoro by book entry.
Tesoro shall transfer the exercise price to MetLife
Louisiana by wire transfer to a bank in the United States
designated by MetLife Louisiana. If MetLife Louisiana fails
to make such a designation in writing to Tesoro at least
three days prior to the transfer date set forth in the
notice, then Tesoro shall pay the exercise price by
delivering a check payable to MetLife Louisiana at the place
in New York City designated by Tesoro for delivery of the
shares. At least three days prior the date for transfer of
the shares, MetLife Louisiana shall provide to Tesoro an
affidavit signed by the President, Chief Financial Officer,
Chief Accounting Officer or any Vice President of MetLife
Louisiana setting forth information with regard to each sale
of Common Stock by MetLife Louisiana on or after the later
of (i) the date of this Agreement and (ii) the date of the
last such affidavit previously delivered to Tesoro,
including the date and manner of sale and the cash amount
actually received by MetLife Louisiana. In the event such
information differs from the information used by Tesoro to
calculate the Exercise Fraction or the exercise price
required to exercise the Option in full, the Exercise
Fraction or exercise price shall be adjusted appropriately.
Nothing herein shall deprive Tesoro of any right to claims
in the event that the information provided did not
accurately reflect the timing, proceeds and notice of any
sale of Common Stock by MetLife Louisiana.
(e) MetLife Louisiana agrees to advise Tesoro in
writing addressed to Tesoro at Tesoro Petroleum Corporation,
8700 Tesoro Drive, San Antonio, Texas 78217, to the
attention of its President, with a copy addressed to its
Secretary, of the date and public or private nature of, and
proceeds from, any sale of Common Stock within 10 days after
such date.
2. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the substantive law of the State of
Delaware, without giving effect to the conflicts or choice of law
provisions of Delaware or any other jurisdiction.
3. COUNTERPARTS. This Agreement may be executed by the
parties hereto individually or in any combination, in one or more
counterparts (including by means of
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signature pages sent by telecopier), each of which shall be an
original, and all of which shall together constitute one and the same
agreement.
4. COMPLETE AGREEMENT. This document contains the complete
agreement between the parties relating to the subject matter hereof
and supersedes any prior understandings, agreements or representations
by or between the parties, written or oral, which may have related to
the subject matter hereof in any way, including, without limitation,
Sections 4 and 13 of the Memorandum of Understanding.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
METLIFE SECURITY INSURANCE TESORO PETROLEUM CORPORATION
COMPANY OF LOUISIANA
By: /S/ JAMES S. RUSSELL By: /S/ Bruce A. Smith
Name: James S. Russell Name:
Title: Vice-President Title:
and Treasurer
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