EXHIBIT 1.1
TESORO PETROLEUM CORPORATION
8% SENIOR SECURED NOTES DUE 2008
PURCHASE AGREEMENT
April 7, 2003
Goldman, Sachs & Co.,
As representative of the several Purchasers
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Tesoro Petroleum Corporation, a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Purchasers named in Schedule I hereto (the "Purchasers"), an aggregate of
$375,000,000 principal amount of the Company's 8% Senior Secured Notes due 2008
(the "Securities"). The Securities will be unconditionally guaranteed as to the
payment of principal, premium and interest (including special interest), if any,
(the "Guarantees") by Digicomp Inc., Far East Maritime Company, Gold Star
Maritime Company, Kenai Pipe Line Company, Tesoro Alaska Company, Tesoro Alaska
Pipeline Company, Tesoro Aviation Company, Tesoro Financial Services Holding
Company, Tesoro Gas Resources Company, Inc., Tesoro High Plains Pipeline
Company, Tesoro Marine Services Holding Company, Tesoro Marine Services, LLC,
Tesoro Maritime Company, Tesoro Petroleum Companies, Inc., Tesoro Refining and
Marketing Company, Tesoro Technology Company, Tesoro Trading Company, Tesoro
Vostok Company, Tesoro Wasatch, LLC and Victory Finance Company (each a
"Delaware Guarantor" and, collectively, the "Delaware Guarantors") Smiley's
Super Service, Inc., and Tesoro Hawaii Corporation, each a Hawaii corporation
(together, the "Hawaii Guarantors") and Tesoro Northstore Company, an Alaska
corporation (the "Alaska Guarantor" and, collectively with the Delaware
Guarantors and the Hawaii Guarantors, the "Guarantors"). Capitalized terms used
but not defined herein shall have the meanings assigned to them in the
Description of the Notes section of the Offering Circular (as defined below).
The Company, simultaneously with the sale of the Securities pursuant to
an indenture to be dated as of April 17, 2003 (the "Indenture") among the
Company, the Guarantors and The Bank of New York as Trustee (the "Trustee"),
proposes to borrow an aggregate amount of $200,000,000 in term loans (the "Term
Loans") from lenders pursuant to a term loan agreement among the Company, the
Guarantors and Goldman Sachs Credit Partners L.P., as the term loan
administrative agent (the "Term Loan Agreement") (it being understood and agreed
that neither Goldman Sachs Credit Partners L.P. nor any of its affiliates is, as
of the date of this Agreement, obligated to enter into the Term Loan
Agreement or to provide any funding thereunder), and an aggregate amount of
approximately $330,000,000 from lenders under a new $650,000,000 senior credit
facility (the "New Credit Facility"), pursuant to a Three-Year Credit Agreement,
to be dated as of April 17, 2003, by and among the Company, certain subsidiaries
of the Company, certain lenders party thereto and Bank One, NA, as
administrative agent (the "New Credit Facility Agreement"), the proceeds of
which, along with the proceeds from the Term Loans and the sale of the
Securities, will be used to repay all outstanding amounts under the Company's
Amended and Restated Credit Agreement dated as of May 17, 2002, by and among the
Company, the lenders party thereto, Lehman Brothers Inc., as arranger, Lehman
Commercial Paper Inc., as syndication agent, ABN AMRO Bank N.V., Bank of
America, N.A., Credit Lyonnais New York Branch and The Bank of Nova Scotia, as
co-documentation agents, and Bank One, NA, as administrative agent, as amended
by that certain First Amendment dated as of September 30, 2002, and that certain
Second Amendment dated as of December 13, 2002 (as amended, the "Existing Senior
Secured Credit Facility") and purchase approximately $25,000,000 of the
Company's existing senior subordinated notes. Collectively, the repayment of the
Existing Senior Secured Credit Facility and purchase by the Company of
approximately $25,000,000 of the Company's existing senior subordinated notes
with the proceeds from the sale of the Securities, borrowings under the Term
Loan Agreement and borrowings under the New Credit Facility, are referred to
herein as the "Financing Transaction."
The Company and each of the Guarantors have agreed to secure, equally
and ratably, the Securities and the Term Loans, by granting to the Collateral
Agent, for the benefit of the holders of the Securities, the Trustee, the
lenders under the Term Loan Agreement and the Term Loan Administrative Agent
(collectively, the "Secured Parties"), a first priority lien (subject to
Permitted Prior Liens) as such term is defined in the Description of the Notes
section of the Offering Circular on certain of their assets as evidenced by the
Security Agreement to be dated April 17, 2003 among the Company, the Guarantors
and the Collateral Agent (the "Security Agreement"), the Control Agreement among
the Company, Wilmington Trust Corporation or one of its affiliates, as
Collateral Agent (the "Collateral Agent") and an institution reasonably
acceptable to the Purchasers, as Depository Agent (the "Control Agreement"), and
the mortgages or deeds of trust as listed on Schedule A attached hereto (the
"Mortgages"), the Collateral Agency Agreement among the Obligors (as such term
will be defined in the Credit Agreement), the Trustee, the Term Loan
Administrative Agent, and the Collateral Agent (the "Collateral Agency
Agreement" and together with the Security Agreement, the Control Agreement, and
the Mortgages, collectively, the "Security Documents").
1. Each of the Company and the Guarantors, jointly and severally,
represents and warrants to, and agrees with, each of the Purchasers that:
(a) A preliminary offering circular, dated April 2, 2003
(the "Preliminary Offering Circular"), and an offering circular, dated
April 7, 2003 (the "Offering Circular"), have been prepared in
connection with the offering of the Securities. Any reference to the
Preliminary Offering Circular or the Offering Circular shall be deemed
to refer to and include the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2002 (the "2002 10-K"), filed
pursuant to the United States Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Company's Current Report on Form 8-K
filed on February 25, 2002, as amended by Amendment No. 1 to the
Current Report on Form 8-K filed on April 22, 2002, the Company's
Current Report on Form 8-K filed on May 24, 2002, as amended by
Amendment No. 1 to the Current Report on Form 8-K filed on July 16,
2002 and Amendment No. 2 to the Current Report on Form 8-K filed on
July 24, 2002, and the Company's Current Report on Form 8-K filed on
April 2, 2003, each of which is incorporated by reference in and made a
part of the Preliminary Offering Circular and the Offering Circular,
and any reference to the Preliminary Offering Circular or the Offering
Circular, as the case may be, as amended or supplemented, as of any
specified date, shall be deemed to include any documents filed with the
United States Securities and Exchange Commission (the "Commission")
pursuant to
2
Section 13(a), 13(c) or 15(d) of the Exchange Act after the date of the
Preliminary Offering Circular or the Offering Circular, as the case may
be, and prior to the completion of the distribution of the Securities;
and all documents filed under the Exchange Act and so deemed to be
included in the Preliminary Offering Circular or the Offering Circular,
as the case may be, or any amendment or supplement thereto are
hereinafter called the "Exchange Act Reports." The Exchange Act
Reports, when they were or are filed with the Commission, conformed or
will conform in all material respects to the applicable requirements of
the Exchange Act and the applicable rules and regulations of the
Commission thereunder. The Preliminary Offering Circular or the
Offering Circular and any amendments or supplements thereto and the
Exchange Act Reports did not and will not, as of their respective
dates, contain an untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Company
by a Purchaser through Goldman, Sachs & Co. expressly for use therein;
(b) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements
included in the Offering Circular any material loss or interference
with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court
or governmental action, order or decree, otherwise than as set forth or
contemplated in the Offering Circular; and, since the respective dates
as of which information is given in the Offering Circular, there has
not been any change in the capital stock or long-term debt of the
Company or any of its subsidiaries or any material adverse change, or
any development involving a prospective material adverse change, in or
affecting the general affairs, management, consolidated financial
position, stockholders' equity or results of operations of the Company
and its subsidiaries, otherwise than as set forth or contemplated in
the Offering Circular;
(c) As of the date of this Agreement, and at the Time of
Delivery (as defined below), each of the Company's subsidiaries that
are not named as Guarantors under this Agreement and are not guarantors
of the Securities, either (i) is not a "Domestic Subsidiary" as such
term is defined in the Description of the Notes section of the Offering
Circular or (ii) qualifies as an "Immaterial Subsidiary" as such term
is defined in the Description of the Notes section of the Offering
Circular;
(d) The Company and its subsidiaries have good and
indefeasible title in fee simple to all real property and good and
defensible title to all personal property owned by them, in each case
free and clear of all liens, encumbrances and defects except such as
are described in, or permitted by, the Offering Circular or such as do
not materially adversely affect the value of such property and do not
interfere with the use made and proposed to be made of such property by
the Company and its subsidiaries; and all real property, buildings and
vessels held under lease by the Company and its subsidiaries are held
by them under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made
and proposed to be made of such property, buildings and vessels by the
Company and its subsidiaries subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights or providing for the relief
of debtors and to general equity principles;
(e) The Company and the Guarantors have each been duly
incorporated or formed, as the case may be, and are validly existing as
a corporation or limited liability company, as the case may be, in good
standing under the laws of their respective jurisdictions of
incorporation or organization, as the case may be, with corporate or
limited liability company
3
power and authority to own or lease their properties and conduct their
business as described in the Offering Circular, and have been duly
qualified as a foreign corporation or limited liability company, as the
case may be, for the transaction of business and are in good standing
under the laws of each other jurisdiction in which the character of
business conducted by it or the location of properties owned or leased
make such qualification or registration necessary (except where the
failure to so qualify would not have a material adverse effect on (i)
the condition (financial or otherwise), results of operations,
business, earnings or prospects of the Company and its subsidiaries,
taken as a whole, (ii) the value of the Collateral or (iii) the
validity or enforceability of the Security Documents or any lien
purporting to be created thereby or any right or remedy arising
thereunder (a "Material Adverse Effect"));
(f) The Company has an authorized capitalization as set
forth in the Offering Circular, and all of the issued shares of capital
stock of the Company have been duly and validly authorized and issued
and are fully paid and non-assessable; all of the issued shares of
capital stock of each Guarantor that is a corporation have been duly
and validly authorized and issued, are fully paid and non-assessable
and (except as described in the Offering Circular and except for one
share of Tesoro Petroleum (Singapore) Pte Ltd.) are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims (each, a "Lien"); and all of the outstanding limited
liability company interests of each Guarantor that is a limited
liability company are owned directly or indirectly by the Company, free
and clear of all Liens (except as described in the Offering Circular);
(g) The Securities have been duly authorized by the
Company and, at the Time of Delivery, will have been duly executed and
delivered by the Company. When the Securities have been issued,
executed and authenticated in accordance with the terms of the
Indenture, and delivered against payment therefor in accordance with
the terms hereof and thereof, the Securities will constitute valid and
legally binding obligations of the Company, entitled to the benefits
provided by the Indenture, enforceable against the Company in
accordance with their terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles;
(h) The Indenture has been duly authorized by the Company
and each of the Guarantors, and, when executed and delivered by the
Company and each of the Guarantors will have been duly executed and
delivered (assuming due authorization, delivery and performance by the
Trustee) and will constitute a valid and legally binding obligation of
the Company and the Guarantors, enforceable against the Company in
accordance with its terms, subject, as to enforcement against the
Company, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights or
providing for the relief of debtors and to general equity principles,
and enforceable against the Guarantors in accordance with its terms,
subject, as to enforcement against the Guarantors, to bankruptcy,
insolvency, fraudulent transfer, fraudulent conveyance, reorganization
and other laws of general applicability relating to or affecting
creditors' rights or providing for the relief of debtors and to general
equity principles;
(i) The Guarantees have been duly authorized by each of
the Guarantors and, when issued and delivered pursuant to this
Agreement and the Indenture, will have been duly executed, issued and
delivered and will constitute valid and legally binding obligations of
such Guarantors, entitled to the benefits provided by the Indenture and
enforceable against them in accordance with their terms, subject, as to
enforcement, to bankruptcy, insolvency, fraudulent transfer, fraudulent
conveyance, reorganization and other laws of general applicability
relating to or affecting creditors' rights or providing for the relief
of debtors and to general equity principles;
4
(j) The exchange and registration rights agreement to be
dated April 17, 2003, among the Company, the Guarantors and the
Purchasers (the "Registration Rights Agreement") has been duly
authorized by the Company and each of the Guarantors and, when executed
and delivered by the Company and such Guarantors, will have been duly
executed and delivered and will constitute a valid and legally binding
obligation of the Company and such Guarantors, enforceable against them
in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights or providing
for the relief of debtors and to general equity principles;
(k) The Company's 8% Senior Secured Notes due 2008 to be
issued in exchange for the Securities in accordance with the
Registration Rights Agreement, which will have terms substantially
identical in all material respects to the Securities (the "Exchange
Securities"), have been duly authorized for issuance by the Company
and, when issued and delivered pursuant to this Agreement, the
Registration Rights Agreement and the Indenture, will have been duly
executed. When the Exchange Securities have been issued, executed and
authenticated in accordance with the terms of the Indenture, they will
constitute valid and legally binding obligations of the Company,
entitled to the benefits provided by the Indenture and enforceable in
accordance with their terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights or providing for the relief
of debtors and to general equity principles;
(l) The guarantees of the Company's obligations under the
Exchange Securities (the "Exchange Guarantees") to be offered in
exchange for the Guarantees in the Exchange Offer have been duly
authorized by each of the Guarantors and, when issued and delivered
pursuant to this Agreement and the Indenture, will have been duly
executed, issued and delivered and will constitute valid and legally
binding obligations of each such the Guarantor, entitled to the
benefits provided by the Indenture and enforceable in accordance with
their terms, subject, as to enforcement, to bankruptcy, insolvency,
fraudulent transfer, fraudulent conveyance, reorganization and other
laws of general applicability relating to or affecting creditors'
rights or providing for the relief of debtors and to general equity
principles;
(m) The Security Documents to which the Company and the
Guarantors are a party have each been duly authorized by each of the
Company and such Guarantors and, when executed and delivered by the
Company and each of the Guarantors, will constitute valid and legally
binding obligations of the Company and such Guarantors, respectively,
enforceable against the Company and such Guarantors in accordance with
their respective terms, subject, as to enforcement and the Liens
created thereby, to bankruptcy, insolvency, fraudulent transfer,
fraudulent conveyance, reorganization and other laws of general
applicability relating to or affecting creditors' rights or providing
for the relief of debtors and to general equity principles;
(n) The Mortgages have each been duly authorized by the
Guarantors party thereto and, when executed and delivered by such
Guarantors, will constitute valid and legally binding obligations of
such Guarantors, respectively, enforceable against such Guarantors in
accordance with their respective terms, subject, as to enforcement and
the Liens created thereby, to bankruptcy, insolvency, fraudulent
transfer, fraudulent conveyance, reorganization and other laws of
general applicability relating to or affecting creditors' rights or
providing for the relief of debtors and to general equity principles;
(o) None of the transactions contemplated by this
Agreement (including, without limitation, the use of the proceeds from
the sale of the Securities) will violate or result in a violation of
Section 7 of the Exchange Act, or any regulation promulgated
thereunder,
5
including, without limitation, Regulations T, U, and X of the Board of
Governors of the Federal Reserve System;
(p) Neither the Company nor the Guarantors has taken, nor
will any of them take, directly or indirectly, any action prohibited by
Regulation M under the Securities Act of 1933, as amended (the
"Securities Act");
(q) The issue and sale of the Securities and the
Guarantees, the grant and perfection of security interests in the
Collateral pursuant to the Security Documents, the performance by the
Company and the Guarantors with their respective obligations pursuant
to provisions of the Securities, the Indenture, the Guarantees, the
Registration Rights Agreement, the Security Documents, and this
Agreement (collectively, the "Operative Documents"), the consummation
by the Company and the Guarantors of the transactions contemplated by
the Financing Transaction or the transactions contemplated by this
Agreement will not:
(i) conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute
a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound or to which any of
the property or assets of the Company or any of its
subsidiaries is subject;
(ii) result in any violation of the provisions of
the Certificate of Incorporation or Certificate of Formation
or By-laws or other organizational documents, as applicable,
of the Company or any of its subsidiaries;
(iii) result in any violation of the applicable
provisions of any law or statute or any order, rule or
regulation, judgment or decree of any court or governmental
agency or body having jurisdiction over, and applicable to,
the Company or any of its subsidiaries or any of their
respective properties or assets; or
(iv) result in the imposition or creation of (or
the obligation to create or impose) a Lien under any agreement
or instrument to which the Company or any subsidiary is a
party or by which the Company or any of their respective
properties or assets is bound (other than as provided in favor
of the holders of the Securities and lenders under the Term
Loan Agreement, and as provided in favor of the lenders under
the New Credit Facility);
except in the case of clauses (i), (iii) and (iv) for such conflicts, breaches,
violations, defaults or Liens which, individually or in the aggregate, would not
result in a Material Adverse Effect;
(r) No consent, approval, authorization, order,
registration or qualification of or with any court or governmental
agency or body is required for the issue and sale of the Securities and
the Guarantees, the grant and perfection of security interests in the
Collateral pursuant to the provisions of the Security Documents, the
performance by the Company and the Guarantors with their respective
obligations pursuant to the Securities, the Guarantees, the Indenture,
the Registration Rights Agreement and the Security Documents or the
consummation by the Company and the Guarantors of the transactions
contemplated by the Financing Transaction or the transactions
contemplated by this Agreement except for (1) the filing and
effectiveness of a registration statement by the Company with the
Commission under the Securities Act pursuant to the Registration Rights
Agreement, (2) the filings required to perfect the Collateral Agent's
security interests granted pursuant to the Security Documents, (3) the
filings required to release existing Liens, (4) such consents,
approvals, authorizations,
6
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by the Purchasers, (5) those regulatory
approvals from the North Dakota Public Service Commission required for
the grant of security interest in the Company's 700-mile pipeline
system in North Dakota and Montana, and the Capital Stock of Tesoro
High Plains Pipeline Company, and (6) such consents required in
connection with the assignment and transfer of leases related to the
waterfront rights at the Hawaii, Alaska, California and Washington
refineries of subsidiaries of the Company;
(s) Neither the Company nor any of the subsidiaries is in
violation of its Certificate of Incorporation or By-laws or in default
in the performance or observance of any obligation, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound, except
where such violation or default would not have a Material Adverse
Effect;
(t) The statements set forth in the Offering Circular
under the captions "Business-Government Regulation and Legislation,"
"Description of Other Indebtedness," "Description of the Notes" and
"Certain Federal Income Tax Considerations" are accurate in all
material respects and present fairly the information described therein;
(u) Other than as set forth in the Offering Circular,
there are no legal or governmental proceedings pending to which the
Company or any of its subsidiaries is a party or to which any property
or assets of the Company or any of its subsidiaries is the subject
which (i) could reasonably be expected to have a Material Adverse
Effect or (ii) could materially and adversely affect the consummation
by the Company and each of the Guarantors of their obligations pursuant
to this Agreement or the other Operative Documents; and, to the
Company's and each of the Guarantors' knowledge, no such proceedings
are threatened or contemplated by governmental authorities or
threatened by others;
(v) When the Securities and the Guarantees are issued and
delivered pursuant to this Agreement, neither the Securities nor the
Guarantees will be of the same class (within the meaning of Rule 144A
under the Securities Act) as securities of the Company or the
Guarantors which are listed on a national securities exchange
registered under Section 6 of the Exchange Act or quoted in a U.S.
automated inter-dealer quotation system;
(w) The Company is subject to Section 13 or 15(d) of the
Exchange Act;
(x) Neither the Company nor any of its subsidiaries is,
or after giving effect to the offering and sale of the Securities, will
be, subject to the Public Utility Holding Company Act of 1935, as
amended, and the rules and regulations thereunder;
(y) Neither the Company, nor any of its subsidiaries, is,
or, after giving effect to the offering and sale of the Securities and
the application of the proceeds therefrom as described under "Use of
Proceeds" in the Offering Circular, will be, an "investment company" or
an entity "controlled by an investment company," as such terms are
defined in the United States Investment Company Act of 1940, as
amended, and the rules and regulations thereunder (the "Investment
Company Act");
(z) The Company and the Guarantors (i) make and keep
accurate books and records and (ii) maintain internal accounting
controls which provide reasonable assurance that (A) transactions are
executed in accordance with management's authorization, (B)
transactions are recorded as necessary to permit preparation of its
financial statements and to
7
maintain accountability for its assets, (C) access to its assets is
permitted only in accordance with management's authorization and (D)
the reported accountability for its assets is compared with existing
assets at reasonable intervals and appropriate action is taken with
respect to any difference;
(aa) Neither the Company nor any Guarantor nor any their
respective affiliates nor any person acting on its or their behalf has
engaged or will engage in any "directed selling efforts" within the
meaning of Regulation S under the Securities Act with respect to the
Securities or the Guarantees. The Company and the Guarantors, each of
their affiliates and any person acting on its or their behalf (other
than the Purchasers, as to whom the Company and the Guarantors make no
representation) has complied and will comply with the offering
restriction requirements of Regulation S. To the Company's and
Guarantor's knowledge, the sale of the Securities and the Guarantees
pursuant to Regulation S is not part of a plan or scheme to evade the
registration provisions of the Securities Act;
(bb) Neither the Company nor any of the Guarantor or any
of its or their respective affiliates (as defined in Rule 501(b) of
Regulation D under the Securities Act, an "Affiliate") has directly, or
through any agent, (i) sold, offered for sale, solicited offers to buy
or otherwise negotiated in respect of, any security (as defined in the
Securities Act) which is or will be integrated with the sale of the
Securities or the Guarantees in a manner that would require the
registration under the Securities Act of the Securities or the
Guarantees or (ii) engaged in any form of general solicitation or
general advertising in connection with the offering of the Securities
or the Guarantees (as those terms are used in Regulation D under the
Securities Act), or in any manner involving a public offering within
the meaning of Section 4(2) of the Securities Act; provided, however,
no representation is made as to the Initial Purchasers or any person
acting on their behalf. No securities of the same class as the
Securities and the Guarantees have been issued and sold by the Company
or the Guarantors within the six-month period immediately prior to the
date hereof;
(cc) Deloitte & Touche LLP, who have certified certain
financial statements of the Company and its subsidiaries, are
independent public accountants as defined in the AICPA's Code of
Professional Conduct;
(dd) Except as described in the Offering Circular and
except for such matters as would not, singly or in the aggregate,
result in a Material Adverse Effect, (i) neither the Company nor any of
its subsidiaries is in violation of any federal, state, local or
foreign statute, law, rule, regulation, ordinance, code, policy or rule
of common law or any judicial or administrative order, consent, decree
or judgment thereof, including any judicial or administrative order,
consent, decree or judgment relating to pollution or protection of
human health, the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including, without limitation, laws and regulations relating
to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum
or petroleum products (collectively, "Hazardous Materials") or to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws"), (ii) the Company and each of its subsidiaries
have all permits, authorizations and approvals required under any
applicable Environmental Laws and are each in compliance with their
requirements, (iii) to the knowledge of the Company, there are no
pending or overtly threatened administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigation or proceedings relating to
any Environmental Law against the Company or any of its subsidiaries
and (iv) to the knowledge of the Company, there are no events or
circumstances that might reasonably be expected to form the basis of an
order for clean-up or remediation, or an action, suit or
8
proceeding by any private party or governmental body or agency, against
or affecting the Company or any of the subsidiaries relating to
Hazardous Materials or Environmental Laws;
(ee) The Company and each of its subsidiaries own or
possess adequate rights to use all material patents, patent
applications, trademarks, service marks, trade names, trademark
registrations, service mark registrations, copyrights and licenses
necessary for the conduct of their respective businesses, except where
the failure to have such rights would not have a Material Adverse
Effect, and have no reason to believe that the conduct of their
respective businesses will conflict with, and have not received any
notice of any claim of conflict with, any such rights of others which,
in the aggregate, could reasonably be expected to have a Material
Adverse Effect;
(ff) The pro forma financial statements which are included
and incorporated by reference in the Offering Circular present fairly
in all material respects the historical and proposed transactions
previously consummated by the Company or contemplated by this Agreement
and the Offering Circular; and such pro forma financial statements
comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, the Exchange Act and the
Rules and Regulations and have been prepared on a basis consistent with
the historical consolidated financial statements of the Company;
(gg) The financial statements, including the notes
thereto, included or incorporated by reference in the Offering Circular
comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, the Exchange Act, and
the rules and regulations of the Commission thereunder, and present
fairly in all material respects the financial position of the Company
and its consolidated subsidiaries and the other entities for which
financial statements are included in the Offering Circular as of the
dates indicated and condition and results of operations for the periods
specified; said financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of
America applied on a consistent basis throughout the periods involved
except as noted therein; and the other historical financial and
statistical information and operating data of the Company which appear
in and are included and incorporated in by reference in the Offering
Circular are in all material respects accurately presented and prepared
on a basis consistent with the financial statements included and
incorporated by reference in the Offering Circular and the books and
records of the Company;
(hh) The Company and its subsidiaries, collectively (the
"Consolidated Company"), and each of the Guarantors has not, and, as a
result of consummation of the transactions herein contemplated and the
consummation of the Financing Transaction, will not have, incurred
debts beyond its ability to pay as they mature;
(ii) The present fair saleable value of the assets of the
Consolidated Company and each of the Guarantors, exceeds the amount
required to pay the probable liability on its and their existing debts,
respectively (whether matured or unmatured, liquidated or unliquidated,
absolute, fixed or contingent), as they become absolute and matured,
and as a result of consummation of the transactions herein contemplated
and after giving effect to the Financing Transaction, will exceed such
amount;
(jj) The Consolidated Company and each of the Guarantors,
does not, and, as a result of consummation of the transactions herein
contemplated and the consummation of the Financing Transaction, will
not, have unreasonably small capital for it to carry on its business as
proposed to be conducted;
9
(kk) Neither the Consolidated Company nor any of the
Guarantors are incurring obligations or making transfers under any
evidence of indebtedness with the intent to hinder, delay or defraud
any entity to which it is or will become indebted;
(ll) Except for such matters which, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect, (i) no labor disturbance by the employees of the Company or any
of its subsidiaries exists or, to the best of the Company's knowledge,
is imminent, (ii) except as disclosed in the Offering Circular, neither
the Company nor any of its subsidiaries is party to a collective
bargaining agreement, and (iii) except as disclosed in the Offering
Circular, there are no unfair labor practice complaints pending against
the Company or any of its subsidiaries or, to the Company's knowledge,
threatened against any of them;
(mm) No "prohibited transaction" (as defined in Section
406 of the Employee Retirement Income Security Act of 1974, as amended,
including the regulations and published interpretations thereunder
("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as
amended from time to time (the "Code")), or "accumulated funding
deficiency" (as defined in Section 302 of ERISA) or any of the events
set forth in Section 4043(b) of ERISA (other than events with respect
to which the 30-day notice requirement under Section 4043 of ERISA has
been waived) has occurred with respect to any "employee benefit plan",
(as defined in Section 3(3) of ERISA), or any "employee benefit plan"
of any entity which is considered one employer with the Company under
Section 4001 of ERISA or Section 414 of the Code (an "ERISA
Affiliate"); each such "employee benefit plan" is in compliance in all
material respects with its terms and applicable law, including ERISA
and the Code; and the Company or any ERISA Affiliate has not
participated in any multiemployer plan (as defined in Section 3(37) of
ERISA); the Company or any ERISA Affiliate has not incurred and does
not expect to incur liability under Title IV of ERISA with respect to
the termination of, or withdrawal from any "pension plan" (as defined
in Section 3(2) of ERISA) and each "pension plan" for which the Company
would have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing
has occurred, whether by action or by failure to act, which could cause
the loss of such qualification;
(nn) Neither the Company nor any of its subsidiaries nor,
to the Company's knowledge, any of its employees or agents has at any
time during the last five years (i) made any unlawful contribution to
any candidate for foreign office, or failed to disclose fully any
contribution in violation of law or (ii) made any payment to any
Federal or state governmental officer or official, or other person
charged with similar public or quasi-public duties, other than payments
required or permitted by the laws of the United States or any
jurisdiction thereof;
(oo) At the Time of Delivery, no Pipeline Subsidiary will
have guaranteed or granted or agreed to grant any security interest in
any of its present or future property to secure any of the Obligations
under the New Credit Facility and the New Credit Facility will be
governed by an agreement that includes the provisions described in
clause (1) of the definition of "Qualified Credit Facility" in the
Description of the Notes section of the Offering Circular;
(pp) As of the Time of Delivery, the Company and the
Guarantors will own the Collateral free and clear of all Liens (other
than Permitted Liens), and no Financing Statements (as defined below)
in respect of any property or assets of the Company or any Guarantor
will be on file in favor of any person other than those in respect of
Permitted Prior Liens (as such term is defined in the Description of
the Notes section of the Offering Circular) and those to be terminated
with respect to existing indebtedness;
10
(qq) When executed and delivered to the Collateral Agent
at the Time of Delivery, the Security Documents grant and create, in
favor of the Collateral Agent for the benefit of the Secured Parties as
security for all of the Secured Obligations, a valid and enforceable
security interest in the Collateral, and when the filings referred to
in the following sentences are made, such security interests will be
perfected first priority security interests (subject to Permitted Prior
Liens). When delivered at the Time of Delivery, each Mortgage will be
delivered, duly acknowledged and, if required for recordation, attested
and otherwise will be in recordable form, and when such Mortgage is
filed for record and recorded in the filing office identified therein,
the security interest of the Collateral Agent in the real property
described therein will be duly perfected. Each of the Company and
Guarantors is a "registered organization" (as defined in Article 9 of
the California Uniform Commercial Code) under the law of the state in
which it is identified in the Indenture, as being organized, and at the
Time of Delivery all security interests granted under the Security
Documents in Collateral consisting of personal property or fixtures
will be duly perfected to the extent such security interests may be
perfected by filing upon the filing of the financing statements
referred to in Section 7(m) hereof. At the Time of Delivery, (i) all
Collateral consisting of Capital Stock of Pipeline Subsidiaries will be
represented by certificated securities and (ii) all such certificated
securities and all promissory notes and other instruments then
evidencing or representing any Collateral will be delivered to the
Collateral Agent in pledge for the benefit of the Secured Parties as
security for all of the Secured Obligations, duly endorsed by an
effective endorsement (unless such certificated securities, promissory
notes and instruments are Excluded Assets);
(rr) All Obligations under or in respect of the Securities
and the Term Loans constitute "Senior Debt" as such term is defined in,
and for the purposes of, the indentures governing the Company's
outstanding 9-5/8% senior subordinated notes due 2012, 9-5/8% senior
subordinated notes due 2008 and 9% senior subordinated notes due 2008
and the promissory notes constituting the Company's junior subordinated
notes due 2012;
(ss) As of the Time of Delivery, the representations and
warranties contained in the Security Documents will be true and correct
in all respects; and
(tt) The Securities, the Guarantees, the Indenture, the
Registration Rights Agreement, the Security Documents, the Term Loan
Agreement and the New Credit Facility Agreement will conform in all
material respects to the descriptions thereof in the Offering Circular.
2. Subject to the terms and conditions herein set forth, the
Company agrees to issue and sell to each of the Purchasers, and each of the
Purchasers agrees, severally and not jointly, to purchase from the Company, at a
purchase price of 96.494% of the principal amount thereof, plus accrued
interest, if any, from April 17, 2003 to the Time of Delivery hereunder, the
principal amount of Securities (and the Guarantees thereof) set forth opposite
the name of such Purchaser in Schedule I hereto.
3. Upon the authorization by you of the release of the Securities
and the Guarantees, the several Purchasers propose to offer the Securities and
the Guarantees for sale upon the terms and conditions set forth in this
Agreement and the Offering Circular and each Purchaser hereby represents and
warrants to, and agrees with the Company that:
(a) It will offer and sell the Securities (i) only to
persons who it reasonably believes are "qualified institutional buyers"
("QIBs") within the meaning of Rule 144A under the Securities Act in
transactions meeting the requirements of Rule 144A and (ii) through its
selling agents, outside the United States, to non-U.S. persons in
reliance on Regulation S under the Securities Act;
11
(b) It is an Institutional Accredited Investor; and
(c) It will not solicit offers for, or offer or sell, the
Securities or the Guarantees by means of any form of general
solicitation or general advertising or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act.
(d) In connection with the transactions described in
subsection (a)(ii) of this Section 3, you have offered and sold the
Securities and the Guarantees, and will offer and sell the Securities
and the Guarantees, (i) as part of your distribution at any time and
(ii) otherwise until 40 days after the later of the commencement of the
offering and the Closing Date (as defined herein) (the "Distribution
Compliance Period"), only in accordance with Rule 903 of Regulation S.
Accordingly, the Purchasers represent and agree that, with respect to
the transactions described in subsection (a)(ii) of this Section 3,
neither they, nor any of their Affiliates, nor any person acting on
their behalf has engaged or will engage in any directed selling efforts
with respect to the Securities and the Guarantees, and that they have
complied and will comply with the offering restrictions requirements of
Regulation S. The Purchasers agree that, at or prior to the
confirmation of sale of the Securities and the Guarantees pursuant to
subsection (a)(iii)(B) of this Section 3, they shall have sent to each
distributor, dealer or person receiving a selling concession, fee or
other remuneration that purchases Securities and Guarantees from the
Purchasers during the Distribution Compliance Period a confirmation or
notice to substantially the following effect:
"The Securities covered hereby have not been registered under
the U.S. Securities Act of 1933 (the "Securities Act") and may
not be offered or sold within the United States to, or for the
account or benefit of, U.S. Persons (i) as part of their
distribution at any time or (ii) otherwise until 40 days after
the later of the commencement of the offering and the time of
delivery of the Securities, except in either case in
accordance with Regulation S or Rule 144A under the Securities
Act. The terms used above have the meaning given to them by
Regulation S."
4. (a) The Securities to be purchased by each Purchaser hereunder
will be represented by one or more definitive global Securities in book-entry
form which will be deposited by or on behalf of the Company with The Depository
Trust Company ("DTC") or its designated custodian. The Company will deliver the
Securities and the Guarantees to Goldman, Sachs & Co., for the account of each
Purchaser, against payment by or on behalf of such Purchaser of the purchase
price therefor by wire transfer in immediately available funds, by causing DTC
to credit the Securities and the Guarantees to the account of Goldman, Sachs &
Co. at DTC. The Company and the Guarantors will cause the certificates
representing the Securities and the Guarantees to be made available to Goldman,
Sachs & Co. for checking at least 24 hours prior to the Time of Delivery at the
office of DTC or its designated custodian (the "Designated Office"). The time
and date of such delivery and payment shall be 9:30 a.m., New York City time, on
April 17, 2003 or such other time and date as Goldman, Sachs & Co. and the
Company may agree upon in writing. Such time and date are herein called the
"Time of Delivery;" and
(b) The documents to be delivered at the Time of Delivery by
or on behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the Securities and any additional documents requested by the
Purchasers pursuant to Section 7(u) hereof, will be delivered at such time and
date at the offices of Latham & Watkins LLP, 885 Third Avenue, New York, New
York 10022 (the "Closing Location"), and the Securities will be delivered at the
Designated Office, all at the Time of Delivery. A meeting will be held at the
Closing Location at 5:00 p.m., New York City time, on the New York Business Day
next preceding the Time of Delivery, at which meeting the final drafts of the
documents to be delivered pursuant to the preceding sentence will be available
for review by the
12
parties hereto. For the purposes of this Section 4, "New York Business Day"
shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a
day on which banking institutions in New York are generally authorized or
obligated by law or executive order to close.
5. Each of the Company and the Guarantors, jointly and severally,
agrees with each of the Purchasers:
(a) To prepare the Offering Circular in a form approved
by you; to make no amendment or any supplement to the Offering Circular
which shall be disapproved by you promptly after reasonable notice
thereof; and to furnish you with such number of copies thereof as you
shall reasonably request;
(b) Promptly, from time to time, to take such action as
you may reasonably request to qualify the Securities and the Guarantees
for offering and sale (or obtain an exemption from registration) under
the securities laws of such jurisdictions as you may request and to
comply with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be necessary
to complete the distribution of the Securities and the Guarantees,
provided that in connection therewith, neither the Company, nor any of
the Guarantors, shall be required to qualify as a foreign corporation
or dealer in securities or to execute a general consent to service of
process in any jurisdiction;
(c) If, at any time prior to the expiration of nine
months after the date of the Offering Circular, any event shall have
occurred as a result of which the Offering Circular as then amended or
supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made when such Offering Circular is delivered, not misleading, or,
if for any other reason it shall be necessary or desirable during such
same period to amend or supplement the Offering Circular, to notify you
and upon your request to prepare and furnish without charge to each
Purchaser and to any dealer in securities as many written and
electronic copies as you may from time to time reasonably request of an
amended Offering Circular or a supplement to the Offering Circular
which will correct such statement or omission or effect such
compliance;
(d) To take such steps as shall be necessary to ensure
that neither the Company nor any Guarantor shall become an "investment
company" within the meaning of such term under the Investment Company
Act of 1940, as amended, and the rules and regulations of the
Commission thereunder;
(e) At any time when the Company is not subject to
Section 13 or 15(d) of the Exchange Act, for the benefit of holders
from time to time of Securities, to furnish at its expense, upon
request, to holders of Securities and prospective purchasers of
securities information (the "Additional Issuer Information") satisfying
the requirements of subsection (d)(4)(i) of Rule 144A under the
Securities Act;
(f) To use its reasonable best efforts to cause the
Securities to be eligible for the PORTAL trading system of the National
Association of Securities Dealers, Inc.;
(g) To furnish to the Purchasers as soon as practicable
after the end of each fiscal year an annual report (including a balance
sheet and statements of income, stockholders' equity and cash flows of
the Company and its consolidated subsidiaries certified by independent
public accountants) and, as soon as practicable after the end of each
of the first three quarters of each fiscal year (beginning with the
fiscal quarter ending after the date of the
13
Offering Circular), to make available to the Purchasers consolidated
summary financial information of the Company and its subsidiaries for
such quarter in reasonable detail;
(h) During a period of five years from the date of the
Offering Circular, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders of the
Company, and to deliver to you as soon as they are available, copies of
any reports and financial statements furnished to or filed with the
Commission or any securities exchange on which the Securities, or any
class of securities of the Company or any of the Guarantors is listed;
(i) Not to, and to cause its affiliates not to, sell,
offer for sale or solicit offers to buy or otherwise negotiate in
respect of any security (as defined in the Securities Act) in a
transaction that could be integrated with the sale of the Securities or
Guarantees in a manner that would require the registration under the
Securities Act of the Securities or the Guarantees;
(j) To do and perform all things required to be done and
performed under this Agreement, the Securities, the Guarantees, the
Indenture, the Registration Rights Agreement and the Security Documents
prior to and after the Time of Delivery;
(k) To comply with all agreements set forth in the
representation letters of the Company to DTC relating to the approval
of the Securities by DTC for "book entry" transfer;
(l) To use the net proceeds received by it from the sale
of the Securities pursuant to this Agreement in the manner specified in
the Offering Circular under the caption "Use of Proceeds"; and
(m) For a period of 180 days from the date of the
Offering Circular, neither the Company, nor any of its subsidiaries or
other affiliates over which it exercises management or voting control,
nor any person acting on its behalf will, without the prior written
consent of Goldman, Sachs & Co., offer, sell, contract to sell or
otherwise dispose of any securities that are substantially similar to
the Securities, except for the Exchange Securities in connection with
the Exchange Offer.
6. Each of the Company and the Guarantors, jointly and severally,
covenants and agrees with the several Purchasers that the Company and the
Guarantors will pay or cause to be paid all reasonable expenses incident to the
performance of the obligations of the Company and the Guarantors under this
Agreement, including the following: (i) the fees, disbursements and expenses of
the Company's counsel and accountants in connection with the issue of the
Securities and the Guarantees, and all other expenses in connection with the
preparation, printing and filing of the Preliminary Offering Circular and the
Offering Circular and any amendments and supplements thereto and the mailing and
delivering of copies thereof to the Purchasers and persons designated by them;
(ii) the cost of printing or producing any Agreement among Purchasers, this
Agreement, the Indenture, the Registration Rights Agreement, the Security
Documents, the Blue Sky and Legal Investment Memoranda, closing documents
(including any compilations thereof) and any other documents in connection with
the offering, purchase, sale and delivery of the Securities; (iii) all expenses
in connection with the qualification of the Securities, the Exchange Securities,
the Guarantees and the Exchange Guarantees for offering and sale under state
securities laws as provided in Section 5(b) hereof, including the reasonable
fees and disbursements of counsel for the Purchasers in connection with such
qualification and in connection with the Blue Sky and legal investment surveys;
(iv) all expenses associated with the creation and perfection of security
interests and associated documents, including, without limitation, the Security
Documents and all Financing Statements (as defined below), including filing fees
and the reasonable fees and disbursements of Latham & Watkins LLP incurred in
connection therewith and the fees and disbursements of local counsel to the
Purchasers incurred in
14
connection therewith; (v) any fees charged by securities rating services for
rating the Securities and the Exchange Securities; (vi) the cost of printing the
Securities and the Guarantees; (vii) the fees and expenses of the Trustee and
any agent of the Trustee and the fees and disbursements of counsel for the
Trustee in connection with the Indenture and the Securities; (viii) the fees and
expenses of the Collateral Agent and any agent of the Collateral Agent and the
fees and expenses of counsel for the Collateral Agent in connection with the
Security Documents, the Financing Statements and the Collateral; (ix) any
expense or listing fee incurred in connection with the designation of the
Securities for trading in PORTAL; and (x) all other costs and expenses incident
to the performance of its obligations hereunder which are not otherwise
specifically provided for in this Section 6. It is understood, however, that,
except as provided in this Section 6, and Sections 8 and 11 hereof, the
Purchasers will pay all of their own costs and expenses, including the fees of
their counsel, transfer taxes on resale of any of the Securities by them, and
any advertising expenses connected with any offers they may make.
7. The obligations of the Purchasers hereunder shall be subject,
in their discretion, to the condition that all representations and warranties of
the Company and the Guarantors herein are, at and as of the Time of Delivery,
true and correct, the condition that the Company and the Guarantors shall have
performed all of their respective obligations hereunder theretofore to be
performed, and the following additional conditions:
(a) Latham & Watkins LLP, counsel for the Purchasers,
shall have furnished to you such opinion or opinions, dated the Time of
Delivery, with respect to the matters covered in paragraphs (i), (ii),
(iii), (iv), (v), (vii), (x) and (xix) of subsection (b) below and
paragraphs (i), (ii), (iii), (ix), (x), (xi), (xii), (xiii), (xiv),
(xv), (xvi), (xvii), and (xviii) of subsection (c) below, as well as
such other related matters as you may reasonably request, and such
counsel shall have received such papers and information as they may
reasonably request to enable them to pass upon such matters;
(b) Fulbright & Jaworski L.L.P., counsel for the Company,
shall have furnished to you their written opinion, dated the Time of
Delivery, in form and substance reasonably satisfactory to you, to the
effect that, and subject to customary exceptions, qualifications,
limitations and assumptions in relation thereto:
(i) The Securities (assuming due authorization,
execution, authentication, delivery and issuance) constitute
valid and legally binding obligations of the Company, entitled
to the benefits provided by the Indenture, enforceable against
the Company in accordance with their terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting
creditors' rights or providing relief of debtors and to
general equity principles;
(ii) The Guarantees (assuming due authorization,
execution, delivery and issuance) constitute valid and legally
binding obligations of each of the Guarantors, entitled to the
benefits provided by the Indenture, enforceable against such
Guarantors in accordance with their terms, subject, as to
enforcement, to bankruptcy, insolvency, fraudulent transfer,
fraudulent conveyance, reorganization and other laws of
general applicability relating to or affecting creditors'
rights or providing relief of debtors and to general equity
principles;
(iii) The Indenture (assuming due authorization,
execution and delivery) constitutes a valid and legally
binding obligation of the Company and each of the Guarantors,
enforceable against the Company in accordance with its terms,
subject, as to enforcement against the Company, to bankruptcy,
insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights or
providing for
15
the relief of debtors and to general equity principles, and
enforceable against the Guarantors in accordance with its
terms, subject, as to enforcement against the Guarantors, to
bankruptcy, insolvency, fraudulent transfer, fraudulent
conveyance, reorganization and other laws of general
applicability relating to or affecting creditors' rights or
providing for the relief of debtors and to general equity
principles;
(iv) The Registration Rights Agreement (assuming
due authorization, execution, and delivery) constitutes a
valid and legally binding obligation of the Company and each
of the Guarantors, enforceable against the Company and such
Guarantors in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting
creditors' rights or providing for relief of debtors and to
general equity principles;
(v) The Security Documents (assuming due
authorization, execution and delivery) constitute valid and
legally binding obligations of the Company and each Guarantor
that is a party thereto, respectively, enforceable against the
Company and such Guarantors in accordance with their
respective terms, subject, as to enforcement and the Liens
created thereby, to bankruptcy, insolvency, fraudulent
transfer, fraudulent conveyance, reorganization and other laws
of general applicability relating to or affecting creditors'
rights or providing for relief to debtors and to general
equity principles;
(vi) No consent, approval, authorization, order,
registration or qualification of or with any court or
governmental agency or body is required to be obtained or made
by the Company or any Guarantor by any material statutory law
applicable to it as a condition to its and their issuance of
the Securities or the Guarantees or the consummation by the
Company and the Guarantors of the Financing Transactions or
the transactions contemplated by this Agreement, the Security
Documents, the Registration Rights Agreement or the Indenture,
except, such consents, approvals, authorizations,
registrations or qualifications as (a) have been obtained or
as may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the
Securities by the Purchasers and (b) such as may be required
under the Securities Act or the Exchange Act or the rules and
regulations of the Commission promulgated thereunder in
connection with (i) the filing of a registration statement for
the Exchange Securities and consummation of the Exchange Offer
pursuant to the Registration Rights Agreement or (ii) the
filing and effectiveness of a shelf registration statement
pursuant to the Registration Rights Agreement, and such
filings as are (x) required to perfect the Collateral Agent's
security interests granted pursuant to the Security Documents
and (y) required to release existing Liens; provided that for
purposes of the opinion expressed in this clause 7(b)(vi),
such counsel may assume that the purchase of senior
subordinated notes by Goldman, Sachs & Co. was done in
compliance with all applicable securities laws;
(vii) The statements set forth in the Offering
Circular under the caption "Certain Federal Income Tax
Considerations", insofar as they refer to statements of law or
legal conclusions, are accurate in all material respects and
present fairly the information described therein;
(viii) To such counsel's knowledge, there are no
contracts or other documents that are required to be described
in the Company's filings under the Exchange Act or filed as
exhibits to the Company's filings under the Exchange Act that
have not been so described or filed;
16
(ix) The Indenture, the Registration Rights
Agreement, the Security Documents, the Securities and the
Guarantees conform, in all material respects to the
descriptions thereof in the Offering Circular;
(x) Assuming (a) the Securities are not offered
to you by means of any form of general solicitation or general
advertising or in any manner involving a public offering
within the meaning of Section 4(2) of the Securities Act and
(b) neither the Company nor any affiliate (as such term is
defined in Rule 501(b) of Regulation D under the Securities
Act) of the Company has directly or though any agent, sold,
offered for sale, solicited offers to buy or otherwise
negotiated in respect of, any security that is or could be
integrated with the Securities in a manner that would require
registration under the Securities Act, no registration of the
Securities under the Securities Act, and no qualification of
the Indenture under the United States Trust Indenture Act of
1939 with respect thereto, is required for the offer, sale and
initial resale of the Securities by the Purchasers in the
manner contemplated by this Agreement;
(xi) The Company is not, and after giving effect
to the offering and sale of the Securities and application of
the net proceeds therefrom as described in the Offering
Circular, will not be, an "investment company," as such term
is defined in the Investment Company Act;
(xii) Neither the Company, nor any of its
subsidiaries, is, or after giving effect to the offering and
sale of the Securities, will be, a "public utility holding
company" or an entity "controlled by a public utility holding
company," as such terms are defined in the United States
Public Utility Holding Company Act of 1935, as amended, and
the rules and regulations thereunder;
(xiii) Assuming the Company applies the net
proceeds as described in the "Use of Proceeds" section of the
Offering Circular, to their knowledge, neither the Purchase
Agreement nor the issuance or sale of the Securities will
violate Regulation T (12 C.F.R. Part 220), Regulation U (12
C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the
Board of Governors of the Federal Reserve System; provided
that for purposes of the opinion expressed in this clause
7(b)(xiii), such counsel may assume that the purchase of
senior subordinated notes by Goldman, Sachs & Co. was done in
compliance with all applicable securities laws;
(xiv) Each of the Security Agreement and the
Control Agreement, at the Time of Delivery, will create a
valid security interest in favor of the Collateral Agent in
that portion of the collateral described in Section 2.1 of the
Security Agreement in which the Obligor has rights and a valid
security interest may be created under Article 9 of the New
York UCC or California UCC, as applicable (the "UCC
Collateral"), which security interest will secure the Secured
Obligations as defined in the Security Agreement;
(xv) The UCC-1 financing statement for each
Obligor that is organized under the laws of Delaware, together
with all schedules and exhibits to such financing statement,
is in appropriate form for filing in the Office of the
Secretary of State of the State of Delaware. Upon the proper
filing of each such financing statement in the Office of the
Secretary of State of the State of Delaware, the security
interest in favor of the Collateral Agent for the benefit of
the Secured Parties in the UCC Collateral described in such
financing statement will be perfected to the extent a security
interest in such Collateral may be perfected under the
Delaware UCC by the filing of a financing statement in that
office;
17
(xvi) To the extent governed by the laws of the
State of Delaware, (a) the transmitting utility filing for
each Pipeline Subsidiary that is organized under the laws of
Delaware, together with all schedules and exhibits to such
filing, is in appropriate form for filing in the Office of the
Secretary of State of the State of Delaware and (b) upon the
proper filing of each such filing in the Office of the
Secretary of State of the State of Delaware, the security
interest in favor of the Collateral Agent for the benefit of
the Secured Parties in the UCC Collateral described in such
filing will be perfected to the extent a security interest in
such Collateral may be perfected under the Delaware UCC by the
filing of such financing statement in that office;
(xvii) Upon delivery of the certificates in
registered form representing the Pipeline Subsidiaries that
constitute "certificated securities" representing the
Collateral within the meaning of Section 8-102(a)(4) of New
York UCC and that are listed on Schedule 1 to the Security
Agreement (the "Pledged Securities") in, and while located in,
the State of New York, pursuant to the Security Agreement,
indorsed to the Collateral Agent or in blank, in each case, by
an effective endorsement, or accompanied by undated stock
powers with respect thereto duly indorsed in blank by an
effective endorsement, the security interest in favor of the
Collateral Agent for the benefit of the Secured Parties in the
Pledged Securities will be perfected. The Collateral Agent's
security interest in the Pledged Securities has priority over
any other security interest in the Pledged Securities granted
by the Company and the Tesoro Alaska Company assuming no other
secured party has control of, and the absence of any other
control agreement with respect to, the Pledged Securities;
(xviii) The Control Agreement is sufficient in form
and substance to provide for the perfection by control, the
security interest in favor of the Collateral Agent in the
Asset Sale Proceeds Account and deposits therein will be
perfected; and
(xix) Such counsel shall also state that they have
participated in conferences with certain officers and
representatives of the Company, counsel to the Purchasers,
representatives of the independent public accountants of the
Company, and representatives of the Purchasers at which the
contents of the Offering Circular and related matters were
discussed and, although they are not passing upon and do not
assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Offering Circular
(except as stated in subsections (vii) and (ix) above), on the
basis of the foregoing (relying as to materiality, to the
extent such counsel deems appropriate, upon the statements of
officers and other representatives of the Company); no
information has come to our attention that has caused us to
believe that the Offering Circular contained as of its date or
contains as of the Time of Delivery an untrue statement of a
material fact or omitted or omits, as the case may be, to
state a material fact necessary to make the statements
therein, in the light of the circumstances under which they
were made, not misleading; it being understood that we make no
comment as to the financial statements, schedules and other
financial or statistical data included in the Offering
Circular;
(c) James C. Reed, Jr., General Counsel of the Company,
shall have furnished to you his written opinion, dated the Time of
Delivery, in form and substance reasonably satisfactory to you, to the
effect that:
(i) The Company has been duly incorporated and
is validly existing as a corporation in good standing under
the laws of the State of Delaware, with corporate power and
authority to own its properties and conduct its business as
described in the Offering Circular;
18
(ii) The Company has been duly qualified as a
foreign corporation for the transaction of business and is in
good standing under the laws of each other jurisdiction in
which it is required to be so qualified, except where the
failure to do so would not have a Material Adverse Effect
(such counsel being entitled to rely in respect of the opinion
in this clause upon opinions of local counsel and in respect
of matters of fact upon certificates of officers of the
Company);
(iii) Each of the Guarantors has been duly
incorporated or formed and is validly existing as a
corporation or limited liability company, as the case may be,
in good standing under the laws of its jurisdiction of
incorporation or formation, with corporate or limited
liability company power and authority to own its properties
and conduct its business as described in the Offering
Circular, and has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under
the laws of each other jurisdiction in which it owns or leases
properties or conducts any business so as to require such
qualification, except where the failure to do so would not
have a Material Adverse Effect (such counsel being entitled to
rely in respect of the opinion in this clause upon opinions of
local counsel and in respect of matters of fact upon
certificates of officers of the Company);
(iv) To such counsel's knowledge and other than
as set forth in the Offering Circular, there are no legal or
governmental proceedings pending to which the Company or any
of its subsidiaries is a party or of which any property of the
Company or any of its subsidiaries is the subject which, if
determined adversely to the Company or any of its
subsidiaries, would, individually or in the aggregate, have a
Material Adverse Effect;
(v) The Company has an authorized capitalization
as set forth in the Offering Circular, and all of the issued
shares of capital stock of the Company have been duly and
validly authorized and issued and are fully paid and
non-assessable;
(vi) All of the issued shares of capital stock of
each of the Guarantors that is a corporation have been duly
and validly authorized and issued, are fully paid and
non-assessable and (except as described in the Offering
Circular and except for one share of Tesoro Petroleum
(Singapore) Pte Ltd.), and, to such counsel's knowledge, are
owned by the Company directly or indirectly through one of the
other Guarantors, free and clear of all Liens except as
described in the Offering Circular. All of the outstanding
limited liability company interests of each of the Guarantors
that is a limited liability company are owned directly or
indirectly by the Company, free and clear of all Liens except
as disclosed in the Offering Circular. Except as described in
the Offering Circular and pursuant to the Company's employee
benefit plans, there are no outstanding subscriptions, rights,
warrants, calls, commitments of sale or options to acquire, or
instruments convertible into or exchangeable for, nor any
restriction on the voting or transfer of, any capital stock or
other equity interest of the Company or any subsidiary created
or held by the Company or any subsidiary;
(vii) To such counsel's knowledge, neither the
Company nor any of the Guarantors is (i) in violation of its
Certificate of Incorporation or Certificate of Formation or
By-laws or other organizational documents or (ii) in default
in the performance or observance of any of its material
obligations pursuant to the express provisions of any covenant
or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other material agreement or
instrument to which it is a party or by which it may be bound
where such default, singly or in the aggregate, would have a
Material Adverse Effect;
19
(viii) Except for the Registration Rights
Agreement, to such counsel's knowledge, there are no
contracts, agreements or understandings between the Company or
any of the Guarantors and any person granting such person the
right to require the Company or such Guarantor to file a
registration statement under the Securities Act with respect
to any securities of the Company or such Guarantor, owned or
to be owned by such person or to require the Company or such
Guarantor to include such securities with any securities being
registered pursuant to any registration statement filed by the
Company or such Guarantor under the Securities Act;
(ix) The Purchase Agreement has been duly
authorized, executed and delivered by the Company and each of
the Guarantors;
(x) The Indenture has been duly authorized,
executed and delivered by the Company and each of the
Guarantors;
(xi) The Securities have been duly authorized,
executed, authenticated, issued and delivered by the Company;
(xii) The Guarantees have been duly authorized,
executed, issued and delivered by the Guarantors;
(xiii) The Registration Rights Agreement has been
duly authorized, executed and delivered by the Company and
each of the Guarantors;
(xiv) The Security Documents to which it is a
party have been duly authorized, executed and delivered by
each of the Company and the Guarantors;
(xv) The Financing Statements have been duly
authorized and delivered by the Company and each of the
Guarantors;
(xvi) The Exchange Securities have been duly
authorized by the Company;
(xvii) The Exchange Guarantees have been duly
authorized by each of the Guarantors;
(xviii) To such counsel's knowledge, the issue and
sale of the Securities and the Guarantees and the performance
by the Company and each of the Guarantors of their respective
obligations pursuant to the express provisions of the
Securities, the Guarantees, the Indenture, the Registration
Rights Agreement, the Security Documents and this Agreement to
which each is a party, the consummation of the transactions
herein and therein contemplated and the consummation of the
Financing Transaction will not (i) result in a breach of, or
constitute a default under, the obligations of any of them
under the express provisions of any indenture, mortgage, deed
of trust, loan agreement or other material agreement or
instrument known to such counsel to which the Company or any
of its subsidiaries is a party or by which the Company or any
of its subsidiaries is bound or to which any of the property
or assets of the Company or any of its subsidiaries is
subject, (ii) result in any violation of the provisions of the
Certificate of Incorporation or Certificate of Formation,
By-laws or other organizational document of the Company or any
of the Guarantors or (iii) result in the violation of any
applicable statute or, to such counsel's knowledge, any order,
rule or regulation of any court or governmental agency or body
having jurisdiction over, and is applicable to, the Company or
any of the Guarantors; provided that for purposes of the
opinion expressed in this clause 7(c)(xviii), such counsel may
assume that the
20
purchase of senior subordinated notes by Goldman, Sachs & Co.
was done in compliance with all applicable securities laws;
and
(xix) The Exchange Act Reports (other than the
financial statements and related schedules therein, as to
which such counsel need express no opinion), when they were
filed with the Commission, complied as to form in all material
respects with the requirements of the Exchange Act, and the
rules and regulations of the Commission thereunder;
(d) A counsel to be named by the Company and reasonably
satisfactory to the Purchasers shall have furnished to you their
written opinion, dated the Time of Delivery, in form and substance
reasonably satisfactory to you to the effect that:
(i) The creation and perfection of security
interests in the stock of Tesoro High Plains Pipeline Company
and all of the fixtures and equipment comprising the pipeline
facilities owned by Tesoro High Plains Pipeline Company,
including the North Dakota-Montana Pipeline System, and the
Guarantee by Tesoro High Plains Pipeline Company, will not
violate, or require any consent, approval, notice or other
filing under the Interstate Commerce Act or the regulations
promulgated thereby related to or implemented by the Federal
Energy Regulatory Commission, ("FERC");
and such opinion will be accompanied by a certificate of an officer of
the Company, dated the Time of Delivery, in form and substance
reasonably satisfactory to the Purchasers, certifying that the only oil
pipeline facilities that the Company or its subsidiaries own, operate
or control that constitute interstate pipeline facilities subject to
regulation by the FERC are the facilities owned and operated by the
Tesoro High Plains Pipeline Company located in North Dakota and
Montana;
(e) Local counsel to the Company in the States of Hawaii,
Alaska, California, Washington, North Dakota, Utah, Idaho and Montana
shall have furnished to you their written opinion, dated the Time of
Delivery, in form and substance reasonably satisfactory to the
Purchasers, as to such matters under the laws of their respective
states as such Purchasers may reasonably request;
(f) Valuation Research Corporation shall have furnished
to you its written opinion, dated the Time of Delivery, in form and
substance reasonably satisfactory to you, to the effect that:
(i) The Consolidated Company has not, and, as a
result of consummation of the transactions herein contemplated
and the consummation of the Financing Transaction, will not
have, incurred debts beyond its ability to pay as they mature;
(ii) The present fair saleable value of the
assets of the Consolidated Company exceeds the amount required
to pay the probable liability on its existing debts, (whether
matured or unmatured, liquidated or unliquidated, absolute,
fixed or contingent), as they become absolute and matured, and
as a result of consummation of the transactions herein
contemplated and the consummation of the Financing
Transaction, will continue to exceed such amount; and
(iii) The Consolidated Company does not, and, as a
result of consummation of the transactions herein contemplated
and the consummation of the Financing Transaction, will not,
have unreasonably small capital to carry on its business as
presently conducted;
21
(g) On the date of the Offering Circular prior to the
execution of this Agreement and also at the Time of Delivery, Deloitte
& Touche LLP shall have furnished to you a letter or letters, dated the
respective dates of delivery thereof, in form and substance reasonably
satisfactory to you, to the effect set forth in Annex I hereto;
(h) The Chief Financial Officer of the Company shall have
furnished a certificate, dated the Closing Date, in form and substance
reasonably satisfactory to you, to the effect that:
(i) The Consolidated Company does not intend to
or believe that it has incurred or will incur, debts that will
be beyond its and their ability to pay as they mature;
(ii) No Significant Subsidiary (as defined in the
Description of Notes Section of the Offering Circular) intends
to or believes that it has incurred or will incur, debts that
will be beyond its ability to pay as they mature;
(iii) The present fair saleable value of the
assets of the Consolidated Company exceeds the amount that
will be required to pay the probable liability on its and
their existing debts, respectively (whether matured or
unmatured, liquidated or unliquidated, absolute, fixed or
contingent), as they become absolute and matured;
(iv) The present fair saleable value of the
assets of each Significant Subsidiary exceeds the amount that
will be required to pay the probable liability on its existing
debts (whether matured or unmatured, liquidated or
unliquidated, absolute, fixed or contingent), as they become
absolute and matured;
(v) The Consolidated Company does not have
unreasonably small capital for it or them, respectively, to
carry on its and their respective businesses as proposed to be
conducted;
(vi) No Significant Subsidiary has unreasonably
small capital for it to carry on its business as proposed to
be conducted;
(vii) The Consolidated Company is not incurring
obligations or making transfers under any evidence of
indebtedness with the intent to hinder, delay or defraud any
entity to which it is or will become indebted; and
(viii) No Significant Subsidiary is incurring
obligations or making transfers under any evidence of
indebtedness with the intent to hinder, delay or defraud any
entity to which it is or will become indebted;
(i) (i) Neither the Company nor any of its subsidiaries
shall have sustained since the date of the latest audited financial
statements included in the Offering Circular any loss or interference
with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court
or governmental action, order or decree, otherwise than as set forth or
contemplated in the Offering Circular, and (ii) since the respective
dates as of which information is given in the Offering Circular there
shall not have been any change in the capital stock or long-term debt
of the Company or any of its subsidiaries or any change, or any
development involving a prospective change, in or affecting the general
affairs, management, consolidated financial position, stockholders'
equity or results of operations of the Company and its subsidiaries,
taken as a whole, otherwise than as set forth or contemplated in the
Offering Circular, the effect of which, in any such case
22
described in clause (i) or (ii), is in the reasonable judgment of the
Representatives so material and adverse as to make it impracticable or
inadvisable to proceed with the offering or the delivery of the
Securities on the terms and in the manner contemplated in this
Agreement and in the Offering Circular;
(j) On or after the date hereof (i) no downgrading shall
have occurred in the rating accorded the Company's debt securities by
any "nationally recognized statistical rating organization," as that
term is defined by the Commission for purposes of Rule 436(g)(2) under
the Securities Act, and (ii) no such organization shall have publicly
announced that it has under surveillance or review, with possible
negative implications, its rating of any of the Company's debt
securities;
(k) On or after the date hereof there shall not have
occurred any of the following: (i) a suspension or material limitation
in trading in securities generally on the New York Stock Exchange (the
"NYSE"); (ii) a suspension or material limitation in trading in the
Company's securities on the NYSE; (iii) a general moratorium on
commercial banking activities declared by either Federal or New York
State authorities or a material disruption in commercial banking or
securities settlement or clearance services in the United States; (iv)
the outbreak or escalation of hostilities involving the United States
or the declaration by the United States of a national emergency or war
or (v) the occurrence of any other calamity or crisis or any change in
financial, political or economic conditions in the United States or
elsewhere, if the effect of any such event specified in clause (iv) or
(v) in the judgment of the Representatives makes it impracticable or
inadvisable to proceed with the offering or the delivery of the
Securities on the terms and in the manner contemplated in the Offering
Circular;
(l) The Securities have been designated for trading on
PORTAL;
(m) The Collateral Agent shall have received (with a copy
for the Purchasers) at the Time of Delivery:
(i) appropriately completed copies, which have
been duly authorized for filing by the appropriate Person, of
Uniform Commercial Code Financing Statements naming the
Company and each Guarantor as a debtor and the Collateral
Agent as the secured party, or other similar instruments or
documents to be filed under the UCC of all jurisdictions as
may be necessary or, in the reasonable opinion of the Trustee
and its counsel, desirable to perfect the security interests
of the Trustee pursuant to the Security Documents;
(ii) appropriately completed copies, which have
been duly authorized for filing by the appropriate Person, of
Uniform Commercial Code Form UCC-3 termination statements, if
any, necessary to release all Liens (other than Permitted
Prior Liens) of any Person in any collateral described in the
Security Documents previously granted by any Person, except to
the extent that the administrative agent under the Existing
Senior Secured Credit Facility has not delivered such
termination statements as of the Time of Delivery but has
agreed to pursuant to a release, reconveyance, satisfaction or
other instrument described in clause (iv) below;
(iii) certified copies of Uniform Commercial Code
Requests for Information or Copies (Form UCC-11), or a similar
search report certified by a party acceptable to the Trustee,
dated a date reasonably near to the Time of Delivery, listing
all effective Financing Statements which name the Company or
any Guarantor (under its present name and any previous names)
as the debtor, together with copies of such Financing
Statements (none of which shall cover any collateral described
in the Security
23
Documents, other than such Financing Statements that evidence
Permitted Prior Liens);
(iv) such releases, reconveyances, satisfactions
or other instruments as it may request to confirm the release,
satisfaction and discharge in full of all mortgages and deeds
of trust at any time delivered by the Company or any Guarantor
to secure any Obligations in respect of the Existing Senior
Secured Credit Facility, duly executed, delivered and
acknowledged in recordable form by the grantee named therein
or its of record successors or assigns;
(v) a letter (in form and substance reasonably
satisfactory to the Purchasers) addressed to the Collateral
Agent, the Trustee and the Term Loan Administrative Agent,
executed and delivered by Bank One, N.A. as administrative
agent under the Existing Senior Secured Credit Facility,
stating the amount (the "Payout Amount") required to pay in
full in cash at the Time of Delivery all outstanding
Obligations under or in respect of the Existing Senior Secured
Credit Facility and confirming and agreeing that upon payment
of such amount all Liens securing such Obligations will be
forever released and discharged;
(vi) confirmation reasonably satisfactory to the
Purchasers that First American Title Insurance Company has
accepted the Mortgages for recording and will cause the
Mortgages to be duly filed and recorded within ten days
following the Time of Delivery and has agreed to issue to the
Collateral Agent for the benefit of the Secured Parties, a
policy of title insurance in form and substance reasonably
satisfactory to the Purchasers, insuring each Mortgage to be a
valid, enforceable and perfected Lien upon all real property
described therein, free from all prior Liens except Permitted
Prior Liens, for the full amount of the Secured Obligations;
(vii) a certificate of insurance reasonably
satisfactory to the Purchasers confirming that all insurance
requirements of the Security Documents are satisfied;
(viii) an agreement (in form and substance
reasonably satisfactory to the Purchasers) executed and
delivered by the Collateral Agent and the Credit Facility
Agent under the New Credit Facility, by which such Credit
Facility Agent certifies to the Collateral Agent that the New
Credit Facility is governed by an agreement that includes the
provisions described in clause (1) of the definition of
"Qualified Credit Facility" and that such Credit Facility
Agent agrees to be bound by and will perform the obligations
of the Credit Facility Agent set forth in the intercreditor
provisions of the Indenture and the Collateral Agent agrees to
be bound by and will perform the obligations of the Collateral
Agent set forth in the intercreditor provisions of the
indenture; and
(ix) such other approvals, opinions, or documents
as the Purchasers, the Trustee or the Collateral Agent may
reasonably request in form and substance reasonably
satisfactory to each of them.
(n) All Uniform Commercial Code Financing Statements or
other similar Financing Statements and Uniform Commercial Code Form
UCC-3 termination statements required pursuant to clause (o)(i) and
(ii) above (collectively, the "Financing Statements") shall have been
delivered to CT Corporation System or another similar filing service
company acceptable to the Trustee (the "Filing Agent"). The Filing
Agent shall have acknowledged in a writing reasonably satisfactory to
the Trustee and its counsel (i) the Filing Agent's receipt of all
Financing Statements, (ii) that the Financing Statements have either
been submitted for filing in the appropriate filing offices or will be
submitted for filing in the appropriate offices within ten
24
days following the Time of Delivery and (iii) that the Filing Agent
will notify the Trustee and its counsel of the results of such
submissions within 30 days following the Time of Delivery;
(o) The Company shall have furnished or caused to be
furnished to you at the Time of Delivery certificates of officers of
the Company reasonably satisfactory to you as to the accuracy of the
representations and warranties of the Company herein at and as of such
Time of Delivery, as to the performance by the Company of all of its
obligations hereunder to be performed at or prior to such Time of
Delivery, as to the matters set forth in subsection (n) of this Section
and as to such other matters as you may reasonably request;
(p) The Company shall have consummated the Term Loan
Agreement, and such Term Loans shall have been funded prior to, or
shall be funded simultaneously with, the Time of Delivery on
substantially the terms described in the Offering Circular and other
terms reasonably satisfactory to the Purchasers, and the Purchasers
shall have received counterparts, conformed as executed, of the Term
Loan Agreement and such other documentation as they deem necessary to
evidence the consummation thereof;
(q) The Company shall have consummated the New Credit
Facility, and such New Credit Facility shall have been funded prior to,
or shall be funded simultaneously with, the Time of Delivery on
substantially the terms described in the Offering Circular and other
terms reasonably satisfactory to the Purchasers, the Purchasers shall
have received counterparts, conformed as executed, of the New Credit
Facility Agreement and such other documentation as they deem necessary
to evidence the consummation thereof;
(r) Prior to or simultaneously with the Time of Delivery,
the Company shall have received cash proceeds from borrowings of the
Term Loans and borrowings under the New Credit Facility in an amount
sufficient, when added to the cash proceeds from the sale of the
Securities (net of underwriting discounts and commissions), to pay in
full in cash the Payout Amount and all other fees, costs and expenses
payable by the Company in connection with the closing of the Financing
Transaction and shall have authorized disbursement of such cash
proceeds directly to pay the Payout Amount and such fees, costs and
expenses pursuant to a disbursement authorization letter (in form and
substance reasonably satisfactory to the Purchasers) executed and
delivered by the Company and the Guarantors, and the Purchasers shall
have received such other confirmation as any of them may reasonably
request as to the termination and discharge of the Existing Senior
Secured Credit Facility and the release and discharge of all Liens
securing Obligations thereunder; and
(s) The Company and each of the Guarantors shall have
delivered executed copies of the Securities, the Guarantees, the
Indenture, the Registration Rights Agreement and the Security Documents
(with all Mortgages duly acknowledged in recordable form) to the
Purchasers, in each case in form and substance reasonably satisfactory
to the Company and the Purchasers.
8. (a) The Company and each of the Guarantors will, jointly and
severally indemnify, and hold harmless each Purchaser against any losses,
claims, damages or liabilities, joint or several, to which such Purchaser may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement of a material
fact contained in any Preliminary Offering Circular or the Offering Circular, or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact necessary to make
the statements therein not misleading, and will reimburse each Purchaser for any
legal or other expenses reasonably incurred by such Purchaser in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that neither the Company nor any of the
25
Guarantors shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Offering Circular or the Offering Circular or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by any Purchaser through Goldman, Sachs & Co. expressly
for use therein;provided further, that with respect to any such untrue statement
or omission made in the Preliminary Offering Circular, the indemnity agreement
contained in this Section 8(a) shall not inure to the benefit of such Purchaser
from whom the person asserting any such losses, claims, damages or liabilities
purchased the Securities concerned if, to the extent that such sale was an
initial sale by such Purchaser and any such loss, claim, damage or liability of
that Purchaser is a result of the fact that both (A) a copy of the Offering
Circular was not sent or given to such person at or prior to written
confirmation of the sale of such Securities to such person and (B) the untrue
statement or omission in the Preliminary Offering Circular was corrected in the
Offering Circular unless, in either case, such failure to deliver the Offering
Circular was a result (x) of noncompliance by the Company with Section 5(c)
hereof or (y) the Company not previously furnishing copies of the Offering
Circular to such Purchaser on a timely basis to permit the Offering Circular to
be sent or given to such person at or prior to written confirmation of the sale
of such Securities to such person;
(b) Each Purchaser will indemnify and hold harmless the
Company and the Guarantors against any losses, claims, damages or liabilities to
which the Company and the Guarantors may become subject, under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in any Preliminary
Offering Circular or the Offering Circular, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in any Preliminary Offering Circular or the Offering Circular or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Purchaser through Goldman, Sachs &
Co. expressly for use therein; and will reimburse the Company and the Guarantors
for any legal or other expenses reasonably incurred by the Company and such
Guarantors in connection with investigating or defending any such action or
claim as such expenses are incurred;
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal expenses of other counsel or any other expenses, in
each case subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable costs of investigation; provided,
however, that the indemnified party shall have the right to employ counsel to
represent all indemnified parties who may be subject to liability arising out of
any claim in respect of which indemnity may be sought by the indemnified parties
against the indemnifying party under this Section 8 if, (i) the employment of
such counsel shall have been authorized by the indemnifying party in connection
with the defense of such action, (ii) the indemnifying party shall not have
engaged counsel reasonably promptly to take charge of the defense
26
of such action or (iii) counsel for any of the indemnified parties shall have
reasonably concluded that there may be defenses available to the indemnified
parties that are in addition to or in conflict with those available to the
indemnifying party, and, in that event, the fees and expenses of such separate
counsel shall be paid by the indemnifying party; provided, further, that in
connection with any proceedings or related proceedings in the same jurisdiction,
the indemnifying party shall not be liable for the legal fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel). No
indemnifying party shall (i) without the prior written consent of the
indemnified party (which consent shall not be unreasonably withheld), effect the
settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (a) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (b) does not include a statement as to, or an admission of, fault,
culpability or a failure to act, by or on behalf of any indemnified party or
(ii) be liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld), but if
settled with its written consent or if there be a final judgment of the
plaintiff in any such action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss of liability by
reason of such settlement or judgment;
(d) If the indemnification provided for in this Section 8
is unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Guarantors on the one hand and
the Purchasers on the other from the offering of the Securities. If, however,
the allocation provided by the immediately preceding sentence is not permitted
by applicable law or if the indemnified party failed to give the notice required
under subsection (c) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Guarantors on the one hand and the Purchasers on
the other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative benefits received
by the Company and the Guarantors on the one hand and the Purchasers on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Company bear to
the total underwriting discounts and commissions received by the Purchasers, in
each case as set forth in the Offering Circular. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company and the
Guarantors on the one hand or the Purchasers on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, the Guarantors and the
Purchasers agree that it would not be just and equitable if contribution
pursuant to this subsection (d) were determined by pro rata allocation (even if
the Purchasers were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (d), no Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities underwritten by it and distributed to
investors were offered to investors exceeds the amount of any damages which such
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission.
27
The Purchasers' obligations in this subsection (d) to contribute are several in
proportion to their respective underwriting obligations and not joint. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation; and
(e) The obligations of the Company and the Guarantors
under this Section 8 shall be in addition to any liability which the Company and
the Guarantors may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Purchaser within the
meaning of the Securities Act; and the obligations of the Purchasers under this
Section 8 shall be in addition to any liability which the respective Purchasers
may otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company or any Guarantor and to each person, if any,
who controls the Company or any Guarantor within the meaning of the Securities
Act.
9. (a) If any Purchaser shall default in its obligation to
purchase the Securities which it has agreed to purchase hereunder, you may in
your discretion arrange for you or another party or other parties to purchase
such Securities on the terms contained herein. If within thirty-six hours after
such default by any Purchaser you do not arrange for the purchase of such
Securities, then the Company shall be entitled to a further period of thirty-six
hours within which to procure another party or other parties reasonably
satisfactory to you to purchase such Securities on such terms. In the event
that, within the respective prescribed periods, you notify the Company that you
have so arranged for the purchase of such Securities, or the Company notifies
you that it has so arranged for the purchase of such Securities, you or the
Company shall have the right to postpone the Time of Delivery for a period of
not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Offering Circular, or in any other documents or
arrangements, and the Company agrees to prepare promptly any amendments to the
Offering Circular which in your opinion may thereby be made necessary. The term
"Purchaser" as used in this Agreement shall include any person substituted under
this Section with like effect as if such person had originally been a party to
this Agreement with respect to such Securities;
(b) If, after giving effect to any arrangements for the
purchase of the Securities of a defaulting Purchaser or Purchasers by you and
the Company as provided in subsection (a) above, the aggregate principal amount
of such Securities which remains unpurchased does not exceed one-eleventh of the
aggregate principal amount of all the Securities, then the Company shall have
the right to require each non-defaulting Purchaser to purchase the principal
amount of Securities which such Purchaser agreed to purchase hereunder and, in
addition, to require each non-defaulting Purchaser to purchase its pro rata
share (based on the principal amount of Securities which such Purchaser agreed
to purchase hereunder) of the Securities of such defaulting Purchaser or
Purchasers for which such arrangements have not been made; but nothing herein
shall relieve a defaulting Purchaser from liability for its default; and
(c) If, after giving effect to any arrangements for the
purchase of the Securities of a defaulting Purchaser or Purchasers by you and
the Company as provided in subsection (a) above, the aggregate principal amount
of Securities which remains unpurchased exceeds one-eleventh of the aggregate
principal amount of all the Securities, or if the Company shall not exercise the
right described in subsection (b) above to require non-defaulting Purchasers to
purchase Securities a defaulting Purchaser or Purchasers, then this Agreement
shall thereupon terminate, without liability on the part of any non-defaulting
Purchaser or the Company, except for the expenses to be borne by the Company and
the Purchasers as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Purchaser from liability for its default;
28
10. The respective indemnities, agreements, representations,
warranties and other statements of the Company, the Guarantors and the several
Purchasers, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Purchaser or any controlling person of any
Purchaser, the Company, or any Guarantor, or any officer or director or
controlling person of the Company or a Guarantor, and shall survive delivery of
and payment for the Securities.
11. If this Agreement shall be terminated pursuant to Section 9
hereof, the Company, the Guarantors and the Purchasers shall not then be under
any liability to any other Party except for the expenses to be borne by the
Company and the Purchasers as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but, if for any other reason, the
Securities and the Guarantees are not delivered by or on behalf of the Company
as provided herein, the Company will reimburse the Purchasers through you for
all out-of-pocket expenses approved in writing by you, including fees and
disbursements of counsel, reasonably incurred by the Purchasers in making
preparations for the purchase, sale and delivery of the Securities and the
Guarantees but the Company shall then be under no further liability to any
Purchaser except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of
the Purchasers, and the parties hereto shall be entitled to act and rely upon
any statement, request, notice or agreement on behalf of any Purchaser made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Purchasers shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives at in care of Goldman,
Sachs & Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; and if to the Company or any Guarantor shall be delivered or sent by
mail, telex or facsimile transmission to the address of the Company set forth in
the Offering Circular, Attention: Secretary; provided, however, that any notice
to a Purchaser pursuant to Section 8(c) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Purchaser at its address set forth
in its Purchasers' Questionnaire, or telex constituting such Questionnaire,
which address will be supplied to the Company by you upon request. Any such
statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Purchasers, the Company, the Guarantors and, to the extent
provided in Sections 8 and 10 hereof, the officers and directors of the Company
and the Guarantors and each person who controls the Company, any Guarantor or
any Purchaser, and their respective heirs, executors, administrators, successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. No purchaser of any of the Securities from any
Purchaser shall be deemed a successor or assign by reason merely of such
purchase.
14. Time shall be of the essence of this Agreement.
15. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
16. This Agreement may be executed by any one or more of the
parties hereto in any number of counterparts, each of which shall be deemed to
be an original, but all such respective counterparts shall together constitute
one and the same instrument.
29
17. The Company (and each employee, representative or other agent
of the Company) is authorized, except as is necessary to comply with applicable
securities laws, to disclose any and all aspects of this potential transaction
that are necessary to support any U.S. federal income tax benefits expected to
be claimed with respect to such transaction, and all materials of any kind
(including tax opinions and other tax analyses) related to those benefits,
without the Purchasers imposing any limitation of any kind.
If the foregoing is in accordance with your understanding, please sign
and return to us five counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Purchasers, this letter and such acceptance hereof
shall constitute a binding agreement among each of the Purchasers, the Company
and the Guarantors. It is understood that your acceptance of this letter on
behalf of each of the Purchasers is pursuant to the authority set forth in a
form of Agreement among Purchasers, the form of which shall be submitted to the
Company for examination upon request, but without warranty on your part as to
the authority of the signers thereof.
30
Very truly yours,
TESORO PETROLEUM CORPORATION
By: /s/ GREGORY A. WRIGHT
--------------------------------
Name: Gregory A. Wright
Title: Senior Vice President and
Chief Financial Officer
31
FAR EAST MARITIME COMPANY
GOLD STAR MARITIME COMPANY
TESORO FINANCIAL SERVICES HOLDING COMPANY
VICTORY FINANCE COMPANY
Very truly yours,
By: /s/ GREGORY A. WRIGHT
--------------------------------
Name: Gregory A. Wright,
Attorney-in-Fact
DIGICOMP INC.
SMILEY'S SUPER SERVICE, INC.
TESORO ALASKA COMPANY
TESORO ALASKA PIPELINE COMPANY
TESORO AVIATION COMPANY
TESORO HAWAII CORPORATION
TESORO HIGH PLAINS PIPELINE COMPANY
TESORO MARINE SERVICES HOLDING COMPANY
TESORO MARINE SERVICES, LLC
By: Tesoro Marine Services
Holding Company, as sole member
TESORO MARITIME COMPANY
TESORO NORTHSTORE COMPANY
TESORO PETROLEUM COMPANIES, INC.
TESORO REFINING AND MARKETING COMPANY
TESORO TRADING COMPANY
TESORO VOSTOK COMPANY
By: Tesoro Petroleum Corporation,
as sole member
By: /s/ GREGORY A. WRIGHT
------------------------------
Name: Gregory A. Wright
Title: Senior Vice President and
Chief Financial Officer
32
KENAI PIPE LINE COMPANY
TESORO GAS RESOURCES COMPANY, INC.
TESORO TECHNOLOGY COMPANY
TESORO WASATCH, LLC
By: Tesoro Petroleum Corporation,
as sole member
By: /s/ SHARON L. LAYMAN
--------------------------------
Name: Sharon L. Layman
Title: Vice President and Treasurer
33
Accepted as of the date hereof:
GOLDMAN, SACHS & CO.
BY: /s/ GOLDMAN, SACHS & CO.
-----------------------------
(Goldman, Sachs & Co.)
34
SCHEDULE I
PRINCIPAL
AMOUNT OF
SECURITIES
TO BE
PURCHASER PURCHASED
--------- ---------
Goldman, Sachs & Co........................................ $ 300,000,000
Banc One Capital Markets, Inc.............................. 75,000,000
-------------
TOTAL...................................................... $ 375,000,000
=============
35
Schedule A
a. The Mortgage and Security Agreement in respect of the
Alaska Refinery dated as of April 17, 2003 (the "Alaska Refinery Mortgage")
between Tesoro Alaska Company, formerly known as Tesoro Alaska Petroleum
Company, and the Collateral Agent;
b. The Mortgage and Security Agreement in respect of the
Kenai Pipeline Company Terminal owned by Kenai Pipeline Company dated as of
April 17, 2003 (the "Alaska Refinery Mortgage") between Tesoro Alaska Company
and the Collateral Agent;
c. The Mortgage and Security Agreement in respect of the
California Refinery dated as of April 17, 2003 (the "California Refinery
Mortgage") between Tesoro Refining and Marketing Company and the Collateral
Agent;
d. The Mortgage and Security Agreement in respect of the
Hawaii Refinery dated as of April 17, 2003 (the "Hawaii Refinery Mortgage")
between Tesoro Hawaii Corporation and the Collateral Agent;
e. The Mortgage and Security Agreement in respect of the
North Dakota Refinery dated as of April 17, 2003 (the "North Dakota Refinery
Mortgage") between Tesoro Refining and Marketing Company and the Collateral
Agent;
f. The Mortgage and Security Agreement in respect of the
Utah Refinery dated as of April 17, 2003 (the "Utah Refinery Mortgage") between
Tesoro Refining and Marketing Company and the Collateral Agent;
g. The Mortgage and Security Agreement in respect of the
Washington Refinery dated as of April 17, 2003 (the "Washington Refinery
Mortgage") between Tesoro Refining and Marketing Company and the Collateral
Agent;
h. The Mortgage and Security Agreement in respect of the
Boise, Idaho Terminal dated as of April 17, 2003 (the "Boise Terminal Mortgage")
between Tesoro Refining and Marketing Company and the Collateral Agent; and
i. The Mortgage and Security Agreement in respect of the
Burley, Idaho Terminal dated as of April 17, 2003 (the "Burley Terminal
Mortgage") between Tesoro Refining and Marketing Company and the Collateral
Agent.
ANNEX I
Pursuant to Section 7(g) of the Purchase Agreement, the accountants
shall furnish letters to the Purchasers to the effect that:
(i) They are independent certified public accountants
with respect to the Company and its subsidiaries under Rule 101 of the
American Institute of Certified Public Accountants' Code of
Professional Conduct, and its interpretations and rulings;
(ii) In our opinion, the consolidated financial statements
audited by us and included in the Offering Circular comply as to form
in all material respects with the applicable accounting requirements of
the Securities Act and the Exchange Act and the related published rules
and regulations adopted by the Commission;
(iii) On the basis of limited procedures not constituting
an audit in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements included in
the Offering Circular, inquiries of officials of the Company and its
subsidiaries responsible for financial and accounting matters and such
other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(A) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of
cash flows included in the Offering Circular are not in
conformity with generally accepted accounting principles
applied on the basis substantially consistent with the basis
for the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of
cash flows included in the Offering Circular;
(B) any other unaudited income statement data and
balance sheet items included in the Offering Circular do not
agree with the corresponding items in the unaudited
consolidated financial statements from which such data and
items were derived, and any such unaudited data and items were
not determined on a basis substantially consistent with the
basis for the corresponding amounts in the audited
consolidated financial statements included in the Offering
Circular;
(C) the unaudited financial statements which were not
included in the Offering Circular but from which were derived
any unaudited condensed financial statements referred to in
clause (A) and any unaudited income statement data and balance
sheet items included in the Offering Circular and referred to
in clause (B) were not determined on a basis substantially
consistent with the basis for the audited consolidated
financial statements included in the Offering Circular;
(D) any unaudited pro forma consolidated condensed
financial statements included in the Offering Circular do not
comply as to form in all material respects with the applicable
accounting requirements or the pro forma adjustments have not
been properly applied to the historical amounts in the
compilation of those statements;
(E) as of a specified date not more than five days
prior to the date of such letter, there have been any changes
in the consolidated capital stock (other than issuances of
capital stock upon exercise of options and stock appreciation
rights, upon earn-outs of performance shares and upon
conversions of convertible securities, in each case which were
outstanding on the date of the latest financial statements
included in the Offering Circular or any increase in the
consolidated long-term debt of the Company and its
subsidiaries, or any decreases in consolidated net current
assets or stockholders' equity or other items specified by the
Representatives, or any increases in any items specified by
the Representatives, in each case as compared with amounts
shown in the latest balance sheet included in the Offering
Circular except in each case for changes, increases or
decreases which the Offering Circular discloses have occurred
or may occur or which are described in such letter; and
(F) for the period from the date of the latest
financial statements included in the Offering Circular to the
specified date referred to in clause (E) there were any
decreases in consolidated net revenues or operating profit or
the total or per share amounts of consolidated net income or
other items specified by the Representatives, or any increases
in any items specified by the Representatives, in each case as
compared with the comparable period of the preceding year and
with any other period of corresponding length specified by the
Representatives, except in each case for decreases or
increases which the Offering Circular discloses have occurred
or may occur or which are described in such letter; and
(v) In addition to the examination referred to in their
report(s) included in the Offering Circular and the limited procedures,
inspection of minute books, inquiries and other procedures referred to
in paragraphs (iii) and (iv) above, they have carried out certain
specified procedures, not constituting an audit in accordance with
generally accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the Representatives,
which are derived from the general accounting records of the Company
and its subsidiaries, which appear in the Offering Circular, and have
compared certain of such amounts, percentages and financial information
with the accounting records of the Company and its subsidiaries and
have found them to be in agreement.
2
March 21, 2003
Dear Deloitte & Touche LLP:
Goldman, Sachs & Co., as representatives of the Purchasers of 8% Senior
Secured Notes to be issued by Tesoro Petroleum Corporation (the "Company"), will
be reviewing certain information relating to the Company that will be included
in the Offering Circular, which may be delivered to investors and utilized by
them as a basis for their investment decision. This review process, applied to
the information relating to the issue, will be substantially consistent with the
due diligence review process that we would perform if this placement of
securities were being registered pursuant to the Securities Act of 1933 (the
Securities Act).(1) We are knowledgeable with respect to the due diligence
review process that would be performed if this placement of securities were
being registered pursuant to the Securities Act. We hereby request that you
deliver to us a "comfort" letter concerning the financial statements of the
issuer and certain statistical and other data included in the offering document.
We will contact you to identify the procedures we wish you to follow and the
form we wish the comfort letter to take.
Very truly yours,
______________________________________
(Goldman, Sachs & Co)
- ------------------
(1) It is recognized however that what is "substantially consistent" may vary
from situation to situation and may not be the same as that done in a registered
offering of the same securities for the same issuer and whether the procedures
being, or to be, followed will be "substantially consistent" will be determined
by us on a case-by-case basis.
F-1