1
EXHIBIT 10.10
SECURITY AGREEMENT
(Accounts and Inventory)
Between
TESORO REFINING, MARKETING & SUPPLY COMPANY
and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
AS AGENT
April 20, 1994
2
SECURITY AGREEMENT
ACCOUNTS AND INVENTORY
THIS SECURITY AGREEMENT is made as of April 20, 1994, between TESORO
REFINING, MARKETING & SUPPLY COMPANY, a Delaware corporation ("Debtor"), and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national banking association, as
Agent ("Secured Party"), for itself, the Issuing Banks and the Lenders.
RECITALS
A. On even date herewith, Tesoro Petroleum Corporation (the
"Company"), Texas Commerce Bank National Association, individually, as Agent
and as an Issuing Bank, Banque Paribas, individually, as Co-Agent and as an
Issuing Bank, and the other financial institutions parties thereto entered into
a Credit Agreement (as amended from time to time, the "Credit Agreement").
B. The conditions precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make the initial Loans and the
Issuing Banks to issue Letters of Credit thereunder, include the execution and
delivery by Debtor of this Security Agreement, and Debtor has agreed to enter
into this Security Agreement.
C. Therefore, (i) in order to comply with the terms and
conditions of the Credit Agreement, (ii) to induce the Lenders at any time from
time to time to loan monies and the Issuing Banks to issue Letters of Credit,
with or without security to or for the account of the Company in accordance
with the terms of the Credit Agreement, (iii) at the special insistence and
request of the Agent, the Issuing Banks and the Lenders, and (iv) for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Debtor hereby agrees with Secured Party as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Terms Defined Above. As used in this Security
Agreement, the terms "Company," "Credit Agreement," "Debtor" and "Secured
Party" shall have the meanings respectively assigned to them.
Section 1.02 Certain Definitions. As used in this Security
Agreement, the following terms shall have the following meanings, unless the
context otherwise requires:
"Accounts" shall mean all accounts (as such term is defined
in the Code).
"Account Debtor" shall mean any Person liable (whether
directly or indirectly, primarily or secondarily) for the payment or
performance of any obligations included in the Collateral, whether as
an account debtor (as defined in the Code), obligor on an instrument,
issuer of documents or securities, guarantor or otherwise.
"Code" shall mean the Uniform Commercial Code as presently in
effect in the State of Texas, Texas Business and Commerce Code,
Chapters 1 through 9.
3
"Collateral" shall mean the following types or items of
Property (including Property hereafter acquired by Debtor as well as
Property which Debtor now owns or in which Debtor has rights):
(a) all of Debtor's Accounts and Inventory;
(b) (i) any Property from time to time delivered to or
deposited with Secured Party by or for the account of Debtor which is
related to any Property referred to in clause (a) of this definition;
and (ii) all certificates of title or other documents evidencing
ownership or possession of or otherwise relating to any Property
referred to in clause (a) of this definition;
(c) (i) all goods which were at any time included in the
Collateral described in clause (a) of this definition and which are
returned to or for the account of Debtor following their sale, lease
or other disposition; (ii) all policies of insurance (whether or not
required by Secured Party) covering any Property referred to in this
definition; and (iii) all proceeds, products, replacements, additions
to, substitutions for, accessions of, and Property necessary for the
operation of any of the Property referred to in this definition,
including, without limitation, insurance payable as a result of loss
or damage to any of the Property referred to in this definition,
refunds of unearned premiums of any such insurance policy and claims
against third parties;
(d) all books and records related to any of the Property
referred to in this definition, including, without limitation, any and
all books of account, customer lists and other records relating in any
way to the Collateral described in this definition;
(e) all of Debtor's general intangibles (as defined in
the Code) which are related (but only those related) to any Property
referred to in this definition, including, without limitation, all (i)
letters of credit, bonds, guaranties, purchase or sales agreements and
other contractual rights, rights to performance, and claims for
damages, refunds (including tax refunds) or other monies due or to
become due; (ii) orders, franchises, permits, certificates, licenses,
consents, exemptions, variances, authorizations or other approvals by
any Governmental Authority; (iii) business records, computer tapes and
computer software; and (iv) other intangible personal property,
whether similar or dissimilar to the Property referred to in clause
(a) of this definition; and
(f) all of Debtor's chattel paper, documents and
instruments (as such terms are defined in the Code) related to or
arising out of any Property referred to in clause (a) of this
definition.
It is expressly contemplated that additional Property may from
time to time be pledged, assigned or granted to Secured Party as
additional security for the Obligations, and, if so, then the term
"Collateral" as used herein shall be deemed for all purposes hereof to
include all such additional Property, together with all other Property
of the types described above related thereto. It is expressly agreed
that Collateral shall not include and shall be exclusive of any
equipment.
"Event of Default" shall have the meaning assigned such term
in Section 6.01 of this Security Agreement.
"Inventory" shall mean all inventory (as defined in the Code).
-2-
4
"Obligations" shall mean with respect to the Debtor, the
Obligations (as defined in the Guaranty Agreement) to the extent the
Debtor is liable therefor as provided in the Guaranty Agreement. The
Obligations are Senior Debt as such term is defined in that certain
Subordination Agreement dated December 15, 1992 among the Company,
Tesoro Alaska Petroleum Company and the State of Alaska attached to
the Settlement Agreement among the Company, Tesoro Alaska Petroleum
Company and the State of Alaska.
"Obligor" shall mean the Company and any other Person, other
than Debtor, liable (whether directly or indirectly, primarily or
secondarily) for the payment or performance of any of the Obligations
whether as maker, co-maker, endorser, guarantor, accommodation party,
general partner or otherwise; and the term "Obligor" shall
specifically include each Guarantor, other than Debtor, named in the
Credit Agreement.
"Property" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Security Agreement" shall mean this Security Agreement, as
the same may be amended, modified or supplemented from time to time.
Section 1.03 Other Defined Terms. Unless otherwise defined herein,
all terms beginning with a capital letter which are defined in the Credit
Agreement shall have the meanings assigned therein, unless the context hereof
requires otherwise. All uncapitalized terms which are defined in the Code
shall have their respective meanings as used in the Code, unless the context
hereof requires otherwise.
ARTICLE II
SECURITY INTEREST
Section 2.01 Grant of Security Interest. Debtor hereby assigns
and grants to Secured Party, for its benefit and the benefit of the Lenders and
the Issuing Banks, a security interest in, lien upon and right of set-off
against the Collateral to secure the prompt payment and performance of the
Obligations.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Debtor represents and warrants to Secured Party, the Issuing Banks and
the Lenders (which representations and warranties will survive the creation and
payment of the Obligations) that:
Section 3.01 First Priority Security Interest. The grant of the
security interest in the Collateral pursuant to this Security Agreement creates
a valid and perfected first priority security interest in the Collateral,
enforceable against Debtor and all third parties and securing payment of the
Obligations.
Section 3.02 No Filings By Third Parties. No financing statement
or other public notice or recording covering the Collateral is on file in any
public office (other than any financing statement or other public notice or
recording naming Secured Party as the secured party therein), and Debtor will
not
-3-
5
execute any such financing statement or other public notice or recording so
long as any of the Obligations are outstanding.
Section 3.03 No Name Changes. Debtor has not, during the
preceding five years, entered into any contract, agreement, security instrument
or other document using a name other than, or been known by or otherwise used
any name other than, the name used by Debtor herein.
Section 3.04 Location of Debtor and Collateral. Debtor's chief
executive office and Debtor's records concerning the Collateral are located at
the address or location set forth on the signature page hereof. The Collateral
is located at such address or at the location(s), if any, specified in Exhibit
A hereto. Any Collateral not at such location(s) nevertheless remains subject
to Secured Party's security interest.
Section 3.05 Collateral. All statements or other information
provided by Debtor to Secured Party, any Issuing Bank or any Lender with
respect to the Collateral is or (in the case of subsequently furnished
information) will be when provided correct and complete in all material
respects. The delivery at any time by Debtor to Secured Party of additional
Collateral or of additional descriptions of Collateral shall constitute a
representation and warranty by Debtor to Secured Party hereunder that the
representations and warranties of this Article III are correct insofar as they
would pertain to such Collateral or the descriptions thereof.
Section 3.06 Accounts.
(a) Each Account represents the genuine, valid and legally
enforceable indebtedness of an Account Debtor arising from the sale, lease or
rendition by Debtor of goods or services and is not and will not be subject to
contra accounts, set-offs, defenses, counterclaims, allowances or adjustments
(other than discounts for prompt payment shown on the invoice), or objections
or complaints by the Account Debtor concerning its liability on the Account;
and any goods, the sale of which gave rise to an Account, have not been
returned or rejected by the Account Debtor or lost or damaged prior to receipt
by the Account Debtor.
(b) The amount shown as to each Account on Debtor's books is or
will be the true and undisputed amount owing and unpaid thereon. Except as
disclosed in writing to Secured Party, each Account arose or shall have arisen
in the ordinary course of Debtor's business; provided, however, that any
Accounts which arose or hereafter arise outside the ordinary course of Debtor's
business shall nevertheless be included as part of the Collateral. Debtor has
no knowledge of any bankruptcy, insolvency or other action affecting creditors'
rights with respect to any Account Debtor.
(c) Except as disclosed in writing to Secured Party, each invoice
or agreement evidencing the Accounts is or will be due and payable not more
than 90 days from the date thereof; provided, however, that any Accounts not so
due and payable shall nevertheless be included as part of the Collateral.
Section 3.07 Delivery of Documents or Letters of Credit. With
respect to any Inventory or other Collateral covered by one or more
certificates of title or other documents evidencing ownership or possession
thereof, and with respect to any Accounts or other Collateral supported by
letters of credit, each of such certificates, documents or letters of credit
has been delivered to Secured Party (provided, however, that all certificates,
documents and letters of credit referred to in Section 1.02 shall be subject
-4-
6
to the security interest created by this Security Agreement irrespective of
whether or not such delivery shall have been made).
Section 3.08 Ownership of Collateral; Encumbrances; Valid and
Binding Agreement. Debtor is the legal and beneficial owner of the Collateral
free and clear of any adverse claim, lien, security interest, option or other
charge or encumbrance except for the security interest created by this
Agreement, and Debtor has full right, power and authority to assign and grant a
security interest in the Collateral to Secured Party. This Agreement
constitutes a legal, valid and binding obligation of Debtor enforceable against
Debtor in accordance with its terms. The execution, delivery and performance
of this Agreement will not violate the terms of any contract, agreement, law,
regulation, order, injunction, judgment, decree or writ to which Debtor is
subject and does not require the consent or approval of any other Person.
Section 3.09 No Required Consent. No authorization, consent,
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body (other than the filing of financing statements) is
required for (i) the due execution, delivery and performance by Debtor of this
Agreement, (ii) the grant by Debtor of the security interest granted by this
Agreement, (iii) the perfection of such security interest or (iv) the exercise
by Secured Party of its rights and remedies under this Agreement.
ARTICLE IV
COVENANTS AND AGREEMENTS
Debtor covenants and agrees that so long as any part of the
Obligations are outstanding:
Section 4.01 Change in Location of Collateral or Debtor. Debtor
will give Secured Party 30 days' prior written notice of (i) any change in
location of the Collateral to a jurisdiction other than Texas, Alaska,
California, Oregon or Washington and which would cause the Secured Party to be
unperfected in the Collateral, (ii) the opening or closing of any place of
Debtor's business or (iii) any change in the location of Debtor's chief
executive office or address.
Section 4.02 Documents; Collateral in Possession of Third Parties.
If certificates of title or other documents evidencing ownership or possession
of the Collateral are issued or outstanding, Debtor will cause the security
interest of Secured Party to be properly noted thereon and will, forthwith upon
receipt, deliver same to Secured Party. If any Collateral is at any time in
the possession or control of any warehouseman, bailee, agent or independent
contractor, Debtor shall notify such Person of Secured Party's security
interest in such Collateral. Upon Secured Party's request, Debtor shall
instruct any such Person to hold all such Collateral for Secured Party's
account subject to Debtor's instructions, or, if an Event of Default shall have
occurred, subject to Secured Party's instructions.
Section 4.03 Delivery of Letters of Credit and Instruments;
Proceeds. Debtor will deliver each letter of credit, if any, included in the
Collateral to Secured Party, in each case forthwith upon receipt by or for the
account of Debtor. If any Account becomes evidenced by a promissory note,
trade acceptance or any other instrument for the payment of money (other than
checks or drafts in payment of Accounts collected by Debtor in the ordinary
course of business prior to notification by Secured Party under Section 5.04),
Debtor will immediately deliver such instrument to Secured Party appropriately
endorsed to Secured Party, as collateral assignee and, regardless of the form
of presentment, demand, notice of dishonor, protest and notice of protest with
respect thereto, Debtor will remain liable thereon
-5-
7
until such instrument is paid in full. Except as permitted by Sections 4.03,
4.08 and 4.09, Debtor will deliver to Secured Party all proceeds from the sale
or other disposition of the Collateral promptly upon receipt. If chattel
paper, documents or instruments are received as proceeds, which are required to
be delivered to Secured Party, they will be, immediately upon receipt, properly
endorsed or assigned and delivered to Secured Party as Collateral.
Section 4.04 Sale, Disposition or Encumbrance of Collateral.
Except (i) as permitted by Section 4.08, or (ii) with the prior written consent
of the Majority Lenders, Debtor will not in any way encumber any of the
Collateral (or permit or suffer any of the Collateral to be encumbered) or
sell, assign, lend, rent, lease or otherwise dispose of or transfer any of the
Collateral to or in favor of any Person other than Secured Party.
Section 4.05 Intentionally left blank.
Section 4.06 Records and Information.
(a) Debtor shall keep accurate and complete records of the
Collateral (including proceeds). These records shall reflect complete and
accurate stock records of the Inventory and all facts concerning each Account.
Debtor shall conduct a physical count of the Inventory at such intervals as
Secured Party requests and promptly supply Secured Party with a copy of such
count accompanied by a report of the value (valued at the lower of cost or
market value) of the Inventory. Secured Party may at any time have access to,
examine, audit, make extracts from and inspect without hindrance or delay
Debtor's records, files and the Collateral.
(b) Debtor will promptly furnish such information as Secured Party
may from time to time reasonably request regarding (i) the business, affairs or
financial condition of Debtor or (ii) the Collateral or Secured Party's rights
or remedies with respect thereto. Any balance sheets or financial statements
requested by Secured Party pursuant to this Section 4.06(b) shall conform to
generally accepted accounting principles.
(c) Debtor recognizes that financing statements pertaining to the
Collateral will be filed with the offices of the Secretary of State of Texas,
the Alaska Department of Natural Resources, the Secretary of State of
California, the Secretary of State of Oregon and the Department of Licensing of
the State of Washington. Debtor will immediately notify Secured Party of any
condition or event that may change the proper location for the filing of any
financing statements or other public notice or recordings for the purpose of
perfecting a security interest in the Collateral. Without limiting the
generality of the foregoing, Debtor will (i) immediately notify Secured Party
of any change to a jurisdiction other than as represented in Section 3.04 (A)
in the location of Debtor's chief executive office or chief place of business,
(B) in the location of the office where Debtor keeps its records concerning the
Accounts, or (C) in the "location" of Debtor within the meaning of Section
9-103(c) of the Code; (ii) immediately notify Secured Party of any change in
the location of the Collateral to any jurisdiction other than the States of
Texas, Alaska, California, Oregon and Washington; and (ii) notify Secured Party
30 days prior to any change in Debtor's name, identity or corporate structure
or Tax Identification Number. In any notice furnished pursuant to this
paragraph, Debtor will expressly state that the notice is required by this
Security Agreement and contains facts that will or may require additional
filings of financing statements or other notices for the purpose of continuing
perfection of Secured Party's security interest in the Collateral. Debtor will
promptly provide written notice to Secured Party of all information which in
any way relates to or affects the Collateral generally, Secured Party's rights
or remedies with respect thereto,
-6-
8
the filing of any financing statement or other public notices or recordings,
or the delivery and possession of items of Collateral for the purpose of
perfecting a security interest in the Collateral.
Section 4.07 Further Assurances. Upon the request of Secured
Party, Debtor shall (at Debtor's expense) execute and deliver all such
assignments, certificates, financing statements or other documents and give
further assurances and do all other acts and things as Secured Party may
reasonably request to perfect Secured Party's interest in the Collateral or to
protect, enforce or otherwise effect Secured Party's rights and remedies
hereunder.
Section 4.08 Inventory. Unless an Event of Default has occurred
and is continuing and after any applicable notice and cure periods provided for
in the Credit Agreement, Debtor may use the Inventory in any lawful manner not
inconsistent with this Security Agreement and with the terms of insurance
thereon and may sell, lease or otherwise dispose of its Inventory for cash or
terms in the ordinary course of business, and Debtor may retain the proceeds of
such sales, leases or other dispositions (subject to Section 4.03 and Section
4.09); provided, however, the Inventory shall remain in Debtor's possession and
control at all times prior to sale, lease or other disposition at Debtor's
address set forth in Section 3.04. Debtor shall bear any risk of loss of the
Inventory. Debtor shall not use any item of Inventory in a manner inconsistent
with the holding thereof for sale, lease or other disposition in the ordinary
course of business or in contravention of the terms of any agreement. Upon the
occurrence and continuance of an Event of Default and after any applicable cure
period, Debtor will not sell, lease or otherwise dispose of any of the
Inventory without the prior written consent of the Majority Lenders, and Debtor
shall immediately deliver to Secured Party any checks, cash or other forms of
payment which Debtor receives in connection with any Inventory, appropriately
endorsed.
Section 4.09 Accounts.
(a) Prior to notification by Secured Party under Section 6.02(i),
Debtor will collect the Accounts in the ordinary course of its business and may
retain the proceeds of such collections (subject to Section 4.03).
(b) Debtor shall immediately notify Secured Party in writing in
the event that any representation given in Article III with respect to any
Account ceases to be true and correct in all material respects; such notice
specifying other representation(s) that cease to be true and correct and the
action, if any, that Debtor proposes to take with respect thereto.
(c) Debtor will not modify, extend or substitute any contract, the
terms of which shall at any time have given rise to an Account, except in the
ordinary course of business or with the prior written consent of Secured Party.
Debtor will not re-date any invoice or sale or make sales with an extended
payment date beyond that customary in the industry, and in no event longer than
90 days. Debtor shall not adjust, settle, discount or compromise any of the
Accounts, except in the ordinary course of business or with the prior written
consent of Secured Party.
(d) Debtor will duly perform or cause to be performed all of
Debtor's obligations with respect to the Accounts and the underlying sales of
goods or other transactions giving rise to the Accounts.
Section 4.10 Condition of Collateral. Debtor will maintain all
Collateral in good condition and in accordance with industry standards and
practices. Debtor will not misuse, abuse, waste, destroy or
-7-
9
endanger the Collateral nor allow it to be used
in any manner other than its intended use. Debtor will not use any Collateral
in violation of any Governmental Requirement, or suffer it to be so used.
Section 4.11 Collateral Separate and Distinct. Debtor shall at
all times keep the Collateral, including proceeds, or cause it to be kept (when
in the possession of warehousemen, bailees, agents, independent contractors or
other third parties), separate and distinct from other Property.
Section 4.12 Change in Debtor's Name or Corporate Structure.
Debtor will not change its name, identity or corporate structure (including,
without limitation, any merger, consolidation or sale of substantially all of
its assets) without notifying Secured Party of such change in writing at least
30 days prior to the effective date of such change. Without the express
written consent of Secured Party, however, Debtor will not engage in any other
business or transaction under any name other than Debtor's name hereunder.
ARTICLE V
RIGHTS, DUTIES, AND POWERS OF SECURED PARTY
The following rights, duties and powers of Secured Party are
applicable irrespective of whether an Event of Default has occurred and is
continuing, but only after having given Debtor at least three (3) days prior
notice:
Section 5.01 Attorney-in-Fact. Secured Party is hereby fully
authorized and empowered (without the necessity of any further consent or
authorization from Debtor) and the right is expressly granted to Secured Party,
and Debtor hereby irrevocably appoints and makes Secured Party as Debtor's
attorney-in-fact, with full authority in the place and stead of Debtor and in
the name of Debtor or otherwise, from time to time in Secured Party's
discretion, but at Debtor's cost and expense to:
(a) obtain, adjust, sell and cancel any insurance with
respect to the Collateral and endorse any draft drawn by insurers of
the Collateral, and Secured Party may apply any proceeds or unearned
premiums of such insurance to the Obligations (whether or not due);
and
(b) take any action and to execute any assignment,
certificate, financing statement, notification, document or instrument
which Secured Party may deem necessary or advisable to accomplish the
purposes of this Security Agreement, including, without limitation, to
receive, endorse and collect all instruments made payable to Debtor
representing any payment or other distribution in respect of the
Collateral or any part thereof and to give full discharge for the
same.
Section 5.02 Transfer of Collateral. Secured Party may transfer
any or all of the Obligations, and upon any such transfer, Secured Party may
transfer its interest in any or all of the Collateral and shall be fully
discharged thereafter from all liability therefor. Any transferee of the
Collateral shall be vested with all rights, powers and remedies of Secured
Party hereunder.
Section 5.03 Purchase Money Financing. To the extent that the
Lenders have advanced or will advance funds to or for the account of Debtor to
enable Debtor to purchase or otherwise acquire specific types or items of
Collateral, the Lenders may at their option pay such funds (i) directly to the
Person from whom Debtor will make such purchase or acquire such rights or (ii)
to Debtor, in which case
-8-
10
Debtor covenants promptly to pay the same to such Person and forthwith furnish
to Secured Party, on request, evidence satisfactory to Secured Party that such
payment has been made from the funds so provided by Secured Party for such
payment.
Section 5.04 Proceeds. If so requested by Debtor, any payments
received by Secured Party on the Accounts or as proceeds of other Collateral
shall upon final collection by Secured Party be credited towards payment of the
Obligations. In the absence of such request from Debtor, and until so
requested, Secured Party may hold such collected payments as cash Collateral
(and Secured Party may at any time place a hold or freeze on all or a part of
any deposit account of Debtor containing deposits of such payments up to the
amount of such deposits).
Section 5.05 Discharge Encumbrances. Secured Party may, at its
option, discharge any taxes, Liens, security interests or other encumbrances at
any time levied or placed on the Collateral, may pay for insurance on the
Collateral and may pay for the maintenance and preservation of the Collateral.
Debtor agrees to reimburse Secured Party upon demand for any payment so made,
plus interest on the portion thereof from time to time remaining unpaid from
the date of Secured Party's demand at the rate for overdue principal and
interest set forth in Section 2.06(c) of the Credit Agreement.
Section 5.06 Disclaimer of Certain Duties.
(a) The powers conferred upon Secured Party by this Security
Agreement are to protect the interest of Secured Party, the Issuing Banks and
the Lenders in the Collateral and shall not impose any duty upon Secured Party,
the Issuing Banks or any Lender to exercise any such powers. Debtor hereby
agrees that Secured Party, the Issuing Banks and the Lenders shall not be
liable for, nor shall the indebtedness evidenced by the Obligations be
diminished by, Secured Party's delay or failure to collect upon, foreclose,
sell, take possession of or otherwise obtain value for the Collateral.
(b) Except as provided in the Credit Agreement, Secured Party
shall be under no duty whatsoever to make or give any presentment, notice of
dishonor, protest, demand for performance, notice of non-performance, notice of
intent to accelerate, notice of acceleration, or other notice or demand in
connection with any Collateral or the Obligations, or to take any steps
necessary to preserve any rights against any Obligor, Account Debtor or other
Person.
Section 5.07 Modification of Obligations; Other Security. Debtor
waives (i) any and all notice of acceptance, creation, modification,
rearrangement, renewal or extension for any period of any instrument executed
by any Obligor in connection with the Obligations and (ii) any defense of any
Obligor by reason of disability, lack of authorization, cessation of the
liability of any Obligor or for any other reason. Debtor authorizes Secured
Party, without notice or demand and without any reservation of rights against
Debtor and without affecting Debtor's liability hereunder or on the
Obligations, from time to time to (x) take and hold other Property, other than
the Collateral, as security for the Obligations, and exchange, enforce, waive
and release any or all of the Collateral, (y) apply the Collateral in the
manner permitted by this Security Agreement and (z) renew, extend for any
period, accelerate, amend or modify, supplement, enforce, compromise, settle,
waive or release the obligations of any Obligor or any instrument or agreement
of such other Person with respect to any or all of the Obligations or
Collateral.
Section 5.08 Waiver of Notice; Demand and Presentment; etc.
Except for any notice required under the Credit Agreement, Debtor hereby waives
any demand, notice of default, notice of acceleration of the maturity of the
Obligations, notice of intent to accelerate the maturity of the Obligations,
-9-
11
presentment, protest and notice of dishonor as to any action taken by Secured
Party in connection with this Security Agreement, or any instrument or
document. Debtor waives any right of marshaling in respect of any and all
Collateral, and waives any right to require Secured Party, any Issuing Bank or
any Lender to proceed against any Obligor, Account Debtor or other Person,
exhaust any Collateral or enforce any other remedy which Secured Party, any
Issuing Bank or any Lender now has or may hereafter have against any Obligor or
other Person.
Section 5.09 Non-judicial Enforcement. To the fullest extent
allowed by applicable law, Secured Party may enforce its rights hereunder
without prior judicial process or judicial hearing, and to the fullest extent
permitted by law Debtor expressly waives any and all legal rights which might
otherwise require Secured Party to enforce its rights by judicial process.
ARTICLE VI
EVENTS OF DEFAULT
Section 6.01 Events of Default. An Event of Default under the
Credit Agreement shall constitute an "Event of Default" under this Security
Agreement.
Section 6.02 Remedies. Upon the occurrence and during the
continuance of any Event of Default, Secured Party may take any or all of the
following actions without notice (except where expressly required under the
Credit Agreement or below) or demand to Debtor:
(a) Declare all or part of the indebtedness pursuant to
the Obligations immediately due and payable and enforce payment of the
same by Debtor or any Obligor.
(b) Take possession of the Collateral, or at Secured
Party's request Debtor shall, at Debtor's cost, assemble the
Collateral and make it available at a location to be specified by
Secured Party which is reasonably convenient to Debtor and Secured
Party. In any event, Debtor shall bear the risk of accidental loss or
damage to or diminution in value of the Collateral, and Secured Party
shall have no liability whatsoever for failure to obtain or maintain
insurance, nor to determine whether any insurance ever in force is
adequate as to amount or as to risk insured.
(c) Sell or lease, in one or more sales or leases and in
one or more parcels, or otherwise dispose of any or all of the
Collateral in its then condition or in any other commercially
reasonable manner as Secured Party may elect, in a public or private
transaction, at any location as deemed reasonable by Secured Party
(including, without limitation, Debtor's premises), either for cash or
credit or for future delivery at such price as Secured Party may deem
fair, and (unless prohibited by the Code, as adopted in any applicable
jurisdiction) Secured Party, any Issuing Bank or any Lender may be the
purchaser of any or all Collateral so sold and may apply upon the
purchase price therefor any Obligations secured hereby. Any such sale
or transfer by Secured Party either to itself or to any other Person
shall be absolutely free from any claim of right by Debtor, including
any equity or right of redemption, stay or appraisal which Debtor has
or may have under any rule of law, regulation or statute now existing
or hereafter adopted. Upon any such sale or transfer, Secured Party
shall have the right to deliver, assign and transfer to the purchaser
or transferee thereof the Collateral so sold or transferred. It shall
not be necessary that the Collateral or any part thereof be present at
the location of any such sale or transfer. Secured Party may, at its
discretion, provide for a public sale, and any such public sale shall
be held at
-10-
12
such time or times within ordinary business hours and at such place or
places as Secured Party may fix in the notice of such sale. Secured
Party shall not be obligated to make any sale pursuant to any such
notice. Secured Party may, without notice or publication, adjourn any
public or private sale by announcement at any time and place fixed for
such sale, and such sale may be made at any time or place to which the
same may be so adjourned. In the event any sale or transfer hereunder
is not completed or is defective in the opinion of Secured Party, such
sale or transfer shall not exhaust the rights of Secured Party
hereunder, and Secured Party shall have the right to cause one or more
subsequent sales or transfers to be made hereunder. In the event that
any of the Collateral is sold or transferred on credit, or to be held
by Secured Party for future delivery to a purchaser or transferee, the
Collateral so sold or transferred may be retained by Secured Party
until the purchase price or other consideration is paid by the
purchaser or transferee thereof, but in the event that such purchaser
or transferee fails to pay for the Collateral so sold or transferred
or to take delivery thereof, neither Secured Party, any Issuing Bank
nor any Lender shall incur any liability in connection therewith. If
only part of the Collateral is sold or transferred such that the
Obligations remain outstanding (in whole or in part), Secured Party's
rights and remedies hereunder shall not be exhausted, waived or
modified, and Secured Party is specifically empowered to make one or
more successive sales or transfers until all the Collateral shall be
sold or transferred and all the Obligations are paid. In the event
that Secured Party elects not to sell the Collateral, Secured Party
retains its rights to lease or otherwise dispose of or utilize the
Collateral or any part or parts thereof in any manner authorized or
permitted by law or in equity, and to apply the proceeds of the same
towards payment of the Obligations. Each and every method of
disposition of the Collateral described in this Section 6.02(c) or in
Section 6.02(f) shall constitute disposition in a commercially
reasonable manner.
(d) Take possession of all books and records of Debtor
pertaining to the Collateral. Secured Party shall have the authority
to enter upon any real or immoveable property or improvements thereon
in order to obtain any such books or records, or any Collateral
located thereon, and remove the same therefrom without liability.
(e) Apply proceeds of the disposition of the Collateral
to the Obligations in any manner elected by Secured Party and
permitted by the Code or otherwise permitted by law or in equity.
Such application may include, without limitation, the reasonable
expenses of retaking, holding, preparing for sale or other
disposition, and the reasonable attorneys' fees and legal expenses
incurred by Secured Party, the Issuing Banks and the Lenders.
(f) Appoint any Person as agent to perform any act or
acts necessary or incident to any sale or transfer by Secured Party of
the Collateral. Additionally, any sale or transfer hereunder may be
conducted by an auctioneer or any officer or agent of Secured Party.
(g) Apply and set-off (i) any deposits of Debtor now or
hereafter held by Secured Party, the Issuing Banks and the Lenders;
(ii) all claims of Debtor against Secured Party, now or hereafter
existing; (iii) any other Property, rights or interests of Debtor
which come into the possession or custody or under the control of
Secured Party; and (iv) the proceeds of any of the foregoing as if the
same were included in the Collateral. Secured Party agrees to notify
Debtor promptly after any such set-off or application; provided,
however, the failure of Secured Party to give any notice shall not
affect the validity of such set-off or application.
(h) With respect to the Collateral, receive, change the
address for delivery, open and dispose of mail addressed to Debtor,
and to execute, assign and endorse negotiable and other
-11-
13
instruments for the payment of money, documents of title or other
evidences of payment, shipment or storage for any form of Collateral
on behalf of and in the name of Debtor.
(i) Notify or require Debtor to notify Account Debtors
that the Accounts have been assigned to Secured Party and direct such
Account Debtors to make payments on the Accounts directly to Secured
Party. To the extent Secured Party does not so elect, Debtor shall
continue to collect and retain the Accounts. Secured Party or its
designee shall also have the right, in its own name or in the name of
Debtor, to do any of the following: (i) to demand, collect, receipt
for, settle, compromise any amounts due, give acquittances for,
prosecute or defend any action which may be in relation to any monies
due or to become due by virtue of, the Accounts; (ii) to sell,
transfer or assign or otherwise deal in the Accounts or the proceeds
thereof or the related goods, as fully and effectively as if Secured
Party were the absolute owner thereof; (iii) to extend the time of
payment of any of the Accounts, to grant waivers and make any
allowance or other adjustment with reference thereto; (iv) to endorse
the name of Debtor on notes, checks or other evidences of payments on
Collateral that may come into possession of Secured Party; (v) to take
control of cash and other proceeds of any Collateral; (vi) to sign the
name of Debtor on any invoice or bill of lading relating to any
Collateral, or any drafts against Account Debtors or other persons
making payment with respect to Collateral; (vii) to send a request for
verification of Accounts to any Account Debtor; and (viii) to do all
other acts and things necessary to carry out the intent of this
Agreement.
(j) Exercise all other rights and remedies permitted by
law or in equity.
Section 6.03 Liability for Deficiency. If any sale or other
disposition of Collateral by Secured Party or any Issuing Bank or any other
action of Secured Party, any Issuing Bank or any Lender hereunder results in
reduction of the Obligations, such action will not release Debtor from its
liability to Secured Party, the Issuing Banks and the Lenders for any unpaid
Obligations, including costs, charges and expenses incurred in the liquidation
of Collateral, together with interest thereon, and the same shall be
immediately due and payable to Secured Party at Secured Party's address set
forth on the signature page of this Security Agreement.
Section 6.04 Reasonable Notice. If any applicable provision of
any law requires Secured Party any Issuing Bank or any Lender to give
reasonable notice of any sale or disposition or other action, Debtor hereby
agrees that fifteen (15) days' prior written notice shall constitute reasonable
notice thereof. Such notice, in the case of public sale, shall state the time
and place fixed for such sale and, in the case of private sale, the time after
which such sale is to be made.
Section 6.05 Account Debtors. Any payment or settlement of an
Account made by an Account Debtor will be, to the extent of such payment or to
the extent provided under such settlement, a release, discharge and acquittance
of the Account Debtor with respect to such Account, and Debtor shall take any
action as may be required by Secured Party in connection therewith. No Account
Debtor on any Account will ever be bound to make inquiry as to the termination
of this Agreement or the rights of Secured Party to act hereunder, but shall be
fully protected by Debtor in making payment directly to Secured Party.
-12-
14
ARTICLE VIII
MISCELLANEOUS
Section 7.01 Notices. Any notice required or permitted to be
given under or in connection with this Security Agreement shall be given in
accordance with the notice provisions of the Guaranty Agreement.
Section 7.02 Amendments and Waivers. Secured Party's, any Issuing
Bank's or any Lender's acceptance of partial or delinquent payments or any
forbearance, failure or delay by the Secured Party in exercising any right,
power or remedy hereunder shall not be deemed a waiver of any obligation of
Debtor or any Obligor, or of any right, power or remedy of Secured Party; and
no partial exercise of any right, power or remedy shall preclude any other or
further exercise thereof. Secured Party may remedy any Event of Default
hereunder or in connection with the Obligations without waiving the Event of
Default so remedied. Debtor hereby agrees that if Secured Party agrees to a
waiver of any provision hereunder, or an exchange of or release of the
Collateral, or the addition or release of any Obligor, any such action shall
not constitute a waiver of any of Secured Party's other rights or of Debtor's
obligations hereunder. This Security Agreement may be amended only by the
manner set forth in Section 8.02 of the Credit Agreement by an instrument in
writing executed jointly by Debtor and Secured Party and may be supplemented
only by documents delivered or to be delivered in accordance with the express
terms hereof.
Section 7.03 Copy as Financing Statement. A photocopy or other
reproduction of this Security Agreement or any financing statement covering the
Collateral is sufficient as a financing statement, and the same may be filed
with any appropriate filing authority for the purpose of perfecting Secured
Party's security interest in the Collateral.
Section 7.04 Possession of Collateral. Secured Party shall be
deemed to have possession of any Collateral in transit to it or set apart for
it (or, in either case, any of its agents, affiliates or correspondents).
Section 7.05 Redelivery of Collateral. If any sale or transfer of
Collateral by Secured Party results in full satisfaction of the Obligations,
and after such sale or transfer and discharge there remains a surplus of
proceeds, Secured Party will deliver to Debtor such excess proceeds in a
commercially reasonable time; provided, however, that neither Secured Party,
any Issuing Bank nor any Lender shall be liable for any interest, cost or
expense in connection with any delay in delivering such proceeds to Debtor.
Section 7.06 Governing Law; Jurisdiction. This Security Agreement
and the security interest granted hereby shall be construed in accordance with
and governed by the laws of the State of Texas (except to the extent that the
laws of any other jurisdiction govern the perfection and priority of the
security interests granted hereby). Debtor consents to and submits to in
personam jurisdiction and venue in the state district and county courts of the
county wherein Secured Party's offices are located at the address specified on
the signature page hereof, and in the Federal District Courts of the district
wherein such offices of Secured Party are located. This submission to
jurisdiction is nonexclusive and does not preclude Secured Party, any Issuing
Bank or any Lender from obtaining jurisdiction over Debtor or the Collateral in
any court otherwise having jurisdiction.
-13-
15
Section 7.07 Cumulative and Other Rights. The rights, powers and
remedies of Secured Party hereunder are in addition to all rights, powers and
remedies given by law or in equity. The exercise by Secured Party, any Issuing
Bank or any Lender of any one or more of the rights, powers and remedies herein
shall not be construed as a waiver of any other rights, powers and remedies,
including, without limitation, any other rights of set-off. If any of the
Obligations are given in renewal, extension for any period or rearrangement, or
applied toward the payment of debt secured by any lien, Secured Party shall be,
and is hereby, subrogated to all the rights, titles, interests and liens
securing the debt so renewed, extended, rearranged or paid.
Section 7.08 Subrogation. Until the Obligations have been paid in
full, Debtor hereby waives any claim, right or remedy which Debtor may now have
or hereafter acquire against the Company which arises out of this Security
Agreement or from the performance by Debtor hereunder, including without
limitation, any claim, remedy or right of subrogation, reimbursement,
exoneration, indemnification, or participation in any such claim, right or
remedy of any other Person against the Company; provided, however,
notwithstanding the foregoing, Debtor reserves its rights of contribution and
reimbursement, if any, from any Obligor. Until the Obligations have been paid
in full, Debtor further waives any benefit of any right to participate in any
security now or hereafter held by Secured Party, the Issuing Banks and/or the
Lenders.
Section 7.09 Continuing Security Agreement.
(a) This Security Agreement shall constitute a continuing security
agreement, and all representations and warranties, covenants and agreements
shall, as applicable, apply to all future as well as existing transactions.
Provisions of this Security Agreement, unless they are by their terms
exclusive, shall be in addition to other agreements between the parties.
(b) Except as may be expressly applicable pursuant to Section
9.505 of the Code, no action taken or omission to act by Secured Party, the
Issuing Banks or the Lenders hereunder, including, without limitation, any
action taken or inaction pursuant to Section 6.02, shall be deemed to
constitute a retention of the Collateral in satisfaction of the Obligations or
otherwise to be in full satisfaction of the Obligations, and the Obligations
shall remain in full force and effect, until Secured Party, the Issuing Banks
and the Lenders shall have applied payments (including, without limitation,
collections from Collateral) towards the Obligations in the full amount then
outstanding or until such subsequent time as is hereinafter provided in
subsection (c) below.
(c) To the extent that any payments on the Obligations or proceeds
of the Collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any bankruptcy law, common law or
equitable cause, then to such extent the Obligations so satisfied shall be
revived and continue as if such payment or proceeds had not been received by
Secured Party, the Issuing Banks or the Lenders, and Secured Party's, the
Issuing Banks' and the Lenders' security interests, rights, powers and remedies
hereunder shall continue in full force and effect. In such event, this
Security Agreement shall be automatically reinstated if it shall theretofore
have been terminated pursuant to Section 7.10.
(d) In the event that the Obligations are structured such that
there are times when no Indebtedness is owing thereunder, this Security
Agreement shall remain valid and in full force and effect as to all subsequent
indebtedness included in the Obligations, provided Secured Party has not in the
interim period executed a written release or termination statement or returned
possession of or reassigned the Collateral to Debtor.
-14-
16
Section 7.10 Termination. The grant of a security interest
hereunder and all of Secured Party's, the Issuing Banks' and the Lenders'
rights, powers and remedies in connection therewith shall remain in full force
and effect until Secured Party has retransferred and delivered all Collateral
in its possession to Debtor, and executed a written release or termination
statement and reassigned to Debtor without recourse or warranty any remaining
Collateral and all rights conveyed hereby. Upon the complete payment of the
Obligations and the compliance by Debtor with all covenants and agreements
hereof, Secured Party, at the written request and expense of Debtor, will
release, reassign and transfer the Collateral to Debtor and declare this
Security Agreement to be of no further force or effect. Notwithstanding the
foregoing, the provisions of Section 7.09(c) shall survive the termination of
this Security Agreement.
Section 7.11 Counterparts, Effectiveness. This Security Agreement
may be executed in two or more counterparts. Each counterpart is deemed an
original, but all such counterparts taken together constitute one and the same
instrument. This Security Agreement becomes effective upon the execution
hereof by Debtor and delivery of the same to Secured Party, and it is not
necessary for Secured Party, the Issuing Banks or any Lender to execute any
acceptance hereof or otherwise signify or express its acceptance hereof.
Section 7.12 Headings Descriptive. All titles or headings to
articles, sections, subsections or other divisions of this Security Agreement
or the exhibits hereto are only for the convenience of the parties and shall
not be construed to have any effect or meaning with respect to the other
content of such articles, sections, subsections or other divisions, such other
content being controlling as to the agreement between the parties hereto.
Section 7.13 Delivery of Copy/Waiver. The Debtor hereby
acknowledges receiving a copy of this Security Agreement. The Debtor waives
all rights to receive from the Secured Party a copy of any financing statement
or financing change statement filed or registered or verification statement
issued at any time in respect of this Security Agreement.
-15-
17
DEBTOR: TESORO REFINING, MARKETING & SUPPLY COMPANY
By: /s/ William T. VanKleef
----------------------------------------
Name: William T. VanKleef
Title: Vice President and Treasurer
Address of Chief Executive Office and
Location of the Collateral:
8700 Tesoro Drive
San Antonio, Texas 78217
SECURED PARTY: TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, AS AGENT
By: /s/ P. Stan Burge
----------------------------------------
Name: P. Stan Burge
Title: Vice President
Address:
712 Main Street
Houston, Texas 77002
-16-
18
FINANCING STATEMENT
This Financing Statement is presented to a filing officer for filing
pursuant to the Uniform Commercial Code.
1. The name and address of the Debtor is:
TESORO REFINING, MARKETING & SUPPLY COMPANY
8700 Tesoro Drive
San Antonio, Texas 78217
Federal Tax Identification No.: 74-2045147
2. The name and address of the Secured Party is:
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Agent
712 Main Street
Houston, Texas 77002
Federal Tax Identification No.: 74-0800980
3. This Financing Statement covers the following Collateral:
(a) all of Debtor's accounts and inventory;
(b) (i) any property from time to time delivered to or
deposited with Secured Party by or for the account of Debtor which is
related to any property referred to in clause (a) of this item 3; and
(ii) all certificates of title or other documents evidencing ownership
or possession of or otherwise relating to any property referred to in
clause (a) of this item 3;
(c) (i) all goods which were at any time included in the
Collateral described in clause (a) of this item 3 and which are
returned to or for the account of Debtor following their sale, lease
or other disposition; (ii), all policies of insurance (whether or not
required by Secured Party) covering any property referred to in this
item 3; and (iii), all proceeds, products, replacements, additions
to, substitutions for, accessions of, and property necessary for the
operation of any of the property referred to in this item 3,
including, without limitation, insurance payable as a result of loss
or damage to any of the property referred to in this item 3, refunds
of unearned premiums of any such insurance policy and claims against
third parties;
(d) all books and records related to any of the property
referred to in this item 3, including, without limitation, any and all
books of account, customer lists and other records relating in any way
to the Collateral described in this item 3;
(e) all of Debtor's general intangibles which are related
(but only those related) to any property referred to in this item 3,
including, without limitation, all (i) letters of credit, bonds,
guaranties, purchase or sales agreements and other contractual rights,
rights to performance, and claims for damages, refunds (including tax
refunds) or other monies due or to become due; (ii) orders,
franchises, permits, certificates, licenses, consents, exemptions,
variances, authorizations or other approvals by any governmental
authority; (iii) business records, computer tapes and computer
software; and (iv) other intangible personal property, whether
19
similar or dissimilar to the other property described or referred to in
clause (a) of this item 3; and
(f) all of Debtor's chattel paper, documents and
instruments related to or arising out of any property referred to in
clause (a) of this item 3.
The Collateral shall not include and shall be exclusive of any
equipment.
DEBTOR: TESORO REFINING, MARKETING & SUPPLY COMPANY
By: /s/ William T. VanKleef
-----------------------------------------
Name: William T. VanKleef
Title: Vice President and Treasurer
-2-