<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON , 1998
REGISTRATION NO. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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TESORO PETROLEUM CORPORATION
TESORO CAPITAL TRUST I
TESORO CAPITAL TRUST II
TESORO CAPITAL TRUST III
(Exact name of registrant as specified in its charter)
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<S> <C>
DELAWARE 95-0862768
DELAWARE 74-6465857
DELAWARE 74-6465856
DELAWARE 74-6465855
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
JAMES C. REED, JR., ESQ.
EXECUTIVE VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
8700 TESORO DRIVE 8700 TESORO DRIVE
SAN ANTONIO, TEXAS 78217 SAN ANTONIO, TEXAS 78217
(210) 828-8484 (210) 828-8484
(Address, including zip code, and telephone (Name, address, including zip code, and telephone
number, including number,
area code, of registrant's principal executive including area code, of agent for service for
offices each registrant)
for each registrant)
</TABLE>
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Copies to:
MICHAEL CONLON
FULBRIGHT & JAWORSKI L.L.P.
601 PENNSYLVANIA AVENUE, N.W., SUITE 400
WASHINGTON, D.C. 20004-2604
(202) 662-0200
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Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement, as determined
in light of market conditions and other factors.
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If the only securities being registered on this form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
(See Calculation Table and Footnotes on Following Page)
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CALCULATION OF REGISTRATION FEE
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<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PER UNIT AGGREGATE REGISTRATION FEE
TO BE REGISTERED REGISTERED (1)(2) (1)(3) OFFERING PRICE(1)(3) (4)
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<S> <C> <C> <C> <C>
Senior Debt Securities of Tesoro
Petroleum Corporation ("Tesoro"
or the "Company").............
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Subordinated Debt Securities of
Tesoro........................
- ----------------------------------------------------------------------------------------------------------------------
Preferred Stock of Tesoro(5)....
- ----------------------------------------------------------------------------------------------------------------------
Common Stock of Tesoro(5).......
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Stock Purchase Units of
Tesoro(6).....................
- ----------------------------------------------------------------------------------------------------------------------
Stock Purchase Contracts of
Tesoro(6).....................
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Trust Preferred Securities of
Tesoro Capital Trust I, Tesoro
Capital Trust II and Tesoro
Capital Trust III.............
- ----------------------------------------------------------------------------------------------------------------------
Guarantees by Tesoro of Trust
Preferred Securities(7).......
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Total................. $600,000,000 100% $600,000,000 $177,000
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(1) There are being registered hereunder such presently indeterminate (a)
principal amount of Senior Debt Securities and Subordinated Debt Securities,
(b) number of shares of Common Stock and Preferred Stock as may be issued
from time to time at indeterminate prices and (c) number of Trust Preferred
Securities of Tesoro Capital Trust I, Tesoro Capital Trust II and Tesoro
Capital Trust III of the Company with an aggregate initial offering price
not to exceed $600,000,000. The proposed maximum offering price per unit
will be determined from time to time by the Registrants in connection with
the issuance by the Registrants of the securities registered hereunder.
(2) Subject to adjustment to prevent dilution resulting from stock splits, stock
dividends or similar transactions.
(3) Estimated solely for the purpose of determining the registration fee. The
aggregate public offering price of all the securities registered hereby will
not exceed $600,000,000.
(4) Calculated pursuant to Rule 457(o) of the Securities Act of 1933, as
amended.
(5) Also includes such indeterminate number of shares of Common Stock or
Preferred Stock as may be issued upon conversion or exchange for any Debt
Securities, Preferred Stock or Trust Preferred Securities that provide for
conversion or exchange into Common Stock or Preferred Stock, or in the case
of Common Stock, upon settlement of Stock Purchase Contracts of Tesoro. No
separate consideration will be received for the Common Stock issuable upon
conversion of or in exchange for such securities.
(6) Each Stock Purchase Unit of Tesoro is a unit that consists of (i) a Stock
Purchase Contract of Tesoro under which the holder, upon settlement of such
Stock Purchase Contract, will purchase an indeterminate number of shares of
Common Stock to be issuable by Tesoro and (ii) initially a beneficial
interest in Preferred Securities of Tesoro Capital Trust I, Tesoro Capital
Trust II or Tesoro Capital Trust III or debt obligations of third parties,
including U. S. Treasury securities, purchased with the proceeds from the
sale of the Stock Purchase Units and pledged to secure the obligation of
such holder to purchase such shares of Common Stock. No separate
consideration will be received for the Stock Purchase Contracts.
(7) Includes the rights of holders of the Trust Preferred Securities under
certain Guarantees and back-up undertakings, consisting of obligations by
Tesoro to provide certain indemnities in respect of, and pay and be
responsible for certain expenses, costs, liabilities, and debts of, as
applicable, Tesoro Capital Trust I, Tesoro Capital Trust II and Tesoro
Capital Trust III, as set forth in the Declaration of Trust and the
Subordinated Debt Securities Indenture, in each case as further described in
the Registration Statement. No separate consideration will be received for
any such Guarantees or any back-up undertakings.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS SUBJECT TO COMPLETION DATED , 1998
TESORO PETROLEUM CORPORATION
SENIOR DEBT SECURITIES
SUBORDINATED DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
STOCK PURCHASE CONTRACTS
STOCK PURCHASE UNITS
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TESORO CAPITAL TRUST I
TESORO CAPITAL TRUST II
TESORO CAPITAL TRUST III
TRUST PREFERRED SECURITIES
(GUARANTEED TO THE EXTENT SET FORTH HEREIN BY TESORO PETROLEUM CORPORATION)
Tesoro Petroleum Corporation ("Tesoro" or the "Company") may offer and sell
from time to time together or separately in one or more series its (i) unsecured
debt securities which may be senior (the "Senior Debt Securities") or
subordinated (the "Subordinated Debt Securities" and, together with the Senior
Debt Securities, the "Debt Securities") consisting of notes, debentures or other
evidences of indebtedness, (ii) shares of preferred stock, no par value (the
"Preferred Stock"), (iii) shares of common stock, par value $0.16 2/3 per share
(the "Common Stock"), (iv) stock purchase contracts ("Stock Purchase Contracts")
to purchase shares of Common Stock or Preferred Stock and (v) stock purchase
units ("Stock Purchase Units"), each representing ownership of a Stock Purchase
Contract and Trust Preferred Securities (as defined below) or debt obligations
of third parties, including U. S. Treasury securities, securing the holder's
obligation to purchase Common Stock or Preferred Stock under the Stock Purchase
Contract, or any combination of the foregoing, either individually or as units
consisting of one or more of the foregoing, in each case in amounts, at prices
and in terms to be determined at or prior to the time of sale.
Tesoro Capital Trust I, Tesoro Capital Trust II and Tesoro Capital Trust
III (individually, a "Tesoro Capital Trust" and collectively, the "Tesoro
Capital Trusts"), each a statutory business trust formed under the laws of the
State of Delaware, may offer and sell, from time to time, trust preferred
securities, representing undivided beneficial interests in the assets of the
respective Tesoro Capital Trusts ("Trust Preferred Securities"). Tesoro will be
the beneficial owner of all the beneficial ownership interests represented by
common securities of each of the Tesoro Capital Trusts (the "Trust Common
Securities" and, together with the Trust Preferred Securities, the "Trust
Securities"). Holders of the Trust Preferred Securities will be entitled to
receive preferential cumulative cash distributions accumulating from the date of
original issuance and payable periodically as specified in the applicable
supplement to this prospectus (a "Prospectus Supplement"). Subordinated Debt
Securities may be issued and sold by Tesoro from time to time in one or more
series to a Tesoro Capital Trust, or a trustee of such Tesoro Capital Trust, in
connection with the investment of the proceeds from the offering of Trust
Securities of such Tesoro Capital Trust. The Subordinated Debt Securities
purchased by a Tesoro Capital Trust may be subsequently distributed pro rata to
holders of Trust Securities in connection with the dissolution of such Tesoro
Capital Trust upon the occurrence of certain events as may be described in a
related Prospectus Supplement. The payment of distributions with respect to
Trust Preferred Securities of each of the Tesoro Capital Trusts out of monies
held by each of the Tesoro Capital Trusts, and payment on liquidation,
redemption or otherwise with respect to such Trust Preferred Securities, will be
guaranteed by Tesoro to the extent described herein (each a "Trust Guarantee").
See "Description of the Trust Guarantees." Tesoro's obligations under the Trust
Guarantees will be subordinate and junior in right of payment to all other
liabilities of Tesoro and rank pari passu with the most senior preferred stock,
if any, issued from time to time by Tesoro.
(Continued on next page)
FOR A DISCUSSION OF CERTAIN RISKS ASSOCIATED WITH AN INVESTMENT IN THE
SECURITIES AND THE TRUST PREFERRED SECURITIES, SEE "RISK FACTORS" ON PAGE 3.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<PAGE> 4
(Continued from previous page)
The Common Stock, the Preferred Stock, Debt Securities, Stock Purchase
Units, Stock Purchase Contracts and Trust Securities offered hereby are
collectively hereinafter referred to as the "Securities." The Securities will be
limited to an aggregate initial public offering price not to exceed
approximately $600 million, or, in the case of Debt Securities, the equivalent
thereof in one or more foreign currencies, including composite currencies. The
Securities may be offered, separately or together, in separate series, in
amounts, at prices and on terms to be determined at the time of sale and set
forth in a related Prospectus Supplement.
Certain specific terms of the particular Securities for which this
Prospectus is being delivered will be set forth in a related Prospectus
Supplement, including, where applicable, (i) in the case of Debt Securities, the
specific designation, aggregate principal amount, authorized denominations,
maturities, interest rate or rates (which may be fixed or variable), the date or
dates on which interest, if any, shall be payable, the place or places where
principal of and premium, if any, and interest, if any, on such Debt Securities
of the series will be payable, terms of optional or mandatory redemption or any
sinking fund or analogous provisions, currency or currencies, or currency unit
or currency units of denomination and payment if other than U.S. dollars, the
initial public offering price, terms relating to temporary or permanent global
securities, provisions regarding convertibility or exchangeability, if any,
provisions regarding registration of transfer or exchange, the proceeds to the
Company and other special terms; (ii) in the case of Preferred Stock, the
specific designations, the number of shares, dividend rights (including, if
applicable, the manner of calculation thereof), and any liquidation, redemption,
conversion, exchange, voting and other rights, the initial public offering price
and other special terms; (iii) in the case of Common Stock, the terms of the
offering and sales thereof; (iv) in the case of Stock Purchase Contracts, the
number of shares of Common Stock issuable thereunder, the purchase price of the
Common Stock, the date or dates on which the Common Stock is required to be
purchased by the holders of the Stock Purchase Contracts, any periodic payments
required to be made by the Company to the holders of the Stock Purchase
Contracts or vice versa, and the terms of the offering and sale thereof, (v) in
the case of Stock Purchase Units, the specific terms of the Stock Purchase
Contracts and any Trust Preferred Securities or debt obligations of third
parties securing the holder's obligation to purchase the Common Stock under the
Stock Purchase Contracts, and the terms of the offering and the sale thereof,
and (vi) in the case of the Trust Preferred Securities or the related Trust
Guarantees, the specific designation, aggregate offering amount, denomination,
term, coupon rate, time of payment of distributions, terms of redemption at the
option of Tesoro or repayment at the option of the holder, provisions regarding
convertibility or exchangeability for capital stock of Tesoro, the designation
of the Trustee(s) acting under the applicable Indenture or Trust Guarantee and
the public offering price.
The Securities may be offered and sold to or through underwriters, dealers,
or agents as designated from time to time, or through a combination of such
methods, and also may be offered and sold directly to one or more other
purchasers. See "Plan of Distribution." The names of, and the principal amounts
or number of shares to be purchased by, underwriters, dealers or agents, and the
compensation of such underwriters, dealers or agents, including any applicable
fees, commissions, and discounts, will be set forth in the related Prospectus
Supplement. No Securities may be sold without delivery of a Prospectus
Supplement describing such series or issue of Securities and the method and
terms of offering thereof.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE DEBT SECURITIES,
INCLUDING STABILIZING AND SYNDICATE COVERING TRANSACTIONS. THE UNDERWRITERS MAY
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE
OF THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF
DISTRIBUTION."
<PAGE> 5
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following Regional Offices of the Commission:
7 World Trade Center, Suite 1300, New York, New York 10048; and Northwestern
Atrium, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such material also may be obtained at prescribed rates from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549. Such material also may be accessed electronically by means of the
Commission's home page on the Internet at http://www.sec.gov. The Common Stock
is listed for trading on the New York Stock Exchange (the "NYSE") and the
Pacific Stock Exchange (the "PSE") under the trading symbol "TSO," and reports,
proxy statements and other information concerning the Company may be inspected
at the offices of the NYSE, 20 Broad Street, New York, New York 10005, and at
the offices of the PSE, 301 Pine Street, San Francisco, California 94104.
No separate financial statements of the Tesoro Capital Trusts have been
included or incorporated by reference herein. Neither the Tesoro Capital Trusts
nor the Company considers such financial statements material to holders of Trust
Preferred Securities because (i) all of the voting securities of each Tesoro
Capital Trust will be owned, directly or indirectly, by the Company, a reporting
company under the Exchange Act, (ii) no Tesoro Capital Trust has independent
operations but rather each exists for the purpose of issuing securities
representing undivided beneficial interests in the assets of such Tesoro Capital
Trust and investing the proceeds thereof in Subordinated Debt Securities, and
(iii) the obligations of the Tesoro Capital Trusts under the Trust Preferred
Securities are fully and unconditionally guaranteed on a subordinated basis by
the Company to the extent set forth herein. See "The Tesoro Capital Trusts" and
"Description of Trust Guarantees." Upon the granting of relief by the Commission
pursuant to SAB 53, the Company intends to provide only abbreviated information
concerning the Tesoro Capital Trusts in the Company's Exchange Act reports.
This Prospectus does not contain all of the information set forth in the
Registration Statement of which this Prospectus is a part, filed with the
Commission under the Securities Act of 1933, as amended (the "Securities Act").
Reference is made to such Registration Statement for further information with
respect to the Company, the Tesoro Capital Trusts and the Securities offered
hereby. Statements contained herein concerning the provisions of documents are
necessarily summaries of such documents, and each statement is qualified in its
entirety by reference to the copy of the applicable document filed with the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed with the Commission by the Company
pursuant to the Exchange Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1997, as amended on Form 10-K/A, filed April 30, 1998.
2. The description of the Common Stock included in the Company's Registration
Statement on Form 8-A dated April 21, 1969, as amended by a Form 8 dated
April 23, 1969.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Securities offered hereby shall be deemed
to be incorporated by reference in this Prospectus and to be part hereof from
the date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained therein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
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The Company will provide without charge to each person, including any
beneficial owner of a Security, to whom a copy of this Prospectus is delivered,
upon written or oral request of such person, a copy of any or all documents
incorporated by reference in this Prospectus (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference into
such documents). Requests for such copies should be directed to Tesoro Petroleum
Corporation, 8700 Tesoro Drive, San Antonio, Texas 78217-6218, Attention: Vice
President and Treasurer, (telephone: (800) 837-6768).
CERTAIN FORWARD-LOOKING STATEMENTS
Statements in this Prospectus and the accompanying Prospectus Supplement
(including the documents incorporated by reference herein) concerning the
Company which are (a) projections of revenues, earnings, earnings per share,
capital expenditures or other financial items, (b) statements of plans and
objectives for future operations, including acquisitions, (c) statements of
future economic performance, or (d) statements of assumptions or estimates
underlying or supporting the foregoing are forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. The ultimate accuracy of forward-looking statements is subject to a wide
range of business risks and changes in circumstances, and actual results and
outcomes often differ from expectations. Any number of important factors could
cause actual results to differ materially from those in the forward-looking
statements herein, including the following: the timing and extent of changes in
commodity prices and underlying demand and availability of crude oil and other
refinery feedstocks, refined products, and natural gas; actions of customers and
competitors; changes in the cost or availability of third-party vessels,
pipelines and other means of transporting feedstocks and products; state and
federal environmental, economic, safety and other policies and regulations, any
changes therein, and any legal or regulatory delays or other factors beyond the
Company's control; execution of planned capital projects; weather conditions
affecting the Company's operations or the areas in which the Company's products
are marketed; future well performance; the extent of Tesoro's success in
acquiring oil and gas properties and in discovering, developing and producing
reserves; political developments in foreign countries; the conditions of the
capital markets and equity markets during the periods covered by the forward-
looking statements; earthquakes or other natural disasters affecting operations;
adverse rulings, judgments, or settlements in litigation or other legal matters,
including unexpected environmental remediation costs in excess of any reserves;
and adverse changes in the credit ratings assigned to the Company's trade
credit. For more information with respect to the foregoing, see the Form 10-K.
The Company undertakes no obligation to publicly release the result of any
revisions to any such forward-looking statements that may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
ii
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THE COMPANY
The Company and its subsidiaries are engaged in petroleum refining,
distributing and marketing of petroleum products, marine logistics services and
the exploration and production of natural gas and oil. These operations are
conducted through three business segments: Refining and Marketing, Exploration
and Production, and Marine Services.
The Company's Refining and Marketing segment operates a petroleum refinery
at Kenai, Alaska, markets refined products through a large network of branded
stations in Alaska and is expanding its marketing presence in the Pacific
Northwest. This segment is also a major supplier of jet fuel to the Anchorage
airport and diesel fuel to Alaska's fishing and marine industry. The Company's
Marine Services segment operates through a network of 23 marine terminals
located in Louisiana and Texas and on the West Coast, distributing petroleum
products and providing logistics services to the offshore Gulf of Mexico
drilling industry and other customers. The Company's Exploration and Production
segment focuses on exploration, development and production of natural gas and
oil onshore in Texas, Louisiana and Bolivia. The Company's net proved worldwide
reserves totaled 517 billion cubic feet equivalents of natural gas at year-end
1997. The Company is focused on its long-term strategy to maximize returns and
develop full value of its assets through strategic expansions, acquisitions and
diversifications in all three of its operating segments.
Tesoro was incorporated in Delaware in 1968 (a successor by merger to a
California corporation incorporated in 1939). Its principal executive offices
are located at 8700 Tesoro Drive, San Antonio, Texas 78217-6218 and its
telephone number is (800) 837-6768.
RECENT DEVELOPMENTS
HAWAII REFINERY ACQUISITION
On March 18, 1998, Tesoro entered into a stock sale agreement ("Hawaii
Stock Sale Agreement") to purchase (the "Hawaii Acquisition") all of the
outstanding stock of two subsidiaries of The Broken Hill Proprietary Company
Limited ("BHP") (together, "BHP Hawaii"). BHP Hawaii owns and operates a
95,000-barrel per day refinery in Kapolei, Hawaii, on the island of Oahu,
approximately 20 miles west of Honolulu, and 32 retail gasoline stations on the
islands of Oahu, Maui and Hawaii. The Hawaii Acquisition, which is subject to
regulatory review and other customary conditions, is anticipated to close on May
29, 1998. Under the terms of the Hawaii Stock Sale Agreement, the Company has
deposited $5 million into an escrow account for this acquisition.
At closing the cash purchase price for the Hawaii Acquisition is currently
estimated to be approximately $275 million less the $5 million escrow deposit.
In addition, Tesoro will issue an unsecured, non-interest bearing promissory
note (the "BHP Note") in the amount of $50 million, payable in five equal annual
installments of $10 million each, beginning on the eleventh anniversary date of
the closing. The BHP Note provides for earlier payment if the financial
performance of BHP Hawaii exceeds certain thresholds. The purchase price will be
adjusted after the closing for the amount by which the working capital of BHP
Hawaii differs from $100 million at the closing date.
In order to ensure the continuity of crude supply to Hawaii Refinery,
Tesoro will also enter into a two year agreement with an affiliate of BHP to
assist Tesoro in acquiring crude oil feedstock sources outside of North America
and arranging for transportation of such crude oil to the Hawaii Refinery.
WASHINGTON STATE REFINERY ACQUISITION
On May 1, 1998, the Company entered into a stock purchase agreement
("Anacortes Stock Purchase Agreement") with Shell Refining Holding Company
("Seller") and Shell Anacortes Refining Company ("SARC"), both subsidiaries of
Shell Oil Company, whereby the Company will purchase all of the outstanding
stock of SARC. SARC owns and operates a 108,000-barrel a day refinery in
Anacortes, Washington, which is approximately 60 miles north of Seattle. The
acquisition, which is subject to approval by the Federal Trade Commission and
the offices of the attorneys general of the States of Oregon and
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<PAGE> 8
Washington as well as other customary conditions, is anticipated to close in mid
to late summer. Under the terms of the Anacortes Stock Purchase Agreement, the
Company has paid a $5 million deposit and has agreed to pay the balance of the
purchase price into an escrow by June 30, 1998 if the stock purchase has not
closed by that date.
At closing the Company will pay the Seller a cash purchase price of $237
million, less the deposit and any escrowed amounts, for the stock of SARC, plus
the value of the working capital of SARC at the time of closing which is
estimated to be approximately $60 million. The SARC Stock Purchase Agreement
contains representations and warranties and other general provisions that are
customary for transactions of this nature.
THE TESORO CAPITAL TRUSTS
Each of Tesoro Capital Trust I, Tesoro Capital Trust II and Tesoro Capital
Trust III is a statutory business trust created under Delaware law pursuant to
(i) a separate declaration of trust (each a "Declaration") executed by Tesoro,
as sponsor for such Tesoro Capital Trust (the "Sponsor"), and the Trustees (as
defined herein) for such Tesoro Capital Trust and (ii) the filing of a
certificate of trust with the Delaware Secretary of State. Each Declaration will
be qualified as an indenture under the Trust Indenture Act of 1939, as amended
(the "TIA"). Each Tesoro Capital Trust exists for the exclusive purposes of (i)
issuing and selling the Trust Securities, (ii) investing the gross proceeds from
the sale of the Trust Securities in Subordinated Debt Securities issued by
Tesoro and (iii) engaging in only those other activities necessary or incidental
thereto.
All of the Trust Common Securities issued by each of the Tesoro Capital
Trusts will be directly or indirectly owned by Tesoro. The Trust Common
Securities will rank pari passu, and payments will be made thereon pro rata,
with the Trust Preferred Securities except that upon an event of default under
the applicable Declaration, the rights of the holders of the Trust Common
Securities to payment in respect of distributions and payments upon liquidation,
redemption, and otherwise will be subordinated to the rights of the holders of
the Trust Preferred Securities. Tesoro will, directly or indirectly, acquire
Trust Common Securities in an aggregate liquidation amount equal to 3% of the
total capital of each Tesoro Capital Trust. A majority of the Trustees (the
"Regular Trustees") of each Tesoro Capital Trust will be persons who are
employees or officers of or affiliated with Tesoro. One trustee of each Tesoro
Capital Trust will be a financial institution that will be unaffiliated with
Tesoro and that will act as property trustee and as indenture trustee for
purposes of the Trust Indenture Act, pursuant to the terms set forth in a
Prospectus Supplement (the "Property Trustee"). In addition, unless the Property
Trustee maintains a principal place of business in the State of Delaware, and
otherwise meets the requirements of applicable law, one trustee of each Tesoro
Capital Trust will have its principal place of business or reside in the State
of Delaware (the "Delaware Trustee" and, together with the Regular Trustees and
the Property Trustee, the "Trustees"). Each Tesoro Capital Trust's business and
affairs will be conducted by the Trustees appointed by the Company, as the
direct or indirect holder of all the Trust Common Securities. Except in certain
limited circumstances, the holder of the Trust Common Securities will be
entitled to appoint, remove or replace any of, or increase or reduce the number
of, the Trustees of a Tesoro Capital Trust. The duties and obligations of the
Trustees shall be governed by the Declaration of each Tesoro Capital Trust. The
Company will pay all fees and expenses related to the Tesoro Capital Trusts and
the offering of Trust Securities, the payment of which will be guaranteed by the
Company. The office of the Delaware Trustee for each Tesoro Capital Trust in the
State of Delaware is Wilmington Trust Company, 1100 North Market Street,
Wilmington, Delaware 19890. The principal place of business of each Tesoro
Capital Trust shall be c/o Tesoro Petroleum Corporation, 8700 Tesoro Drive, San
Antonio 78217-6218 (telephone: (800) 837-6768).
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<PAGE> 9
USE OF PROCEEDS
Unless otherwise specified in a Prospectus Supplement, the net proceeds
received by the Company from the sale of the Securities will be used to finance
acquisitions, refinance certain existing indebtedness and for general corporate
purposes. Funds not required immediately for such purposes may be invested in
marketable securities and short-term investments. The Tesoro Capital Trusts will
use all proceeds received from the sale of the Trust Preferred Securities to
purchase Subordinated Debt Securities from the Company.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995 1994 1993
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Ratio of Earning to Fixed Charges...................... 3.61x 5.64x 3.28x 2.00x 1.97x
Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividend Requirements................ 3.61x 5.64x 3.28x 1.80x 1.33x
</TABLE>
For purposes of calculating this ratio: (i) "fixed charges" consist of
interest expense (whether expensed or capitalized), amortization of debt
discount and issuance costs and the portion of rental expense estimated to be
equivalent to interest; and (ii) "earnings" represent earnings before income
taxes and extraordinary loss on extinguishments of debt plus fixed charges,
excluding capitalized interest.
RISK FACTORS
THE SECURITIES TO BE OFFERED HEREBY MAY INVOLVE A HIGH DEGREE OF RISK. SUCH
RISKS WILL BE SET FORTH IN THE PROSPECTUS SUPPLEMENT RELATING TO SUCH SECURITY.
IN ADDITION, CERTAIN RISK FACTORS, IF ANY, RELATING TO THE COMPANY'S BUSINESS
WILL BE SET FORTH IN A PROSPECTUS SUPPLEMENT.
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<PAGE> 10
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Senior Debt Securities will be issued under an indenture (the "Senior
Indenture"), to be entered into between the Company, the Guarantors and
, as trustee (the "Senior Trustee"), and the
Subordinated Debt Securities will be issued under a separate indenture (the
"Subordinated Indenture") also to be entered into between the Company, the
Guarantors and , as trustee (the "Subordinated
Trustee"). The term "Trustee" as used herein shall refer to the Senior Trustee
or the Subordinated Trustee, as appropriate. The Senior Indenture and the
Subordinated Indenture are sometimes collectively referred to herein as the
"Indentures" and individually as an "Indenture." The Indentures are subject to
and governed by the TIA, and may be supplemented from time to time following
execution.
The terms of the Debt Securities include those stated in the applicable
Indenture and those made part of such Indenture by reference to the TIA. The
Debt Securities are subject to all such terms, and holders of Debt Securities
are referred to the applicable Indenture and the TIA for a statement of those
terms.
The statements set forth below in this section are brief summaries of
certain provisions contained in the Indentures, do not purport to be complete,
and are subject to, and are qualified in their entirety by reference to, the
Indentures, including the definitions of certain terms therein, and the TIA.
Capitalized terms used in this section and not otherwise defined in this section
have the respective meanings assigned to them in the Indentures. For purposes of
this section, the term "Company" refers to Tesoro Petroleum Corporation only and
does not include its subsidiaries.
TERMS
The Debt Securities will be direct, unsecured obligations of the Company.
The indebtedness represented by the Senior Debt Securities will rank equally
with all other unsecured and unsubordinated indebtedness of the Company. The
indebtedness represented by the Subordinated Debt Securities will be
subordinated in right of payment to the prior payment in full of the Senior Debt
of the Company as described below under "-- Subordination."
In the event Subordinated Debt Securities are issued to a Tesoro Capital
Trust or a trustee of such trust in connection with the issuance of Trust
Securities by such Tesoro Capital Trust, such Subordinated Debt Securities
subsequently may be distributed pro rata to the holders of such Trust Securities
in connection with the dissolution of such Tesoro Capital Trust upon the
occurrence of certain events described in the Prospectus Supplement relating to
such Trust Securities. Only one series of Subordinated Debt Securities will be
issued to a Tesoro Capital Trust or a trustee of such trust in connection with
the issuance of Trust Securities by such Tesoro Capital Trust.
Reference is made to the Prospectus Supplement relating to the particular
series offered thereby for the terms of such Debt Securities, including where
applicable: (a) the form and title of the Debt Securities and whether such Debt
Securities are Senior Debt Securities or Subordinated Debt Securities; (b) the
aggregate principal amount of the Debt Securities and any limit on such
aggregate principal amount; (c) the date or dates on which the Debt Securities
may be issued; (d) the date or dates on which the principal of and premium, if
any, on the Debt Securities shall be payable; (e) the rate or rates (which may
be fixed or variable) at which the Debt Securities shall bear interest, if any,
and the date or dates from which such interest shall accrue; (f) the dates on
which interest, if any, shall be payable and the record dates for the interest
payment dates; (g) the place or places where the principal of and premium, if
any, and interest, if any, on the Debt Securities of the series will be payable;
(h) the period or periods, if any, within which, the price or prices at which,
and the terms and conditions upon which, the Debt Securities may be redeemed at
the option of the Company or otherwise; (i) any optional or mandatory redemption
or any sinking fund or analogous provisions; (j) if other than denominations of
$1,000 and integral multiples thereof, the denominations in which the Debt
Securities of the series shall be issuable; (k) if other than the principal
amount thereof, the portion of the principal amount of the Debt Securities which
shall be payable upon declaration of the
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<PAGE> 11
acceleration of the maturity thereof in accordance with the provisions of the
applicable Indenture; (l) whether payment of the principal of and premium, if
any, and interest, if any, on the Debt Securities shall be without deduction for
taxes, assessments, or governmental charges paid by the holders; (m) the
currency or currencies, or currency unit or currency units, in which the
principal of and premium, if any, and interest, if any, on the Debt Securities
shall be denominated, payable, redeemable or purchasable, as the case may be;
(n) any Events of Default with respect to the Debt Securities that differ from
those set forth in the applicable Indenture; (o) whether the Debt Securities
will be convertible; (p) whether the Debt Securities of such series shall be
issued as a global certificate or certificates and, in such case, the identity
of the depositary for such series; (q) provisions regarding the convertibility
or exchangeability of the Debt Securities; (r) covenants restricting the
Company's and its subsidiaries' ability to make certain types of payments and
investments, incur indebtedness and dispose of assets; and (s) any other terms
not inconsistent with the provisions of the applicable Indenture.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Debt Securities of any series will be issued only in fully registered form
in denominations of $1,000 or any integral multiple thereof. The Debt Securities
of a series may be issuable in the form of one or more global certificates,
which will be denominated in an amount equal to all or a portion of the
aggregate principal amount of such Debt Securities. See "-- Global Debt
Securities."
Each Indenture provides that the Debt Securities may be issued in one or
more series, in each case as established from time to time in, or pursuant to
authority granted by, a resolution of the board of directors of the Company or
as established in one or more indentures supplemental to such Indenture. All
Debt Securities of one series need not be issued at the same time and, unless
otherwise provided, a series may be reopened, without the consent of the holders
of the Debt Securities of such series, for issuances of additional Debt
Securities of such series.
One or more series of Debt Securities offered hereby may be sold at a
substantial discount below their stated principal amount, bearing no interest or
interest at a rate that at the time of issuance is below market rates. The
federal income tax consequences and special considerations applicable to any
such series of Debt Securities will be described generally in the Prospectus
Supplement relating thereto.
GLOBAL DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global certificates that will be deposited with, or on
behalf of, a depositary (the "Depositary"), or its nominee, identified in the
Prospectus Supplement relating to such series. Unless and until such global
certificate or certificates are exchanged in whole or in part for Debt
Securities in individually certificated form, a global Debt Security may not be
transferred or exchanged except as a whole to a nominee of the Depositary for
such global Debt Security, or by a nominee for the Depositary to the Depositary,
or to a successor of the Depositary or a nominee of such successor, except in
the circumstances described in the applicable Prospectus Supplement.
The specific terms of the depositary arrangement with respect to a series
of Debt Securities and the rights of, and limitations on, owners of beneficial
interests in a global Debt Security representing all or a portion of a series of
Debt Securities will be described in the Prospectus Supplement relating to such
series.
SUBSIDIARY GUARANTEES
The Company's payment obligations under a series of the Debt Securities may
be jointly and severally guaranteed (the "Subsidiary Guarantees") by certain
Subsidiaries of the Company (the "Guarantors"). Any Subsidiary of the Company
that guarantees any Indebtedness of the Company will be required to execute a
Subsidiary Guarantee and become a Guarantor under the applicable Indenture. The
obligations of each Guarantor under its Subsidiary Guarantee will be limited to
the maximum amount the Guarantors are permitted to guarantee under applicable
law without creating a "fraudulent conveyance."
5
<PAGE> 12
Each Indenture will provide that no Guarantor may consolidate with or merge
with or into (whether or not such Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such Guarantor
unless (i) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger (if other than such
Guarantor) assumes all the obligations of such Guarantor pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee thereunder, under the Debt Securities of any series and the applicable
Indenture; (ii) immediately after giving effect to such transaction, no Default
or Event of Default exists with respect to such series of Debt Securities; and
(iii) except in the case of the merger of a Guarantor with or into another
Guarantor or the Company, the Company would be permitted to incur at least $1.00
of additional Indebtedness pursuant to the applicable covenant described in the
Prospectus Supplement relating thereto.
Notwithstanding the foregoing paragraph, (i) any Guarantor may consolidate
with, merge into or transfer all or a part of its properties and assets to the
Company or any other Guarantor and (ii) any Guarantor may merge with a Wholly
Owned Subsidiary of the Company that has no significant assets or liabilities
and was incorporated solely for purpose of reincorporating such Guarantor in
another State of the United States; provided that such merged entity continues
to be a Guarantor.
Each of the Indentures will provide that, with respect to any series of
Debt Securities issued thereunder, (i) upon the release by the lenders under all
Indebtedness of the Company of all Indebtedness of the Company, of all
guarantees of a Guarantor, and all Liens on the property and assets of such
Guarantor relating to such Indebtedness, or (ii) upon a sale or other
disposition of all of the assets of any Guarantor, by way of merger,
consolidation or otherwise, or a sale or other disposition of all of the capital
stock of any Guarantor in compliance with the applicable Indenture to any entity
that is not the Company or a Subsidiary, then such Guarantor (in the event of a
sale or other disposition, by way of such a merger, consolidation or otherwise,
of all of the capital stock of such Guarantor), or the Person acquiring the
property (in the event of such a sale or other disposition of all of the assets
of such Guarantor), will be released and relieved of any obligations under its
Subsidiary Guarantee with respect to such series of Debt Securities; provided,
however, that any such termination shall occur only to the extent that all
obligations of such Guarantor under such Indebtedness and all of its guarantees
of, and under all of its pledges of assets or other security interests which
secure, Indebtedness of the Company shall also terminate upon such release, sale
or transfer and, in the event of any sale or other disposition, that the Net
Proceeds of such sale or other disposition are applied in accordance with the
applicable provisions of each of the Indentures.
Each of the Indentures will provide that if any Subsidiary of the Company
guarantees any Indebtedness of the Company, then such Subsidiary shall (i)
execute a supplemental indenture in form and substance satisfactory to the
Trustee thereunder providing that such Subsidiary shall become a Guarantor under
the applicable Indenture and (ii) deliver an opinion of counsel to the effect,
inter alia, that such supplemental indenture has been duly authorized and
executed by such Subsidiary.
CHANGE OF CONTROL
Each of the Indentures will provide that, with respect to a series of Debt
Securities, in the event that there shall occur a Change of Control, then the
Company may be required to make an Offer (as described under "-- Procedures for
Offers" below) to purchase all or any part (equal to $1,000 or an integral
multiple thereof) of each holder's Debt Securities of the applicable series at a
purchase price equal to 101% of the aggregate principal amount thereof, plus
accrued and unpaid interest to the date of purchase. Such right to require the
repurchase of Debt Securities shall not continue after a discharge of the
Company from its obligations with respect to the Debt Securities. See
"-- Defeasance."
A Change of Control purchase feature of a series of Debt Securities may, in
certain circumstances, make it more difficult or discourage a takeover of the
Company and, as a result, may make removal of incumbent management more
difficult. The Company has no present intention to engage in a transaction
involving a Change of Control, although it is possible that the Company could
decide to do so in the future.
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<PAGE> 13
If a Change of Control were to occur, the Company may not have sufficient
liquid assets to satisfy its obligation to purchase all of the Debt Securities
that might be delivered by holders seeking to exercise the purchase right and
make any payments that may become necessary, if not waived.
The provisions of each of the Indentures would not necessarily afford
holders of the Debt Securities protection in the event of a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction
involving the Company that may adversely affect such holders.
COVENANTS
The particular covenants, including covenants relating to the issuance of
Subordinated Debt Securities to a Tesoro Capital Trust or a trustee of such
Tesoro Capital Trust, relating to any series of Debt Securities will be
described in the Prospectus Supplement relating to such series. If any such
covenants are described, the Prospectus Supplement will also state whether the
"covenant defeasance" provisions described below also apply.
PROCEDURES FOR OFFERS
Within 30 days following a Change of Control, the Company will mail to each
holder of Debt Securities, at such holder's registered address, a notice
stating: (i) the Offer is being made as a result of a Change of Control, the
length of time the Offer shall remain open, and the maximum aggregate principal
amount of Debt Securities that will be accepted for payment pursuant to such
Offer, (ii) the purchase price, the amount of accrued and unpaid interest as of
the Purchase Date, and the Purchase Date, (iii) the circumstances and material
facts regarding such Change of Control, to the extent known to the Company
(including, but not limited to, information with respect to pro forma and
historical financial information after giving effect to such Change of Control,
and information regarding the Person or Persons acquiring control), and (iv)
such other information required by each of the Indentures and applicable laws
and regulations.
On the Purchase Date for any Offer, the Company will (1) accept for payment
all Debt Securities tendered pursuant to such Offer, (2) deposit with the Paying
Agent the aggregate purchase price of all Debt Securities accepted for payment
and any accrued and unpaid interest on such Debt Securities as of the Purchase
Date, and (3) deliver or cause to be delivered to each of the Trustees all Debt
Securities tendered pursuant to the Offer. If less than all Debt Securities
tendered pursuant to any Offer are accepted for payment by the Company for any
reason, selection of the Debt Securities to be purchased will be in compliance
with the requirements of the principal national securities exchange, if any, on
which any series of Debt Securities is listed or, if not so listed, by lot or by
such method as each of the Trustees shall deem fair and appropriate; provided
that Debt Securities accepted for payment in part shall only be purchased in
integral multiples of $1,000. The Paying Agent will promptly mail to each holder
of Debt Securities accepted for payment an amount equal to the purchase price
for such Debt Securities plus any accrued and unpaid interest. Each of the
Trustees will promptly authenticate and mail to holders of Debt Securities
accepted for payment in part new Debt Securities equal in principal amount to
any unpurchased portion of each holder's Debt Securities, and any Debt
Securities not accepted for payment in whole or in part shall be promptly
returned to the holder thereof. On and after a Purchase Date, interest will
cease to accrue on the Debt Securities accepted for payment. The Company will
announce the results of the Offer to holders of the Debt Securities on or as
soon as practicable after the Purchase Date.
The Company will comply with all applicable requirements of Rule 14e-1
under the Exchange Act and all other applicable securities laws and regulations
thereunder, to the extent applicable, in connection with any offer.
EVENTS OF DEFAULT
Each Indenture provides that the following will be Events of Default with
respect to any series of Debt Securities issued thereunder: (a) failure to pay
any interest on any Debt Security of such series when due, continued for 30
days; (b) failure to pay principal of (or premium, if any, on) any Debt Security
of such series when due; (c) failure to perform or comply with any covenant or
warranty of the Company contained in the
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<PAGE> 14
Debt Securities of such series or in the applicable Indenture, continued for 30
days after written notice as provided in the Indenture (other than a default
otherwise specifically dealt with in the applicable Indenture or in any
supplemental indenture); (d) failure to deposit a sinking fund payment, if any,
when and as due by the terms of a Debt Security of such series; (e) except as
permitted by the applicable Indenture, any Subsidiary Guarantee shall be held in
any judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Guarantor, or any Person acting on
behalf of any Guarantor, shall deny or disaffirm its obligations under its
Subsidiary Guarantee (other than by reason of the termination of the Indenture
or the release of any such Subsidiary Guarantee in accordance with the
Indenture); (f) certain events in bankruptcy, insolvency or reorganization
affecting the Company or any Guarantor; and (g) any other Event of Default set
forth in the applicable supplemental indenture and Prospectus Supplement
relating to the Debt Securities of such series.
If an Event of Default under either Indenture with respect to Debt
Securities of any series at the time outstanding shall occur and be continuing,
then in every such case either the applicable Trustee or the holders of at least
25% in aggregate principal amount of the outstanding Debt Securities of that
series may accelerate the maturity of all Debt Securities of that series;
provided, however, that after such acceleration, but before a judgment or decree
based on acceleration, the holders of a majority in aggregate principal amount
of outstanding Debt Securities of that series may, under certain circumstances,
rescind and annul such acceleration if all Events of Default, other than the
nonpayment of accelerated principal, have been cured or waived as provided in
the applicable Indenture.
Each Indenture provides that no holder of any Debt Security will have any
right to institute any proceeding with respect to the applicable Indenture or
for any remedy thereunder, unless such holder shall have previously given to the
Trustee thereunder written notice of a continuing Event of Default and unless
the holders of at least 25% in aggregate principal amount of the outstanding
Debt Securities of such series shall have made written request, and offered
reasonable indemnity, to the Trustee to institute such proceeding as Trustee,
and the Trustee shall not have received from the holders of a majority in
aggregate principal amount of the outstanding Debt Securities of such series a
direction inconsistent with such request and shall have failed to institute such
proceeding within 60 days. However, such limitations do not apply to a suit
instituted by a holder of a Debt Security for enforcement of payment of the
principal of (and premium, if any) or interest on such Debt Security on or after
the respective due dates expressed in such Debt Security.
Subject to provisions in each Indenture relating to its duties in case an
Event of Default shall have occurred and be continuing, neither Trustee is under
an obligation to exercise any of its rights or powers under such Indenture at
the request or direction of any holders of Debt Securities then outstanding
under such Indenture, unless such holders shall have offered to the Trustee
thereunder reasonable indemnity. Subject to the provisions in each Indenture for
the indemnification of the Trustee thereunder, the holders of a majority in
aggregate principal amount of the outstanding Debt Securities of any series will
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the applicable Trustee or exercising any trust or
power conferred on such Trustee.
The Company will be required to furnish to each Trustee annually a
statement as to the performance by the Company of certain of its obligations
under the applicable Indenture and as to any default in such performance.
DEFEASANCE
Each Indenture provides that, at the option of the Company, (A) if
applicable, the Company will be discharged from any and all obligations in
respect of the Debt Securities of any series issued under such Indenture or (B)
if applicable, the Company may omit to comply with certain restrictive
covenants, and that such omission shall not be deemed to be an Event of Default
under the applicable Indenture and the Debt Securities of any series issued
thereunder, and that such Debt Securities shall no longer be subject to the
subordination provisions in the case of either (A) or (B) upon irrevocable
deposit with the applicable Trustee, in trust, of money and/or U.S. government
obligations which will provide money in an amount sufficient in the opinion of a
nationally recognized accounting firm to pay the principal of and premium, if
any, and each
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<PAGE> 15
installment of interest, if any, on such Debt Securities. With respect to clause
(B), the obligations under the applicable Indenture other than with respect to
such covenants and the Events of Default other than the Event of Default
relating to such covenants above shall remain in full force and effect. Such
trust may only be established if, among other things (i) with respect to clause
(A), the Company has received from, or there has been published by, the IRS a
ruling or there has been a change in law, which in the Opinion of Counsel
provides that holders of such Debt Securities will not recognize gain or loss
for federal income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to federal income tax on the same amount, in the
same manner and at the same times as would have been the case if such deposit,
defeasance and discharge had not occurred; or, with respect to clause (B), the
Company has delivered to the applicable Trustee an Opinion of Counsel to the
effect that the holders of such Debt Securities will not recognize gain or loss
for federal income tax purposes as a result of such deposit and defeasance and
will be subject to federal income tax on the same amount, in the same manner and
at the same times as would have been the case if such deposit and defeasance had
not occurred; (ii) no Event of Default or event that, with the passing of time
or the giving of notice, or both, shall constitute an Event of Default with
respect to such Debt Securities shall have occurred or be continuing; (iii) the
Company has delivered to the applicable Trustee an Opinion of Counsel to the
effect that such deposit shall not cause such Trustee or the trust so created to
be subject to the Investment Company Act of 1940; and (iv) certain other
customary conditions precedent.
SUBORDINATION
Upon any distribution to creditors of the Company in a liquidation,
dissolution or reorganization, the payment of the principal of and interest on
the Subordinated Debt Securities will be subordinated to the extent provided in
the Subordinated Indenture in right of payment to the prior payment in full of
all Senior Debt, but the obligation of the Company to make payment of the
principal of and interest on the Subordinated Debt Securities will not otherwise
be affected. No payment of principal or interest may be made on the Subordinated
Debt Securities at any time if a default on Senior Debt exists that permits the
holders of such Senior Debt to accelerate its maturity and the default is the
subject of judicial proceedings or the Company receives notice of the default.
After all Senior Debt is paid in full and until the Subordinated Debt Securities
are paid in full, Holders will be subrogated to the rights of holders of Senior
Debt to the extent that distributions otherwise payable to Holders have been
applied to the payment of Senior Debt. By reason of such subordination, in the
event of a distribution of assets upon insolvency, certain general creditors of
the Company may recover more, ratably, than holders of the Subordinated Debt
Securities.
MODIFICATION AND WAIVER
Modifications and amendments of either Indenture may be made by the Company
and the applicable Trustee with the consent of the holders of a majority in
aggregate principal amount of all outstanding Debt Securities issued under such
Indenture which are affected by such modification or amendment; provided,
however, that no such modification or amendment may, without the consent of the
holder of each such Debt Security affected thereby, (a) change the Stated
Maturity of the principal of, or any installment of interest on, any such Debt
Security, (b) reduce the principal amount of (or the premium), or interest on,
any such Debt Security, (c) change the place or currency of payment of principal
of (or premium), or interest on, any such Debt Security, (d) impair the right to
institute suit for the enforcement of any payment on or with respect to any such
Debt Security, (e) reduce the above-stated percentage of outstanding Debt
Securities of any series necessary to modify or amend the applicable Indenture,
(f) reduce the percentage of aggregate principal amount of outstanding Debt
Securities of any series necessary for waiver of compliance with certain
provisions of the applicable Indenture or for waiver of certain defaults, or (g)
modify any provisions of such Indenture relating to the modification and
amendment of such Indenture or the waiver of past defaults or covenants, except
as otherwise specified.
The holders of a majority in aggregate principal amount of the outstanding
Debt Securities of a series may waive compliance by the Company with certain
restrictive provisions of the applicable Indenture. The holders of a majority in
aggregate principal amount of the outstanding Debt Securities of a series may
waive any past default under the applicable Indenture. In the case of any series
of Subordinated Debt Securities held
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<PAGE> 16
as trust assets of a Tesoro Capital Trust, the consent of the holders of all of
the holders of the Preferred Trust Securities and Common Trust Securities of
such Tesoro Capital Trust may be required under the Declaration of Trust of such
Tesoro Capital Trust.
THE TRUSTEE
Both Indentures provide that, except during the continuance of an Event of
Default, the Trustee thereunder will perform only such duties as are
specifically set forth in the applicable Indenture. During the existence of an
Event of Default, the Trustee will exercise such rights and powers vested in it
under such Indenture and use the same degree of care and skill in its exercise
as a prudent person would exercise under the circumstances in the conduct of
such person's own affairs.
Both Indentures and the provisions of the TIA incorporated by reference
therein contain limitations on the rights of each of the Trustees, should it
become a creditor of the Company, to obtain payment of claims in certain cases
or to realize on certain property received by it in respect of any such claim as
security or otherwise. Each of the Trustees are permitted to engage in other
transactions with the Company or any Affiliate; provided, however, that if it
acquires any conflicting interest (as defined in the applicable Indenture or in
the TIA), it must eliminate such conflict or resign.
NO PERSONAL LIABILITY OF OFFICERS, DIRECTORS, EMPLOYEES OR STOCKHOLDERS
No director, officer, employee or stockholder, as such, of the Company or
any of its affiliates shall have any personal liability in respect of the
obligations of the Company under either of the Indentures or the Debt Securities
by reason of his, her or its status as such.
APPLICABLE LAW
The Indentures are, and the Debt Securities offered hereby will be,
governed by, and construed in accordance with, the laws of the State of New
York.
DESCRIPTION OF PREFERRED STOCK
The Company's Board of Directors, without any further action by the
stockholders of the Company, is authorized to issue up to 5,000,000 shares of
Preferred Stock, and to divide the Preferred Stock into one or more series, and
to fix by resolution or resolutions any of the designations, powers, preferences
and rights, and the qualifications, limitations, or restrictions of the shares
of each such series, including, but not limited to, dividend rates, conversion
rights, voting rights, terms of redemption and liquidation preferences, and the
number of shares constituting each such series. The issuance of Preferred Stock
may have the effect of delaying, deterring, or preventing a Change in Control of
the Company. Preferred Stock, upon issuance against full payment of the purchase
price therefor, will be fully paid and nonassessable. The specific terms of a
particular series of Preferred Stock will be described in the Prospectus
Supplement relating to that series. The description of the terms of the
particular series of Preferred Stock set forth in the related Prospectus
Supplement does not purport to be complete and is qualified in its entirety by
reference to the certificate of designation relating to the particular series of
Preferred Stock.
The designations, powers, preferences and rights, and the qualifications,
limitations, or restrictions of the Preferred Stock of each series will be fixed
by the certificate of designation relating to such series. The Prospectus
Supplement relating to each series will specify the terms of the Preferred Stock
as follows:
(a) The maximum number of shares to constitute such series and the
distinctive designation thereof;
(b) The annual dividend rate, if any, on shares of such series,
whether such rate is fixed or variable or both, the date or dates from
which dividends will begin to accrue or accumulate, and whether dividends
will be cumulative;
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<PAGE> 17
(c) The price at which, and the terms and conditions on which, the
shares of such series may be redeemed, including the time during which
shares of such series may be redeemed and any accumulated dividends thereon
that the holders of shares of such series shall be entitled to receive upon
the redemption thereof;
(d) The liquidation preference, if any, and any accumulated dividends
thereon, that the holders of shares of such series shall be entitled to
receive upon the liquidation, dissolution, or winding up of the affairs of
the Company;
(e) Whether or not the shares of such series will be subject to
operation of a retirement or sinking fund, and, if so, the extent and
manner in which any such fund shall be applied to the purchase or
redemption of the shares of such series for retirement or for other
corporate purposes, and the terms and provisions relating to the operation
of such fund;
(f) The terms and conditions, if any, on which the shares of such
series shall be convertible into, or exchangeable for, debt securities,
shares of any other class or classes of capital stock of the Company, or
any series of any other class or classes, or of any other series of the
same class, including the price or prices or the rate or rates of
conversion or exchange, whether such conversion or exchange will be
mandatory and the method, if any, of adjusting the same;
(g) The voting rights, if any, on the shares of such series; and
(h) Any or all other preferences and relative, participating,
operational, or other special rights, qualifications, limitations, or
restrictions thereof.
The federal income tax consequences and special considerations applicable
to any such series of Preferred Stock will be generally described in the
Prospectus Supplement relating thereto.
DESCRIPTION OF COMMON STOCK
The Company's Certificate of Incorporation, as amended, currently
authorizes the Company to issue up to 50,000,000 shares of Common Stock. The
holders of Common Stock are entitled to one vote for each share held of record
on all matters submitted to a vote of stockholders. Subject to preferences that
may be applicable to any outstanding Preferred Stock, holders of Common Stock
are entitled to receive ratably such dividends as may be declared by the Board
of Directors of the Company out of funds legally available therefor. In the
event of a liquidation, dissolution, or winding up of the Company, holders of
Common Stock are entitled to share ratably in all assets remaining after payment
of liabilities and liquidation preference of any outstanding Preferred Stock.
Holders of Common Stock have no preemptive rights and have no rights to convert
their Common Stock into any other securities. There are no redemption provisions
with respect to any shares of Common Stock. All of the outstanding shares of
Common Stock are, and the Common Stock offered hereby will be, upon issuance
against full payment of the purchase price therefor, fully paid and
nonassessable. As of April 22, 1998 there were issued and outstanding 26,668,910
shares of Common Stock.
The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services L.L.C.
DESCRIPTION OF THE STOCK PURCHASE CONTRACTS
AND THE STOCK PURCHASE UNITS
The Company may issue Stock Purchase Contracts, including contracts
obligating holders to purchase from the Company, and the Company to sell to the
holders, a specified number of shares of Common Stock or Preferred Stock at a
future date or dates. The consideration per share of Common Stock or Preferred
Stock may be fixed at the time of the Stock Purchase Contracts are issued or may
be determined by reference to a specific formula set forth in the Stock Purchase
Contracts. Any such formula may include anti-dilution provisions to adjust the
number of shares issuable pursuant to such Stock Purchase Contracts upon the
occurrence of certain events. The Stock Purchase Contracts may be issued
separately or as a part of Stock Purchase Units consisting of a Stock Purchase
Contract and Debt Securities, Trust Preferred Securities or
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<PAGE> 18
debt obligations of third parties, including U. S. Treasury securities, securing
the holders' obligations to purchase the Common Stock or Preferred Stock under
the Stock Purchase Contracts. The Stock Purchase Contracts may require the
Company to make periodic payments to the holders of the Stock Purchase Contracts
or vice versa, and such payments may be unsecured or prefunded on some basis.
The Stock Purchase Contracts may require holders to secure their obligations
thereunder in a specified manner.
The applicable Prospectus Supplement will describe the terms of any Stock
Purchase Contracts or Stock Purchase Units. The description in the Prospectus
Supplement will not necessarily be complete, and reference will be made to the
Stock Purchase Contracts, and, if applicable, collateral arrangements and
depository arrangements, relating to such Stock Purchase Contracts or Stock
Purchase Units.
DESCRIPTION OF THE TRUST PREFERRED SECURITIES
Each Tesoro Capital Trust may issue, from time to time, only one series of
Trust Preferred Securities having terms described in the Prospectus Supplement
relating thereto. The Declaration of each Tesoro Capital Trust authorizes the
Regular Trustees of such Tesoro Capital Trust to issue on behalf of such Tesoro
Capital Trust one series of Trust Preferred Securities. The Declaration will be
qualified as an indenture under the TIA. The Trust Preferred Securities will
have such terms, including distributions, redemption, voting, conversion,
exchange, liquidation rights and such other preferred, deferred or other special
rights or such restrictions as shall be set forth in the Declaration or made
part of the Declaration by the Trust Indenture Act. Reference is made to the
Prospectus Supplement relating to the Trust Preferred Securities of the Tesoro
Capital Trust for specific terms, including (a) the distinctive designation of
such Trust Preferred Securities; (b) the number of Trust Preferred Securities
issued by such Tesoro Capital Trust; (c) the annual distribution rate (or method
of determining such rate) for Trust Preferred Securities issued by such Tesoro
Capital Trust and the date or dates upon which such distributions shall be
payable; provided, however, that distributions on such Trust Preferred
Securities shall be payable on a quarterly basis to holders of such Trust
Preferred Securities as of a record date in each quarter during which such Trust
Preferred Securities are outstanding; (d) whether distributions on Trust
Preferred Securities issued by such Tesoro Capital Trust shall be cumulative,
and, in the case of Trust Preferred Securities having such cumulative
distribution rights, the date or dates or method of determining the date or
dates from which distributions on Trust Preferred Securities issued by such
Tesoro Capital Trust shall be cumulative; (e) the amount or amounts which shall
be paid out of the assets of such Tesoro Capital Trust to the holders of Trust
Preferred Securities of such Tesoro Capital Trust upon voluntary or involuntary
dissolution, winding-up or termination of such Tesoro Capital Trust; (f) the
obligation, if any, of such Tesoro Capital Trust to purchase or redeem Trust
Preferred Securities issued by such Tesoro Capital Trust and the price or prices
at which, the period or periods within which, and the terms and conditions upon
which, Trust Preferred Securities issued by such Tesoro Capital Trust shall be
purchased or redeemed, in whole or in part, pursuant to such obligation; (g) the
voting rights, if any, of Trust Preferred Securities issued by such Tesoro
Capital Trust in addition to those required by law, including the number of
votes per Trust Preferred Security and any requirement for the approval by the
holders of Trust Preferred Securities, or of Trust Preferred Securities issued
by one or more Tesoro Capital Trusts, or of both, as a condition to specified
action or amendments to the Declaration of such Tesoro Capital Trust; (h) the
terms and conditions, if any, upon which the assets of such Tesoro Capital Trust
may be distributed to holders of Trust Preferred Securities; (i) provisions
regarding convertibility or exchangeability of the Trust Preferred Securities
for capital stock of Tesoro; (j) if applicable, any securities exchange upon
which the Trust Preferred Securities shall be listed; and (k) any other relevant
rights, preferences, privileges, limitations or restrictions of Trust Preferred
Securities issued by such Tesoro Capital Trust not inconsistent with the
Declaration of such Tesoro Capital Trust or with applicable law. All Trust
Preferred Securities offered hereby will be guaranteed by the Company to the
extent set forth below under "Description of the Trust Guarantees." Any U.S.
federal income tax considerations applicable to any offering of Trust Preferred
Securities will be described in the Prospectus Supplement relating thereto.
In connection with the issuance of Trust Preferred Securities, each Tesoro
Capital Trust will issue one series of Trust Common Securities. The Declaration
of each Tesoro Capital Trust authorizes the Regular Trustees of such trust to
issue on behalf of such Tesoro Capital Trust one series of Trust Common
Securities
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<PAGE> 19
having such terms including distributions, redemption, voting, liquidation
rights or such restrictions as shall be set forth therein. The terms of the
Trust Common Securities issued by a Tesoro Capital Trust will be substantially
identical to the terms of the Trust Preferred Securities issued by such Tesoro
Capital Trust, and the Trust Common Securities will rank pari passu, and
payments will be made thereon pro rata, with the Trust Preferred Securities
except that, upon an event of default under the Declaration, the rights of the
holders of the Trust Common Securities to payment in respect of distributions
and payments upon liquidation, redemption and otherwise will be subordinated to
the rights of the holders of the Trust Preferred Securities. Except in certain
limited circumstances, the Trust Common Securities will also carry the right to
vote to appoint, remove or replace any of the Trustees of a Tesoro Capital
Trust. All of the Trust Common Securities of each Tesoro Capital Trust will be
directly or indirectly owned by the Company.
DESCRIPTION OF THE TRUST GUARANTEES
Set forth below is a summary of information concerning the Trust Guarantees
which will be executed and delivered by Tesoro from time to time for the benefit
of the holders of the Trust Preferred Securities. Each Trust Guarantee will be
qualified as an indenture under the Trust Indenture Act. Wilmington Trust
Company will act as indenture trustee under each Trust Guarantee (the "Trust
Guarantee Trustee"). The terms of each Trust Guarantee will be those set forth
in such Trust Guarantee and those made part of such Trust Guarantee by the Trust
Indenture Act. The summary does not purport to be complete and is subject in all
respects to the provisions of, and is qualified in its entirety by reference to,
the form of Trust Guarantee, which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, and the Trust Indenture Act.
Each Trust Guarantee will be held by the Trust Guarantee Trustee for the benefit
of the holders of the Trust Preferred Securities of the applicable Tesoro
Capital Trust.
GENERAL
Pursuant to each Trust Guarantee, Tesoro will irrevocably and
unconditionally agree, to the extent set forth therein, to pay in full, to the
holders of the Trust Preferred Securities issued by a Tesoro Capital Trust, the
Trust Guarantee Payments (as defined herein) (except to the extent paid by such
Tesoro Capital Trust), as and when due, regardless of any defense, right of
set-off or counterclaim which such Tesoro Capital Trust may have or assert. The
following payments with respect to Trust Preferred Securities issued by a Tesoro
Capital Trust to the extent not paid by such Tesoro Capital Trust (the "Trust
Guarantee Payments"), will be subject to the Trust Guarantee thereon (without
duplication): (i) any accrued and unpaid distributions which are required to be
paid on such Trust Preferred Securities, to the extent such Tesoro Capital Trust
shall have funds available therefor; (ii) the redemption price, including all
accrued and unpaid distributions (the "Redemption Price"), to the extent such
Tesoro Capital Trust has funds available therefor with respect to any Trust
Preferred Securities called for redemption by such Tesoro Capital Trust; and
(iii) upon a voluntary or involuntary dissolution, winding-up or termination of
such Tesoro Capital Trust (other than in connection with the distribution of the
assets of such Tesoro Capital Trust to the holders of Trust Preferred Securities
or the redemption of all of the Trust Preferred Securities), the lesser of (a)
the aggregate of the liquidation amount and all accrued and unpaid distributions
on such Trust Preferred Securities to the date of payment, to the extent such
Tesoro Capital Trust has funds available therefor and (b) the amount of assets
of such Tesoro Capital Trust remaining available for distribution to holders of
such Trust Preferred Securities in liquidation of such Tesoro Capital Trust.
Tesoro's obligation to make a Trust Guarantee Payment may be satisfied by direct
payment of the required amounts by the Company to the holders of Trust Preferred
Securities or by causing the applicable Tesoro Capital Trust to pay such amounts
to such holders.
Each Trust Guarantee will be a full and unconditional guarantee with
respect to the Trust Preferred Securities issued by the applicable Tesoro
Capital Trust, but will not apply to any payment of distributions except to the
extent such Tesoro Capital Trust shall have funds available therefor. If Tesoro
does not make interest payments on the Subordinated Debt Securities purchased by
a Tesoro Capital Trust, such Tesoro Capital Trust will not pay distributions on
the Trust Preferred Securities issued by such Tesoro Capital Trust and will not
have funds available therefor. See "Description of the Subordinated Debt
Securities -- Certain Covenants."
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<PAGE> 20
Tesoro has also agreed separately to irrevocably and unconditionally
guarantee the obligations of the Tesoro Capital Trusts with respect to the Trust
Common Securities (the "Trust Common Securities Guarantees") to the same extent
as the Trust Guarantees, except that upon an event of default under the
Subordinated Indenture, holders of Trust Preferred Securities shall have
priority over holders of Trust Common Securities with respect to distributions
and payments on liquidation, redemption or otherwise.
CERTAIN COVENANTS
In each Trust Guarantee, Tesoro will covenant that, so long as any Trust
Preferred Securities issued by the applicable Tesoro Capital Trust remain
outstanding, if there shall have occurred any event that would constitute an
event of default under such Trust Guarantee or the Declaration of such Tesoro
Capital Trust, then (a) Tesoro shall not declare or pay any dividend on, make
any distributions with respect to, or redeem, purchase or make any liquidation
payment with respect to, any of its capital stock (other than (i) purchases or
acquisitions of shares of Tesoro Common Stock in connection with the
satisfaction by Tesoro of its obligations under any employee benefit plans or
the satisfaction by Tesoro of its obligations pursuant to any contract or
security requiring Tesoro to purchase shares of Company Common Stock or, (ii)
the purchase of fractional interests in shares of Company capital stock as a
result of a reclassification of Company capital stock or the exchange or
conversion of one class or series of Company capital stock for another class or
series of Company capital stock or make any guarantee payments with respect to
the foregoing and (b) Tesoro shall not make any payment of interest, principal
or premium, if any, on or repay, repurchase or redeem any debt securities
(including guarantees) issued by Tesoro which rank pari passu with or junior to
the Subordinated Debt Securities.
MODIFICATION OF THE TRUST GUARANTEES; ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders of Trust Preferred Securities (in which case no vote will be
required), each Trust Guarantee may be amended only with the prior approval of
the holders of not less than a majority in liquidation amount of the outstanding
Trust Preferred Securities issued by the applicable Tesoro Capital Trust. The
manner of obtaining any such approval of holders of such Trust Preferred
Securities will be as set forth in an accompanying Prospectus Supplement. All
guarantees and agreements contained in a Trust Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of Tesoro and shall
inure to the benefit of the holders of the Trust Preferred Securities of the
applicable Tesoro Capital Trust then outstanding.
TERMINATION
Each Trust Guarantee will terminate as to the Trust Preferred Securities
issued by the applicable Tesoro Capital Trust upon the first to occur of (a)
full payment of the Redemption Price of all Trust Preferred Securities of such
Tesoro Capital Trust, (b) distribution of the assets of such Tesoro Capital
Trust to the holders of the Trust Preferred Securities of such Tesoro Capital
Trust, and (c) full payment of the amounts payable upon liquidation of such
Tesoro Capital Trust in accordance with the Declaration of such Tesoro Capital
Trust. Each Trust Guarantee will continue to be effective or will be reinstated,
as the case may be, if at any time any holder of Trust Preferred Securities
issued by the applicable Tesoro Capital Trust must restore payment of any sums
paid under such Trust Preferred Securities or such Trust Guarantee.
EVENTS OF DEFAULT
An event of default under a Trust Guarantee will occur upon the failure of
Tesoro to perform any of its payment or other obligations thereunder.
The holders of a majority in liquidation amount of the Trust Preferred
Securities relating to such Trust Guarantee have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trust Guarantee Trustee in respect of the Trust Guarantee or to direct the
exercise of any trust or power conferred upon the Trust Guarantee Trustee under
such Trust Preferred Securities. If the Trust Guarantee Trustee fails to enforce
such Trust Guarantee, any holder of Trust Preferred Securities relating to
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<PAGE> 21
such Trust Guarantee may institute a legal proceeding directly against Tesoro to
enforce the Trust Guarantee Trustee's rights under such Trust Guarantee, without
first instituting a legal proceeding against the relevant Tesoro Capital Trust,
the Trust Guarantee Trustee or any other person or entity. Notwithstanding the
foregoing, if Tesoro has failed to make a guarantee payment, a holder of Trust
Preferred Securities may directly institute a proceeding against Tesoro for
enforcement of the Trust Guarantee for such payment. Tesoro waives any right or
remedy to require that any action be brought first against such Tesoro Capital
Trust or any other person or entity before proceeding directly against Tesoro.
STATUS OF THE TRUST GUARANTEES
The Trust Guarantees will constitute unsecured obligations of Tesoro and
will rank (i) subordinate and junior in right of payment to all other
liabilities of Tesoro; (ii) pari passu with the most senior preferred or
preference stock now or hereafter issued by Tesoro and with any guarantee now or
hereafter entered into by Tesoro in respect of any preferred or preference stock
of any affiliate of Tesoro; and (iii) senior to the Tesoro Common Stock. The
terms of the Trust Preferred Securities provide that each holder of Trust
Preferred Securities issued by the applicable Tesoro Capital Trust, by
acceptance thereof, agrees to the subordination provisions and other terms of
the Trust Guarantee relating thereto.
The Trust Guarantees will constitute a guarantee of payment and not of
collection (that is, the guaranteed party may institute a legal proceeding
directly against the guarantor to enforce its rights under the Trust Guarantee
without instituting a legal proceeding against any other person or entity).
INFORMATION CONCERNING THE TRUST GUARANTEE TRUSTEE
The Trust Guarantee Trustee, prior to the occurrence of a default with
respect to a Trust Guarantee, undertakes to perform only such duties as are
specifically set forth in such Trust Guarantee and, after default, shall
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to such provisions, the Trust
Guarantee Trustee is under no obligation to exercise any of the powers vested in
it by a Trust Guarantee at the request of any holder of Trust Preferred
Securities, unless offered reasonable indemnity against the costs, expenses and
liabilities which might be incurred thereby.
The Company and certain of its affiliates may, from time to time, maintain
a banking relationship with the Trust Guarantee Trustee.
GOVERNING LAW
The Trust Guarantees will be governed by, and construed in accordance with,
the laws of the State of New York.
RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES,
THE SUBORDINATED DEBT SECURITIES AND THE GUARANTEES
As long as Tesoro makes payments of interest and other payments when due on
the Subordinated Debt Securities, such payments will be sufficient to cover
distributions and other payments due on the Trust Preferred Securities,
primarily because (i) the aggregate principal amount of the Subordinated Debt
Securities will be equal to the sum of the aggregate stated liquidation
preference of the Trust Securities; (ii) the interest rate and interest and
other payment dates of the Subordinated Debt Securities will match the
distribution rate and distribution and other payment dates for the Trust
Preferred Securities; (iii) Tesoro shall pay for all and any costs, expenses and
liabilities of the Tesoro Capital Trusts except the Tesoro Capital Trusts'
obligations to holders of the Trust Preferred Securities under the Trust
Preferred Securities of the Tesoro Capital Trusts; and (iv) the Declaration of
each Tesoro Capital Trust further provides that such Tesoro Capital Trust will
not engage in any activity that is not consistent with the limited purposes of
such Tesoro Capital Trust.
Payments of distributions and other amounts due on the Trust Preferred
Securities of a Tesoro Capital Trust (to the extent such Tesoro Capital Trust
has funds available for the payment of such distributions) are
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<PAGE> 22
irrevocably guaranteed by Tesoro as and to the extent set forth under
"Description of Trust Guarantees." Taken together, Tesoro's obligations under
the Subordinated Debt Securities, the Subordinated Indenture, the Declarations
of the Tesoro Capital Trusts and the Trust Guarantees provide a full,
irrevocable and unconditional guarantee of payments of distributions and other
amounts due on the Trust Preferred Securities. No single document standing alone
or operating in conjunction with fewer than all of the other documents
constitutes such guarantee. It is only the combined operation of these documents
that has the effect of providing a full, irrevocable and unconditional guarantee
of each of the Tesoro Capital Trust's obligations under the Trust Preferred
Securities. If and to the extent that Tesoro does not make payments on the
Subordinated Debt Securities, the Tesoro Capital Trusts will not pay
distributions or other amounts due on the Trust Preferred Securities. The Trust
Guarantees do not cover payment of distributions when a Tesoro Capital Trust
does not have sufficient funds to pay such distributions. In such event, the
remedies of a holder of the Trust Preferred Securities of such Tesoro Capital
Trust are described herein under "Description of the Trust Guarantees -- Events
of Default." The obligations of Tesoro under the Trust Guarantees are
subordinate and junior in right of payment to all Senior Indebtedness of Tesoro.
Notwithstanding anything to the contrary in the Subordinated Indenture and
to the extent set forth therein, Tesoro has the right to set-off any payment it
is otherwise required to make thereunder with and to the extent Tesoro has
theretofore made, or is concurrently on the date of such payment making, a
payment under a Trust Guarantee.
A holder of Trust Preferred Securities of a Tesoro Capital Trust may
institute a legal proceeding directly against Tesoro to enforce its rights under
the Trust Guarantee with respect to such Tesoro Capital Trust without first
instituting a legal proceeding against the Trust Guarantee Trustee, such Tesoro
Capital Trust or any other person or entity.
The Trust Preferred Securities of a Tesoro Capital Trust evidence a
beneficial interest in such Tesoro Capital Trust. The Tesoro Capital Trusts
exist for the sole purpose of issuing the Trust Securities and investing the
proceeds thereof in Subordinated Debt Securities. A principal difference between
the rights of a holder of Trust Preferred Securities and a holder of
Subordinated Debt Securities is that a holder of Subordinated Debt Securities is
entitled to receive from Tesoro the principal amount of and interest accrued on
Subordinated Debt Securities held, while a holder of Trust Preferred Securities
is entitled to receive distributions from a Tesoro Capital Trust (or from Tesoro
under the Trust Guarantee) if and to the extent such Tesoro Capital Trust has
funds available for the payment of such distributions.
Upon any voluntary or involuntary termination, winding-up or liquidation of
a Tesoro Capital Trust involving the liquidation of the Subordinated Debt
Securities, the holders of the Trust Preferred Securities of such Tesoro Capital
Trust will be entitled to receive, out of assets held by such Tesoro Capital
Trust and after satisfaction of liabilities to creditors of such Tesoro Capital
Trust as provided by applicable law, the liquidation distribution in cash. See
"Description of Trust Preferred Securities." Upon any voluntary or involuntary
liquidation or bankruptcy of Tesoro, the Property Trustee of a Tesoro Capital
Trust, as holder of the Subordinated Debt Securities of such Trust, would be a
subordinated creditor of Tesoro, subordinated in right of payment to all Senior
Indebtedness of Tesoro, but entitled to receive payment in full of principal and
interest, before any shareholders of Tesoro receive payments or distributions.
Since Tesoro is the guarantor under the Trust Guarantees and has agreed to pay
for all costs, expenses and liabilities of the Tesoro Capital Trusts (other than
the Tesoro Capital Trusts' obligations to the holders of the Trust Preferred
Securities), the positions of a holder of Trust Preferred Securities and a
holder of Subordinated Debt Securities relative to other creditors and to
shareholders of Tesoro in the event of liquidation or bankruptcy of Tesoro would
be substantially the same.
A default or event of default under any Senior Indebtedness of Tesoro will
not constitute a default or Event of Default under the Subordinated Indenture.
However, in the event of payment defaults under, or acceleration of, Senior
Indebtedness of Tesoro, the subordination provisions of the Subordinated
Indenture provide that no payments may be made in respect of the Subordinated
Debt Securities until such Senior Indebtedness has been paid in full or any
payment default thereunder has been cured or waived. Failure to
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<PAGE> 23
make required payments on the Subordinated Debt Securities would constitute an
Event of Default under the Subordinated Indenture with respect thereto.
PLAN OF DISTRIBUTION
The Company and any Tesoro Capital Trust may offer or sell the Securities
and the Trust Preferred Securities, respectively, to or through one or more
underwriters, dealers or agents as designated from time to time, or through a
combination of such methods and also may offer or sell the Securities and the
Trust Preferred Securities, respectively, directly to one or more other
purchasers. The Company and any Tesoro Capital Trust may sell the Securities and
the Trust Preferred Securities, respectively, as soon as practicable after
effectiveness of the Registration Statement of which this Prospectus is a part.
A Prospectus Supplement will set forth the terms of the offering of the
particular series of Securities offered thereby, including: (i) the name or
names of any underwriters or agents; (ii) the initial public offering or
purchase price of such series of Securities; (iii) any underwriting discounts,
commissions, and other items constituting underwriters' compensation and any
other discount, concessions, or commissions allowed or reallowed or paid by any
underwriters to other dealers; (iv) any commissions paid to any agents; (v) the
net proceeds to the Company from the sales; (vi) the net proceeds to a Tesoro
Capital Trust; and (vii) any securities exchanges or markets on which the
Securities may be listed.
Unless otherwise set forth in the Prospectus Supplement relating to a
particular series of Securities, the obligations of the underwriters to purchase
such series of Securities will be subject to certain conditions precedent and
each of the underwriters with respect to such series of Securities will be
obligated to purchase all of the Securities of such series allocated to it if
any such Securities are purchased. Any initial public offering price and any
discounts or concessions allowed, reallowed, or paid to dealers may be changed
from time to time.
The Securities may also be offered and sold, if so indicated in the
applicable Prospectus Supplement, in connection with a remarketing upon their
purchase, in accordance with a redemption or repayment pursuant to their terms,
or otherwise, by one or more firms ("remarketing firms"), acting as principals
for their own accounts or as agents for the Company or the Tesoro Capital Trust,
as applicable. Any remarketing firm will be identified and the terms of its
agreement, if any, with the Company or the Tesoro Capital Trust, and its
compensation will be described in the applicable Prospectus Supplement.
Remarketing firms may be deemed to be underwriters, as that term is defined in
the Securities Act, in connection with the Securities remarketed thereby.
The Securities may be offered and sold by the Company or any Tesoro Capital
Trust, respectively, directly or through agents designated by the Company or any
Tesoro Capital Trust from time to time. Unless otherwise indicated in the
related Prospectus Supplement, each such agent will be acting on a best efforts
basis for the period of its appointment. Any agent participating in the
distribution of Securities may be deemed to be an "underwriter," as that term is
defined in the Securities Act, of the Securities so offered and sold. The
Securities also may be sold to dealers at the applicable price to the public set
forth in the Prospectus Supplement relating to such series of Securities. Such
dealers may be deemed to be "underwriters" within the meaning of the Securities
Act. Underwriters, dealers and agents may be entitled, under agreements entered
into with the Company or a Tesoro Capital Trust, to indemnification by the
Company or such Tesoro Capital Trust against certain civil liabilities,
including liabilities under the Securities Act.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, or be customers of, the Company in the ordinary course of
business.
Other than the Common Stock, Preferred Stock and Senior Debt Securities,
all Securities offered will be a new issue of securities with no established
trading market. Any underwriter to whom Securities are sold by the Company for
public offering and sale may make a market in such Securities, but such
underwriters will not be obligated to do so and may discontinue any market
making at any time without notice. The Securities may or may not be listed on a
national securities exchange or a foreign securities exchange, except that the
Common Stock is listed for trading on the NYSE and the PSE. Any Common Stock
sold pursuant to a
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<PAGE> 24
Prospectus Supplement will be listed for trading on the NYSE and the PSE,
subject to official notice of issuance. No assurance can be given as to the
liquidity of or the trading markets for any Securities.
LEGAL MATTERS
The validity of the Securities will be passed upon for the Company and the
Trusts by Fulbright & Jaworski L.L.P., Washington, D.C. Certain matters of
Delaware law relating to the validity of the Trust Preferred Securities will be
passed upon for the Company and the Tesoro Capital Trusts by ,
Wilmington, Delaware, special Delaware counsel to the Company and the Tesoro
Capital Trusts. If the Securities are being distributed in an underwritten
offering, the validity of the Securities will be passed upon for the
underwriters by counsel identified in the related Prospectus Supplement.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference from the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than selling
or underwriting discounts and commissions, to be incurred by the Company in
connection with the issuance and distribution of the Securities being
registered. All amounts shown are estimated except the Commission registration
fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $177,000
*Printing expenses.......................................... 15,000
*Legal fees and expenses.................................... 40,000
*Accounting fees and expenses............................... 30,000
*Trustees' fees and expenses................................ 10,000
*Miscellaneous.............................................. 10,000
--------
Total............................................. $282,000
========
</TABLE>
- ---------------
* Estimated for the purposes of completing the information required pursuant to
this Item 14.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify directors and officers as well as other employees and
individuals against expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement in connection with specified actions, rules, or
proceedings, whether civil, criminal, administrative, or investigative (other
than action by or in the right of the corporation -- a "derivative action"), if
they acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe their conduct
was unlawful. A similar standard is applicable in the case of derivative
actions, except that indemnification only extends to expenses (including
attorneys' fees) incurred in connection with the defense or settlement of such
action, and the statute requires court approval before there can be any
indemnification where the person seeking indemnification has been found liable
to the corporation. The statute provides that it is not exclusive of other
indemnification that may be granted by a corporation's charter, by-laws,
disinterested director vote, stockholder vote, agreement, or otherwise.
Article II, Section 2.9 of the Company's By-laws requires indemnification
to the full extent authorized or permitted by the laws of the State of Delaware
of any person who is made, or threatened to be made, a party to an action, suit
or proceeding (whether civil, criminal, administrative or investigative) by
reason of the fact that he, his testator or intestate is or was a director,
officer, or employee of the Company or serves or served any other enterprise at
the request of the Company.
Section 102(b)(7) of the Delaware General Corporation Law permits a
corporation to provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability for (i) any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
payment of unlawful dividends or unlawful stock purchases or redemptions, or
(iv) any transaction from which the director derived an improper personal
benefit.
Article Ninth of the Company's Restated Certificate of Incorporation, as
amended, provides that a director will not be personally liable to the Company
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law,
II-1
<PAGE> 26
which concerns unlawful payment of dividends, stock purchases or redemptions or
(iv) for any transaction from which the director derived an improper personal
benefit.
The Company maintains directors' and officers' liability insurance which
provides for payment, on behalf of the directors and officers of the Company and
its subsidiaries, of certain losses of such persons (other than matters
uninsurable under law) arising from claims, including claims arising under the
Securities Act, for acts or omissions by such persons while acting as directors
or officers of the Company and/or its subsidiaries, as the case may be.
The Company has entered into indemnification agreements with its directors
and certain of its officers.
Each Declaration of Trust pursuant to which each Tesoro Capital Trust is
organized provides that no Regular Trustee, or affiliate of any Regular Trustee,
or officer, director, shareholder, member, partner, employee, representative or
agent of any Regular Trustee or of any such affiliate, or employee or agent of
the applicable Tesoro Capital Trust or its affiliates (each an "Indemnified
Person") shall be liable, responsible or accountable in damages or otherwise to
such Tesoro Capital Trust or any employee or agent of such Tesoro Capital Trust
or its affiliates for any loss, damage or claim incurred by reason of any act or
omission performed or omitted by such Indemnified Person in good faith on behalf
of such Tesoro Capital Trust and in a manner such Indemnified Person reasonably
believed to be within the scope of the authority conferred on such Indemnified
Person by such Declaration of Trust or by law, except that an Indemnified Person
shall be liable for any such loss, damage or claim incurred by reason of such
Indemnified Person's gross negligence or willful misconduct with respect to such
act or Person's gross negligence or willful misconduct with respect to such act
or omission. Each Declaration of Trust also provides that to the fullest extent
permitted by applicable law, the Company shall indemnify and hold harmless each
Indemnified Person from and against any loss, damage or claim incurred by such
Indemnified Person by reason of any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the applicable Tesoro Capital
Trust and in a manner such Indemnified Person reasonably believed to be within
the scope of authority conferred on such Indemnified Person by such Declaration
of Trust, except that no Indemnified Person shall be entitled to be indemnified
in respect of any loss, damage or claim incurred by such Indemnified Person by
reason of gross negligence or willful misconduct with respect to such act or
omission. Each Declaration of Trust further provides that, to the fullest extent
permitted by applicable law, expenses (including legal fees) incurred by an
Indemnified Person in defending any claim, demand, action, suit or proceeding
shall, from time to time, be advanced by the Company prior to the final
disposition of such claim, demand, action, suit or proceeding upon receipt of an
undertaking by or on behalf of the Indemnified Person to repay such amount if it
shall be determined that the Indemnified Person is not entitled to be
indemnified for the underlying cause of action as authorized by such Declaration
of Trust.
Reference is made to Exhibits 1.1 and 1.2 hereto, respectively, which
contain provisions for indemnification of the Company, and its directors,
officers, and any controlling persons, against certain liabilities for
information furnished by the underwriters and/or agents, as applicable,
expressly for use in the Prospectus Supplements.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S>
*1.1 -- Form of Debt Securities Underwriting Agreement
*1.2 -- Form of Equity Securities Underwriting Agreement
*1.3 -- Form of Tesoro Capital Trust Preferred Securities
Underwriting Agreement
+2.1 -- Stock Sale Agreement, dated March 18, 1998, among the
Company, BHP Hawaii Inc. and BHP Petroleum Pacific
Islands Inc.
</TABLE>
II-2
<PAGE> 27
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S>
**2.2 -- Stock Purchase Agreement, dated May 1, 1998, among Shell
Refining Holding Company, Shell Anacortes Refining
Company and the Company.
2.3 -- Agreement and Plan of Merger dated as of November 20,
1995, between the Company, Coastwide Energy Services,
Inc. and CNRG Acquisition Corp. (incorporated by
reference herein to the Company's Registration Statement
on Form S-4, Reg. No. 333-00229)
2.4 -- First Amendment to Agreement and Plan of Merger dated
effective February 19, 1996 between the Company,
Coastwide Energy Services, Inc. and CNRG Acquisition
Corp. (incorporated by reference herein to the Company's
Form 10-K for the fiscal year ended December 31, 1995)
*4.1 -- Form of Senior Indenture (including form of Senior Debt
Security)
*4.2 -- Form of Subordinated Indenture (including form of
Subordinated Debt Security)
*4.3 -- Form of Stock Purchase Contract
+4.4 -- Certificate of Trust of Tesoro Capital Trust I
+4.5 -- Declaration of Trust of Tesoro Capital Trust I
+4.6 -- Certificate of Trust of Tesoro Capital Trust II
+4.7 -- Declaration of Trust of Tesoro Capital Trust II
+4.8 -- Certificate of Trust of Tesoro Capital Trust III
+4.9 -- Declaration of Trust of Tesoro Capital Trust III
*4.10 -- Form of Trust Preferred Guarantee Agreement to be issued
by the Company (Agreements for Tesoro Capital Trust I,
Tesoro Capital Trust II and Tesoro Capital Trust III are
substantially identical except for names and dates)
*4.11 -- Form of Amended and Restated Declaration of Trust
(including form of Trust Preferred Security)
(Declarations for Tesoro Capital Trust I, Tesoro Capital
Trust II and Tesoro Capital Trust III are substantially
identical except for names and dates)
4.12 -- Restated Certificate of Incorporation of the Company
(incorporated by reference herein to the Company's Form
10-K for the fiscal year ended December 31, 1993)
4.13 -- By-laws of the Company, as amended through June 6, 1996
(incorporated by reference herein to the Company's Form
10-K for the fiscal year ended December 31, 1996)
4.14 -- Amendment to Restated Certificate of Incorporation of the
Company (incorporated by reference herein to the
Company's Form 10-K for the fiscal year ended December
31, 1993)
4.15 -- Certificate of Designation Establishing a Series of $2.20
Cumulative Convertible Preferred Stock, dated as of
January 26, 1983 (incorporated by reference herein to the
Company's Form 10-K for the fiscal year ended December
31, 1993)
4.16 -- Certificate of Designation Establishing a Series A
Participating Preferred Stock, dated as of December 16,
1985 (incorporated by reference herein to the Company's
Form 10-K for the fiscal year ended December 31, 1993)
4.17 -- Certificate of Amendment, dated as of February 9, 1994,
to Restated Certificate of Incorporation of the Company
(incorporated by reference herein to the Company's Form
10-K for the fiscal year ended December 31, 1993)
*5.1 -- Opinion of Fulbright & Jaworski L.L.P. as to the legality
of the Securities
*5.2 -- Opinion of Delaware counsel as to the legality of the
Trust Preferred Securities
</TABLE>
II-3
<PAGE> 28
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S>
*8.1 -- Opinion of Fulbright & Jaworski L.L.P. is to certain
federal income tax matters
+12.1 -- Computation of Ratio of Earnings to Fixed Charges
+23.1 -- Consent of Deloitte & Touche LLP
*23.2 -- Consent of Fulbright & Jaworski L.L.P. (included in
Exhibit 5.1)
*23.3 -- Consent of Delaware counsel (included in Exhibit 5.2)
+24.1 -- Power of Attorney (included on signature page)
*25.1 -- Form T-1 Statement of Eligibility of Trustee for the
Senior Debt Securities
*25.2 -- Form T-1 Statement of Eligibility of Trustee for the
Subordinated Debt Securities
*25.3 -- Form T-1 Statement of Eligibility of Trustee for the
Trust Preferred Securities
</TABLE>
- ---------------
* To be filed as an exhibit to the Company's Current Report on Form 8-K in
connection with a specific offering.
** To be filed pursuant to the Exchange Act and incorporated by reference herein
at such time.
+ Filed herewith.
ITEM 17. UNDERTAKINGS
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(b) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of the Prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20% change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement.
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in this Registration Statement;
provided, however, that paragraphs A(l)(a) and A(l)(b) above do not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-4
<PAGE> 29
B. The undersigned Registration hereby undertakes that, for purposes of
determining any liability under the Securities Act, such filing of the Company's
annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act
(and, where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in this Registration Statement shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
C. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 15 above, or otherwise,
the Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-5
<PAGE> 30
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Antonio, State of Texas, on May 4, 1998.
TESORO PETROLEUM CORPORATION
By: /s/ BRUCE A. SMITH
----------------------------------
Bruce A. Smith
Chairman of the Board of
Directors, President
and Chief Executive Officer
Each person whose individual signature appears below hereby authorizes
Bruce A. Smith and James C. Reed, Jr. and each of them as attorneys-in-fact with
full power of substitution, to execute in the name and on behalf of such person,
individually and in each capacity stated below, and to file, any and all
amendments to this Registration Statement, including any and all post-effective
amendments.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates as indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ BRUCE A. SMITH Chairman of the Board of May 4, 1998
- ----------------------------------------------------- Directors, President and Chief
(Bruce A. Smith) Executive Officer (Principal
Executive Officer)
/s/ JAMES C. REED, JR. Executive Vice President, General May 4, 1998
- ----------------------------------------------------- Counsel and Secretary (Principal
(James C. Reed, Jr.) Financial Officer)
/s/ DON E. BEERE Vice President, Controller May 4, 1998
- ----------------------------------------------------- (Principle Accounting Officer)
(Don E. Beere)
/s/ STEVEN H. GRAPSTEIN Vice Chairman of the Board of May 4, 1998
- ----------------------------------------------------- Directors and Director
(Steven H. Grapstein)
/s/ WILLIAM J. JOHNSON Director May 4, 1998
- -----------------------------------------------------
(William J. Johnson)
/s/ ALAN J. KAUFMAN Director May 4, 1998
- -----------------------------------------------------
(Alan J. Kaufman)
/s/ RAYMOND K. MASON, SR. Director May 4, 1998
- -----------------------------------------------------
(Raymond K. Mason, Sr.)
/s/ PATRICK J. WARD Director May 4, 1998
- -----------------------------------------------------
(Patrick J. Ward)
/s/ MURRAY L. WEIDENBAUM Director May 4, 1998
- -----------------------------------------------------
(Murray L. Weidenbaum)
</TABLE>
II-6
<PAGE> 31
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Tesoro Capital
Trust I certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Antonio, State of Texas, on May 4, 1998.
Tesoro Capital Trust I
By: Tesoro Petroleum Corporation, as
Sponsor
By: /s/ BRUCE A. SMITH
----------------------------------
Bruce A. Smith
Chairman of the Board of
Directors, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, Tesoro Capital
Trust II certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Antonio, State of Texas, on May 4, 1998.
Tesoro Capital Trust II
By: Tesoro Petroleum Corporation, as
Sponsor
By: /s/ BRUCE A. SMITH
----------------------------------
Bruce A. Smith
Chairman of the Board of
Directors, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, Tesoro Capital
Trust III certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Antonio, State of Texas, on May 4, 1998.
Tesoro Capital Trust III
By: Tesoro Petroleum Corporation, as
Sponsor
By: /s/ BRUCE A. SMITH
----------------------------------
Bruce A. Smith
Chairman of the Board of
Directors, President
and Chief Executive Officer
II-7
<PAGE> 32
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
*1.1 -- Form of Debt Securities Underwriting Agreement
*1.2 -- Form of Equity Securities Underwriting Agreement
*1.3 -- Form of Tesoro Capital Trust Preferred Securities
Underwriting Agreement
+2.1 -- Stock Sale Agreement, dated March 18, 1998, among the
Company, BHP Hawaii Inc. and BHP Petroleum Pacific
Islands Inc.
**2.2 -- Stock Purchase Agreement, dated May 1, 1998, among Shell
Refining Holding Company, Shell Anacortes Refining
Company and the Company
2.3 -- Agreement and Plan of Merger dated as of November 20,
1995, between the Company, Coastwide Energy Services,
Inc. and CNRG Acquisition Corp. (incorporated by
reference herein to the Company's Registration Statement
on Form S-4, Reg. No. 333-00229).
2.4 -- First Amendment to Agreement and Plan of Merger dated
effective February 19, 1996 between the Company,
Coastwide Energy Services, Inc. and CNRG Acquisition
Corp. (incorporated by reference herein to the Company's
Form 10-K for the fiscal year ended December 31, 1995).
*4.1 -- Form of Senior Indenture (including form of Senior Debt
Security)
*4.2 -- Form of Subordinated Indenture (including form of
Subordinated Debt Security)
*4.3 -- Form of Stock Purchase Contract
+4.4 -- Certificate of Trust of Tesoro Capital Trust I
+4.5 -- Declaration of Trust of Tesoro Capital Trust I
+4.6 -- Certificate of Trust of Tesoro Capital Trust II
+4.7 -- Declaration of Trust of Tesoro Capital Trust II
+4.8 -- Certificate of Trust of Tesoro Capital Trust III
+4.9 -- Declaration of Trust of Tesoro Capital Trust III
*4.10 -- Form of Trust Preferred Guarantee Agreement to be issued
by the Company (Agreements for Tesoro Capital Trust I,
Tesoro Capital Trust II and Tesoro Capital Trust III are
substantially identical except for names and dates)
*4.11 -- Form of Amended and Restated Declaration of Trust
(including form of Trust Preferred Security)
(Declarations for Tesoro Capital Trust I, Tesoro Capital
Trust II and Tesoro Capital Trust III are substantially
identical except for names and dates)
4.12 -- Restated Certificate of Incorporation of the Company
(incorporated by reference herein to the Company's Form
10-K for the fiscal year ended December 31, 1993)
4.13 -- By-laws of the Company, as amended through June 6, 1996
(incorporated by reference herein to the Company's Form
10-K for the fiscal year ended December 31, 1996)
4.14 -- Amendment to Restated Certificate of Incorporation of the
Company (incorporated by reference herein to the
Company's Form 10-K for the fiscal year ended December
31, 1993)
4.15 -- Certificate of Designation Establishing a Series of $2.20
Cumulative Convertible Preferred Stock, dated as of
January 26, 1983 (incorporated by reference herein to the
Company's Form 10-K for the fiscal year ended December
31, 1993)
</TABLE>
II-8
<PAGE> 33
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
4.16 -- Certificate of Designation Establishing a Series A
Participating Preferred Stock, dated as of December 16,
1985 (incorporated by reference herein to the Company's
Form 10-K for the fiscal year ended December 31, 1993)
4.17 -- Certificate of Amendment, dated as of February 9, 1994,
to Restated Certificate of Incorporation of the Company
(incorporated by reference herein to the Company's Form
10-K for the fiscal year ended December 31, 1993)
*5.1 -- Opinion of Fulbright & Jaworski L.L.P. as to the legality
of the Securities
*5.2 -- Opinion of Delaware counsel as to the legality of the
Trust Preferred Securities
*8.1 -- Opinion of Fulbright & Jaworski L.L.P. is to certain
federal income tax matters
+12.1 -- Computation of Ratio of Earnings to Fixed Charges
+23.1 -- Consent of Deloitte & Touche LLP
*23.2 -- Consent of Fulbright & Jaworski L.L.P. (included in
Exhibit 5.1)
*23.3 -- Consent of Delaware counsel (included in Exhibit 5.2)
+24.1 -- Power of Attorney (included on signature page)
*25.1 -- Form T-1 Statement of Eligibility of Trustee for the
Senior Debt Securities
*25.2 -- Form T-1 Statement of Eligibility of Trustee for the
Subordinated Debt Securities
*25.3 -- Form T-1 Statement of Eligibility of Trustee for the
Trust Preferred Securities
</TABLE>
- ---------------
* To be filed as an exhibit to the Company's Current Report on Form 8-K in
connection with a specific offering.
** To be filed pursuant to the Exchange Act and incorporated by reference herein
at such time.
+ Filed herewith.
II-9
<PAGE> 1
EXHIBIT 2.1
================================================================================
STOCK SALE AGREEMENT
BY AND AMONG
BHP HAWAII INC.,
a Hawaii corporation,
BHP PETROLEUM PACIFIC ISLANDS INC.,
a Hawaii corporation,
AND
TESORO PETROLEUM CORPORATION,
a Delaware corporation
DATED AS OF MARCH 18, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
RECITALS ....................................................................... 1
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms ...................................................... 1
1.2 Other Defined Terms ........................................................ 6
ARTICLE II
PURCHASE AND SALE OF STOCK
2.1 Sale of Stock .............................................................. 6
2.2 Purchase Price and Payment for Stock ....................................... 7
2.3 Contribution of Certain Assets ............................................. 9
2.4 Certain Accounts ........................................................... 10
2.5 Pre-Closing Cash Distribution .............................................. 10
ARTICLE III
CLOSING
3.1 Closing .................................................................... 10
3.2 BHP Hawaii and BHP Pacific Obligations at Closing .......................... 10
3.3 Buyer Obligations at Closing ............................................... 11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BHP HAWAII
4.1 Organization ............................................................... 11
4.2 Authorization .............................................................. 12
4.3 Non-Contravention .......................................................... 13
4.4 Financial Statements ....................................................... 13
4.5 Absence of Certain Changes ................................................. 14
4.6 Title to Stock and Assets .................................................. 14
4.7 Real Property .............................................................. 15
4.8 Intellectual Property ...................................................... 15
4.9 Litigation ................................................................. 16
4.10 Employee Benefit Matters .................................................. 16
</TABLE>
- i -
<PAGE> 3
<TABLE>
Section Page
<S> <C>
4.11 Taxes ..................................................................... 17
4.12 Compliance With Law ....................................................... 19
4.13 Contracts and Commitments ................................................. 19
4.14 Permits and Other Operating Rights ........................................ 20
4.15 Labor Matters ............................................................. 20
4.16 Capitalization of Subsidiary .............................................. 20
4.17 Disclaimer ................................................................ 21
4.18 Assets Necessary to the Business .......................................... 21
4.19 Accuracy of Information Furnished ......................................... 22
4.20 Insurance ................................................................. 22
4.21 No Brokers ................................................................ 22
4.22 Knowledge of BHP Hawaii ................................................... 22
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
5.1 Organization ............................................................... 22
5.2 Authorization .............................................................. 22
5.3 Non-Contravention .......................................................... 23
5.4 SEC Filings; Financial Statements .......................................... 23
5.5 No Undisclosed Liabilities ................................................. 24
5.6 Absence of Certain Changes or Events ....................................... 24
5.7 Litigation ................................................................. 24
5.8 Availability of Funds ...................................................... 24
5.9 Acquisition for Investment ................................................. 24
5.10 Buyer's Knowledge ......................................................... 25
5.11 No Brokers ................................................................ 25
ARTICLE VI
CERTAIN COVENANTS
6.1 Access to Information ...................................................... 25
6.2 Conduct of Business Pending Closing ........................................ 26
6.3 No Solicitation of Transactions ............................................ 27
6.4 Authorizations ............................................................. 27
6.5 Books and Records .......................................................... 28
</TABLE>
- ii -
<PAGE> 4
<TABLE>
Section Page
<S> <C>
6.6 BHP Marks .................................................................. 29
6.7 Acknowledgements by Buyer .................................................. 29
6.8 Public Announcements ....................................................... 29
6.9 No Competition ............................................................. 30
6.10 U.S. GAAP Financial Statements ............................................ 30
6.11 Environmental Matters ..................................................... 31
6.12 Software and Computer Programs ............................................ 31
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF BUYER
7.1 Accuracy of Representations and Warranties ................................. 31
7.2 Performance ................................................................ 31
7.3 HSR Act .................................................................... 31
7.4 Absence of Governmental Orders ............................................. 32
7.5 Officers' Certificates ..................................................... 32
7.6 Certain Agreements ......................................................... 32
7.7 Material Damage ............................................................ 32
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF BHP HAWAII AND BHP PACIFIC
8.1 Accuracy of Representations and Warranties ................................. 32
8.2 Performance ................................................................ 32
8.3 HSR Act .................................................................... 32
8.4 Absence of Governmental Orders ............................................. 32
8.5 Officers' Certificates ..................................................... 32
8.6 Certain Agreements ......................................................... 33
ARTICLE IX
INDEMNIFICATION
9.1 Survival of Representations and Warranties ................................. 33
9.2 Indemnification by BHP Hawaii .............................................. 33
9.3 Indemnification by Buyer ................................................... 33
9.4 General Indemnification Provisions ......................................... 34
9.5 Limitations on Indemnification ............................................. 35
</TABLE>
- iii -
<PAGE> 5
ARTICLE X
TAX MATTERS
<TABLE>
Section Page
<S> <C>
10.1 Indemnification for Taxes ................................................. 35
10.2 Other Tax Matters ......................................................... 37
ARTICLE XI
EMPLOYEES AND EMPLOYEE BENEFIT PLANS
11.1 Employment ................................................................ 40
11.2 Employee Benefit Plans .................................................... 40
11.3 Plant Closing Notice ...................................................... 43
ARTICLE XII
TERMINATION
12.1 Termination ............................................................... 43
12.2 Written Notice ............................................................ 44
12.3 Effect of Termination ..................................................... 44
12.4 Waiver .................................................................... 44
ARTICLE XIII
GENERAL PROVISIONS
13.1 Expenses, Taxes, Etc ...................................................... 44
13.2 Notices ................................................................... 44
13.3 Disclosure Schedule ....................................................... 46
13.4 Interpretation ............................................................ 46
13.5 Severability .............................................................. 47
13.6 Assignment ................................................................ 47
13.7 No Third-Party Beneficiaries .............................................. 47
13.8 Amendment ................................................................. 47
13.9 No Other Remedies ......................................................... 47
13.10 Further Assurances ....................................................... 47
13.11 Mutual Drafting .......................................................... 48
13.12 Governing Law ............................................................ 48
13.13 Dispute Resolution ....................................................... 48
13.14 Consent to Jurisdiction; Waivers ......................................... 49
13.15 Waiver of Jury Trial ..................................................... 49
13.16 Counterparts ............................................................. 49
</TABLE>
- iv -
<PAGE> 6
<TABLE>
Section Page
<S> <C>
13.17 Entire Agreement ......................................................... 49
</TABLE>
EXHIBITS:
<TABLE>
<S> <C>
Exhibit 1.1(a) ..................................................................................BHP Guaranty
Exhibit 1.1(b) .......................................................................Environmental Agreement
Exhibit 1.1(c) ..............................................................................Escrow Agreement
Exhibit 1.1(d) ...............................................................................Promissory Note
Exhibit 1.1(e) ..............................................................................Supply Agreement
Exhibit 1.1(f) .........................Opinion of Orrick, Herrington & Sutcliffe LLP and BHP's Group Counsel
Exhibit 1.1(g) ........................................................Opinion of Fulbright & Jaworski L.L.P.
Exhibit 1.1(h) .......................................................................Form of Tax Certificate
</TABLE>
SCHEDULES:
<TABLE>
<S> <C>
2.2(c) .........................................Pro Forma Net Working Capital As Of December 31, 1997
2.3 .........................................Assets To Be Contributed to Subsidiary Before Closing
2.4 ..............................................................................Certain Accounts
5.9 ....................................................................Acquisition for Investment
6.2 ...........................................................Conduct of Business Pending Closing
11.1(b) ..............................Employees Who May Be Hired By An Affiliate Of BHP Before Closing
11.2(h) ......................................Full Years of Service as of 03/01/98 for Vice Presidents
13.4(a) ..................................................BHP Hawaii And BHP Pacific Knowledge Persons
13.4(b) .......................................................................Buyer Knowledge Persons
</TABLE>
DISCLOSURE SCHEDULE:
<TABLE>
<S> <C>
SECTION 4.1(c)........................................................................................Investments
SECTION 4.2(c).....................................................................................Authorizations
SECTION 4.3.....................................................................................Non-Contravention
SECTION 4.4(a)...............................................................................Financial Statements
SECTION 4.5............................................................................Absence of Certain Changes
SECTION 4.6(b)....................................................................................Title to Assets
SECTION 4.7(a)................................................................................Owned Real Property
SECTION 4.7(b).................................................................Leased Real Property and Easements
SECTION 4.8.............................................................................Patents, Trademarks, Etc.
SECTION 4.10.............................................................................Employee Benefit Matters
SECTION 4.11................................................................................................Taxes
SECTION 4.13............................................................................Contracts and Commitments
SECTION 4.14...................................................................Permits and Other Operating Rights
SECTION 4.15........................................................................................Labor Matters
SECTION 4.18(a)..................................................................Assets Necessary to the Business
SECTION 4.18(b).........................................................................Previously Owned Property
SECTION 4.20...................................................................................Insurance Policies
</TABLE>
- v -
<PAGE> 7
STOCK SALE AGREEMENT
STOCK SALE AGREEMENT, dated as of March 18, 1998, by and among
BHP Hawaii Inc., a Hawaii corporation ("BHP Hawaii"), BHP Petroleum Pacific
Islands Inc., a Hawaii corporation ("BHP Pacific"), and Tesoro Petroleum
Corporation, a Delaware corporation ("Buyer").
RECITALS
A. Hawaii Energy Resources Inc., a Hawaii corporation and
wholly owned subsidiary of BHP Hawaii ("HERI"), is the owner of all the
outstanding shares of capital stock of BHP Petroleum Americas Refining Inc, a
Hawaii corporation ("BHP Refining"), and BHP Pacific is the owner of all the
outstanding shares of capital stock of BHP Petroleum South Pacific Inc., a
California corporation ("BHP South Pacific").
B. BHP Hawaii desires to cause HERI to sell to Buyer, and
Buyer desires to purchase from HERI, all of such shares of stock of BHP Refining
and BHP Pacific desires to sell to Buyer, and Buyer desires to purchase from BHP
Pacific, all of such shares of stock of BHP South Pacific, as provided in this
Agreement.
C. The parties intend that the Environmental Agreement to be
executed and delivered at the Closing shall set forth the sole and exclusive
rights, obligations, representations, warranties, covenants and indemnities of
the parties hereto regarding any matters arising under or relating to
Environmental Laws, Environmental Permits, Hazardous Material or Releases of
Hazardous Material except as otherwise provided in subsection 6.1(b).
In consideration of the premises and the respective
representations, warranties and agreements herein contained, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such definitions to be
equally applicable to both the singular and plural forms of the terms defined):
"Action" means any claim, action, suit or arbitration, or any
other proceeding, in each instance by or before any Governmental Authority or
any nongovernmental arbitration, mediation or other nonjudicial dispute
resolution body.
"Actuary" means an enrolled actuary as defined in ERISA
Section 103(a)(4)(c).
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations under the Securities Exchange Act of 1934, as amended.
<PAGE> 8
"Agreement" means this Stock Sale Agreement, including all
schedules and exhibits hereto, as it may be further amended from time to time as
herein provided.
"Agreement Date" means March 18, 1998.
"Ancillary Agreements" means, collectively, the Supply
Agreement, the Environmental Agreement, the Note, the Escrow Agreement and the
BHP Guaranty.
"Antitrust Authorities" has the meaning specified in
subsection 6.4(c).
"Balance Sheet" has the meaning specified in subsection
4.4(a).
"BHP" means The Broken Hill Proprietary Company Limited,
A.C.N. 004 028 077, an Australian corporation.
"BHP Affiliates" means, collectively, BHP, BHP Hawaii, BHP
Pacific, BHP Refining, BHP South Pacific, Smiley's, HERI and BHP Petroleum
Trading and Marketing Proprietary Limited, A.C.N. 003 401 661, an Australian
corporation.
"BHP Guaranty" means the Guaranty of BHP, substantially in the
form of Exhibit 1.1(a).
"BHP Hawaii" means BHP Hawaii Inc., a Hawaii corporation.
"BHP Medical Plan" means the plan or plans of BHP Hawaii and
BHP Pacific providing medical, dental, prescription drug and health care
flexible spending account benefits.
"BHP Pacific" means BHP Petroleum Pacific Islands Inc., a
Hawaii corporation.
"BHP Pension Plan" means the BHP USA Pension Plan II, or any
successor thereto.
"BHP Refining" means BHP Petroleum Americas Refining Inc., a
Hawaii corporation.
"BHP Retirement Savings Plan" means the BHP Retirement Savings
Plan.
"BHP South Pacific" means BHP Petroleum South Pacific Inc., a
California corporation.
"Books and Records" means all of the following which pertain
to the conduct of the Business: books, records, manuals and other materials,
accounting books and records, continuing property records for property, plant
and equipment, files, computer tapes, disks, other storage media and records,
advertising matter, catalogues, price lists, correspondence, mailing lists,
lists of customers and suppliers, distribution lists, photographs, production
data, sales and promotional materials and records, purchasing materials and
records, personnel records, credit records, manufacturing and quality control
records and procedures, blueprints, research and development files, data and
laboratory books, patent and trademark files and disclosures, media
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<PAGE> 9
materials and plates, sales order files, litigation files, deeds, easements and
other instruments relating to the Real Property, any Tax Returns filed by
Subsidiary, including all work papers and calculations in support of such Tax
Returns, and any comparable information with respect to predecessors of
Subsidiary to the extent available.
"Business" means collectively, (a) BHP Refining's business of
manufacturing, refining, marketing, selling and distributing petroleum products
within the State of Hawaii, (b) BHP Refining's business of marketing and selling
petroleum products outside of the State of Hawaii, and (c) BHP South Pacific's
business of selling and distributing petroleum products in the American Samoa
Territory.
"Business Employee" means any employee employed by Subsidiary
who is listed in Disclosure Schedule Section 4.10, as amended through the
Closing.
"Buyer Indemnified Parties" has the meaning specified in
Section 9.2.
"Buyer Loss" has the meaning specified in Section 9.2.
"Buyer's Hawaii Medical Plan" means the medical plan
established by Buyer pursuant to subsection 11.2(d).
"Buyer's Pension Plan" means the Tesoro Petroleum Corporation
Retirement Plan or such other retirement plan established or designated by
Buyer.
"Buyer's 401(k) Plan" means the Tesoro Petroleum Corporation
Thrift Plan.
"Bylaws" means a corporation's bylaws, code of regulations or
equivalent document.
"Charter" means a company's articles of association, articles
of incorporation, certificate of incorporation or equivalent organizational
documents.
"Closing" means the closing of the transactions contemplated
by this Agreement as specified in Section 3.1.
"Closing Date" has the meaning specified in Section 3.1.
"Code" means the United States Internal Revenue Code of 1986
and any successor statute thereto, as amended.
"Commitments" has the meaning specified in Section 4.13.
"Confidentiality Agreement" means the Confidentiality
Agreement, dated April 22, 1997, between BHP Hawaii and Buyer.
"Current Employee" has the meaning specified in subsection
11.1(a).
"Deposit" has the meaning specified in subsection 2.2(a).
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<PAGE> 10
"Disclosure Schedule" means the Disclosure Schedule dated as
of the date hereof, and as amended in accordance with this Agreement, as
delivered to Buyer by BHP Hawaii and forming a part of this Agreement.
"Employee Plan" has the meaning specified in subsection
4.10(a).
"Encumbrance" means any interest (including any security
interest), pledge, mortgage, lien, charge, adverse claim or other right of third
Persons.
"Environmental Agreement" means the Environmental Agreement,
substantially in the form of Exhibit 1.1(b).
"Environmental Laws" means all laws, regulations, ordinances,
codes, policies, Governmental Orders and consent decrees, and any judicial and
administrative interpretations thereof, of Governmental Authorities, or any
common law doctrines, in effect from time to time relating to pollution or
protection of the environment and natural resources, including those relating to
emissions, discharges, Releases or threatened Releases of Hazardous Material
into the environment (including ambient air, surface water, groundwater or
land), or otherwise relating to the manufacture, processing, distribution, use,
possession, treatment, storage, disposal, transport or handling of Hazardous
Material.
"Environmental Permits" means all permits, approvals,
identification numbers, licenses and other authorizations required under any
applicable Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Escrow Agreement" means the Escrow Agreement, substantially
in the form of Exhibit 1.1(c).
"Financial Statements" has the meaning specified in subsection
4.4(a).
"GAAP" means U.S. generally accepted accounting principles,
unless expressly described otherwise.
"Governmental Authority" means any international, national,
Federal, state, municipal or local government, governmental authority,
regulatory or administrative agency, governmental commission, department, board,
bureau, agency or instrumentality, court, tribunal, arbitrator or arbitral body.
"Governmental Order" means any order, writ, rule, judgment,
injunction, decree, stipulation, determination or award entered by or with any
Governmental Authority.
"Hazardous Material" means any substance, pollutant, material
or waste which is regulated or shall become regulated under any Environmental
Law, including any such materials regulated as hazardous or toxic substances or
material, and asbestos, petroleum and any fraction or product of crude oil or
petroleum.
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<PAGE> 11
"HERI" means Hawaii Energy Resources Inc., a Hawaii
corporation.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, Section 7A of the Clayton Act, 15 U.S.C. ss. 18A, and
the regulations promulgated thereunder.
"Intellectual Property" has the meaning specified in Section
4.8.
"IRS" means the U.S. Internal Revenue Service.
"Leased Real Property" has the meaning specified in subsection
4.7(b).
"Liabilities" means any and all debts, liabilities and
obligations of any nature whatsoever, whether accrued or fixed, absolute or
contingent, mature or unmatured or determined or indeterminable.
"Material Adverse Effect" means any event(s) with respect to,
change(s) in, or effect(s) on, Subsidiary or the Business which, individually or
in the aggregate, is reasonably likely to be adverse to the Business,
operations, results of operations, assets or properties, Liabilities or
financial condition of Subsidiary in a manner that is material to Subsidiary
taken as a whole.
"Note" means the Promissory Note, substantially in the form of
Exhibit 1.1(d).
"Owned Real Property" has the meaning specified in subsection
4.7(a).
"Permitted Liens" means any (a) mechanics', carriers',
workers' and other similar liens arising in the ordinary course of business
which are not delinquent and which in the aggregate are not material in amount,
and do not interfere with the present use of the assets of Subsidiary to which
they apply; (b) liens for current Taxes and assessments not yet due and payable;
(c) usual and customary non-monetary real property Encumbrances that do not and
will not interfere with the operation of that portion of the Business currently
conducted on such property or the Business as a whole; (d) all applicable zoning
ordinances and land use restrictions; and (e) with respect to any asset of
Subsidiary which consists of a leasehold or other possessory interest in real
property, all Encumbrances, covenants, imperfections in title, easements,
restrictions and other title matters (whether or not the same are recorded) not
known to BHP Hawaii to which the underlying fee estate in such real property is
subject which were not created by or incurred by Subsidiary and which do not
currently and are not reasonably expected to interfere materially with the
operation of that portion of the Business currently conducted on such property.
"Person" shall include any individual, trustee, firm,
corporation, partnership, limited liability company, Governmental Authority or
other entity, whether acting in an individual, fiduciary or any other capacity.
"Purchase Price" has the meaning specified in subsection
2.2(b).
"Real Property" has the meaning specified in subsection
4.7(b).
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<PAGE> 12
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment (including the abandonment or discarding of
barrels, containers and other closed receptacles containing any Hazardous
Material).
"Seller Indemnified Parties" has the meaning specified in
Section 9.3.
"Seller Loss" has the meaning specified in Section 9.3.
"Smiley's" means Smiley's Super Service Inc., a Hawaii
corporation.
"Stock" has the meaning specified in Section 2.1.
"Subsidiary" means, collectively, BHP Refining, BHP South
Pacific and Smiley's.
"Supply Agreement" means the Supply Agreement, substantially
in the form of Exhibit 1.1(e).
"Tax" means any federal, state, local, or foreign income,
gross receipts, license, payroll, parking, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Sec. 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated tax, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not, including such
item for which Liability arises as a transferee or successor-in-interest.
"Tax Return" means any return, declaration, report, claim for
refund, information return or statement relating to Taxes, including any
schedules or attachments thereto, and including any amendment thereof.
"Taxing Authority" means any Governmental Authority
responsible for the imposition or collection of any Tax.
"Transferred Employee" has the meaning specified in Section
11.1.
1.2 OTHER DEFINED TERMS. In addition to the terms defined in
Section 1.1, certain other terms are defined elsewhere in this Agreement and,
whenever such terms are used in this Agreement, they shall have their respective
defined meanings.
ARTICLE II
PURCHASE AND SALE OF STOCK
2.1 SALE OF STOCK. Subject to the terms and conditions herein
set forth and in consideration of the payment of the Purchase Price, at the
Closing (a) BHP Hawaii shall cause HERI to sell, assign, transfer and deliver to
Buyer, and Buyer shall purchase from HERI, all the
6
<PAGE> 13
issued and outstanding shares of capital stock of BHP Refining and (b) BHP
Pacific shall sell, assign, transfer and deliver to Buyer, and Buyer shall
purchase from BHP Pacific, all the issued and outstanding shares of capital
stock of BHP South Pacific (collectively, the "Stock").
2.2 PURCHASE PRICE AND PAYMENT FOR STOCK. (a) Concurrently
with its execution and delivery of this Agreement, Buyer shall pay to Citibank
N.A., as escrow agent pursuant to the Escrow Agreement, in cash FIVE MILLION
DOLLARS ($5,000,000) by wire transfer of immediately available funds (the
"Deposit", which term shall include interest earned thereon). The Deposit shall
be paid, held and released pursuant to the terms of the Escrow Agreement. At
Closing, the Deposit shall be applied as a credit against the cash portion of
the Purchase Price then payable by Buyer. In the event that this Agreement is
terminated (i) by BHP Hawaii or BHP Pacific pursuant to subsection 12.1(d) or
(ii) by Buyer pursuant to subsection 12.1(b) and on or prior to October 31,
1998, then BHP Hawaii, acting on behalf of itself and BHP Pacific, shall retain
the Deposit as full liquidated damages and not as a penalty. In this regard, the
parties acknowledge and agree that the damages of BHP Hawaii and BHP Pacific as
a result of such termination are not capable of exact ascertainment and that
such liquidated damages are fair and reasonable.
(b) Subject to the terms and conditions herein set forth, and
in consideration of the sale, assignment, transfer and delivery to Buyer of the
Stock, Buyer shall (i) pay to BHP Hawaii (acting on behalf of itself and BHP
Pacific) in cash, at the Closing, TWO HUNDRED SEVENTY FIVE MILLION DOLLARS
($275,000,000), less the amount of the Deposit, and (ii) execute and deliver to
BHP Hawaii at the Closing the Note, in the principal amount of FIFTY MILLION
DOLLARS ($50,000,000). Such cash amount (including the Deposit), as estimated
and adjusted in accordance with subsection 2.2(c), together with the principal
amount of the Note constitutes the "Purchase Price" for purposes of this
Agreement.
(c) The portion of the Purchase Price payable in cash at the
Closing shall be subject to adjustment as follows:
(i) The Purchase Price shall be increased to the
extent Net Working Capital is greater than $100,000,000 and shall be reduced to
the extent Net Working Capital is less than $100,000,000. For purposes of this
subsection 2.2(c), "Net Working Capital" means that amount obtained by
subtracting Subsidiary's total Current Liabilities from Subsidiary's total
Current Assets as of the Closing Date, "Current Assets" means all cash assets,
external trade and sundry receivables (net of doubtful accounts), intercompany
receivables (sales to BHP Affiliates) (but excluding other current intercompany
accounts), provided such receivables are paid within 30 days of the Closing
Date, current inventories of product, crude and materials and stores, plus other
current assets (prepaid expenses plus current portion of deferred turnaround
cost) and all costs and expenses associated with, including cost of parts and
equipment purchased in connection with, the June 1998 scheduled turnaround of
the refinery operated by BHP Refining (including any such costs and expenses
recorded as other non-current assets) and "Current Liabilities" means all
obligations to external creditors, both trade and sundry, plus intercompany
trade creditors, current portion of other financing, which is primarily the
current portion of capital leases, current taxes payable and bank overdrafts.
Net Working Capital shall be prepared from the books and records of Subsidiary
in
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<PAGE> 14
accordance with Australian GAAP and shall reflect the pre-Closing Date balance
sheet transactions described in Sections 2.4 and 2.5. An illustration of the
manner in which the dollar figure set forth in the first sentence of this
subsection 2.2(c)(i) was calculated and the manner in which Net Working Capital
would be calculated had the Closing Date been December 31, 1997, is attached
hereto as Schedule 2.2(c). The methodology portrayed in the pro forma
calculation of Net Working Capital as of December 31, 1997 as reflected in the
December 31, 1997 spreadsheet included in such Schedule 2.2(c) shall be used to
calculate Net Working Capital as of the Closing Date.
(ii) Net Working Capital shall be estimated in good
faith by BHP Hawaii and set forth, together with a reasonably detailed statement
of the calculation thereof, in a certificate (the "Initial Adjustment
Certificate") to be delivered to Buyer at least five business days prior to the
Closing Date. BHP Hawaii shall be entitled to call upon, and to receive, the
assistance of Arthur Andersen LLP in the preparation of the Initial Adjustment
Certificate. The Initial Adjustment Certificate shall constitute the basis on
which the cash portion of the Purchase Price shall be calculated for the Closing
(the "Initial Cash Purchase Price").
(iii) On or before 90 calendar days after the Closing
Date, Buyer shall deliver to BHP Hawaii its proposed final calculation of Net
Working Capital, together with reasonably detailed supporting documentation, in
a certificate (the "Final Adjustment Certificate") which shall set forth in
reasonable detail (1) the nature and extent of each and every variance, if any,
between the amounts estimated in the Initial Adjustment Certificate and the
amounts set forth in the Final Adjustment Certificate and (2) the proposed final
Purchase Price payable in cash resulting from such variance (the "Proposed Cash
Purchase Price"). Buyer shall be entitled to call upon, and to receive, the
assistance of its auditors in the preparation of the Final Adjustment
Certificate.
(iv) Upon delivery by Buyer of such materials, BHP
Hawaii shall have 45 calendar days therefrom in which to notify Buyer of any
objection with respect to the proposed adjustment to the Initial Purchase Price
and the Proposed Cash Purchase Price, if any, set forth in the Final Adjustment
Certificate. Such notice shall specify in reasonable detail the particulars of
such disagreement and BHP Hawaii's proposed alternative calculation of the
adjustment to the Initial Cash Purchase Price. If such notice is given and the
parties are unable to resolve their disagreements within 30 days' of Buyer's
receipt of such notice, the matter in dispute shall be resolved by a "Big Six"
independent accounting firm (other than Arthur Andersen LLP or Deloitte & Touche
LLP) with expertise in petroleum refining and petroleum products distribution
mutually satisfactory to the parties (the "Independent Auditor"). Within 45 days
after submission, the Independent Auditor shall render its final decision, with
such determination being binding and conclusive upon the parties without further
appeal therefrom. Buyer and BHP Hawaii shall bear equally the fees and expenses
of the Independent Auditor. In the event that BHP Hawaii fails to notify Buyer
within the 45-day period specified in this subsection 2.2(c)(iv) of any
objection with respect to the Proposed Cash Purchase Price and the proposed
adjustment to the Initial Cash Purchase Price, if any, set forth in the Final
Adjustment Certificate, the matters set forth therein shall be deemed to be
final, conclusive and binding on the parties. The date upon which the Final
Adjustment
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<PAGE> 15
Certificate shall be deemed to be final, conclusive and binding pursuant to this
subsection 2.2(c)(iv) shall be the "Settlement Date."
(v) On the fourth business day following the
Settlement Date, either BHP Hawaii shall pay to Buyer, as a downward adjustment
of the cash portion of the Purchase Price, the amount, if any, by which the
Initial Cash Purchase Price exceeds the Proposed Cash Purchase Price, or Buyer
shall pay to BHP Hawaii, on behalf of itself and BHP South Pacific, as an upward
adjustment of the cash portion of the Purchase Price, the amount, if any, by
which the Proposed Cash Purchase Price exceeds the Initial Cash Purchase Price.
Any such payment (including interest thereon as provided in the next sentence)
shall be made by wire transfer of immediately available funds to an account
designated by the recipient of such payment. Any such payment shall bear
interest, from the Closing Date until such payment is paid, at the prime rate
announced from time to time by Chase Manhattan Bank, computed on the basis of
the actual number of days elapsed and a year of 365 days.
(vi) Buyer shall cooperate with BHP Hawaii in BHP
Hawaii's review of the Final Adjustment Certificate and shall provide BHP Hawaii
and its employees and agents (including accountants) full access to the books,
records, work papers, information, facilities and employees of Buyer used to
prepare the Final Adjustment Certificate. BHP Hawaii shall cooperate with Buyer
in its review of the Initial Adjustment Certificate and shall provide Buyer and
its employees and agents (including accountants) full access to the books,
records, work papers, information, facilities and employees of BHP Hawaii, BHP
Pacific or Subsidiary used to prepare the Initial Adjustment Certificate.
(d) The parties hereto acknowledge and agree that the Purchase
Price shall be allocated to the Stock as follows:
(i) An amount equal to the adjusted tax basis of the
assets (less liabilities) of BHP South Pacific for federal income tax
purposes as of the Closing Date shall be allocated to the capital stock
of BHP South Pacific.
(ii) The remainder of the Purchase Price, together
with the Note in the principal amount of FIFTY MILLION DOLLARS
($50,000,000), shall be allocated to the capital stock of BHP Refining.
Any Net Working Capital adjustment to the Purchase Price pursuant to
subsection 2.2(c) shall be allocated to the capital stock of BHP
Refining.
2.3 CONTRIBUTION OF CERTAIN ASSETS. (a) Immediately prior to
the Closing, BHP Hawaii and BHP Pacific shall contribute, convey, assign,
transfer and deliver to BHP Refining and BHP South Pacific, as set forth on
Schedule 2.3, and BHP Refining and BHP South Pacific shall accept and acquire
from BHP Hawaii and BHP Pacific, all of the rights, title and interests of BHP
Hawaii and BHP Pacific in and to the assets and properties listed on Schedule
2.3. The contribution of such assets to BHP Refining and BHP South Pacific
shall, except as otherwise expressly provided in this Agreement (including
Sections 4.3, 4.9 and 4.13), be without any representations or warranties of any
kind or nature, express or implied, as to the
9
<PAGE> 16
condition, value or quality of such assets and, except as otherwise expressly
provided in this Agreement (including Sections 4.3, 4.9 and 4.13), BHP Hawaii
and BHP Pacific SPECIFICALLY DISCLAIM ANY REPRESENTATION OR WARRANTY OF
MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH
RESPECT TO SUCH ASSETS, OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF,
OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, IT BEING
UNDERSTOOD THAT SUCH ASSETS SHALL BE SO CONTRIBUTED OR SOLD "AS IS, WHERE IS"
AND IN THEIR PRESENT CONDITION. Such contribution shall be effected by
instruments of conveyance, transfer and assignment as Buyer may reasonably
request that are reasonably necessary to vest in BHP Refining and BHP South
Pacific, as the case may be, all of the rights, title and interests of BHP
Hawaii and BHP Pacific therein.
(b) Buyer shall continue the membership of BHP Hawaii in the
Marine Preservation Association, including discharging BHP Hawaii's associated
membership (including dues) obligations; provided, however, that BHP Hawaii
shall be solely responsible for any resignation fee arising from its withdrawal
as a member of such Association.
2.4 CERTAIN ACCOUNTS. Notwithstanding any other provision of
this Agreement, prior to the Closing Date, BHP Hawaii and BHP Pacific shall
take, and shall cause BHP Refining, BHP South Pacific and Smiley's, as the case
may be, to take, all action necessary or deemed appropriate for BHP Refining,
BHP South Pacific and Smiley's, as the case may be, to pay off or otherwise
cause to be zero as of the Closing Date the amounts set forth in the accounts of
Subsidiary listed in Schedule 2.4 as shown on its accounting records.
2.5 PRE-CLOSING CASH DISTRIBUTION Notwithstanding any
provision of this Agreement to the contrary, immediately prior to the Closing
BHP Hawaii and BHP Pacific shall cause Subsidiary to pay to them an amount equal
to BHP Hawaii's good faith estimate of the consolidated cash and cash
equivalents of Subsidiary as of the Closing Date.
ARTICLE III
CLOSING
3.1 CLOSING. Subject to the fulfillment or waiver of the
conditions precedent set forth in Articles VII and VIII, the consummation of the
purchase and sale of the Stock (the "Closing") shall take place at the offices
of BHP Refining, 733 Bishop Street, Suite 2700, Honolulu, Hawaii, at 5:00 a.m.,
local time, (a) on the last business day of the month in which all such
conditions are fulfilled or waived, effective as of 11:59 p.m. as of the last
calendar day of such month, or (b) at such other date, time or place as the
parties hereto may agree upon in writing; provided, however, that in no event
shall the Closing occur prior to May 29, 1998. The date and time of the Closing
are referred to herein as the "Closing Date."
3.2 BHP HAWAII AND BHP PACIFIC OBLIGATIONS AT CLOSING. At the
Closing, BHP Hawaii and BHP Pacific shall deliver or cause to be delivered to
Buyer:
(a) Certificates representing the Stock, duly endorsed in
blank for transfer or accompanied by duly executed stock powers assigning the
Stock in blank;
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(b) Certificates of duly authorized officers of BHP Hawaii and
BHP Pacific, each dated the Closing Date, certifying as to the matters requested
by Buyer pursuant to Section 7.5;
(c) Each Ancillary Agreement, duly executed by the BHP
Affiliate indicated therein as a signatory thereto;
(d) Resignations effective as of the Closing of all the
officers and directors of each Subsidiary;
(e) The Charter and Bylaws, as amended to date, minute books,
stock transfer books and corporate seals of each Subsidiary;
(f) The opinions of Orrick, Herrington & Sutcliffe LLP and
BHP's Group Counsel substantially in the forms of Exhibit 1.1(f); and
(g) IRS Forms 8023, completed to the extent reasonably
practicable, executed by Hawaii Parent and Pacific Parent.
3.3 BUYER OBLIGATION AT CLOSING. At the Closing, Buyer shall
deliver or cause to be delivered to BHP Hawaii (acting on behalf of itself and
BHP Pacific):
(a) The Initial Cash Purchase Price, less the Deposit, by wire
transfer of immediately available funds to BHP Hawaii's account, such account to
be specified by BHP Hawaii not less than five days before the Closing Date (it
being understood that should the Closing occur on a non-business day, such wire
transfer shall be made on the next business day together with interest from the
Closing Date at the prime rate announced from time to time by Chase Manhattan
Bank);
(b) Certificates of duly authorized officers of Buyer, each
dated the Closing Date, certifying as to the matters requested by BHP Hawaii and
BHP Pacific pursuant to Section 8.5;
(c) Each Ancillary Agreement to which Buyer is a party, duly
executed by Buyer;
(d) The opinion of Fulbright & Jaworski L.L.P. substantially
in the form of Exhibit 1.1(g); and
(e) IRS Forms 8023, completed to the extent reasonably
practicable, executed by Buyer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF BHP HAWAII
BHP Hawaii represents and warrants to Buyer as follows:
4.1 ORGANIZATION. (a) Each of BHP Hawaii and BHP Pacific is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Hawaii and
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has full corporate power and corporate authority to own its assets and
properties and to conduct its business as and where it is now being conducted.
(b) Each of BHP Refining and Smiley's is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Hawaii. BHP South Pacific is a corporation duly organized, validly existing and
in good standing under the laws of the State of California. Each Subsidiary has
full corporate power and corporate authority to own its assets and properties
and to conduct the Business as and where it is now being conducted. By virtue of
the nature of the properties owned or leased by each Subsidiary and the Business
conducted by them, each Subsidiary is not required to qualify to transact
business as a foreign corporation in any jurisdiction, except where the failure
to be so qualified will not result in a Buyer Loss in excess of $500,000 and
except that BHP South Pacific is so qualified in the America Samoa Territory.
BHP Hawaii has delivered or made available to Buyer complete and correct copies
of the Charter and Bylaws of each Subsidiary as of the Agreement Date.
(c) Except as set forth in Disclosure Schedule Section 4.1(c),
no Subsidiary has, or had during the one year period prior to the Agreement
Date, any wholly or partially owned subsidiaries or any equity or debt
investment in any Person.
4.2 AUTHORIZATION. (a) Each of BHP Hawaii and BHP Pacific has
full corporate power and corporate authority to enter into this Agreement and to
consummate the transactions contemplated hereby. HERI has full corporate power
and authority to sell the stock of BHP Refining and the consummation of the
transactions contemplated hereby has been duly authorized by all necessary
corporate action on the part of HERI. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby by each
of BHP Hawaii and BHP Pacific have been duly authorized by all necessary
corporate action on the part of BHP Hawaii and BHP Pacific. This Agreement has
been duly executed and delivered by BHP Hawaii and BHP Pacific. This Agreement
constitutes a legal, valid and binding obligation of each of BHP Hawaii and BHP
Pacific, enforceable against each of BHP Hawaii and BHP Pacific in accordance
with its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and general principles
of equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).
(b) Each BHP Affiliate has full corporate power and corporate
authority to enter into the Ancillary Agreements to which it is a party and to
consummate the transactions contemplated thereby. The execution and delivery of
the Ancillary Agreements and the consummation of the transactions contemplated
thereby by the BHP Affiliates who are parties thereto have been duly authorized
by all necessary corporate action on the part of such BHP Affiliates. Each
Ancillary Agreement to which a BHP Affiliate is a party, when executed and
delivered by such BHP Affiliate, will constitute a legal, valid and binding
obligation of such BHP Affiliate, enforceable against such BHP Affiliate in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and general principles
of equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).
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(c) Except (i) for compliance with the notification, filing
and waiting period requirements of the HSR Act and the filing contemplated by
subsection 10.2(h) or (ii) as otherwise set forth in Disclosure Schedule Section
4.2(c), no consent, waiver, approval, order or authorization of, notice to, or
registration, declaration, designation, qualification or filing with, any
Governmental Authority or third Person, domestic or foreign, is or has been or
will be required on the part of any BHP Affiliate in connection with the
execution and delivery of this Agreement or any Ancillary Agreement or the
consummation by them of the transactions contemplated hereby or thereby, other
than where the failure to obtain such consents, waivers, approvals, orders or
authorizations or to make or effect such registrations, declarations,
designations, qualifications or filings will not (x) prevent or materially delay
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements, (y) prevent such BHP Affiliates from performing their
obligations under this Agreement and the Ancillary Agreements or (z) result in a
Buyer Loss in the aggregate in excess of $500,000.
4.3 NON-CONTRAVENTION. Except as set forth in Disclosure
Schedule Section 4.3, neither the execution and delivery of this Agreement or
any Ancillary Agreement by any BHP Affiliate, nor the consummation by them of
the transactions contemplated hereby or thereby, will violate or conflict with,
or result in the acceleration of rights, benefits or payments under, (a) any
provision of any such BHP Affiliate's Charter or Bylaws, (b) any statute, law,
regulation or Governmental Order to which such BHP Affiliate or the assets and
properties of such BHP Affiliate are bound or subject, (c) any Commitment to
which a Subsidiary is a party or by which it or any of its properties may be
bound or subject or (d) any agreement, contract or commitment of a BHP Affiliate
to which such BHP Affiliate is a party or by which it or any of its properties
may be bound or subject, except, with respect to clauses (b), (c) and (d), for
such violations and conflicts which will not (i) prevent or materially delay
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements, (ii) prevent such BHP Affiliate from performing its
obligations under this Agreement and the Ancillary Agreements or (iii) result in
a Buyer Loss in the aggregate in excess of $500,000.
4.4 FINANCIAL STATEMENTS. (a) Disclosure Schedule Section
4.4(a) sets forth the unaudited balance sheet for Subsidiary as at December 31,
1997, the unaudited balance sheet of Subsidiary as at May 31, 1997, the
unaudited balance sheet of Subsidiary as at January 31, 1998 (the "Balance
Sheet") and the unaudited statements of income of Subsidiary for the eight
months ended January 31, 1998 and January 31, 1997, and the fiscal years ended
May 31, 1997 and May 31, 1996 (collectively, the "Financial Statements"). Except
as set forth in Disclosure Schedule Section 4.4(a), the Financial Statements
have been prepared in accordance with Australian GAAP applied on a basis
consistent with prior periods, except as described in the notes thereto. Except
as set forth in Disclosure Schedule Section 4.4(a), the Balance Sheet presents
fairly, in all material respects, the financial condition of Subsidiary as at
January 31, 1998, and the income statements included in the Financial Statements
present fairly, in all material respects, the results of operations of
Subsidiary for the periods covered thereby. The books and records of Subsidiary
from which the Financial Statements were prepared were complete and accurate in
all material respects at the time of such preparation.
(b) Subsidiary has no Liabilities, except for Liabilities (i)
reflected in the Balance Sheet, (ii) incurred by Subsidiary in the ordinary
course of business and consistent with past practices since the date of the
Balance Sheet, or (iii) which in the aggregate are less than
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$325,000. As used in this subsection 4.4(b), the term "Liabilities" excludes any
Liabilities under permits, licenses, orders, approvals, authorizations,
contracts, agreements or commitments for future payments or performance where
Subsidiary is not currently in violation of or default under any provision
thereof.
4.5 ABSENSE OF CERTAIN CHANGES. Except as set forth in
Disclosure Schedule Section 4.5, since the date of the Balance Sheet:
(a) through the Agreement Date, Subsidiary has not suffered
any damage or destruction adversely affecting the Business or the tangible
assets owned or leased by Subsidiary that has had or is reasonably likely to
result in a loss, cost or expense to Subsidiary in excess of $500,000;
(b) Subsidiary has not incurred, assumed or become subject to
any additional indebtedness for money borrowed or purchase money indebtedness,
including capitalized leases;
(c) Subsidiary has not made any change in the compensation
levels of the senior executives of Subsidiary (i.e., vice presidents and above),
any change in the manner in which other employees of Subsidiary generally are
compensated, or any provision of additional or supplemental benefits for
employees of Subsidiary generally, except normal periodic increases or
promotions effected in the ordinary course of business and consistent with past
practices;
(d) Subsidiary has not entered into any transaction not in the
ordinary course of business, except as contemplated by this Agreement or any
Ancillary Agreement;
(e) except for changes affecting the petroleum refining or
petroleum products distribution industry generally, no Material Adverse Effect
has occurred;
(f) through the Agreement Date, Subsidiary has not amended or
modified any Commitment;
(g) there have been no Encumbrances on the assets of
Subsidiary, other than Permitted Liens; and
(h) Subsidiary has not agreed, whether in writing or
otherwise, to take any action described in this Section 4.5.
4.6 TITLE TO STOCK AND ASSETS. (a) All of the issued and
outstanding shares of capital stock of BHP Refining and BHP South Pacific, which
consists only of the Stock, are owned of record and beneficially by HERI and BHP
Pacific, respectively, free and clear of any Encumbrance. Upon delivery to Buyer
of the certificates for the Stock in accordance with this Agreement, assuming
that Buyer pays the consideration contemplated by this Agreement and has no
notice of any adverse claim, good and valid title to the Stock represented by
such certificate will have been transferred to Buyer, free and clear of any
Encumbrances. Neither HERI nor BHP Pacific has received any notice of any
adverse claim to their respective title to the Stock.
(b) Except as set forth in Disclosure Schedule Section 4.6(b),
Subsidiary has good title to all of the assets and properties (including Owned
Real Property, as defined below) which
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it owns or purports to own (including those reflected on the Balance Sheet),
except for assets and properties sold, consumed or otherwise disposed of in the
ordinary course of business and consistent with past practices since the date of
the Balance Sheet, free and clear of any Encumbrance, other than Permitted
Liens. As of the Closing Date, Subsidiary will have good title to the assets and
properties contributed to it by BHP Hawaii and BHP Pacific pursuant to Section
2.3. BHP Refining owns all of the issued and outstanding shares of capital stock
of Smiley's, free and clear of any Encumbrances.
4.7 REAL PROPERTY. (a) Disclosure Schedule Section 4.7(a)
lists each parcel of real property which Subsidiary owns (the "Owned Real
Property").
(b) Except for easement rights and real property leases and
subleases, the failure of which to possess or hold would not in the aggregate
result in a Buyer Loss in the aggregate in excess of $1,000,000, Disclosure
Schedule Section 4.7(b) contains an accurate and complete list of all (i)
easement rights held by Subsidiary (collectively, the "Easement Rights") and
(ii) real property leased or subleased to Subsidiary (the "Leased Real Property"
and, together with the Owned Real Property and the Easement Rights, the "Real
Property"). All Easement Rights and leases and subleases of such Leased Real
Property by Subsidiary (x) are legal, valid and binding obligations of
Subsidiary, enforceable against Subsidiary in accordance with their terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity), and
are in full force and effect, and (y) originals or copies of which that were
accurate and complete as of the date provided have been made available to Buyer
(in accordance with the terms of the Confidentiality Agreement) for review.
Except as disclosed in Disclosure Schedule Section 4.14, Subsidiary enjoys
peaceful and undisturbed possession under all Easement Rights and leases and
subleases of Leased Real Property, and, to BHP Hawaii's knowledge, all grantors
under any Easement Right and all lessors under any lease or sublease of Leased
Real Property (1) are not (with or without notice or the lapse of time, or both)
in material breach or default thereunder, (2) have performed all material
obligations required to be performed by it thereunder, and (3) have not given
written notice to BHP Hawaii, BHP Pacific or Subsidiary of their intent to
terminate such Easement Right or lease or sublease of Leased Real Property.
4.8 INTELLECTUAL PROPERTY. Disclosure Schedule Section 4.8
contains an accurate and complete list of (a) all patents throughout the world,
(b) all trademarks, trade names and service marks and applications therefor
throughout the world, (c) all copyrights and applications therefor throughout
the world, (d) all software and computer programs, and (e) all licenses relating
to patents, patent rights, know how, trade secrets, trademarks, trade names,
service marks, software and computer programs or other intellectual property, in
each case issued to or used or held for use by Subsidiary in the operation of
the Business (collectively, the "Intellectual Property"). Except as set forth in
Disclosure Schedule Section 4.8, Subsidiary is the sole and exclusive owner or
licensee of, with all right, title and interest in and to (free and clear of any
Encumbrances, other than Permitted Liens), the Intellectual Property. To the
knowledge of BHP Hawaii, the use of any such Intellectual Property in the
conduct of the Business as presently conducted does not violate any rights of
any third Person, the violation of which would result in losses, costs or
expenses in the aggregate in excess of $500,000. BHP Hawaii has not
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received written notice that the use of any such Intellectual Property in the
conduct of the Business as presently conducted violates any rights of any third
Person the violation of which would result in losses, costs or expenses in the
aggregate in excess of $500,000.
4.9 LITIGATION. There is no Action pending or, to the
knowledge of BHP Hawaii, threatened against Subsidiary, whether at law or in
equity, or before or by any Governmental Authority which (a) seeks damages or
other monetary relief in excess of $325,000, (b) seeks injunctive relief or (c)
relates to the transactions contemplated by this Agreement or any Ancillary
Agreement. Except as listed in Disclosure Schedule Section 4.9, neither
Subsidiary nor any of its properties or assets currently are subject to or bound
by any Governmental Order (other than any Governmental Order that may be
applicable generally to the industry in which the Business operates).
4.10 EMPLOYEE BENEFIT MATTERS. (a) Disclosure Schedule Section
4.10 sets forth an accurate and complete list as of February 28, 1998 of the
name, 1997 total compensation (including 1997 bonuses and commissions), title,
current base salary rate, 1997 bonus, commissions and accrued unused vacation
benefits as of March 13, 1998 of each of the then employees of Subsidiary
("Business Employees"). At the Closing, BHP Hawaii shall deliver to Buyer an
updated Disclosure Schedule Section 4.10 which shall provide all of the
information required under the preceding sentence as of the most recent
practicable date prior to the Closing. Disclosure Schedule Section 4.10 sets
forth an accurate and complete list of (i) each "Employee Benefit Plan," as such
term is defined in Section 3(3) of ERISA, which is maintained by BHP Hawaii, BHP
Pacific, Subsidiary or any of their Affiliates for the benefit of the Business
Employees; (ii) to the extent not disclosed in the preceding clause (i), each
plan, contract, program, policy, practice or arrangement, whether written or
oral, funded or unfunded, providing stock options, stock ownership, stock
purchase or award, phantom stock, stock appreciation rights, deferred
compensation, retirement, insurance, flexible spending, dependent care, fringe
benefit, vacation pay, holiday pay, sick pay, workers compensation, severance or
termination pay, supplemental unemployment benefits, employee loans, severance,
educational assistance, incentive, bonus, or other profit-sharing arrangements
for the benefit of Business Employees (all in the preceding clauses (i) and (ii)
being collectively referred to as "Employee Plans"); and (iii) an accurate and
complete list of all employment, managerial, advisory, and consulting
agreements, employee confidentiality agreements, employee severance agreements
and all other material agreements, policies, or arrangements maintained by BHP
Hawaii, BHP Pacific or Subsidiary for Business Employees. BHP Hawaii has
delivered or made available to Buyer copies, which were accurate and complete as
of the date so delivered, of all such documents and (if applicable) summary plan
descriptions with respect to such plans, agreements and arrangements, or summary
description(s) of any such plans, agreements or arrangements not otherwise in
writing and, except as described in Disclosure Schedule Section 4.10, there have
been no changes to such documents as of the Agreement Date.
(b) Except as disclosed in Disclosure Schedule Section 4.10,
(i) each Employee Plan which is intended to be qualified is so qualified in form
and operation in all material respects, and nothing has occurred which would
adversely affect the qualified status of such Employee Plans; (ii) each Employee
Plan has been operated in accordance with its provisions and in material
compliance with the statutes, rules and regulations governing each such Employee
Plan; (iii) no "disqualified person" or "party-in-interest" (as defined in
Section 4975
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of the Code and Section 3(14) of ERISA) has engaged in any prohibited
transaction, as such term is defined in Section 4975 of the Code or Section 406
of ERISA, which could subject BHP Hawaii, Subsidiary, any of their Employee
Plans (or their related trusts), or Buyer, to any material liability under
Section 4975 of the Code or Section 502(i) of ERISA; (iv) with respect to any
Employee Plan, no event has occurred and there has been no failure to act upon
the part of BHP Hawaii, BHP Pacific, Subsidiary, a fiduciary of any Employee
Plan or a "plan official" (as defined in Section 412 of ERISA) that could
subject BHP Hawaii, BHP Pacific, Subsidiary, any Employee Plan or Buyer to the
imposition of any material Tax or penalty; (v) there are no Actions pending
(other than routine claims for benefits) regarding any Employee Plan; (vi) each
Employee Plan has been maintained in compliance with the minimum funding
standards of ERISA and the Code where applicable and has not incurred any
"accumulated funding deficiency" (as defined in ERISA) whether or not waived;
(vii) no steps have been taken by any of BHP Hawaii, BHP Pacific, Subsidiary or
any Affiliate thereof to terminate any Employee Plans of BHP Hawaii, BHP Pacific
or Subsidiary and, to the knowledge of BHP Hawaii, no proceeding has been
initiated by the Pension Benefit Guaranty Corporation ("PBGC") to terminate any
such Employee Plan or to appoint a trustee to administer any such Employee Plan;
(viii) no "reportable event" within the meaning of Section 4043 of ERISA and the
regulations thereunder has occurred with respect to any Employee Benefit Plan
which must be reported to PBGC; (ix) each Employee Plan which is a group health
plan has been operated and administered in compliance with the continuation
coverage requirements of Section 4980B of the Code and Part 6 of Title I of
ERISA; (x) none of BHP Hawaii, BHP Pacific, Subsidiary or their Affiliates
currently contributes to any multiemployer plan as defined in Section 3(37) that
is subject to Title IV of ERISA, and there has not been any complete or partial
withdrawal, as such terms are respectively defined in Sections 4203 and 4205 of
ERISA (and as such terms may be defined in any Employee Plan that is a welfare
plan) from any Employee Plan that is a pension or welfare multiemployer plan
that could result in withdrawal liability for BHP Hawaii, BHP Pacific,
Subsidiary, their Affiliates or Buyer, whether directly or as a result of
controlled group liability; (xi) all contributions and premiums that would
normally be made or paid with respect to any Employee Plan on behalf of
Transferred Employees by the Closing Date will have been made by the Closing
Date; and (xii) as of the Closing Date no Transferred Employee will be excluded
from coverage under BHP Hawaii's, BHP Pacific's or Subsidiary's medical plan as
the result of a preexisting condition.
(c) Each Employee Benefit Plan has been established and
administered in all material respects in accordance with the material terms of
ERISA and the applicable provisions of the Code.
4.11 TAXES. (a) Except as set forth in Disclosure Schedule
Section 4.11, (i) BHP Hawaii, BHP Pacific or Subsidiary has timely filed or
caused to be timely filed (or will timely file or cause to be timely filed) with
the appropriate Taxing Authorities all Tax Returns required to be filed on or
prior to the Closing Date (taking into account all extensions of due dates) by
or with respect to Subsidiary and has timely paid or adequately provided for (or
will timely pay or adequately provide for) all Taxes shown thereon as owing,
except where the failure to file such Tax Returns or pay any such Taxes would
not, or could not reasonably be expected to, in the aggregate result in losses,
costs or expenses to Subsidiary in excess of $500,000 after the Closing Date,
(ii) all such Tax Returns were or will be correct and complete in all material
respects, and (iii) to the knowledge of BHP Hawaii, all withholding Tax
requirements imposed
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on or with respect to Subsidiary have been or will be satisfied in full in all
respects. No written claim has been made to BHP Hawaii, BHP Pacific or
Subsidiary by any Taxing Authority in any jurisdiction where BHP Hawaii, BHP
Pacific and Subsidiary do not file Tax Returns asserting that any of them are
required to file a Tax Return.
(b) BHP Refining and Smiley's are members of an affiliated
group of corporations which file consolidated federal income tax returns
("Hawaii Group") with BHP Operations Inc., a Delaware corporation, as the common
parent ("Hawaii Parent"), and BHP South Pacific is a member of an affiliated
group of corporations which file consolidated federal income tax returns
("Pacific Group") with BHP Holdings (USA), a Delaware corporation, as the common
parent ("Pacific Parent"). The Hawaii Group and the Pacific Group have been
subject to normal and routine audits, examinations and adjustments of Taxes from
time to time, but there are no current audits or audits for which written
notification has been received (in either case, with respect to or which include
Subsidiary), other than those set forth in Disclosure Schedule Section 4.11.
There are no written agreements with any Taxing Authority with respect to or
including Subsidiary which will in any way affect Subsidiary's liability for
Taxes after the Closing Date.
(c) Except as set forth in Disclosure Schedule Section 4.11,
no material assessment, deficiency or adjustment for any Taxes has been asserted
in writing or, to the knowledge of BHP Hawaii, Hawaii Parent or Pacific Parent,
is proposed with respect to any Tax Return of, or which includes, Subsidiary.
(d) Except as set forth in Disclosure Schedule Section 4.11,
there is not in force any extension of time with respect to the due date for the
filing of any Tax Return of or with respect to or which includes Subsidiary or
any waiver or agreement for any extension of time for the assessment or payment
of any Tax of or with respect to or which includes Subsidiary.
(e) Except for Taxes due with respect to Tax Returns that will
be paid by BHP Hawaii, BHP Pacific or the parent of the respective consolidated
group (and not subject to reimbursement by Subsidiary), the accounting records
of Subsidiary will include immediately prior to the Closing Date adequate
provisions for the payment of all Taxes of Subsidiary for all taxable periods or
portions thereof through the Closing Date.
(f) All such Tax allocation or sharing agreements or
arrangements have been or will be cancelled on or prior to the Closing Date. No
payments are or will become due by Subsidiary after the Closing Date pursuant to
any such agreement or arrangement.
(g) Except as set forth in Disclosure Schedule Section 4.11,
none of the property of Subsidiary is held in an arrangement for which
partnership Tax Returns are being filed, Subsidiary does not own an interest in
a partnership and Subsidiary does not own any interest in any controlled foreign
corporation (as defined in Section 957 of the Code) or passive foreign
investment company (as defined in Section 1296 of the Code).
(h) Except as set forth in Disclosure Schedule Section 4.11,
none of the property of Subsidiary is subject to a safe-harbor lease (pursuant
to Section 168(f)(8) of the Internal Revenue Code of 1954 as in effect after the
Economic Recovery Act of 1981 and before the Tax
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Reform Act of 1986) or is "tax-exempt use property" (within the meaning of
Section 168(h) of the Code) or "tax-exempt bond financed property" (within the
meaning of Section 168(g)(5) of the Code).
(i) Except as set forth in Disclosure Schedule Section 4.11,
Subsidiary will not be required to include any amount in income for any taxable
period beginning after the Closing Date as a result of a change in accounting
method for any taxable period ending on or before the Closing Date or pursuant
to any agreement with any Taxing Authority with respect to any such taxable
period.
(j) Subsidiary has not consented to have the provisions of
Section 341(f)(2) of the Code apply with respect to a sale of its stock.
(k) None of BHP Hawaii, BHP Pacific nor Subsidiary will, as a
result of the transactions contemplated by this Agreement, be obligated to make
a payment to an individual that would be a "parachute payment" as defined in
Section 280G of the Code without regard to whether such payment is reasonable
compensation for personal services performed or to be performed in the future.
(l) Subsidiary has not participated in or cooperated with an
international boycott within the meaning of Section 999 of the Code.
(m) Neither HERI or BHP Pacific is a "foreign person" within
the meaning of Section 1445 of the Code.
(n) No power of attorney has been granted with respect to any
matter relating to Taxes of the Subsidiary which is currently in force.
4.12 COMPLIANCE WITH LAW. Since March 18, 1989, Subsidiary has
not violated any law, statute or regulation which has subjected it to fines or
penalties in excess of $500,000 in the aggregate. As of the Agreement Date,
Subsidiary is in compliance in all material respects with all laws, statutes or
regulations applicable to Subsidiary, except where the noncompliance with which
would not, in the aggregate, result in the imposition on Subsidiary of fines or
penalties in excess of $500,000.
4.13 CONTRACTS AND COMMITMENTS. Disclosure Schedule Section
4.13 contains an accurate and complete list of each contract, agreement or
commitment of Subsidiary (a) to which Subsidiary or any of its assets or
properties is bound and which requires total payments to or by Subsidiary of at
least $325,000 annually (other than spot crude and product contracts); (b) to
which Subsidiary or any of its assets or properties is bound and which has a
remaining term longer than one year, which requires total payments by Subsidiary
of at least $325,000 during such term and which is not terminable on 30 or fewer
days' notice without penalty; (c) containing covenants limiting the freedom of
Subsidiary to compete in any line of business or with any Person in any
geographical area; (d) calling for the proposed acquisition of any operating
business or any assets outside the ordinary course of business and with a
purchase price in excess of $325,000; (e) relating to the proposed purchase or
sale of any material assets or properties of Subsidiary; (f) to which Subsidiary
is a party or by which any of its assets or properties are bound relating to
indebtedness for borrowed money, including capital leases,
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security agreements relating thereto and any amendment or waiver thereof, (g)
constituting vehicle leases; (h) to provide capital or funds by way of a loan or
guaranty of a loan or any other form of guaranty, assurance, funding agreement
or other arrangement intended to assure the payment or performance of any
material obligation by a third party; and (i) with BHP Hawaii, BHP Pacific or
any Affiliate thereof, other than spot crude and product contracts
(collectively, the "Commitments"). Each Commitment is a legal, valid and binding
obligation of Subsidiary, enforceable against Subsidiary in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or in
equity). Except as set forth in Disclosure Schedule Section 4.13, Subsidiary is
not, nor to BHP Hawaii's knowledge is any other party thereto, in default under
any of the Commitments where such default would result, in the aggregate, in a
Buyer Loss in excess of $500,000. Except as set forth in Disclosure Schedule
Section 4.13, since December 31, 1997, neither BHP Hawaii nor Subsidiary has
received written notice of cancellation or termination of any Commitment from
any other party thereto.
4.14 PERMITS AND OTHER OPERATING RIGHTS. Except as set forth
in Disclosure Schedule Section 4.14, Subsidiary possesses all permits, licenses,
orders, approvals and authorizations required by any applicable law, statute,
regulation or Governmental Order, or by the property and contract rights of
third Persons, reasonably necessary to permit the operation of the Business in
the manner currently conducted by Subsidiary and to permit the current occupancy
of the Real Property by Subsidiary, except where the failure to possess such
permit, license, order, approval, authorization or rights would not result in
losses, costs or expenses to Subsidiary, in the aggregate, in excess of
$500,000. None of Subsidiary, BHP Hawaii nor BHP Pacific has received written
notice from any Governmental Authority that any such permit, license, order,
approval or authorization has been, or will be, revoked or terminated.
4.15 LABOR MATTTERS. No employee of Subsidiary is covered
under any collective bargaining agreement. Except to the extent set forth in
Disclosure Schedule Section 4.15: (a) there is no unfair labor practice
complaint against BHP Hawaii, BHP Pacific or Subsidiary pending or, to the
knowledge of BHP Hawaii, threatened before the National Labor Relations Board or
any comparable state or local Governmental Authority, (b) there is no labor
strike, slowdown or work stoppage actually pending or, to the knowledge of BHP
Hawaii, threatened against or directly affecting Subsidiary, and (c) no
grievance or any Action arising out of or under collective bargaining agreements
is pending or, to the knowledge of BHP Hawaii, threatened against Subsidiary.
4.16 CAPITALIZATION OF SUBSIDIARY. (a) The authorized capital
stock of BHP Refining consists of 500 shares of common stock, no par value, all
of which shares are issued, outstanding and owned of record and beneficially by
HERI and constitute the Stock of BHP Refining to be sold to Buyer hereby. The
shares of Stock of BHP Refining have been validly issued and are fully paid and
nonassessable. No other equity securities of BHP Refining, no securities
convertible into, exchangeable for or carrying the right to acquire equity
securities of BHP Refining, or other arrangements or commitments (other than
this Agreement) obligating BHP Refining to issue or dispose of any of its equity
securities or any ownership interest therein, are authorized, issued or
outstanding.
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(b) The authorized capital stock of BHP South Pacific consists
of 1,000,000 shares of common stock, no par value, all of which shares are
issued, outstanding and owned of record and beneficially by BHP Pacific and
constitute the Stock of BHP South Pacific to be sold to Buyer hereby. The shares
of Stock of BHP South Pacific have been validly issued and are fully paid and
nonassessable. No other equity securities of BHP South Pacific, no securities
convertible into, exchangeable for or carrying the right to acquire equity
securities of BHP South Pacific, or other arrangements or commitments (other
than this Agreement) obligating BHP South Pacific to issue or dispose of any of
its equity securities or any ownership interest therein, are authorized, issued
or outstanding.
(c) The authorized capital stock of Smiley's consists of 1,000
shares of common stock, $1.00 par value per share, all of which shares are
issued, outstanding and owned of record and beneficially by BHP Refining. Such
outstanding shares of have been validly issued and are fully paid and
nonassessable. No other equity securities of Smiley's, no securities convertible
into, exchangeable for or carrying the right to acquire equity securities of
Smiley's, or other arrangements or commitments (other than this Agreement)
obligating Smiley's to issue or dispose of any of its equity securities or any
ownership interest therein, are authorized, issued or outstanding.
4.17 DISCLAIMER. Except as otherwise expressly set forth in
this Article IV, BHP Hawaii, BHP Pacific and all other BHP Affiliates expressly
disclaim any representations or warranties of any kind or nature, express or
implied, as to the condition, value or quality of the assets or properties
currently or formerly used, operated, owned, leased, controlled, possessed,
occupied or maintained by Subsidiary, and BHP Hawaii, BHP Pacific and all other
BHP Affiliates SPECIFICALLY DISCLAIM ANY REPRESENTATION OR WARRANTY OF
MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH
RESPECT TO SUCH ASSETS OR PROPERTIES, OR ANY PART THEREOF, OR AS TO THE
WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR
PATENT, IT BEING UNDERSTOOD THAT SUCH ASSETS AND PROPERTIES ARE BEING ACQUIRED
"AS IS, WHERE IS" ON THE CLOSING DATE, AND IN THEIR PRESENT CONDITION, WITH ALL
FAULTS, AND THAT BUYER SHALL RELY ON ITS OWN EXAMINATION AND INVESTIGATION
THEREOF.
4.18 ASSETS NECESSARY TO THE BUSINESS. Except as set forth in
Disclosure Schedule Section 4.18(a), immediately before the Closing Date
Subsidiary will hold or have the right to use in the Business all of the assets
and properties (including all licenses and agreements) currently being used
(except those disposed of in the ordinary course of business or otherwise as
contemplated or permitted by this Agreement) or which are reasonably necessary
to permit the operation of the Business in the manner currently conducted by
Subsidiary. Since March 18, 1989, Subsidiary has conducted no business other
than the Business and, since such date, Subsidiary has owned no interest in real
property except for (i) the Owned Real Property and the Leased Real Property,
(ii) properties listed on Disclosure Schedule Section 4.18(b) and (iii)
properties, the ownership of which, will not give rise to obligations of
Subsidiary in the future in excess of $500,000 in the aggregate.
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4.19 ACCURACY OF INFORMATION FURNISHED. No representation or
warranty made by BHP Hawaii in this Article IV and the related Disclosure
Schedule contains any untrue statement of material fact or omits to state, in
light of the circumstances under which it has been made, a material fact
necessary to make such representation or warranty not misleading; provided,
however, that no representation or warranty is made as to projections, forecasts
or other forward looking information furnished by any BHP Affiliate to Buyer.
4.20 INSURANCE. Disclosure Schedule Section 4.20 contains an
accurate and complete list of Subsidiary's insurance policies and all other
insurance policies applicable to Subsidiary (the "Insurance Policies") in effect
on the Agreement Date. The Insurance Policies are in full force and effect as of
the Agreement Date and the premiums due thereon have been duly and timely paid
through the Agreement Date. Disclosure Schedule Section 4.20 contains a list of
the open claims against Subsidiary as of the Agreement Date and a brief
description of any self-insurance levels, underlying limits and deductibles for
such claims.
4.21 NO BROKERS. Except for Merrill Lynch, Pierce, Fenner &
Smith Incorporated, the fees and expenses of which will be paid by an Affiliate
of BHP, none of BHP Hawaii, BHP Pacific, Subsidiary nor any of their directors,
officers or employees has employed any broker, finder or investment banker or
incurred any Liability for any brokerage fees, commissions, finders' fees or
similar fees in connection with the transactions contemplated by this Agreement
or any Ancillary Agreement.
4.22 KNOWLEDGE OF BHP HAWAII. To the knowledge of BHP Hawaii
on the Agreement Date, Buyer's representations and warranties made in Article V
are true and correct in all material respects.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to BHP Hawaii and BHP Pacific as
follows:
5.1 ORGANIZATION. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full corporate power and corporate authority to own its assets and
properties and to conduct its business as and where it is now being conducted.
5.2 AUTHORIZATION. (a) Buyer has full corporate power and
corporate authority to enter into this Agreement and the Ancillary Agreements
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and such Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby by Buyer (i)
have been duly authorized by all necessary corporate action on the part of Buyer
and (ii) do not require approval of Buyer's stockholders. This Agreement has
been duly executed and delivered by Buyer. This Agreement constitutes, and upon
the execution and delivery thereof by Buyer, each Ancillary Agreement will
constitute, a legal, valid and binding obligation of Buyer, enforceable against
Buyer in accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or
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other similar laws affecting the enforcement of creditors' rights generally and
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity).
(b) Except for compliance with the notification filing and
waiting period requirements of the HSR Act and the filing contemplated by
Section 10.2(h), no consent, waiver, approval, order or authorization of, notice
to, or registration, declaration, designation, qualification or filing with, any
Governmental Authority or third Person, domestic or foreign, is or has been or
will be required on the part of Buyer in connection with the execution and
delivery of this Agreement or any Ancillary Agreement or the consummation by
Buyer of the transactions contemplated hereby or thereby, other than where the
failure to obtain such consents, waivers, approvals, orders or authorizations or
to make or effect such registrations, declarations, designations, qualifications
or filings is not reasonably likely to (x) prevent or materially delay
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements or (y) prevent Buyer from performing its obligations under
this Agreement and the Ancillary Agreements.
5.3 NON-CONTRAVENTION. Neither the execution and delivery of
this Agreement or any Ancillary Agreement, nor the consummation of the
transactions contemplated hereby or thereby, will violate or conflict with (a)
any provision of Buyer's Charter or Bylaws, (b) any statute, law, regulation or
Governmental Order to which Buyer or the assets or properties of Buyer are bound
or subject or (c) any agreement, contract or commitment to which the Buyer is a
party or by which it or any of its properties may be bound or subject, except,
with respect to clause (b) and (c), for such violations and conflicts which are
not reasonably likely to (i) prevent or materially delay consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements or (ii)
prevent Buyer from performing its obligations under this Agreement and the
Ancillary Agreements.
5.4 SEC FILINGS; FINANCIAL STATEMENTS. (a) Buyer has filed and
made available to BHP Hawaii and BHP Pacific all forms, reports, documents and
other information required to be filed by Buyer with the U.S. Securities and
Exchange Commission (the "SEC") pursuant to the Securities Exchange Act of 1934,
as amended ("Exchange Act"), since December 31, 1996 (collectively, the "Buyer
SEC Reports"). The Buyer SEC Reports (i) at the time filed complied in all
material respects with the applicable requirements of the Exchange Act and the
rules and regulations thereunder and (ii) did not at the time they were filed
(or if amended or superseded by a filing prior to the Agreement Date, then on
the date of such filing) contain any untrue statement of a material fact or omit
to state a material fact required to be stated in the Buyer SEC Reports or
necessary in order to make the statements in the Buyer SEC Reports, in the light
of the circumstances under which they were made, not misleading. None of Buyer's
subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) Each of the consolidated financial statements (including,
in each case, any related notes) contained in the Buyer SEC Reports, including
any Buyer SEC Reports filed after the Agreement Date through the Closing,
complied or will comply as to form in all material respects with the applicable
published rules and regulations of the SEC with respect thereto, was or will be
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such financial
statements or, in the case of unaudited statements, as permitted for
presentation in Quarterly Reports on Form 10-Q),
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and fairly presented or will fairly present the consolidated financial position
of Buyer and its subsidiaries as at the respective dates and the consolidated
results of its operations and cash flows for the periods indicated, except that
the unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount with respect to Buyer. The unaudited balance sheet of Buyer as at
September 30, 1997 included in the Buyer SEC Reports is referred to herein as
the "Buyer Balance Sheet."
5.5 NO UNDISCLOSED LIABILITIES. Buyer and its subsidiaries do
not have any Liabilities which individually or in the aggregate would be
reasonably likely to have a Buyer Material Adverse Effect (as defined below),
other than (i) Liabilities reflected in the Buyer Balance Sheet and (ii) normal
or recurring Liabilities incurred since September 30, 1997 in the ordinary
course of business consistent with past practices. For purposes of this
Agreement, "Buyer Material Adverse Effect" means any event(s) with respect to,
change(s) in, or effect(s) on, Buyer or any of its subsidiaries which,
individually or in the aggregate, is reasonably likely to be adverse to any of
such Person's business, operations, results of operations, assets or properties,
Liabilities or financial condition in a manner that is material to Buyer and its
subsidiaries taken as a whole.
5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of
the Buyer Balance Sheet, Buyer and its subsidiaries have conducted their
business only in the ordinary course and in a manner consistent with past
practices and, since such date, there has not been (i) any damage, destruction
or loss (whether or not covered by insurance) with respect to Buyer or any of
its subsidiaries having a Buyer Material Adverse Effect; (ii) any material
change by Buyer in its accounting methods, principles or practices; (iii) any
material revaluation by Buyer of any of its assets, including, without
limitation, writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business; or (iv) any other
event that constitutes a Buyer Material Adverse Effect.
5.7 LITIGATION. There is no Action pending or, to the
knowledge of Buyer, threatened against Buyer, whether at law or in equity,
before or by any Governmental Authority which relates to the transactions
contemplated by this Agreement or any Ancillary Agreement.
5.8 AVAILABILITY OF FUNDS. Buyer will have available to it, at
the time that all the conditions set forth in Article VII are satisfied,
sufficient funds to enable it to consummate the transactions contemplated by
this Agreement on the Closing Date. Buyer has no reason to believe that any of
the conditions to obtaining such funds will not be satisfied or that such funds
will not be available at the time that such Article VII conditions are
satisfied.
5.9 ACQUISITION FOR INVESTMENT. Buyer acknowledges that the
Stock has not been registered under the Securities Act of 1933, as amended, or
qualified or registered under any state securities law on the ground that no
distribution or public offering of the Stock is to be effected and that no
public market now exists for the Stock and that a public market may never exist
therefor. Buyer is acquiring the Stock solely for its own account and not as
nominee or agent for any other Person and not with a view to, or for sale in
connection with, any distribution thereof. Except as set forth on Schedule 5.9,
Buyer has no contract, undertaking, agreement or arrangement with any Person to
sell, transfer or pledge to such Person, or to any other Person,
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the Stock, and Buyer has no present plans or intentions to enter into any such
contract, undertaking, agreement or arrangement.
5.10 BUYER'S KNOWLEDGE. To the knowledge of Buyer on the
Agreement Date, BHP Hawaii's representations and warranties made in Article IV
are true and correct in all material respects.
5.11 NO BROKERS. Except for Lehman Brothers, the fees and
expenses of which will be paid by Buyer, neither Buyer nor any of its directors,
officers or employees has employed any broker, finder or investment banker or
incurred any Liability for any brokerage fees, commissions, finders' fees or
similar fees in connection with the transactions contemplated by this Agreement
or any Ancillary Agreement.
ARTICLE VI
CERTAIN COVENANTS
6.1 ACCESS TO INFORMATION. (a) From the Agreement Date
through the Closing Date, but subject to any rights of third Persons, upon
reasonable notice, BHP Hawaii and BHP Pacific shall (i) afford the officers,
employees and authorized agents and representatives of Buyer reasonable access
during normal business hours to the offices, properties and Books and Records of
Subsidiary and (ii) furnish to the officers, employees and authorized agents and
representatives of Buyer such additional financial and operating data and other
information regarding the assets, properties and Liabilities of Subsidiary and
the Business (or legible copies thereof) as Buyer may from time to time
reasonably request; provided, however, that such investigation shall not
unreasonably interfere with any of the businesses or operations of BHP Hawaii,
BHP Pacific or Subsidiary. Without limiting the generality of the foregoing, BHP
Hawaii and BHP Pacific shall cooperate fully with Buyer's investigation of such
assets, properties and Liabilities and the Business and provide copies of such
documents in its possession as Buyer may reasonably request to confirm the title
to any and all properties or assets owned or leased by Subsidiary. No Seller
Indemnified Party shall be responsible for any bodily injury suffered by any of
the officers, employees or authorized agents and representatives of Buyer
conducting any investigation of Subsidiary's assets and properties. No
investigation by Buyer shall affect the representations and warranties of BHP
Hawaii.
(b) Subsection 6.1(a) notwithstanding and except for
background environmental records reviews of any Governmental Authority, requests
for certified charter documents or copies of UCC filings from any Governmental
Authority and other routine requests for information maintained by Government
Authorities, (i) Buyer shall not investigate any matter with any Governmental
Authority (including contacting any official thereof) having jurisdiction over
any aspect of the Business or Subsidiary's assets or properties, unless and
until the written consent of BHP Hawaii (which consent shall not be unreasonably
withheld) to the making of such investigation has been received by Buyer, and
(ii) Buyer's right of examination and access pending the Closing with respect to
environmental matters relating to the Real Property shall be limited to an
examination of existing records and interviews with Subsidiary's personnel as
authorized in writing by BHP Hawaii, and in no event shall include physical
testing of the Real Property for the presence of Hazardous Material.
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6.2 CONDUCT OF BUSINESS PENDING CLOSING. From the Agreement
Date through the Closing Date, except as set forth in Schedule 6.2 or as
required by this Agreement or otherwise consented to or approved by Buyer in
writing, which consent or approval shall not be unreasonably withheld:
(a) BHP Hawaii and BHP Pacific shall cause Subsidiary to
operate the Business only in its usual, regular and ordinary manner and
substantially in the same manner as heretofore conducted. BHP Hawaii
and BHP Pacific shall cause Subsidiary to use commercially reasonable
efforts to (i) preserve the Business; (ii) keep available to Buyer the
services of the present officers, employees, agents and independent
contractors of Subsidiary; (iii) maintain the assets of the Business in
their current state of repair, order and condition, usual and ordinary
wear and tear excepted and subject to requirements in the ordinary
course of business; and (iv) maintain in effect insurance upon the
assets of Subsidiary and with respect to the conduct of the Business in
such amounts and of such kinds comparable in all material respects to
that in effect on the Agreement Date.
(b) BHP Hawaii and BHP Pacific shall cause Subsidiary not to:
(i) amend the Charter or Bylaws of any Subsidiary;
(ii) incur or assume or become subject to any
additional indebtedness for money borrowed or purchase money
indebtedness, except in the ordinary course of business and consistent
with past practices;
(iii) except as necessary to effect the transactions
contemplated by Sections 2.4 and 2.5, declare or pay any dividend or
make any other distribution to any shareholder of any Subsidiary;
(iv) redeem or otherwise acquire any shares of
capital stock of any Subsidiary or issue any capital stock of any
Subsidiary or any option, warrant or right relating thereto or any
securities exchangeable for or convertible into any such shares;
(v) permit or allow any Subsidiary's assets or
properties to be subject to any additional Encumbrance (other than
Permitted Liens) or sell, transfer, lease or otherwise dispose of any
such assets or properties, in each case except in the ordinary course
of business and consistent with past practices;
(vi) grant any increase in salaries or commissions
payable or to become payable to any employee of Subsidiary, or to any
sales agent or representative of Subsidiary, except normal periodic
increases in salaries and commissions in accordance with Subsidiary's
existing compensation practices;
(vii) make any capital expenditure or commitment
therefor for additions to property, equipment or facilities in excess
of $2,000,000 in the aggregate per month;
(viii) license, sell, transfer, pledge, modify,
disclose, dispose of or permit to lapse any right under or respecting,
or enter into any settlement regarding the breach or infringement of,
any material Intellectual Property;
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(ix) hire any new employee unless such employee is a
bona fide replacement for a vacancy in a budgeted, authorized position
with the Business as of the Agreement Date and necessary to continue
the operations of the Business;
(x) terminate, renew, enter into or amend any
Commitment or contract or agreement which would qualify as a Commitment
(other than any spot crude and product contracts);
(xi) establish or adopt any severance pay plan or
arrangement with respect to, or for the benefit of, Transferred
Employees;
(xii) make any change in any method of accounting or
accounting practice or policy, other than those required by Australian
GAAP;
(xiii) engage in any transactions with a BHP
Affiliate, other than transactions in the ordinary course and
consistent with past practices;
(xiv) make any changes in the method of acquiring
feedstock or in the type of feedstock which is not consistent with past
practices;
(xv) make any changes in the documents referred to in
the last sentence of subsection 4.10(a); or
(xvi) agree, whether in writing or otherwise, to do
any of the foregoing.
6.3 NO SOLICITATION OF TRANSACTIONS. From the Agreement Date
through the Closing Date, none of BHP Hawaii, BHP Pacific nor any of their
representatives, Affiliates, directors, officers, employees, subsidiaries or
agents will solicit, consider, encourage or accept any other offers to acquire
any of the Stock or the assets or properties of Subsidiary (other than in the
ordinary course of business) or assist any third Person in preparing or
soliciting such an offer. BHP Hawaii and BHP Pacific shall not have, and shall
cause such representatives, Affiliates, directors, officers, employees,
subsidiaries and agents not to have, any discussions, conversations,
negotiations or other communication with any Person(s) expressing an interest in
any such offer.
6.4 AUTHORIZATIONS. (a) Each of Buyer, BHP Hawaii and BHP
Pacific, as promptly as practicable after the Agreement Date, shall (i) deliver,
or cause to be delivered, all notices and make, or cause to be made, all such
declarations, designations, registrations, filings and submissions under all
statutes, laws, regulations and Governmental Orders applicable to it as may be
required for it to consummate the sale of the Stock and the other transactions
contemplated hereby and by the Ancillary Agreements in accordance with the terms
of this Agreement and the Ancillary Agreements; (ii) use commercially reasonable
efforts to obtain, or cause to be obtained, all authorizations, approvals,
orders, consents and waivers from all Persons necessary to consummate the
foregoing; and (iii) use commercially reasonable efforts to take, or cause to be
taken, all other actions necessary, proper or advisable in order for it to
fulfill its respective obligations hereunder and to carry out the intentions of
the parties expressed herein. The preceding sentence notwithstanding, (x) BHP
Hawaii and BHP Pacific shall have no obligation to take any action with respect
to any contract, agreement, arrangement, purchase
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order, commitment, permit, license, order, approval or authorization listed (or
which should have been listed) in Disclosure Schedule Sections 4.3, 4.7(b), 4.8,
4.13 and 4.14 which is not also listed (or which should have been listed) in
Disclosure Schedule Section 4.2(c) or Disclosure Schedule Section 4.3 and (y)
neither party shall have any obligation to waive any condition herein for its
benefit or any performance hereunder by any other party.
(b) Each party shall use its commercially reasonable efforts
to satisfy the conditions to Closing applicable to it in Articles VII and VIII
as soon as commercially practicable.
(c) Buyer, BHP Hawaii and BHP Pacific shall comply
substantially with any additional requests for information, including requests
for production of documents and production of witnesses for interviews or
depositions, by the Antitrust Division of the United States Department of
Justice, the United States Federal Trade Commission or the antitrust or
competition law authorities of any State of the United States (the "Antitrust
Authorities").
(d) Each party shall use its commercially reasonable efforts,
and shall cooperate fully with the other, to prevent the entry in any Action
brought by an Antitrust Authority or any other Person of any Governmental Order
which would prohibit, make unlawful or materially delay the consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements.
6.5 BOOKS AND RECORDS. Buyer, on the one hand, and BHP Hawaii
and BHP Pacific, on the other hand, shall, at the request of the other party,
make available to such other party from time to time on a reasonable basis the
Books and Records in their possession. Such Books and Records shall be held by
the party in possession thereof for seven years after the Closing Date, and the
other party shall have the right, at its expense, to inspect and make copies of
such Books and Records upon such party's request; provided, however, that (i)
all such access and copying shall be done in such a manner so as not to
unreasonably interfere with the normal conduct of the operations of the party
requested to provide access to such Books and Records and (ii) the party
requesting access to such Books and Records shall treat the same and the
contents thereof as confidential and not disclose such Books and Records or the
contents thereof to any Person, except as required by applicable statute, law,
regulation or Governmental Order. In addition, after the Closing Date, at BHP
Hawaii's or BHP Pacific's request, Buyer shall make available to BHP Hawaii, BHP
Pacific and their Affiliates, employees, representatives and agents those
employees of Buyer requested by BHP Hawaii in connection with any Action,
including to provide testimony, to be deposed, to act as witnesses and to assist
counsel; provided, however, that (x) such access to such employees shall not
unreasonably interfere with the normal conduct of the operations of Buyer and
(y) BHP Hawaii shall reimburse Buyer for the allocated time charges of such
employees and the out-of-pocket costs reasonably incurred by Buyer in making
such employees available to BHP Hawaii or BHP Pacific. Further, after the
Closing Date, at Buyer's request, BHP Hawaii and BHP Pacific shall make
available to Buyer and its Affiliates, employees, representatives and agents
those employees of BHP Hawaii and BHP Pacific requested by Buyer in connection
with any Action, including to provide testimony, to be deposed, to act as
witnesses and to assist counsel; provided, however, that (x) such access to such
employees shall not unreasonably interfere with the normal conduct of the
operations of BHP Hawaii and BHP Pacific and (y) Buyer shall reimburse BHP
Hawaii and BHP Pacific for the
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allocated time charges of such employees and the out-of-pocket costs reasonably
incurred by BHP Hawaii and BHP Pacific in making such employees available to
Buyer. Buyer, on the one hand, and BHP Hawaii and BHP Pacific, on the other
hand, shall not dispose of any Books and Records (other than clearly immaterial
Books and Records disposed of in the ordinary course of business) without first
offering to surrender such Books and Records to the other party.
6.6 BHP MARKS. Buyer acknowledges and agrees with BHP Hawaii
and BHP Pacific that BHP Hawaii and BHP Pacific have the absolute and exclusive
proprietary right to all names, marks, trade names, trademarks and corporate
symbols and logos incorporating "Broken Hill", "BHP" and "BHP Hawaii"
(collectively and together with all other names, marks, trade names, trademarks
and corporate symbols and logos owned by BHP Hawaii, BHP Pacific or any of their
Affiliates, the "BHP Marks", which term shall exclude BHP Marks, or portions
thereof, that do not incorporate "Broken Hill," "BHP" or "BHP Hawaii"), all
rights to which and the goodwill represented thereby and pertaining thereto are
being retained by BHP Hawaii and BHP Pacific. Within 150 days after the Closing
Date, Buyer shall cease using any BHP Mark and shall remove from all the assets
and properties of Subsidiary any and all BHP Marks; provided, however, that
within 60 days after the Closing Date, Buyer shall remove all prominent BHP
Marks from all Gas Express stations. Thereafter, Buyer shall not use any BHP
Mark in connection with the sale of any products or services or otherwise in the
conduct of its business. In the event that Buyer breaches this Section 6.6, BHP
Hawaii shall be entitled to specific performance of this Section 6.6 and to
injunctive relief against further violations, as well as any other remedies at
law or in equity available to BHP Hawaii.
6.7 ACKNOWLEDGEMENTS BY BUYER. In order to induce BHP Hawaii
and BHP Pacific to enter into and perform this Agreement and the Ancillary
Agreements, Buyer acknowledges and agrees with BHP Hawaii and BHP Pacific as
follows: THE REPRESENTATIONS AND WARRANTIES SET FORTH IN ARTICLE IV OF THIS
AGREEMENT AND IN ARTICLE II OF THE ENVIRONMENTAL AGREEMENT CONSTITUTE THE SOLE
AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF BHP HAWAII, BHP PACIFIC AND THE
OTHER BHP AFFILIATES TO BUYER IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED
HEREBY AND BY THE ANCILLARY AGREEMENTS. THERE ARE NO REPRESENTATIONS,
WARRANTIES, COVENANTS, UNDERSTANDINGS OR AGREEMENTS, ORAL OR WRITTEN, IN
RELATION THERETO AMONG THE PARTIES OTHER THAN THOSE INCORPORATED HEREIN AND
THEREIN. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN
ARTICLE IV OF THIS AGREEMENT AND IN ARTICLE II OF THE ENVIRONMENTAL AGREEMENT,
BUYER DISCLAIMS RELIANCE ON ANY REPRESENTATIONS OR WARRANTIES, EITHER EXPRESS OR
IMPLIED, BY OR ON BEHALF OF BHP HAWAII, BHP PACIFIC OR ANY OTHER BHP AFFILIATE,
OR ANY EMPLOYEES, REPRESENTATIVES OR AGENTS OF ANY OF SUCH PERSONS. Nothing in
this Section 6.7 shall be deemed to lessen in any way Buyer's reliance on, and
right to enforce, any covenant or agreement contained in this Agreement or in
the Environmental Agreement.
6.8 PUBLIC ANNOUNCEMENTS. Neither Buyer, BHP Hawaii, BHP
Pacific nor the representatives of any of them shall make any public
announcement with respect to this Agreement, the Ancillary Agreements or the
transactions contemplated hereby or thereby without the prior written consent of
the other party hereto. The foregoing notwithstanding, any
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such public announcement may be made if required by applicable statute, law,
regulation, Governmental Order or securities exchange rule, provided that the
party required to make such public announcement, to the extent reasonably
possible, shall confer with the other party concerning the timing and content of
such public announcement before the same is made.
6.9 NO COMPETITION. (a) For a period of five years from the
Agreement Date, neither BHP Hawaii nor BHP Pacific shall, and BHP Hawaii and BHP
Pacific shall cause each of its Affiliates not to, own, lease, manage, operate
or control, or participate in the ownership, lease, management, operation or
control of, or be connected with or have any interest in (as a shareholder,
director, officer, employee, agent, partner or creditor), any Person which owns,
leases, manages, operates or controls, any business or activity, anywhere in the
State of Hawaii or the Territory of American Samoa, which consists of the
manufacture, refining, sale or distribution of petroleum products (a
"Competitive Business"); provided, however, that nothing in the foregoing shall
prevent BHP Hawaii and/or its Affiliates from owning, in the aggregate, not more
than five percent (5%) of the outstanding voting stock or other equity interests
in any Person with shares or equity interests registered pursuant to Sections
12(b) or 12(g) of the Securities Exchange Act of 1934, as amended.
(b) The restrictions set forth in this Section 6.9 shall not
restrict BHP Hawaii, BHP Pacific or any of their Affiliates from doing in any
way any of the following: (i) continuing its remaining businesses, (ii)
manufacturing, selling or distributing any current products of any of its
remaining businesses, or (iii) providing any current services of its remaining
businesses; provided, however, that such entities shall not sell into the State
of Hawaii or the Territory of American Samoa any refined products similar to
those being sold by Subsidiary in the State of Hawaii or the Territory of
American Samoa, respectively, as of the Agreement Date.
(c) In the event that either BHP Hawaii or BHP Pacific
breaches this Section 6.9, Buyer shall be entitled to specific performance of
this Section 6.9 and to injunctive relief against further violations, as well as
any other remedies at law or in equity available to Buyer.
6.10 U.S. GAAP FINANCIAL STATEMENTS. BHP Hawaii shall cause to
be prepared in accordance with U.S. GAAP, and shall deliver to Buyer as soon as
reasonably practicable after the Agreement Date, the following audited financial
statements of Subsidiary: the balance sheets as of May 31, 1997 and May 31, 1996
and the statements of cash flows and income for the fiscal years ended May 31,
1997, May 31, 1996 and May 31, 1995. BHP Hawaii shall also cause to be prepared
in accordance with U.S. GAAP, and shall also deliver to Buyer as soon as
reasonably practicable after the Agreement Date, the following unaudited
financial statements of Subsidiary: the balance sheets as of December 31, 1997
and December 31, 1996 and the statements of cash flows and income for the seven
months ended December 31, 1997 and December 31, 1996. Buyer shall be responsible
for all costs and expenses related to such preparation and delivery. Buyer shall
reimburse BHP Hawaii, within 30 days after such delivery, for all such costs and
expenses incurred by BHP Hawaii, including the fees and expenses of the
independent public accountants retained by BHP Hawaii with respect to such
audited financial statements. In the event that this Agreement is terminated
pursuant to Article XII (other than pursuant to subsection 12.1(d)) and within
12 months of such termination all the Stock or substantially all the assets of
BHP Refining is sold to a Person or Persons not an Affiliate of BHP, BHP Hawaii
shall promptly return to Buyer one-half of the amount so
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reimbursed. In the event this Agreement is terminated pursuant to Section
12.1(c), BHP Hawaii shall promptly return to Buyer the entire amount so
reimbursed.
6.11 ENVIRONMENTAL MATTERS. Notwithstanding any other
provision of this Agreement (other than subsection 6.1(b)), the parties intend
and agree that the Environmental Agreement entered into at the Closing shall set
forth the sole and exclusive rights, obligations, representations, warranties,
covenants and indemnities of the parties hereto regarding any matters arising
under or relating to Environmental Laws, Environmental Permits, Hazardous
Material or Releases of Hazardous Material.
6.12 SOFTWARE AND COMPUTER PROGRAMS. From the Agreement Date
through the date which is 90 days after the Closing Date, BHP Hawaii and BHP
Pacific, as applicable, agree to engage in discussions with the licensors of the
software and computer programs (i) listed in Disclosure Schedule 4.18(a) and
(ii) identified in a written notice provided to BHP Hawaii by Buyer on or prior
to the Closing Date, the purpose of which discussions shall be to assist Buyer
in its efforts to obtain a license with respect to such software and/or computer
programs with terms acceptable to Buyer. Notwithstanding the foregoing, Buyer
acknowledges and agrees that there can be no assurance that such discussions
will achieve the results desired by Buyer and neither BHP Hawaii nor BHP Pacific
make any representation or warranty with respect thereto; provided, however,
that BHP Hawaii and BHP Pacific represent to Buyer that Subsidiary will be able
to obtain the benefit of the understanding set forth in the letter, dated March
19, 1998, from SAP Australia to BHP Petroleum.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF BUYER
The obligations of Buyer to effect the transactions
contemplated herein shall be subject to the fulfillment satisfaction or waiver,
on or before the Closing Date, of each of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of BHP Hawaii contained in Article IV shall be
true and correct in all material respects at and as of the Closing Date with the
same effect as though made at and as of the Closing Date, except that
representations and warranties made as of, or in respect of, only a specified
date or period shall be true and correct in all material respects in respect of,
or as of, such date or period.
7.2 PERFORMANCE. BHP Hawaii and BHP Pacific shall have
performed and complied in all material respects with all agreements and
obligations required by this Agreement to be performed or complied with by them
on or prior to the Closing Date.
7.3 HSR ACT. Any waiting period (and any extension thereof)
under the HSR Act applicable to the transactions contemplated hereby shall have
expired or shall have been terminated.
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7.4 ABSENCE OF GOVERNMENTAL ORDERS. No temporary or permanent
Governmental Order shall be in effect which prohibits or makes unlawful
consummation of the transactions contemplated hereby.
7.5 OFFICERS' CERTIFICATES. BHP Hawaii and BHP Pacific shall
have furnished Buyer with such certificates of their officers certifying as to
compliance with the conditions set forth in this Article VII as may be
reasonably requested by Buyer.
7.6 CERTAIN AGREEMENTS. Each BHP Affiliate shall have executed
the Ancillary Agreements to which it is a party and BHP Hawaii shall have
delivered the same to Buyer.
7.7 MATERIAL DAMAGE. Since the Agreement Date, Subsidiary
shall not have suffered any damage or destruction adversely affecting the
Business or the tangible assets owned or leased by Subsidiary that has had or is
reasonably likely to have a Material Adverse Effect.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF BHP HAWAII AND BHP PACIFIC
The obligations of BHP Hawaii and BHP Pacific to effect the
transactions contemplated herein shall be subject to the fulfillment,
satisfaction or waiver, on or before the Closing Date, of each of the following
conditions:
8.1 ACCUARACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Buyer contained in Article V shall be true and
correct in all material respects at and as of the Closing Date with the same
effect as though made at and as of the Closing Date, except that representations
and warranties made as of, or in respect of, only a specified date or period
shall be true and correct in all material respects in respect of, or as of, such
date, or period.
8.2 PERFORMANCE. Buyer shall have performed and complied in
all material respects with all agreements and obligations required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date.
8.3 HSR ACT. Any waiting period (and any extension thereof)
under the HSR Act applicable to the transactions contemplated hereby shall have
expired or shall have been terminated.
8.4 ABSENCE OF GOVERNMENTAL ORDERS. No temporary or permanent
Governmental Order shall be in effect which prohibits or makes unlawful
consummation of the transactions contemplated hereby.
8.5 OFFICERS' CERTIFICATES. Buyer shall have furnished BHP
Hawaii and BHP Pacific with such certificates of its officers certifying as to
compliance with the conditions set forth in this Article VIII as may be
reasonably requested by BHP Hawaii and BHP Pacific.
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8.6 CERTAIN AGREEMENTS. Buyer shall have executed and
delivered to the BHP Affiliates the Ancillary Agreements.
ARTICLE IX
INDEMNIFICATION
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of BHP Hawaii in Article IV and of Buyer in
Article V shall survive for a period of 24 months from the Closing; provided,
however, that the representations and warranties as to title contained in
Section 4.6 shall survive the Closing indefinitely and the representations and
warranties contained in Section 4.11 shall survive until the applicable statute
of limitations with respect to Taxes has expired. If written notice of a claim
has been given prior to the expiration of the applicable representations and
warranties by a party in whose favor such representations and warranties have
been made to the party that made such representations and warranties, then the
relevant representations and warranties shall survive as to such claim, until
the claim has been finally resolved.
9.2 INDEMNIFICATION BY BHP HAWAII. Except as otherwise limited
by this Article IX, BHP Hawaii shall indemnify, defend and hold harmless Buyer,
Subsidiary and Buyer's Affiliates, shareholders, officers, directors, employees,
subsidiaries, successors and assigns (collectively, the "Buyer Indemnified
Parties") from and against, and pay or reimburse the Buyer Indemnified Parties
for, any and all losses, damages, claims, costs and expenses, interest, awards,
judgments, fines, and penalties (including reasonable legal costs and expenses)
suffered or incurred by them (hereinafter a "Buyer Loss") arising out of or
resulting from:
(a) the inaccuracy of any representation or warranty of BHP
Hawaii set forth in Article IV;
(b) any other breach or violation of this Agreement by BHP
Hawaii or BHP Pacific; or
(c) any Employee Plan, except to the extent Buyer has
expressly agreed to assume obligations thereunder pursuant to Article XI.
9.3 INDEMNIFICATION BY BUYER. Except as otherwise limited by
this Article IX, Buyer shall indemnify, defend and hold harmless BHP Hawaii, BHP
Pacific and their Affiliates, shareholders, officers, directors, employees,
subsidiaries, successors and assigns (collectively, the "Seller Indemnified
Parties") from and against, and pay or reimburse the Seller Indemnified Parties
for, any and all losses, damages, claims, costs and expenses, interest, awards,
judgments, fines, and penalties (including reasonable legal costs and expenses)
actually suffered or incurred by them (hereinafter a "Seller Loss") arising out
of or resulting from:
(a) the inaccuracy of any representation or warranty of Buyer
set forth in Article V;
(b) any other breach or violation of this Agreement by Buyer;
or
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(c) any Action commenced by any Governmental Authority or any
security holder or former security holder of Buyer in connection with Buyer's
efforts to finance, directly or indirectly, in whole or in part, the
transactions contemplated hereby.
9.4 GENERAL INDEMNIFICATION PROVISIONS. (a) For the purposes
of this Section 9.4 and Section 9.5, the term "Indemnitee" shall refer to the
Person or Persons indemnified, or entitled, or claiming to be entitled, to be
indemnified, pursuant to the provisions of Section 9.2 or 9.3, as the case may
be; the term "Indemnitor" shall refer to the person having the obligation to
indemnify pursuant to such provisions; and "Losses" shall refer to Seller Losses
or Buyer Losses, as the case may be. Losses shall be determined without
reduction based on the amount thereof which may fall below standards based on
materiality or specified amounts.
(b) Within a reasonable time following the determination
thereof, an Indemnitee shall give the Indemnitor notice of any matter which an
Indemnitee has determined has given or could give rise to a right of
indemnification under this Agreement (regardless of whether a claim for
indemnification otherwise would be prohibited by subsection 9.5(a)), stating the
amount of the Loss, if known, and method of computation thereof, all with
reasonable particularity and containing a reference to the provisions of this
Agreement in respect of which such right of indemnification is claimed or
arises. The obligations and Liabilities of an Indemnitor under this Article IX
with respect to Losses arising from claims of any third party that are subject
to the indemnification provided for in this Article IX ("Third Party Claims")
shall be governed by and contingent upon the following additional terms and
conditions: If an Indemnitee shall receive notice of any Third Party Claim, the
Indemnitee shall promptly give the Indemnitor notice of such Third Party Claim
and shall permit the Indemnitor, at its option, to undertake the defense of such
Third Party Claim by counsel of its own choice and at its expense; provided,
however, that the failure of the Indemnitee to notify the Indemnitor during the
required notification period shall only relieve the Indemnitor from its
obligation to indemnify the Indemnitee pursuant to this Article IX to the extent
that the Indemnitor is actually prejudiced by such failure (whether as a result
of the forfeiture of substantive rights or defenses or otherwise). If the
Indemnitor acknowledges in writing its obligation to indemnify the Indemnitee
hereunder against any Losses that may result from such Third Party Claims
(subject to the limitations set forth herein), then the Indemnitor shall be
entitled, at its option, to assume and control the defense of such Third Party
Claim at its expense and through counsel of its reasonable choice if it gives
notice to the Indemnitee within 20 calendar days of the receipt of notice of
such Third Party Claim from the Indemnitee of its intention to do so. If the
Indemnitor elects to assume and control the defense of any such Third Party
Claim, the Indemnitee shall have the right to employ separate counsel and to
participate in (but not control) the defense, compromise or settlement of the
Third Party Claim, but the fees and expenses of such counsel will be at the
expense of the Indemnitee, unless (i) the Indemnitor has agreed to pay such fees
and expenses, (ii) any relief other than the payment of money damages is sought
against the Indemnitee, or (iii) the Indemnitee has been advised by its counsel
that there may be one or more defenses reasonably available to it which are
different from or additional to those available to the Indemnitor and which can
not be effectively raised by Indemnitor, and in any such case that portion of
the fees and expenses of such separate counsel that are reasonably related to
matters covered by the indemnification provided by this Article IX will be paid
by the Indemnitor. Expenses of counsel to the Indemnitee shall be reimbursed on
a current basis by the Indemnitor if there is no dispute as to the obligation of
the Indemnitor to pay such amounts pursuant to this Article IX. In the event the
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Indemnitor exercises its right to undertake the defense against any such Third
Party Claim as provided above, the Indemnitee shall cooperate with the
Indemnitor in such defense and make available to the Indemnitor, at the
Indemnitor's expense, all witnesses, pertinent records, materials and
information in its possession or under its control relating thereto as is
reasonably required by the Indemnitor. Similarly, in the event the Indemnitee
is, directly or indirectly, conducting the defense against any such Third Party
Claim, the Indemnitor shall cooperate with the Indemnitee in such defense and
make available to it, at the Indemnitor's expense, all such witnesses, records,
materials and information in its possession or under its control relating
thereto as is reasonably required by the Indemnitee. No such Third Party Claim,
except the settlement thereof which involves the payment of money only (by a
party or parties other than the Indemnitee) and for which the Indemnitee is
released by the third party claimant and is totally indemnified by the
Indemnitor, may be settled by the Indemnitor without the written consent of the
Indemnitee. No Third Party Claim which is being defended in good faith by the
Indemnitor shall be settled by the Indemnitee without the written consent of the
Indemnitor.
9.5 LIMITATIONS ON INDEMNIFICATION. (a) No claim or claims may
be made against an Indemnitor for indemnification pursuant to subsection 9.2(a)
or subsection 9.3(a), as the case may be, unless the collective Losses of the
Indemnitees with respect to such subsections shall exceed in the aggregate an
amount equal to $2,000,000, in which case the Indemnitor shall be obligated to
the Indemnitee only for the amount of the Loss or Losses in excess of
$2,000,000.
(b) In addition to the provisions and limitations as provided
in (i) Section 9.1 with respect to the period of survival of representations and
warranties and (ii) subsection 9.5(a) with respect to dollar amounts of Losses
for which indemnification for breaches of representations and warranties is not
available: (A) BHP Hawaii shall not be liable for any Buyer Loss (x) to the
extent Buyer Losses relate to breaches of BHP Hawaii's representations and
warranties contained in Article IV and exceed (in the aggregate) an amount equal
to $65,000,000 or (y) for which a claim for indemnification relating to such a
breach is not asserted hereunder within the applicable survival period as
provided in Section 9.1; and (B) Buyer shall not be liable for any Seller Loss
(x) to the extent Seller Losses relate to breaches of Buyer's representations
and warranties contained in Article V and exceed (in the aggregate) an amount
equal to $65,000,000 or (y) for which a claim for indemnification relating to
such a breach is not asserted hereunder within the applicable survival period as
provided in Section 9.1.
(c) Notwithstanding any other provision of this Agreement, the
Liability of any Indemnitor for Losses shall be determined on a basis that is
net of the amount of any such Losses covered by insurance after subtracting
deductibles and retroactive premiums and other co-payments required to be made
by an Indemnitee.
ARTICLE X
TAX MATTERS
10.1 INDEMNIFICATION FOR TAXES. (a) BHP Hawaii or BHP Pacific,
as the case may be, shall be responsible for, and shall indemnify Buyer against,
all Taxes imposed on their respective subsidiaries (i.e., BHP Refining and
Smiley's in the case of BHP Hawaii; and BHP South Pacific in the case of BHP
Pacific, and including any entity which was merged into such
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subsidiary), and all Liabilities, losses, costs, fines, penalties, damages
(actual, punitive or other), reasonable attorneys' fees, and expenses arising
therefrom, relating to (i) taxable periods or portions thereof ending on or
before the Closing Date, (ii) Taxes resulting from the ss.ss. 338(g) and
338(h)(10) elections (or any comparable elections under foreign, state or local
tax law) contemplated by section 10.2, (iii) Taxes resulting from the
application of Treas. Reg. ss. 1.1502-6 or any comparable state, local or
foreign tax law attributable to Hawaii Parent, Pacific Parent or any corporation
or entity which is or has been affiliated with or been part of a combined,
unitary or affiliated group with Hawaii Parent, Pacific Parent or BHP Hawaii,
and (iv) the portion of the Taxes for any Straddle Period (as defined in
subsection 10.2(b)) allocable to BHP Hawaii or BHP Pacific, as the case may be,
under subsection 10.2(d); provided, that BHP Hawaii and BHP Pacific shall not be
responsible for, and shall not be required to indemnify Buyer against, any Taxes
to the extent that such Taxes do not exceed the accrued liability for Taxes
taken into account in determining Net Working Capital under subsection 2.2(c),
if any.
(b) Buyer shall be responsible for and shall indemnify BHP
Hawaii, or BHP Pacific, as the case may be, against all Taxes imposed on BHP
Hawaii's or BHP Pacific's respective subsidiaries (i.e., BHP Refining and
Smiley's in the case of BHP Hawaii; and BHP South Pacific in the case of BHP
Pacific), and all Liabilities, losses, costs, fines, penalties, damages (actual,
punitive, or other), reasonable attorneys' fees and expenses arising therefrom,
relating to (i) taxable periods beginning after the Closing Date or (ii) the
portion of the Taxes for any Straddle Period which are allocable to Buyer under
subsection 10.2(d).
(c) Each party shall promptly notify the other party of the
commencement of any demand, claim, audit, examination, Action or other proposed
change or adjustment by any Taxing Authority concerning any Tax which could give
rise to a claim for indemnity pursuant to subsection 10.1(a) or subsection
10.1(b), as the case may be (each a "Tax Claim"). Such notice shall contain
factual information describing the asserted Tax Claim in reasonable detail and
shall include copies of any notice or other document received from any Taxing
Authority in respect of any such asserted Tax Claim.
(d) BHP Hawaii, at its own expense, shall have the sole right
to represent Subsidiary's interests in any Tax Claim relating to any taxable
period of Subsidiary ending on or prior to the Closing Date and to employ
counsel of its choice. Buyer shall have the right to participate in such Action
at its own expense. BHP Hawaii shall not consent to any settlement that
reasonably would be expected to have an adverse effect on the Taxes of
Subsidiary in any period after the Closing Date without Buyer's consent, which
consent shall not be unreasonably withheld. Buyer's consent shall in no way
reduce any indemnification due to Buyer under subsection 10.1(a). If BHP Hawaii
elects to control the defense, compromise or settlement of any Tax Claim, BHP
Hawaii shall keep Buyer informed of the progress and disposition of such Tax
Claim. Buyer shall handle any Tax Claims of Subsidiary for periods ending on or
prior to the Closing Date which BHP Hawaii elects in writing not to control, and
Buyer shall be entitled to defend, compromise or settle such Tax Claims in its
sole discretion without in any way reducing its rights to indemnification under
subsection 10.1(a).
(e) With respect to any taxable period of Subsidiary beginning
before and ending after the Closing Date (a "Straddle Period"), Buyer shall
control, and BHP Hawaii, at its own expense, shall have the right to participate
in, the defense and settlement of any Tax Claim and
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each party shall cooperate with the other party and there shall be no settlement
or closing or other agreement with respect thereto without the consent of the
other party, which consent shall not be unreasonably withheld; provided, that if
either party shall refuse (the "Refusing Party") to consent to any settlement,
closing or other agreement agreed to by the relevant Taxing Authority with
respect to any such Tax Claim that the other party (the "Accepting Party")
proposed to accept (a "Proposed Settlement"), then (i) the Accepting Party's
Liability with respect to the subject matter of the Proposed Settlement shall be
limited to the amount that such Liability would have been if the Proposed
Settlement had been accepted, and (ii) the Refusing Party shall be responsible
for all Liabilities and expenses incurred or imposed thereafter in connection
with the contest of such Tax Claim to the extent that the final settlement is
more than the Proposed Settlement.
10.2 OTHER TAX MATTERS. (a) All tax sharing agreements between
Subsidiary and any other party, including without limitation, BHP Operations
Inc. and BHP Holdings (USA) hereby is terminated as of the Closing Date and all
rights and obligations of Subsidiary with respect to Taxes shall be as provided
herein.
(b) Tax Returns (each a "Pre-Closing Return") which are
required to be filed with respect to Subsidiary on a consolidated, unitary or
other combined basis with Hawaii Group, Pacific Group, BHP Hawaii or the
appropriate parent for a taxable period which ends on or before the Closing Date
(a "Pre-Closing Period") shall be prepared and filed by (or shall be the
responsibility of) BHP Hawaii, which shall include the preparation and filing of
the consolidated federal and state income Tax Returns of the Hawaii Group and
the Pacific Group which includes Subsidiary for the period up to and including
the Closing Date. All such Pre-Closing Returns shall be filed on a basis
consistent with prior Tax Returns filed with respect to Subsidiary. BHP Hawaii,
BHP Pacific or the appropriate parent of Subsidiary shall timely pay or cause to
be paid all Taxes shown on such Pre-Closing Returns. All Tax Returns which (i)
are required to be filed by Subsidiary on a separate basis (including the
preparation of supporting schedules, Tax Returns and other Tax information with
respect to Subsidiary necessary for completion of the Pre-Closing Returns) after
the Closing Date for a Pre-Closing Period (a "Post-Closing Return"), and (ii)
are required to be filed by or with respect to Subsidiary for a taxable period
that ends after the Closing Date, including any Tax Return (a "Straddle Return")
for a Straddle Period, shall be prepared and filed by Buyer; subject to the
rights to indemnification under subsection 10.1(a) and subsection 10.2(e), Buyer
shall timely pay or cause to be paid all Taxes shown on such Tax Returns.
(c) BHP Hawaii and BHP Pacific agree to provide Buyer and
Buyer agrees to provide BHP Hawaii and BHP Pacific with such cooperation and
information as the other shall reasonably request in connection with the
preparation or filing of any Tax Return required under this Agreement.
(d) With respect to any Straddle Period, to the extent
permitted by applicable law, Subsidiary shall elect to treat the Closing Date as
the last day of the taxable period. If applicable law, regulation or
Governmental Order will not permit the Closing Date to be the last day of a
period, the Tax attributable to the operations of Subsidiary for the portion of
the period up to and including the Closing Date shall be (i) in the case of real
or personal property taxes or a flat minimum dollar amount tax, the total amount
of such Taxes multiplied by a fraction, the
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numerator of which is the number of days in the partial period through and
including the Closing Date and the denominator of which is the total number of
days in such Straddle Period, (ii) in the case of all Taxes based on or in
respect of income, the Tax computed on the basis of the taxable income or loss
of Subsidiary for such partial period as determined from its Books and Records,
and (iii) in the case of all other Taxes, on the basis of the actual activities
of Subsidiary for such partial period as determined from its Books and Records.
(e) With respect to any Post-Closing Return or Straddle
Return, Buyer shall deliver, at least 30 days prior to the due date for filing
such Tax Return (including any extension) to BHP Hawaii a statement setting
forth the amount of Tax for which BHP Hawaii or BHP Pacific, as the case may be,
owes pursuant to subsection 10.1(a), including the allocation of Taxes under
subsection 10.2(d), and copies of such Tax Return. BHP Hawaii shall have the
right to review such Tax Returns and the allocation of Tax Liability and to
suggest to Buyer any reasonable changes to such Tax Returns no later than 15
days prior to the date for the filing of such Tax Returns. BHP Hawaii and BHP
Pacific, as the case may be, and Buyer agree to consult and to attempt to
resolve in good faith any issue arising as a result of the review of such Tax
Returns and allocation of Tax Liability and mutually to consent to the filing as
promptly as possible of such Tax Returns. Not later than 15 days before the due
date for the payment of Taxes with respect to such Tax Returns, BHP Hawaii or
BHP Pacific, as the case may be, shall pay to Buyer an amount equal to the Taxes
as agreed to by Buyer and BHP Hawaii as being owed by BHP Hawaii or BHP Pacific,
as the case may be, pursuant to subsection 10.1(a). In the event that Buyer and
BHP Hawaii cannot agree on the amount of Taxes owed by BHP Hawaii or BHP
Pacific, as the case may be, with respect to a Straddle Return or a Post-Closing
Return, BHP Hawaii or BHP Pacific, as the case may be, shall pay to Buyer the
amount of Taxes reasonably determined by Buyer to be owed by them pursuant to
subsection 10.1(a). Within ten (10) days following such payment, BHP Hawaii and
Buyer shall refer the matter to an independent "Big-Six" accounting firm agreed
to by Buyer and BHP Hawaii to arbitrate the dispute. BHP Hawaii and Buyer shall
equally share the fees and expenses of such accounting firm and its
determination as to the amount owing by BHP Hawaii or BHP Pacific, as the case
may be, pursuant to subsection 10.1(a) with respect to a Straddle Return or
Post-Closing Return shall be binding on both parties. Within five (5) days of
the determination by such accounting firm, if necessary, the appropriate party
shall pay the other party any amount which is determined by such accounting firm
to be owed. BHP Hawaii or BHP Pacific, as the case may be, shall be entitled to
reduce its obligation to pay Taxes with respect to a Straddle Return or a
Post-Closing Return by the amount of any estimated Taxes paid with respect to
such Tax Liabilities by or on behalf of Subsidiary on or before the Closing
Date.
(f) BHP Hawaii or BHP Pacific, as the case may be, shall have
the right to all refunds of Taxes (including interest thereon), other than
refunds which are reflected as an asset in the calculation of Net Working
Capital, which relate to Taxes of Subsidiary for Pre-Closing Periods and, to the
extent provided in the following sentence, for Straddle Periods. Buyer shall pay
over to BHP Hawaii any such refunds within 10 days of receipt thereof, net of
any Taxes imposed on Buyer or Subsidiary by reason of the receipt of such
refund. To the extent any refund of Taxes, other than refunds which are
reflected as an asset in the calculation of Net Working Capital, is made with
respect to a Straddle Period, such refund shall be apportioned between Buyer and
BHP Hawaii or BHP Pacific, as the case may be, based on the appropriate
allocation method set forth in clauses (i), (ii) or (iii) of subsection 10.2(d).
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(g) Buyer and BHP Hawaii agree to consult and resolve in good
faith any issues arising in connection with the preparation or review of any Tax
Return or the calculation of any Tax described in this Section 10.2.
(h) Both Hawaii Parent and Pacific Parent, on the one hand,
and Buyer, on the other hand, will make a timely and effective election under
Section 338(h)(10) of the Code (and any comparable provision of foreign, state
or local law) with respect to the purchase by Buyer of the Stock hereunder
(collectively, together with the elections under Section 338(g) of the Code and
any comparable provision of foreign, state or local law, the "Section 338(h)(10)
Elections"). At the Closing, Hawaii Parent, Pacific Parent and Buyer shall
execute IRS Form 8023, completed to the extent reasonably practicable. Within
120 days after the Closing Date, Buyer shall deliver to BHP Hawaii any
additional information or required schedules thereto and any similar forms under
applicable state or local law (the "Forms") with respect to Buyer's purchase of
the Stock. Provided that the information on such Forms is, in the reasonable
determination of BHP Hawaii, correct and complete in all material respects, BHP
Hawaii will consent to the filing of such Forms. BHP Hawaii and Buyer shall
cooperate fully with each other and make available to each other such Tax data
and other information as may be reasonably required by BHP Hawaii or Buyer in
order to prepare and timely file the Forms and any other required statements or
schedules. In the event that Buyer and BHP Hawaii are unable to resolve any
disagreements regarding the allocation of the "modified aggregate deemed sales
price" (as defined under applicable Treasury Regulations) among the assets or
other aspects of the Forms, Buyer (i) shall be entitled to file the Forms, but
only if either the information not agreed upon is deleted or the Forms reflect
that the information has not been agreed upon or (ii) within 30 days after
notice of such disagreement, the matter in dispute shall be resolved as soon as
practicable by a "Big Six" independent accounting firm or, if the disagreement
involves valuation, to a nationally recognized appraisal firm mutually
satisfactory to the parties (but in no event longer than 30 days), which
resolution shall be binding and conclusive upon Buyer and BHP Hawaii without
further appeal therefrom. Buyer and BHP Hawaii shall bear equally the fees and
expenses of such firm. Buyer will timely file the Forms, and any required
supplements thereto, in the manner prescribed by Treasury Regulation
1.338(h)(10)-1(d) or the corresponding provisions of applicable foreign, state
or local law, and will provide written evidence to BHP Hawaii that it has done
so. Buyer and BHP Hawaii agree that neither of them will take, or permit any of
their Affiliates to take, any action to modify or revoke the elections contained
in or the content of any Forms without the express written consent of the other.
(i) If, after the Closing Date, BHP Hawaii or any Affiliate
receives or is credited with a refund of any Tax attributable to the utilization
or carryback of any Tax attribute (e.g., net operating losses, Tax credits) of
Subsidiary arising after the Closing Date, BHP Hawaii shall pay to Buyer an
amount equal to the amount of such refund together with any interest received
from or credited thereon by the applicable Taxing Authority, net of any Taxes
imposed upon BHP Hawaii or any Affiliate by reason of the receipt of such refund
or credit.
(j) At the Closing, HERI and BHP Pacific each shall deliver to
Buyer certificates signed under penalties of perjury (i) stating that it is not
a foreign corporation, foreign partnership, foreign trust or foreign estate,
(ii) providing its U.S. Employer Identification Number and (iii) providing its
address, all pursuant to Section 1445 of the Code, each such certificate to be
substantially in the form attached hereto as Exhibit 1.1(h).
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ARTICLE XI
EMPLOYEES AND EMPLOYEE BENEFIT PLANS
11.1 EMPLOYMENT. (a) As of the Closing Date, and subject to
the normal employment policies of Buyer (except as provided otherwise herein),
Buyer shall cause Subsidiary to employ at Closing all Business Employees (other
than any Business Employees who are receiving long term disability benefits from
BHP Hawaii's or BHP Pacific's, as the case may be, or Subsidiary's long-term
disability plan as of the Closing Date) ("Current Employee") at a rate of
compensation at least equal to the Current Employee's base rate of compensation
as disclosed in Disclosure Schedule Section 4.10 (as updated pursuant to Section
4.10) on the Closing Date (the "Total Salary Rate"). The terms of such
employment shall include, but shall not be limited to, the position, title and
level of responsibility that each Current Employee possesses immediately prior
to the Closing Date. Each Current Employee who continues as an employee of
Subsidiary immediately after the Closing shall be referred to as a "Transferred
Employee" except that the term "Transferred Employee" shall not include those
persons listed as expatriates on Schedule 11.1(b). As of the Closing Date, Buyer
agrees that, except as to medical benefits and retiree medical benefits, the
compensation packages and benefit plans and programs for the Transferred
Employees will be comparable to those provided by Buyer for its other employees,
and for eligibility and vesting purposes only Buyer shall treat all service with
BHP Hawaii, BHP Pacific or Subsidiary as service with Buyer. Buyer agrees that,
as of the Closing Date, the medical benefits and retiree medical benefits it
provides for Transferred Employees will be comparable to those provided by BHP
Hawaii, BHP Pacific and Subsidiary prior to the Closing Date; provided that BHP
transfers its contracts with its medical providers to Subsidiary prior to the
Closing Date without any increase in rates. For purposes of all medical and
retiree medical plans provided to Transferred Employees, Buyer shall treat all
service with BHP Hawaii, BHP Pacific or Subsidiary as service with Buyer. Buyer
shall cause Subsidiary to assume all accrued vacation for Transferred Employees,
as disclosed in Disclosure Schedule Section 4.10. Effective as of the Closing
Date, Buyer shall cause Subsidiary to assume the vacation policy of the Buyer
for Transferred Employees. If BHP Hawaii or BHP Pacific determines to pay any
amount to Transferred Employees in accordance with the Team Bonus and Management
Bonus programs in effect at Subsidiary immediately prior to the Closing Date and
with respect to the period in 1998 up to the Closing Date, then BHP Hawaii or
BHP Pacific, as applicable, shall, on or prior to August 31, 1998, provide Buyer
with a written notice specifying the amount of all such payments and the names
of the individuals to whom such payments are to be made and Buyer agrees to make
such payments on behalf of BHP Hawaii or BHP Pacific, as applicable. BHP Hawaii
and BHP Pacific, as applicable, agree to reimburse Buyer for the amount of any
such payments and the employer portion of any additional employment taxes
attributable to such payments.
(b) The Employees of Subsidiary listed in Schedule 11.1(b) may
be offered, and may accept, before the Closing, employment by any Affiliate of
BHP.
11.2 EMPLOYEE BENEFIT PLANS. (a) Effective as of the Closing
Date, Transferred Employees shall cease to accrue benefits under the BHP Pension
Plan. Within the time limits allowed by ERISA, Buyer shall enroll Transferred
Employees in Buyer's Pension Plan to provide benefits for the Transferred
Employees from and after the Closing Date. Buyer shall amend Buyer's Pension
Plan to recognize the service of a Transferred Employee, including
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service performed by such Transferred Employee before the Closing Date with BHP
Hawaii, BHP Pacific or Subsidiary for purposes of participation, vesting and
eligibility with Buyer or Subsidiary on and after the Closing Date under Buyer's
Pension Plan. As of the Closing Date, the Transferred Employees shall not have
any accrued benefit under any Pension Plan as defined in ERISA which is
sponsored by the Buyer, other than any benefit any such Transferred Employee may
have accrued without regard to this Agreement. In order to permit BHP Hawaii to
administer distributions from the BHP Pension Plan, following the Closing Date,
Buyer agrees to cooperate with BHP Hawaii by responding to inquires from BHP
Hawaii, or its designee, as to whether any Transferred Employee has terminated
employment with Buyer, and the date of any such termination.
(b) (i) As soon as practicable after the Closing Date (but no
earlier than 90 days after the Closing Date), Buyer shall enroll Transferred
Employees (who elect to participate or who roll over an account balance to
Buyer's 401(k) Plan as provided herein) into Buyer's 401(k) Plan to provide
benefits from and after the Closing Date to the Transferred Employees. All
periods of employment with BHP Hawaii, BHP Pacific or Subsidiary shall be
recognized as service with Buyer by Buyer's 401(k) Plan.
(ii) As soon as practicable following the Closing
Date, BHP Hawaii shall cause the BHP Retirement Savings Plan to permit a
distribution to participants who are Transferred Employees in accordance with
Code Section 401(k)(10) and the regulations thereunder. Buyer shall cause
Buyer's 401(k) Plan to accept direct rollovers (including rollovers of
participant loans) of amounts so distributable from the BHP Retirement Savings
Plan on the 90th day after the Closing Date or, if such 90th day is not a
business day, the next business day. Buyer shall not be obligated to service the
loan balances of any Transferred Employees who maintain account balances under
the BHP Retirement Savings Plan.
(c) Prior to the Closing Date, Buyer and BHP Hawaii shall
provide each other with an IRS determination letter relating to the tax
qualified status under Sections 401(a) and 501(a) of the Code of their
respective tax-qualified plans (described above) and related trusts. In the
absence of such determination letters, Buyer or BHP Hawaii (as the case may be)
shall, within the applicable remedial amendment period, apply for a favorable
determination letter regarding the plan's qualification under Section 401(a) of
the Code and shall take all actions necessary in order to obtain such letter,
including making all necessary or appropriate changes to the terms of the plan.
(d) Effective as of the Closing Date, Buyer shall, with
respect to Transferred Employees, establish one or more plans to provide
preretirement medical, dental, vision and prescription drug benefits (the
"Buyer's Hawaii Medical Plan") to Transferred Employees and their eligible
dependents. On the Closing Date, Buyer shall allow all Transferred Employees and
their eligible dependents covered under Subsidiary's preretirement medical,
dental, vision or prescription drug benefit plan ("Subsidiary Plan") to enroll,
without any waiting period, in Buyer's Hawaii Medical Plan. All other
Transferred Employees may enter the Buyer's Hawaii Medical Plan as of the next
open enrollment date or as of such earlier date as the Subsidiary Plan would
permit. As of the Closing Date, Buyer's Hawaii Medical Plan shall offer
Transferred Employees health and welfare benefit plans that are comparable to
those provided by BHP Hawaii, BHP Pacific and Subsidiary prior to the Closing
Date; provided that BHP transfers its
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contracts with its medical providers to Subsidiary prior to the Closing Date
without any increase in rates. For Transferred Employees who elect to enroll in
Buyer's Hawaii Medical Plan, Buyer and Buyer's Hawaii Medical Plan shall be
responsible for all the preretirement medical, dental, and prescription drug
expenses incurred by Transferred Employees and their eligible dependents on and
after the Closing Date. With respect to Transferred Employees, Buyer's Hawaii
Medical Plan providing medical and prescription drug benefits shall waive any
restrictions and limitations for pre-existing conditions to the extent required
by law. Transferred Employees' service shall be recognized by Buyer's Hawaii
Medical Plans as service with the Buyer. BHP Hawaii, BHP Pacific and the BHP
Medical Plan shall only be responsible for medical, dental, and prescription
drug expenses of Transferred Employees and their dependents to the extent such
expenses are covered under the terms of the BHP Medical Plan and are incurred
prior to the Closing Date. BHP Medical Plan expenses for the current year
incurred before the Closing Date, shall be taken into account for purposes of
determining deductibles and out-of-pocket limits under Buyer's Hawaii Medical
Plan for the remainder of the plan year under Buyer's Hawaii Medical Plan, only
if BHP Hawaii provides Buyer with a list showing the amount of such expenses
within 30 days after the Closing Date.
(e) Effective as of the Closing Date, Buyer shall allow
Transferred Employees to enroll in its plans providing long term and short term
disability benefits; provided such Transferred Employees are currently enrolled
in the long term disability and short term disability plans or programs
sponsored by BHP Hawaii. Service of Transferred Employees shall be recognized by
Buyer's long term and short term disability benefit plans as if such service had
been with Buyer. Buyer and its plans shall assume all responsibility for
accident and sickness, worker's compensation, short term and long term
disability claims incurred by any Transferred Employee on and after the Closing
Date, but only to the extent such plans cover the accident or injury or such
coverage is otherwise required by law. BHP Hawaii and BHP Pacific shall be
responsible for workers compensation, and short term and long term disability
claims incurred by any Transferred Employee prior to the Closing Date (including
any short term disability claim incurred prior to the Closing Date that changes
status to a long term disability on or after the Closing Date), but only to the
extent such plans cover the accident or injury or such coverage is otherwise
required by law.
(f) Effective as of the Closing Date, Buyer shall allow
Transferred Employees to enroll in its plans providing life insurance,
accidental death and dismemberment, and travel accident coverage; provided such
Transferred Employees are currently enrolled in a life insurance, accidental
death and dismemberment and travel accident coverage plan sponsored by BHP
Hawaii. Service of Transferred Employees shall be recognized by Buyer under its
plans as if such service had been with Buyer.
(g) Each of BHP Hawaii and BHP Pacific shall retain its
Liability and that of Subsidiary to the Transferred Employees under the BHP
Supplemental Plan, and shall indemnify Buyer from any Buyer Losses relating to
such plan as provided in subsection 9.2(b).
(h) Service of Transferred Employees recognized by BHP Hawaii,
BHP Pacific or Subsidiary shall be recognized by Buyer for the calculation of
severance benefits upon termination of employment with Buyer, Subsidiary or an
Affiliate thereof to the extent listed on Schedule 11.2(h). Buyer shall provide
any Transferred Employee who is terminated by Buyer,
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Subsidiary or an Affiliate thereof prior to the first anniversary of the Closing
Date with severance benefits at least equal to the greater of those determined
in accordance with the schedule set forth on Schedule 11.2(h) or those set forth
in Buyer's severance plan. BHP Hawaii shall indemnify Buyer for one-half of the
amount by which severance benefits paid to any Transferred Employee in
accordance with the preceding sentence exceed the amount of severance benefits
payable to such Transferred Employee under the terms of Buyer's severance plan
described in Schedule 11.2(h); provided that the total amount payable by BHP
Hawaii to Buyer in accordance with this sentence shall not exceed $1,500,000.
(i) BHP Hawaii shall retain all Liability under any retiree
medical or retiree life plan maintained, or contributed to, by BHP Hawaii, BHP
Pacific or Subsidiary with respect to any retiree, former employee or any other
employee of Subsidiary who is not a Transferred Employee. Effective as of the
Closing Date, Buyer shall adopt a retiree medical and life insurance plan for
Transferred Employees that is comparable to the retiree medical plan maintained
by Subsidiary immediately prior to the Closing Date.
11.3 PLANT CLOSING NOTICE. Each party to this Agreement shall
give the other parties sufficient notice to permit such other party(ies) to
comply with the U.S. Worker Adjustment and Retraining Notification Act (the
"WARN Act") and Chapter 394B, Hawaii Revised Statutes, as amended ("Hawaii Plant
Closing Act"). Buyer shall be responsible for all Liabilities arising under the
WARN Act or the Hawaii Plant Closing Act as a result of the transactions
contemplated by this Agreement.
ARTICLE XII
TERMINATION
12.1 TERMINATION. This Agreement may be terminated at any
time prior to the Closing:
(a) by the mutual written consent of Buyer, BHP Hawaii and BHP
Pacific; or
(b) by either Buyer, on the one hand, or BHP Hawaii and BHP
Pacific, on the other hand, if the Closing shall not have occurred by May 31,
1998, unless a request under the HSR Act for additional information is received
on or prior to May 31, 1998, in which case the May 31, 1998 date shall be
extended to July 31, 1998; provided, however, that the right to terminate this
Agreement pursuant to this subsection shall not be available to any party or
parties whose failure to fulfill any obligation under this Agreement shall have
been the cause of, or shall have resulted in, the failure of the Closing to
occur prior to such date; or
(c) by Buyer, as a result of the breach in any material
respect of any of the representations and warranties of BHP Hawaii contained in
Article IV or the failure by BHP Hawaii or BHP Pacific to perform and comply in
any material respect with any of the agreements and obligations required by this
Agreement to be performed or complied with by BHP Hawaii or BHP Pacific,
provided that such breach or failure is not cured within 30 days of BHP Hawaii's
receipt of a written notice from Buyer that such a breach or failure has
occurred; or
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(d) by BHP Hawaii and BHP Pacific, as a result of the breach
in any material respect of any of the representations and warranties of Buyer
contained in Article V or the failure by Buyer to perform and comply in any
material respect with any of the agreements and obligations required by this
Agreement to be performed or complied with by Buyer, provided that such breach
or failure is not cured within 30 days of Buyer's receipt of a written notice
from such parties' that such a breach or failure has occurred.
12.2 WRITTEN NOTICE. In order to terminate this Agreement
pursuant to Section 12.1, the party so acting shall give written notice of such
termination to the other parties, specifying the grounds thereof.
12.3 EFFECT OF TERMINATION. In the event of the termination of
this Agreement in accordance with Section 12.1, this Agreement (other than
Sections 6.8, Article XII and Section 13.1, which shall survive the termination
hereof) shall become void and have no effect, with no liability on the part of
any party or its Affiliates, directors, officers, employees, shareholders or
agents in respect thereof; provided, however, that nothing in this Section 12.3
shall deprive BHP Hawaii or BHP Pacific, on the one hand, and Buyer, on the
other, from bringing any Action for breach of the Agreement by the other.
12.4 WAIVER. At any time prior to the Closing, Buyer, on the
one hand, and BHP Hawaii and BHP Pacific, on the other hand, may (a) extend the
time for the performance of any of the obligations or other acts of the other
party hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto or (c) waive
compliance with any of the agreements or conditions contained herein.
ARTICLE XIII
GENERAL PROVISIONS
13.1 EXPENSES, TAXES, ETC. Except as otherwise provided herein
or in any Ancillary Agreement, each party will pay all fees and expenses
incurred by it in connection with this Agreement, the Ancillary Agreements and
the transactions contemplated hereby and thereby; provided, however, that the
$45,000 filing fee under the HSR Act and all sales, use, documentary, stamp and
excise Taxes and all transfer, filing, recordation and similar Taxes and fees
(including all real estate transfer Taxes and conveyance and recording fees, if
any) incurred by any party or Subsidiary in connection with this Agreement, the
Ancillary Agreements and the transactions contemplated hereby and thereby will
be borne equally by Buyer, on the one hand, and BHP Hawaii and BHP Pacific, on
the other hand.
13.2 NOTICES. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered or mailed if delivered personally or by
recognized overnight delivery service or mailed by registered or certified mail
(postage prepaid, return receipt requested), or sent by facsimile transmission
(confirmation received) to the parties at the following addresses and facsimile
transmission numbers (or at such other address or number for a party as shall be
specified by like notice), except that notices after the giving of which there
is a designated period within which to perform an act and notices of changes of
address or number shall be effective only upon receipt:
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(a) if to BHP Hawaii and BHP Pacific:
BHP Hawaii Inc.
733 Bishop Street
P. O. Box 3379
Honolulu, Hawaii 96842
U.S.A.
Attention: President
Telecopy No.: (808) 547-3091
Telephone No.: (808) 547-3111
with copies to:
BHP Petroleum Pty Ltd
GPO Box 1911R
Melbourne Victoria 3001
Australia
Attention: Group General Manager, Finance and Administration
Telecopy No.: 613-9652-6528
Telephone No.: 613-9652-6820
and
Orrick, Herrington & Sutcliffe LLP
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, California 94111
U.S.A.
Attention: Richard V. Smith, Esq.
Telecopy No.: (415) 773-5759
Telephone No.: (415) 392-1122
(b) if to Buyer:
Tesoro Petroleum Corporation
8700 Tesoro Drive
San Antonio, Texas 78217
U.S.A.
Attention: Corporate Secretary
Telecopy No.: (210) 283-2400
Telephone No.: (210) 283-2248
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with a copy to:
Fulbright & Jaworski L.L.P.
1301 McKinney, 49th Floor
Houston, Texas 77010-3095
U.S.A.
Attention: Michael W. Conlon, Esq.
Telecopy No.: (713) 651-5246
Telephone No.: (713) 651-5427
Copies of all notices provided by Buyer with respect to Tax matters pursuant to
Article X also shall be provided to "Group General Tax Counsel, BHP Group
Taxation USA, 550 California Street, Seventh Floor, San Francisco, California
94104" in accordance with this Section 13.2.
13.3 DISCLOSURE SCHEDULE. The Disclosure Schedule shall be
divided into sections corresponding to the sections and subsections of this
Agreement. Disclosure of any matter in the Disclosure Schedule shall not be
deemed to imply that such matter is or is not material. Disclosure of any matter
in the Disclosure Schedule shall not constitute an admission or raise any
inference that such matter constitutes a violation of law or an admission of
Liability or facts supporting Liability.
13.4 INTERPRETATION. (a) When a reference is made in this
Agreement to Sections, subsections, Schedules or Exhibits, such reference shall
be to a Section, subsection, Schedule or Exhibit to this Agreement unless
otherwise indicated. The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and the headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. The words "herein" and "hereby" and similar
references mean, except where a specific Section or Article reference is
expressly indicated, the entire Agreement rather than any specific Section or
Article. Except as otherwise expressly provided herein, all monetary amounts
referenced in this Agreement shall mean U.S. dollars. All capitalized terms
defined herein are equally applicable to both the singular and plural forms of
such terms.
(b) Any references in this Agreement to the "knowledge" of BHP
Hawaii or BHP Pacific, or to matters "known" to BHP Hawaii or BHP Pacific, shall
mean the actual knowledge without inquiry or investigation of only the Persons
listed on Schedule 13.4(a). Any references in this Agreement to the "best
knowledge" or "knowledge" of Buyer shall mean the actual knowledge without
inquiry or investigation of only the Persons listed on Schedule 13.4(b).
Anything herein to the contrary notwithstanding, no Person listed on any of such
schedules shall have any personal Liability with respect to any of the matters
set forth in this Agreement or any representation or warranty herein being or
becoming untrue, inaccurate or incomplete
(c) The parties hereby agree and acknowledge that no provision
of this Agreement, other than subsection 6.1(b) and the Environmental Agreement
when the same is executed and delivered by the parties hereto, shall be
construed or interpreted as establishing, directly or indirectly, any rights,
obligations, representations, warranties, covenants and
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indemnities of the parties hereto regarding any matters arising under or
relating to Environmental Laws, Environmental Permits, Hazardous Material or
Releases of Hazardous Material
13.5 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the greatest extent
possible.
13.6 ASSIGNMENT. This Agreement may not be assigned by
operation of law or otherwise; provided, however, that (a) either BHP Hawaii or
BHP Pacific may assign this Agreement to any Affiliate of BHP without Buyer's
consent so long as such assignment does not release such assignor from any of
its obligations hereunder and (b) Buyer may assign the Agreement to any
Affiliate of Buyer without the consent of BHP Hawaii or BHP Pacific so long as
notice of any such assignment is promptly given to BHP Hawaii and BHP Pacific
and provided further that such assignment does not release Buyer from its
obligations hereunder or under any Ancillary Agreement.
13.7 NO THIRD-PARTY BENEFICIARIES. This Agreement is for the
sole benefit of the parties hereto and their permitted assigns and nothing
herein expressed or implied shall give or be construed to give to any Person,
other than the parties hereto and such assigns, any legal or equitable rights or
remedies hereunder.
13.8 AMENDMENT. This Agreement may not be amended or modified
except by an instrument in writing signed by BHP Hawaii, BHP Pacific and Buyer.
13.9 NO OTHER REMEDIES. Except as provided in Sections 6.6,
6.9, 12.3 and 13.13, any and all remedies herein expressly conferred upon a
party hereby are deemed exclusive of any other remedy conferred hereby or by law
or equity on such party. In particular, except as provided in Sections 6.6 and
6.9 and Article X, the remedies provided by Article IX for Losses shall be
exclusive of any other rights or remedies available to a party against the other
party, either at law or in equity, in relation to any breach, default or
nonperformance of any representation, warranty, covenant, agreement or
undertaking made or entered into by such other party pursuant to this Agreement
or the transactions contemplated hereby. Notwithstanding any provision hereof,
neither party shall be liable hereunder to any Buyer Indemnified Party or Seller
Indemnified Party for any incidental or consequential damages, damages for loss
of profits or opportunities or exemplary or punitive damages, regardless of the
circumstances from which such damages arose.
13.10 FURTHER ASSURANCES. Each party agrees to cooperate fully
with the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by any other party to evidence and
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reflect the transactions described herein and contemplated hereby and to carry
into effect the intents and purposes of this Agreement.
13.11 MUTUAL DRAFTING. This Agreement is the joint product of
Buyer, BHP Hawaii and BHP Pacific and each provision hereof has been subject to
the mutual consultation, negotiation and agreement of Buyer, BHP Hawaii and BHP
Pacific and shall not be construed for or against any party hereto.
13.12 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York
applicable to agreements made and to be performed entirely within such State
(without giving effect to such State's choice of law principles).
13.13 DISPUTE RESOLUTION. Except as otherwise provided in
Sections 6.6, 6.9 and 12.3 and subsections 2.2(c) and 10.2(i), any dispute,
controversy or claim between the parties relating to, arising out of or in
connection with this Agreement (or any subsequent agreements or amendments
thereto), including as to its existence, enforceability, validity,
interpretation, performance or breach or as to indemnification or damages,
including claims in tort, whether arising before or after the termination of
this Agreement (any such dispute, controversy or claim being herein referred to
as a "Dispute"), shall be settled without litigation and only by use of the
following alternative dispute resolution procedure:
(a) At the written request of a party, each party shall
appoint a knowledgeable, responsible representative to meet and negotiate in
good faith to resolve any Dispute. The discussions shall be left to the
discretion of the representatives. Upon agreement, the representatives may
utilize other alternative dispute resolution procedures such as mediation to
assist in the negotiations. Discussions and correspondence among the parties'
representatives for purposes of these negotiations shall be treated as
confidential information developed for the purposes of settlement, exempt from
discovery and production, and without the concurrence of both parties shall not
be admissible in the arbitration described below or in any lawsuit. Documents
identified in or provided with such communications, which are not prepared for
purposes of the negotiations, are not so exempted and may, if otherwise
admissible, be admitted in the arbitration.
(b) If negotiations between the representatives of the parties
do not resolve the Dispute within 60 days of the initial written request, the
Dispute shall be submitted to binding arbitration by a panel of three
arbitrators (each of which shall have at least ten years of experience in the
industry in which the Business operates or some material aspect thereof relating
to the matter subject to arbitration) pursuant to the Commercial Arbitration
Rules, as then amended and in effect, of the American Arbitration Association
(the "Rules"). Any party may demand such arbitration in accordance with the
procedures set out in the Rules. BHP Hawaii and Buyer shall each select one
arbitrator, and the two arbitrators so selected shall select the third
arbitrator. The arbitration shall take place in New York, New York. The
arbitration hearing shall be commenced within 60 days of such party's demand for
arbitration. The arbitrators shall control the scheduling (so as to process the
matter expeditiously) and any discovery. The parties may submit written briefs.
At the arbitration hearing, each party may make written and oral presentations
to the arbitrators, present testimony and written evidence and
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examine witnesses. No party shall be eligible to receive, and the arbitrators
shall not have the authority to award, incidental or consequential damages,
damages for loss of profits or opportunities or exemplary or punitive damages.
The arbitrators shall rule on the Dispute by issuing a written opinion within 30
days after the close of hearings. The arbitrators' decision shall be binding and
final. Judgment upon the award rendered by the arbitrators may be entered in any
court having jurisdiction.
(c) Each party will bear its own costs and expenses in
submitting and presenting its position with respect to any Dispute to the
arbitrators. Buyer, on the one hand, and BHP Hawaii and BHP Pacific, on the
other hand, shall pay one-half of the fees and expenses of the arbitrators and
the American Arbitration Association.
(d) Notwithstanding any other provision of this Agreement, any
party may commence an Action to compel compliance with this Section 13.13.
13.14 CONSENT TO JURISDICTION; WAIVERS. Subject to Section
13.13, each of the parties hereto irrevocably submits to the exclusive
jurisdiction of (a) the Supreme Court of the State of New York, New York County,
and (b) the United States District Court for the Southern District of New York,
for the purposes of any Action arising out of this Agreement, any Ancillary
Agreement or any transaction contemplated hereby or thereby. Each of the parties
hereto agrees to commence any Action relating hereto either in the United States
District Court for the Southern District of New York or if such Action may not
be brought in such court for jurisdictional reasons, in the Supreme Court of the
State of New York, New York County. Each of the parties hereto further agrees
that service of any process, summons, notice or document by U.S. registered mail
to such party's respective address set forth in Section 13.2 shall be effective
service of process for any Action in New York with respect to any matters to
which it has submitted to jurisdiction in this Section 13.14. Each of the
parties hereto irrevocably and unconditionally waives any objection to the
laying of venue of any Action arising out of this Agreement, any Ancillary
Agreement or any transaction contemplated hereby or thereby in (i) the Supreme
Court of the State of New York, New York County, or (ii) the United States
District Court for the Southern District of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such Action brought in any such court has been brought in an
inconvenient forum.
13.15 WAIVER OF JURY TRIAL. Each of the parties hereto
irrevocably and unconditionally waives trial by jury in any Action relating to
this Agreement, the Ancillary Agreements or any transaction contemplated hereby
or thereby, and for any counterclaim with respect thereto.
13.16 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
13.17 ENTIRE AGREEMENT. This Agreement, together with all
Schedules and Exhibits hereto, and the documents and instruments and other
agreements among the parties delivered pursuant hereto, including the Ancillary
Agreements, constitute the entire agreement
49
<PAGE> 56
and supersede all prior agreements and undertakings, both written and oral,
other than the Confidentiality Agreement, among BHP Hawaii, BHP Pacific and
Buyer with respect to the subject matter hereof.
IN WITNESS WHEREOF, BHP Hawaii, BHP Pacific and Buyer have
caused this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
BHP HAWAII INC.,
a Hawaii corporation
By: /s/ Henry G. Neal
-------------------------------------
Henry G. Neal
President
BHP PETROLEUM PACIFIC ISLANDS INC.,
a Hawaii corporation
By: /s/ Henry G. Neal
-------------------------------------
Henry G. Neal
President
TESORO PETROLEUM CORPORATION,
a Delaware corporation
By: /s/ Bruce A. Smith
-------------------------------------
Bruce A. Smith
Chairman of the Board of Directors,
President and Chief Executive Officer
50
<PAGE> 57
EXHIBITS
<PAGE> 58
EXHIBIT 1.1(a)
THE BROKEN HILL PROPRIETARY COMPANY LIMITED
BHP Tower - Bourke Place
48th Floor
600 Bourke Street
Melbourne, Victoria 3000
Australia
________________ __, 1998
Tesoro Petroleum Corporation
8700 Tesoro Drive
San Antonio, Texas 78217
U.S.A.
RE: STOCK SALE AGREEMENT ("STOCK SALE AGREEMENT") AND ENVIRONMENTAL
AGREEMENT (TOGETHER WITH THE STOCK SALE AGREEMENT, THE
"TRANSACTION AGREEMENTS"), EACH DATED AS OF MARCH 18, 1998,
BY AND AMONG BHP HAWAII INC., A HAWAII CORPORATION ("BHP
HAWAII"), BHP PETROLEUM PACIFIC ISLANDS INC., A HAWAII
CORPORATION ("BHP PACIFIC"), AND TESORO PETROLEUM
CORPORATION, A DELAWARE CORPORATION ("BUYER")
Gentlemen:
1. The Broken Hill Proprietary Company Limited, A.C.N. 004 028
077, an Australian corporation ("BHP"), which, directly or indirectly, is the
sole beneficial owner of all the issued and outstanding capital stock of BHP
Hawaii and BHP Pacific, guarantees to Buyer, subject to the provisions of the
next two paragraphs, (i) the due and punctual payment of each and all amounts
which BHP Hawaii or BHP Pacific shall become obligated to pay under the
Transaction Agreements, as and when the same shall become due and payable
thereunder, and (ii) the due and punctual performance and observance by BHP
Hawaii and BHP Pacific of each term, provision and condition either of them is
required to perform or observe under the Transaction Agreements, as and when the
same shall be required to be performed or observed thereunder. The foregoing
obligations in clauses (i) and (ii) are referred to hereinafter, collectively,
as the "Guaranteed Obligations." Subject to the provisions of the next two
paragraphs, in the case of the failure of BHP Hawaii or BHP Pacific to duly and
punctually pay or perform the Guaranteed Obligations when due, payable or
required by the Transaction Agreements, BHP does hereby agree immediately to
make such payments, or to perform or cause to be performed, such Guaranteed
Obligations and in addition thereto, to pay such further amounts as shall be
sufficient to cover the reasonable costs and expenses of enforcing the
Guaranteed Obligations together with interest on
<PAGE> 59
Tesoro Petroleum Corporation
__________ ____, 1998
Page 2
any payment required to be made from the date when owing to the date of payment
at a rate per annum equal to the London Interbank Offered Rate as published from
time to time in the Wall Street Journal plus 5%. The foregoing shall constitute
a guaranty of payment and not of collection and, subject to the next paragraph,
BHP waives any right to require that any action be brought against BHP Hawaii or
BHP Pacific or to require that resort be made to any security. BHP agrees that
it shall not be required to consent to, or receive any notice of, any amendment
or modification of, or waiver, consent or extension with respect to, the
Transaction Agreements to which BHP Hawaii or BHP Pacific are parties that may
be made or given as expressly provided therein. BHP agrees that its obligations
hereunder, subject to the next two paragraphs, shall be unconditional,
irrespective of any such amendment, modification, waiver, consent, extension or
any other circumstances which might otherwise constitute a legal or equitable
discharge or defense of a guarantor.
2. Notwithstanding such Paragraph 1, BHP shall have no
obligation to pay or perform any of the Guaranteed Obligations unless and until
(i) BHP Hawaii or BHP Pacific, as the case may be, defaults in the payment or
performance of such Guaranteed Obligations (as determined by a final and binding
decision of the arbitrators rendered pursuant to Section 13.13 of the Stock Sale
Agreement) and such default continues for a period of 10 days after the date
such decision is rendered and communicated to Buyer, BHP Hawaii and BHP Pacific;
or (ii) either (A) a filing against BHP Hawaii or BHP Pacific, as the case may
be, of an involuntary case or proceeding under any applicable bankruptcy,
insolvency, reorganization or other similar law is made and remains unstayed for
a period of 60 days, or (B) a filing by BHP Hawaii or BHP Pacific, as the case
may be, of a voluntary case or proceeding seeking liquidation reorganization,
arrangement, adjustment, receivership or composition of or in respect of BHP
Hawaii or BHP Pacific, as the case may be, is made under any applicable law.
3. BHP shall be entitled to exercise all rights, and assert
all defenses, of BHP Hawaii and BHP Pacific under the Transaction Agreements;
provided BHP may not raise or claim any rights or defenses waived by BHP Hawaii
or BHP Pacific or already contested by BHP Hawaii or BHP Pacific and resolved by
arbitration as provided in the Transaction Agreements. BHP and Buyer each shall
have rights of set off against the other as to amounts owed and unpaid so long
as such amounts have been determined by arbitration as provided in the
Transaction Agreements.
4. Each party will pay all fees and expenses incurred by it in
connection with this letter agreement and the transactions contemplated hereby.
5. BHP acknowledges that Buyer would not enter into the
Transaction Agreements unless BHP agreed to enter into and be bound by this
letter agreement and that Buyer is relying on this letter agreement being
binding on and enforceable against BHP.
6. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered or mailed if delivered personally or by recognized
overnight delivery service or mailed by
<PAGE> 60
Tesoro Petroleum Corporation
__________ ____, 1998
Page 3
registered or certified mail (postage prepaid, return receipt requested), or
sent by facsimile transmission (confirmation received) to the parties at the
following addresses and facsimile transmission numbers (or at such other address
or number for a party as shall be specified by like notice), except that notices
after the giving of which there is a designated period within which to perform
an act and notices of changes of address or number shall be effective only upon
receipt:
(a) if to BHP:
The Broken Hill Proprietary Company Limited
BHP Tower - Bourke Place, 45th Floor
600 Bourke Street
Melbourne, Victoria 3000
Australia
Attention: Group Treasurer
Telecopy No.: 613-9609-3572
Telephone No.: 613-9609-3834
with a copy to:
Orrick, Herrington & Sutcliffe LLP
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, California 94111
U.S.A.
Attention: Richard V. Smith, Esq.
Telecopy No.: (415) 773-5759
Telephone No.: (415) 392-1122
(b) if to Buyer:
Tesoro Petroleum Corporation
8700 Tesoro Drive
San Antonio, Texas 78217
U.S.A.
Attention: Corporate Secretary
Telecopy No.: (210) 283-2400
Telephone No.: (210) 283-2248
<PAGE> 61
Tesoro Petroleum Corporation
____________ ___, 1998
Page 4
with a copy to:
Fulbright & Jaworski L.L.P.
1301 McKinney, 49th Floor
Houston, Texas 77010-3095
U.S.A.
Attention: Michael W. Conlon, Esq.
Telecopy No.: (713) 651-5246
Telephone No.: (713) 651-5427
7. This letter agreement may not be assigned by operation of
law or otherwise; provided, however, that either party may assign this letter
agreement in connection with any merger, consolidation or similar transaction in
which it is the surviving entity of such transaction.
8. Any dispute, controversy or claim among the parties
relating to, arising out of or in connection with the Transaction Agreements (or
any subsequent agreements or amendments thereto), including as to their
existence, enforceability, validity, interpretation, performance or breach or as
to indemnification or damages, including claims in tort, shall be settled in
accordance with Section 13.13 of the Stock Sale Agreement.
9. This letter agreement is for the sole benefit of the
parties hereto and their permitted assigns and nothing herein expressed or
implied shall give or be construed to give any Person, other than the parties
hereto and such assigns, any legal or equitable rights hereunder.
10. This letter agreement shall be governed by, and construed
in accordance with, the internal laws of the State of New York applicable to
agreements made and to be performed entirely within such State (without giving
effect to such State's choice of law principles).
11. Subject to Paragraph 8 above, each of the parties hereto
irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of
the State of New York, New York County, and (b) the United States District Court
for the Southern District of New York, for the purposes of any Action arising
out of this letter agreement or any transaction contemplated hereby. Each of the
parties hereto agrees to commence any Action relating hereto either in the
United States District Court for the Southern District of New York or if such
Action may not be brought in such court for jurisdictional reasons, in the
Supreme Court of the State of New York, New York County. Each of the parties
hereto further agrees that service of any process, summons, notice or document
by U.S. registered mail to such party's respective address set forth in
Paragraph 6 above shall be effective service of process for any Action in New
York with respect to any matters to which it has submitted to jurisdiction in
this Paragraph 11. Each of the parties hereto irrevocably and unconditionally
waives any objection to the laying of venue of any
<PAGE> 62
Tesoro Petroleum Corporation
____________ ___, 1998
Page 5
Action arising out of this letter agreement or any transaction contemplated
hereby in (i) the Supreme Court of the State of New York, New York County, or
(ii) the United States District Court for the Southern District of New York, and
hereby further irrevocably and unconditionally waives and agrees not to plead or
claim in any such court that any such Action brought in any such court has been
brought in an inconvenient forum.
12. This letter agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same instrument.
13. Terms used herein and not otherwise defined shall have
the meanings assigned to them in the Stock Sale Agreement.
14. This letter agreement constitutes the entire agreement
and supersedes all prior agreements and undertakings, both written and oral,
among the parties hereto with respect to the subject matter hereof.
Please indicate your agreement with this letter agreement by
signing this letter agreement in the space provided below.
THE BROKEN HILL PROPRIETARY
COMPANY LIMITED
By
---------------------------
Name:
Title:
ACCEPTED AND AGREED TO THIS ___
DAY OF ________, 1998.
TESORO PETROLEUM CORPORATION
By
----------------------
Name:
Title:
<PAGE> 63
EXHIBIT 1.1(b)
ENVIRONMENTAL AGREEMENT
BY AND AMONG
BHP HAWAII INC.,
A HAWAII CORPORATION,
BHP PETROLEUM PACIFIC ISLANDS INC.,
A HAWAII CORPORATION,
AND
TESORO PETROLEUM CORPORATION,
A DELAWARE CORPORATION
DATED AS OF __________ __, 1998
<PAGE> 64
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS...................................................................................................1
DEFINITIONS................................................................................................1
Certain Defined Terms.............................................................................1
Other Defined Terms...............................................................................4
REPRESENTATIONS AND WARRANTIES OF BHP HAWAII...............................................................4
Notices...........................................................................................4
Actions...........................................................................................5
Permits...........................................................................................5
No Upgrades.......................................................................................5
Compliance With Laws and Permits..................................................................5
CERTAIN COVENANTS..........................................................................................6
Acknowledgements by Buyer.........................................................................6
INDEMNITIES................................................................................................6
Survival of Representations and Warranties........................................................6
Indemnification by BHP Hawaii.....................................................................6
Indemnification By Buyer..........................................................................8
Limitations on Indemnification...................................................................10
General Indemnification Provisions...............................................................11
Defense and Implementation of Indemnity Obligations..............................................13
Waiver and Release...............................................................................14
GENERAL PROVISIONS........................................................................................14
Notices..........................................................................................14
Disclosure.......................................................................................16
Interpretation...................................................................................16
Severability.....................................................................................16
Assignment.......................................................................................17
No Third-Party Beneficiaries.....................................................................17
Amendment........................................................................................17
No Other Remedies................................................................................17
Further Assurances...............................................................................17
Mutual Drafting..................................................................................18
Governing Law....................................................................................18
</TABLE>
i
<PAGE> 65
TABLE OF CONTENTS
(continued)
<TABLE>
Page
----
<S> <C>
Dispute Resolution...............................................................................18
Consent to Jurisdiction; Waivers.................................................................18
Waiver of Jury Trial.............................................................................18
Counterparts.....................................................................................18
Entire Agreement.................................................................................19
</TABLE>
ii
<PAGE> 66
ENVIRONMENTAL AGREEMENT
ENVIRONMENTAL AGREEMENT, dated as of __________ __, 1998, by
and among BHP Hawaii Inc., a Hawaii corporation ("BHP Hawaii"), BHP Petroleum
Pacific Islands Inc., a Hawaii corporation ("BHP Pacific"), and Tesoro Petroleum
Corporation, a Delaware corporation ("Buyer").
RECITALS
A. The parties have entered into a Stock Sale Agreement, dated
as of March 18, 1998 ("Stock Sale Agreement"), pursuant to which Buyer has
agreed to purchase and BHP Hawaii and BHP Pacific have agreed to sell, all the
outstanding shares of capital stock of BHP Petroleum Americas Refining Inc., a
Hawaii corporation ("BHP Refining"), and BHP Petroleum South Pacific Inc., a
California corporation ("BHP South Pacific").
B. The Stock Sale Agreement provides that the parties will
enter into this Agreement at the Closing and that this Agreement shall set forth
the sole and exclusive rights, obligations, representations, warranties,
covenants and indemnities of the parties hereto regarding any matters arising
under or relating to Environmental Laws, Environmental Permits, Hazardous
Material or Releases of Hazardous Material.
In consideration of the premises and the respective
representations, warranties and agreements herein contained, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such definitions to be
equally applicable to both the singular and plural forms of the terms defined):
"Action" means any actual or threatened claim, action, suit or
arbitration, or any other proceeding, in each instance by or before any
Governmental Authority or any non-governmental arbitration, mediation or
non-judicial dispute resolution body.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations under the Securities Exchange Act of 1934, as amended.
"Agreement" means this Environmental Agreement, including all
schedules hereto, as it may be further amended from time to time as herein
provided.
"Agreement Date" means __________ ___, 1998.
"BHP" means The Broken Hill Proprietary Company Limited,
A.C.N. 004 028 077, an Australian corporation.
<PAGE> 67
"BHP Hawaii" means BHP Hawaii Inc., a Hawaii corporation.
"BHP Pacific" means BHP Petroleum Pacific Islands Inc., a
Hawaii corporation.
"BHP Refining" means BHP Petroleum Americas Refining Inc., a
Hawaii corporation.
"BHP South Pacific" means BHP Petroleum South Pacific Inc., a
California corporation.
"Books and Records" means all of the following which pertain
to environmental matters arising from or associated with the conduct of the
Business: books, records, manuals and other materials, accounting books and
records, continuing property records for property, plant and equipment, files,
computer tapes, discs, other storage media, and records, correspondence, lists
of customers and suppliers, distribution lists, photographs, production data,
purchasing materials and records, manufacturing and quality control records and
procedures, blueprints, research and development files, data and laboratory
books, media materials and plates, litigation files, deeds, easements and other
instruments relating to the Real Property, Environmental Permits and all
documents relating to Environmental Claims.
"Business" means, collectively, (a) BHP Refining's business of
manufacturing, refining, marketing, selling and distributing petroleum products
within the State of Hawaii, (b) BHP Refining's business of marketing and selling
petroleum products outside of the State of Hawaii, and (c) BHP South Pacific's
business of selling and distributing petroleum products in the American Samoa
territory.
"Buyer Indemnified Parties" has the meaning specified in
Section 4.2.
"Buyer Loss" has the meaning specified in Section 4.2.
"Campbell Industrial Park" means the Campbell Industrial Park
located on Barbers Point, Oahu, Hawaii.
"Closing" shall have the meaning given in the Stock Sale
Agreement.
"Closing Date" shall have the meaning given in the Stock Sale
Agreement.
"Costs" means any damages, losses, fines, penalties, awards,
assessments, charges, fees and expenses related thereto (including related costs
of defense and reasonable attorneys' fees and experts' fees and disbursements).
"Data Room" means those documents identified and collected in
a "data room" established by BHP Hawaii and made available for Buyer's
inspection and copying at BHP's Hawaii's offices in Honolulu prior to the
Agreement Date.
2
<PAGE> 68
"Environmental Claims" means any and all Actions, claims,
demands, demand letters, information requests, liens, investigations,
proceedings or Governmental Orders arising out of any violation or alleged
violation of any Environmental Law or Environmental Permit, including (i) any
and all Environmental Claims by Governmental Authorities for enforcement,
cleanup, removal, responses, remedial or other actions or damages pursuant to
any applicable Environmental Law, and (ii) any and all Environmental Claims by
any third party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Hazardous Materials or arising
from alleged injury or threat of injury to health, safety or the environment.
"Environmental Laws" means all laws, regulations, ordinances,
codes, policies, Governmental Orders and consent decrees, and any judicial and
administrative interpretations thereof, of Governmental Authorities, or any
common law doctrines, in effect from time to time relating to pollution or
protection of the environment and natural resources, including those relating to
emissions, discharges, Releases or threatened Releases of Hazardous Material
into the environment (including ambient air, surface water, groundwater or
land), or otherwise relating to the manufacture, processing, distribution, use,
possession, treatment, storage, disposal, transport or handling of Hazardous
Material.
"Environmental Permits" means all permits, approvals,
identification numbers, licenses and other authorizations required under any
applicable Environmental Law.
"EPA" means the U.S. Environmental Protection Agency.
"Governmental Authority" means any international, national,
Federal, state, municipal or local government, governmental authority,
regulatory or administrative agency, governmental commission, department, board,
bureau, agency or instrumentality, court, tribunal, arbitrator or arbitral body.
"Governmental Order" means any order, writ, rule, judgment,
injunction, decree, stipulation, determination, award, citation or notice of
violation entered by or with any Governmental Authority.
"Hawaii State Superfund Law" means the Hawaii Environmental
Response Law, also known as the Hawaii State Superfund Law at Chapter 128D of
the Hawaii Revised Statutes.
"Hazardous Material" means any substance, pollutant, material
or waste which is regulated or shall become regulated under any Environmental
Law, including any such materials regulated as hazardous or toxic substances or
material, and asbestos, petroleum and any fraction or product of crude oil or
petroleum.
"Honolulu Harbor State Superfund Proceeding" means any Action
or Environmental Claim arising from the Iwilei Unit of the Honolulu Harbor State
Superfund Site, including pending, threatened and actual claims of the Hawaii
Department of Health ("HDOH") under the Hawaii State Superfund Law for Response
Actions as part of HDOH's current regulatory efforts to address regional
groundwater contamination and such claims of EPA under the Comprehensive
Environmental Response Compensation and Liability Act, 42 U.S.C.
3
<PAGE> 69
Section 9601 et seq., as amended, at such location and any third party claims
arising from conditions at such location.
"Material Adverse Effect" means any event(s) with respect to,
change(s) in, or effect(s) on, Subsidiary or the Business which, individually or
in the aggregate, is reasonably likely to be adverse to the Business,
operations, results of operations, assets or properties, liabilities or
financial condition of Subsidiary, in a manner that is material to Subsidiary
taken as a whole.
"Person" shall have the meaning given in the Stock Sale
Agreement.
"Real Property" shall have the meaning given in the Stock Sale
Agreement.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment (including the abandonment or discarding of
barrels, containers and other closed receptacles containing any Hazardous
Material).
"Response Actions" shall mean any investigation, monitoring,
abatement, removal, decontamination, detoxification, remediation, cleanup or
disposal of Hazardous Materials.
"Seller Indemnified Parties" has the meaning specified in
Section 4.3.
"Seller Loss" has the meaning specified in Section 4.3.
"Stock Sale Agreement" means the Stock Sale Agreement, dated
as of March 18, 1998, by and among BHP Hawaii, BHP Pacific and Buyer, including
all schedules and exhibits thereto, as it may be further amended from time to
time as therein provided.
"Subsidiary" means, collectively and taken as a whole, BHP
Refining, BHP South Pacific and Smiley's Super Service Inc., a Hawaii
corporation.
1.2 OTHER DEFINED TERMS. In addition to the terms defined in
Section 1.1, certain other terms are defined elsewhere in this Agreement and,
whenever such terms are used in this Agreement, they shall have their respective
defined meanings.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF BHP HAWAII
Except as set forth in Schedule I, BHP Hawaii represents and
warrants to Buyer as follows:
2.1 NOTICES.
4
<PAGE> 70
(a) Subsidiary has not received any written notice from any
Person that Subsidiary is in violation of any Environmental Law or any of its
Environmental Permits arising out of Subsidiary's ownership, use or operation
of, or the condition of, its assets or properties or Subsidiary's operation of
the Business, except for any such violation not reasonably likely to result in a
Buyer Loss in excess of $1,000,000 in the aggregate with Buyer Losses under
subsection 2.1(a) and Sections 2.2, 2.3 and 2.5.
(b) Subsidiary has not received any written notice from any
Person that Subsidiary has been named as a "Potentially Responsible Party" with
respect to any designated "Superfund" site under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. Sections 9601 et
seq., as amended, the Hawaii State Superfund Law, or any similar state
"Superfund" statute.
2.2 ACTIONS. There are no pending or, to the knowledge of BHP
Hawaii, threatened Environmental Claims with respect to Subsidiary's compliance
with Environmental Laws or its Environmental Permits arising out of Subsidiary's
ownership, use or operation of, or the condition of, its assets or properties or
Subsidiary's operation of the Business, that, in each case, is reasonably likely
to result in a Buyer's Loss in excess of $1,000,000 in the aggregate with Buyer
Losses under subsection 2.1(a) and Sections 2.2, 2.3 and 2.5.
2.3 PERMITS. Since January 1, 1994, Subsidiary has not
received any written notice from any Person that Subsidiary does not have, or is
not in compliance with, all Environmental Permits required by Environmental Laws
for the ownership, use or operation by Subsidiary of its assets or properties or
the operation of the Business by Subsidiary (other than any Environmental Permit
the absence of which is not reasonably likely to result in a Buyer Loss in
excess of $1,000,000 in the aggregate with Buyer Losses under subsection 2.1(a)
and Sections 2.2, 2.3 and 2.5, or any written notice the subject of which has
since been resolved, satisfied or complied with).
2.4 NO UPGRADES. To the knowledge of BHP Hawaii, no
representations or promises have been made to any Governmental Authority by or
on behalf of BHP Hawaii or Subsidiary to install pollution control equipment or
to take Response Actions at its refinery as part of the negotiations or
potential litigation with EPA over the June 24, 1997 Notice of Violation (Docket
No. EPCRA ss.304-97-001 and CERCLA Section 103-97-001), the June 24, 1997 Notice
of Violation (Docket No. OPA-97-001) or August 5, 1996 Finding of Violation
(Docket No. 9-96-10) under Section 113(a)(3) of the Clean Air Act, 42 U.S.C.
Sections 7410 et seq.
2.5 COMPLIANCE WITH LAWS AND PERMITS. To the knowledge of BHP
Hawaii, and except as specifically disclosed in documents contained in the Data
Room or as disclosed in three environmental audits discussed with Buyer's
outside environmental counsel on February 13, 1998 and February 25, 1998 (ENSR's
May 1996 "Comprehensive Air Quality Compliance Audit"; Environmental
Technologies International's January 1994 audit for BHP Pacific,American Samoa
Operations; Dan Dagdagen's September 1997 hazardous and solid waste and
hazardous materials audit of the BHP Refining refinery), neither BHP Hawaii nor
Subsidiary has determined, after consultation with counsel, that Subsidiary as
of the Agreement
5
<PAGE> 71
Date is in violation of any Environmental Law or Environmental Permit, which
violation is reasonably likely to result in a Buyer's Loss in excess of
$1,000,000 in the aggregate with Buyer Losses under subsection 2.1(a) and
Sections 2.2, 2.3 and 2.5.
ARTICLE III
CERTAIN COVENANTS
3.1 ACKNOWLEDGEMENTS BY BUYER. In order to induce BHP Hawaii
and BHP Pacific to enter into and perform this Agreement and the Stock Sale
Agreement, Buyer acknowledges and agrees with BHP Hawaii and BHP Pacific as
follows:
(a) To the knowledge of Buyer, on the Agreement Date, BHP
Hawaii's representations and warranties made in Article II are true and correct.
(b) Buyer has concluded those inspections relating to the
Business, and the Real Property in particular, including a review of documents
in the Data Room, and an analysis of any applicable records of any Governmental
Authority having or asserting jurisdiction over BHP Hawaii, BHP Pacific,
Subsidiary or any of their assets or properties, that Buyer deemed appropriate
prior to Closing. Nothing in this subsection 3.1(b) shall limit Buyer's right to
conduct additional investigations relating to the Business and the Real Property
after Closing.
(c) THE REPRESENTATIONS AND WARRANTIES SET FORTH IN ARTICLE II
OF THIS AGREEMENT CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND
WARRANTIES OF BHP HAWAII, BHP PACIFIC, SUBSIDIARY, OR ANY OF THEIR AFFILIATES,
EMPLOYEES, REPRESENTATIVES OR AGENTS TO BUYER WITH RESPECT TO THE SUBJECT MATTER
OF THIS AGREEMENT. THERE ARE NO REPRESENTATIONS, WARRANTIES, COVENANTS,
UNDERSTANDINGS OR AGREEMENTS, ORAL OR WRITTEN, IN RELATION THERETO BETWEEN THE
PARTIES OTHER THAN THOSE INCORPORATED HEREIN.
ARTICLE IV
INDEMNITIES
4.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of BHP Hawaii in Article II shall survive for a
period of ten years from the Closing.
4.2 INDEMNIFICATION BY BHP HAWAII. Except as otherwise limited
by this Article IV, BHP Hawaii shall indemnify, defend and hold harmless Buyer
and its Affiliates, stockholders, officers, directors, employees, subsidiaries,
successors and assigns (collectively, the "Buyer Indemnified Parties") from and
against, and pay or reimburse the Buyer Indemnified Parties for, any and all
losses, damages, claims, costs and expenses (other than any compensation paid or
payable to any employee of Buyer for work performed in satisfaction of or in
connection with Buyer's obligations under this Agreement), interest, awards,
judgments, fines and penalties
6
<PAGE> 72
(including reasonable legal costs and expenses and environmental response costs)
suffered or incurred by them (hereinafter a "Buyer Loss") arising out of or
resulting from the following (collectively, "Environmental Agreement Claims"):
(a) the inaccuracy of any representation or warranty of BHP
Hawaii set forth in Article II;
(b) any other breach or violation of this Agreement by BHP
Hawaii or BHP Pacific;
(c) except for Buyer Losses arising out of the Honolulu Harbor
State Superfund Proceeding, any Environmental Claim as it relates to or arises
from (x) Subsidiary's pre-Closing operations on, and/or Subsidiary's pre-Closing
use, operation, ownership, lease, possession, control, occupancy or maintenance
of, any real property, (y) the condition, before the Closing, of any such real
property or the structures or fixtures thereon; or (z) Subsidiary's operation of
the Business before the Closing (collectively, "Pre-Closing Environmental
Losses"); which Pre-Closing Environmental Losses shall include Buyer Losses
arising out of or resulting from:
(i) the presence of any Hazardous Material or other substances
or matter in the fixtures, structures, soils, groundwater, surface
water or air on, under or about or migrating from the assets and
properties currently or formerly used, operated, owned, leased,
controlled, possessed, occupied or maintained by Subsidiary and any
such Hazardous Material or other substances migrating to adjoining or
other properties;
(ii) the use, generation, production, manufacture, treatment,
storage, disposal, Release, threatened Release, discharge, spillage,
loss, seepage or filtration of Hazardous Materials or other substances
or matter, by Subsidiary or its employees, successors, agents, assigns,
or contractors from, on, under or about such assets or properties or
the presence therein or thereunder of any underground or above-ground
tanks for the storage of fuel oil, gasoline and/or other petroleum
products or by-products or other Hazardous Material;
(iii) the violation or noncompliance or alleged violation or
noncompliance by Subsidiary or its employees, successors, agents,
assigns or contractors of any Environmental Law or Environmental Permit
arising from or related to the operation of the Business or the use,
operation, ownership, lease, possession, control, occupancy,
maintenance or condition of any of such assets or properties;
(iv) the failure by Subsidiary or its employees, successors,
agents, assigns or contractors to have obtained or maintained in effect
any Environmental Permit required by any Environmental Law as a result
of the operation of the Business or the use, operation, ownership,
lease, control, possession, occupancy, maintenance or condition of such
assets or properties;
(v) any and all claims arising out of any of the matters
described in this subsection 4.2(c);
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(vi) any and all claims by Governmental Authorities for
enforcement, cleanup, removal, treatment, response, natural resources,
remedial or other actions or damages arising out of any of the matters
described in this subsection 4.2(c);
(vii) any and all claims by any third Person seeking damages,
contribution, indemnification, cost recovery, compensation or
injunctive relief arising from any of the matters described in this
subsection 4.2(c); and
(viii) any and all remedial work and other corrective action
(including investigation or monitoring of site conditions, or any
clean-up, containment, restoration or removal) taken by, or the costs
of which are imposed upon, any Buyer Indemnified Party arising from the
matters described in this subsection 4.2(c);
(d) any Environmental Claim as it relates to or arises from
(i) the operations of Gasco, Inc., a Hawaii corporation ("Gasco"); (ii) Gasco's
use, operation, ownership, lease, possession, control, occupancy or maintenance
of any real property or (iii) the condition of any such real property;
(e) any Environmental Claim as it relates to or arises from
(i) the operation of PRI Northwest, Inc. or PRI Northwest, Inc.'s use,
operation, lease, possession, control, or occupancy or maintenance of any real
property or (ii) the condition of any such real property, including any
liability from the Port of Tacoma/Commencement Bay Federal Superfund Site; and
(f) any Environmental Claim as it arises out of the Honolulu
Harbor State Superfund Proceeding.
Notwithstanding the foregoing, in no event shall the indemnity obligations of
BHP Hawaii under this Agreement extend to any (i) Buyer Loss caused by the
discharge of any Hazardous Materials or other substances, or by any acts or
omissions, by Buyer after the Closing Date, or (ii) Buyer Loss associated with
the installation of or upgrade to pollution control equipment, process
equipment, above ground or underground tanks, or other equipment, except to the
extent that a that such installations or upgrades must be undertaken to achieve
compliance with the requirements of any Environmental Law or Environmental
Permit in effect and enforceable against BHP Hawaii prior to Closing. The
immediately preceding sentence does not limit Buyer's rights under Article II or
subsection 4.2(a) or 4.2(b).
4.3 INDEMNIFICATION BY BUYER. Except as otherwise limited by
this Article IV, Buyer shall indemnify, defend and hold harmless BHP Hawaii, BHP
Pacific and their Affiliates, shareholders, officers, directors, employees,
subsidiaries, successors and assigns (collectively, the "Seller Indemnified
Parties") from and against, and pay or reimburse the Seller Indemnified Parties
for, any and all losses, damages, claims, costs and expenses (other than any
compensation paid or payable to any employee of BHP Hawaii for work performed in
satisfaction of or in connection with BHP Hawaii's obligations under this
Agreement), interest, awards, judgments, fines and penalties (including
reasonable legal costs and expenses and environmental response costs) actually
suffered or incurred by them (hereinafter a "Seller Loss") arising out of or
resulting from:
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(a) the inaccuracy of any representation or warranty of Buyer
set forth in this Agreement;
(b) any breach or violation of this Agreement by Buyer; and
(c) except for BHP Hawaii's indemnification obligations in
Section 4.2 (which indemnification obligations expire as provided in subsection
4.4(a) and are limited in amount as further provided in subsections 4.4(b) and
(c)), any Environmental Claim as it relates to or arises from (x) Subsidiary's
former or current operations on, and/or Subsidiary's former or current use,
operation, ownership, lease, possession, control, occupancy or maintenance of,
any real property, whether before or after the Closing; (y) the condition,
whether before or after the Closing, of any such real property or the structures
or fixtures thereon; or (z) Subsidiary's or Buyer's operation of the Business,
whether before or after the Closing (collectively, "Covered Environmental
Losses"); which Covered Environmental Losses shall include Seller Losses arising
out of or resulting from:
(i) the presence of any Hazardous Material or other substances
or matter in the fixtures, structures, soils, groundwater, surface
water or air on, under or about or migrating from the assets and
properties currently or formerly used, operated, owned, leased,
controlled, possessed, occupied or maintained by Subsidiary or Buyer,
and any such Hazardous Material or other substances migrating to
adjoining or other properties;
(ii) the use, generation, production, manufacture, treatment,
storage, disposal, Release, threatened Release, discharge, spillage,
loss, seepage or filtration of Hazardous Materials or other substances
or matter, by Subsidiary or Buyer or their employees, successors,
agents, assigns, or contractors from, on, under or about such assets or
properties or the presence therein or thereunder of any underground or
above-ground tanks for the storage of fuel oil, gasoline and/or other
petroleum products or by-products or other Hazardous Material;
(iii) the violation or noncompliance or alleged violation or
noncompliance by Subsidiary or Buyer or their employees, successors,
agents, assigns or contractors of any Environmental Law or
Environmental Permit arising from or related to the operation of the
Business or the use, operation, ownership, lease, possession, control,
occupancy, maintenance or condition of any of such assets or
properties;
(iv) the failure by Subsidiary or Buyer or their employees,
successors, agents, assigns or contractors to have obtained or
maintained in effect any Environmental Permit required by any
Environmental Law as a result of the operation of the Business or the
use, operation, ownership, lease, control, possession, occupancy,
maintenance or condition of such assets or properties;
(v) any and all claims arising out of any of the matters
described in this subsection 4.3(c); and
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(vi) any and all claims by Governmental Authorities for
enforcement, cleanup, removal, treatment, response, natural resources,
remedial or other actions or damages arising out of any of the matters
described in this subsection 4.3(c);
(vii) any and all claims by any third Person seeking damages,
contribution, indemnification, cost recovery, compensation or
injunctive relief arising from any of the matters described in this
subsection 4.3(c); and
(viii) any and all remedial work and other corrective action
(including investigation or monitoring of site conditions, or any
clean-up, containment, restoration or removal) taken by, or the costs
of which are imposed upon, any Seller Indemnified Party arising from
the matters described in this subsection 4.3(c).
This subsection 4.3(c) shall not limit Buyer's rights with respect to Section
4.18 of the Stock Sale Agreement.
4.4 LIMITATIONS ON INDEMNIFICATION.
(a) Time Limits. With respect to BHP Hawaii's indemnification
obligations under Section 4.2, Buyer must give BHP Hawaii written notice of
Environmental Agreement Claims (describing the basis for each such claim) on or
before ten years from the Closing Date. BHP Hawaii shall have no obligation to
indemnify, defend or hold harmless Buyer Indemnified Parties for such
Environmental Agreement Claims unless and until such written notice is provided
by Buyer to BHP Hawaii. BHP Hawaii's indemnification obligations under Section
4.2 shall terminate ten years after the Closing Date, except for claims so
asserted prior to that date. An Environmental Agreement Claim shall be deemed to
be asserted when notice of such claim (describing the basis for such claim) is
given to BHP Hawaii pursuant to Section 5.1. Notwithstanding anything to the
contrary in this subsection, BHP Hawaii's obligations under subsections 4.2(d),
(e) and (f) shall not be subject to this ten year limit.
(b) Maximum Liability. BHP Hawaii's obligations to Buyer
Indemnified Parties under this Agreement shall be subject to the following
additional limitations:
(i) in no event shall BHP Hawaii's obligations to Buyer
Indemnified Parties under subsection 4.2(a) exceed a total of $
5,000,000;
(ii) in no event shall BHP Hawaii's obligations under 4.2(c)
exceed a total of $9,500,000, after allocation to BHP and Buyer as
specified in subsection 4.4(c).
Notwithstanding anything to the contrary in this subsection 4.4(b), BHP Hawaii's
obligations under subsections 4.2(d), 4.2(e), and 4.2(f) shall not be subject to
this maximum liability.
(c) Cost Sharing. Subject to subsections 4.4(a) and
4.4(b)(ii), necessary and reasonable Costs to satisfy Environmental Agreement
Claims under Section 4.2(c) shall be allocated between and paid by BHP Hawaii
and Buyer as follows:
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(i) BHP Hawaii shall be responsible for 100% of the first
$5,000,000 of such Costs, and
(ii) BHP Hawaii shall be responsible for 75% and Buyer
responsible for 25% of the next $6,000,000 of such Costs.
Notwithstanding anything to the contrary in this subsection 4.4(c), BHP Hawaii's
obligations under subsections 4.2(d), 4.2(e), and 4.2(f) shall not be subject to
this cost sharing.
(d) No Admission or Assumption of Liability. The undertaking
and performance of indemnification obligations respecting Buyer Losses and
Seller Losses shall not constitute and shall not be used as evidence of any
admission or assumption of any liability to any third party (including any
Governmental Authority) by either Buyer or BHP Hawaii.
(e) Insurance. The liability of any Indemnitor with respect to
any Losses shall be determined on a basis that is net of the amount of any
proceeds recovered by Indemnitee from its insurers after deducting the costs of
processing the insurance claim and deducting the Losses not covered by the
indemnity obligations. This subsection 4.4(e) shall not require Indemnitee to
pursue indemnity or defense obligations from any insurer.
4.5 GENERAL INDEMNIFICATION PROVISIONS.
(a) For the purposes of this Section 4.5, the term
"Indemnitee" shall refer to the Person or Persons indemnified, or entitled, or
claiming to be entitled, to be indemnified, pursuant to the provisions of
Sections 4.2 and 4.3, as the case may be; the term "Indemnitor" shall refer to
the Person having the obligation to indemnify pursuant to such provisions; and
"Losses" shall refer to Seller Losses or Buyer Losses, as the case may be.
(b) Within 30 days following the determination thereof, an
Indemnitee shall give Indemnitor written notice of any matter which an
Indemnitee has determined has given or could give rise to a right of
indemnification under this Agreement (regardless of whether a claim for
indemnification otherwise would be prohibited by this Agreement), stating the
nature of the matter that is subject to the indemnity, the costs incurred, or an
estimate of the costs that may be incurred, and the method for their
computation, all with reasonable particularity and containing a reference to the
provisions of this Agreement in respect of which such right of indemnification
is claimed or arises.
(c) Indemnitor shall have four months from receipt of the
claim to determine whether it falls within its indemnity obligations under this
Agreement and to notify Indemnitee in writing of its acceptance or rejection of
the indemnity request. During that four month period, Indemnitor shall have all
rights of access to documents and information and rights of consultation and
approval as described in subsections 4.5(f), 4.6(b) and 4.6(c) herein. During
such period, Indemnitee shall also cooperate to the fullest extent reasonable
(subject to protection of applicable privileges) in providing additional
information, including interviews with Indemnitee's employees, to enable
Indemnitor to reasonably determine whether the claim falls within the
Indemnitor's indemnity obligations under this Agreement. If Indemnitor rejects
the indemnity request or fails to accept or reject it within such four month
time period, Indemnitee
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may seek relief through arbitration in accordance with Section 13.13 of the
Stock Sale Agreement; provided, however, that Indemnitor may not challenge
actions taken and expenses incurred in good faith by Indemnitee during or
pending Indemnitor's acceptance or rejection of an indemnity obligation during
this four month period, or during the resolution of any dispute with regard to
an indemnity obligation, so long as Indemnitee has made good faith efforts to
provide Indemnitor during that time period with its rights as described in
subsections 4.5(f), 4.6(b) and 4.6(c).
(d) If Indemnitor accepts the indemnity claim in writing, then
Indemnitee shall bill Indemnitor quarterly for the costs of indemnified
obligations. Each bill shall include copies of all relevant invoices, bills, a
description of the work done and any other documents supporting the invoice.
Indemnitee shall respond promptly to Indemnitor's reasonable requests, made
within 14 days of receiving the initial invoice submittal, for additional
information regarding the reasons for and scope of the work and of the costs
incurred. Indemnitor shall tender payment to Indemnitee within forty-five (45)
days of receipt of a complete, adequately supported invoice package with the
response to Indemnitor's information request. If Indemnitor fails to tender
payment within such forty-five (45) day period, the amount billed will become
overdue and shall bear interest at the rate set forth in subsection 4.5(e).
(e) In any arbitration proceeding under Section 13.13 of the
Stock Sale Agreement, the arbitrators shall have the right in their sole
discretion to award to Indemnitee the payment of interest as appropriate under
the circumstances for any claims which fall under Indemnitor's indemnity
obligations and for which Indemnitor has refused to pay. In no circumstance may
any interest so awarded exceed five points over the London Interbank Offered
Rate as published in The Wall Street Journal as of the date of the arbitrators'
award.
(f) From the Closing Date through the later to occur of (i)
the date which is ten years from the Closing Date and (ii) two years after which
all Environmental Agreement Claims have been completely resolved or settled, but
subject to any rights of third Persons, upon reasonable notice and solely for
the purpose of responding to Environmental Claims or Response Actions,
Indemnitee or Indemnitor, as applicable, shall, subject to applicable privileges
(i) afford the officers, employees and authorized agents and representatives of
Indemnitor or Indemnitee, as applicable, reasonable access during normal
business hours to the offices, properties and Books and Records of Subsidiary
and (ii) furnish to the officers, employees and authorized agents and
representatives of Indemnitor or Indemnitee, as applicable, such additional
financial and operating data and other information regarding Environmental
Claims (or legible copies thereof) as Indemnitor or Indemnitee, as applicable,
may from time to time reasonably request; provided, however, that such
investigation shall not unreasonably interfere with any of the businesses or
operations of Indemnitee or Indemnitor, as applicable.
(g) Buyer shall cooperate with BHP Hawaii to allow BHP Hawaii
to satisfy its indemnity obligations under subsections 4.2(d), 4.2(e), and
4.2(f), including making available relevant documents and other information
described in subsection 4.5(f); allowing access to real property, structures or
fixtures thereon; allowing reasonable access for environmental investigations;
and allowing reasonable access to employees of the Business for the purpose of
providing information, giving interviews, participating in discussions, and
similar purposes
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necessary for BHP Hawaii to discharge its indemnity obligations under
subsections 4.2(d), 4.2(e), and 4.2(f).
4.6 DEFENSE AND IMPLEMENTATION OF INDEMNITY OBLIGATIONS.
(a) Unless otherwise set forth in and subject to the other
conditions of this Section 4.6, with respect to all environmental matters for
which there is a right of indemnification under this Agreement (except for
claims arising out of the Honolulu Harbor State Superfund Proceeding, the
operations of Gasco, Inc. or PRI Northwest, Inc., as provided in subsections
4.2(d), 4.2(e) and 4.2(f)), Buyer shall be responsible for performing the
actions required to defend, satisfy or settle the matter giving rise to the
indemnity obligation.
(b) Where an indemnification claim has been accepted pursuant
to this Agreement or where Indemnitor is still determining whether the claim
falls within its indemnity obligations during the first four months after
presentation of the indemnity request, Indemnitor and Indemnitee shall cooperate
fully with each other in the defense, development and/or implementation of the
actions that arise from such obligation. No matter may be settled by Indemnitor
or Indemnitee without the written consent of the other. The consent of
Indemnitee or Indemnitor, as applicable, shall not be unreasonably withheld.
(c) Where Indemnitor has accepted the indemnity claim pursuant
to this Agreement, or where Indemnitor is still determining in the four-month
period after presentation of the claim whether it falls within its indemnity
obligations, Indemnitee shall also (i) provide reasonable advance notice to, an
opportunity for review and consultation with, and a right of approval by
Indemnitor of any anticipated Response Actions to comply with Environmental
Permits or Environmental Laws, or of any offer to settle any Environmental
Claims; (ii) concurrently provide Indemnitor with copies of all correspondence
and other documents (including without limitation inspection reports, citations
and notices of violation) exchanged with any Governmental Authority or other
third person regarding Environmental Claims; and (iii) provide Indemnitor an
opportunity to observe and participate in negotiations with any Governmental
Authority over Response Actions or other satisfaction of Environmental Claims.
Indemnitor's approval of Indemnitee's actions shall not be unreasonably
withheld. BHP Hawaii shall have the sole responsibility for undertaking all
Response Actions arising out of the Honolulu Harbor State Superfund Proceeding,
and for responding to any Environmental Claim relating to the subject of
subsection 4.2(d) or 4.2(e).
(d) In the event that Indemnitor accepts in writing its
obligation to indemnify Indemnitee, then Indemnitor shall be entitled, at its
option and subject to subsection 4.6(b) above, to assume and control the defense
of such matter, at its expense and through counsel of its reasonable choice if
it gives written notice to Indemnitee within 60 calendar days of the receipt of
notice of such matter from Indemnitee of its intention to do so. In such event,
Indemnitee shall cooperate with Indemnitor in such defense and make materials
and information in its possession or under its control relating thereto as is
reasonably required by Indemnitor. Similarly, in the event Indemnitee is
conducting the defense against any such matter, Indemnitor shall cooperate with
Indemnitee in such defense and make available to it all such witnesses, records,
materials and information in its possession or under its control relating
thereto as is
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reasonably required by Indemnitee. In the event that a potential indemnification
liability may exceed the maximum liability cap under subsection 4.4(b), Buyer
and BHP Hawaii will meet and confer to determine which party is the most
appropriate to assume the defense of the matter, given the potential exposure
and funds available under the cap.
(e) BHP Hawaii's rights under subsections 4.6(b), (c) and (d)
to access, approval of settlement, opportunity for consultation and review,
rights to copies of documents, and right to control the defense, shall terminate
once the maximum liability cap applicable to its indemnity obligations under
subsection 4.4(b) has been exceeded.
(f) Other than Indemnitor's and Indemnitee's obligation to
generally cooperate with each other in the defense of indemnity claims, Buyer
shall have no other rights (including no right to select counsel, approve
settlement, consult with BHP Hawaii or receive and review documents) in BHP
Hawaii's defense of indemnity claims arising from its obligation under
subsection 4.2(d), 4.2(e), and 4.2(f), which defense shall be conducted by BHP
Hawaii in its sole discretion.
4.7 WAIVER AND RELEASE. Except as provided in this Agreement,
Buyer, on behalf of itself and any Buyer Indemnified Party, and Seller, on
behalf of itself and any Seller Indemnified Party, hereby forever waives,
relieves, releases and discharges the other and their successors and assigns
from any and all rights, Liabilities, Actions (including future Actions) and
Buyer Losses and Seller Losses, as applicable, whether known or unknown at the
Closing Date, which each has or incurs, or may in the future have or incur,
arising out of or related to the Environmental Claims, Environmental Laws and
Environmental Permits. Without limiting the foregoing, Buyer and Seller hereby
forever waives, relieves, releases and discharges the other and the other's
Indemnified Parties, and their successors and assigns from any and all claims
for cost recovery or contribution under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), the Resource
Conservation and Recovery Act ("RCRA") and any state counterparts thereto, as
they may be amended from time to time, and under common law doctrines, including
without limitation, nuisance, waste, trespass and strict liability arising out
of or relating to Environmental Claims, Environmental Law and Environmental
Permits. Buyer, on behalf of itself and all Buyer Indemnified Parties, and
Seller, on behalf of itself and all Seller Indemnified Parties, recognize that
there is a risk arising out of the uncertainty of determining the nature and
scope of any pre-Closing Releases of Hazardous Materials. Buyer and Seller
acknowledge that this release is a material part of the consideration for
entering into the transactions described in the Stock Sale Agreement.
ARTICLE V
GENERAL PROVISIONS
5.1 NOTICES. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered or mailed if delivered personally or
mailed by registered or certified mail (postage prepaid, return receipt
requested), or sent by facsimile transmission, (confirmation received) to the
parties at the following addresses and facsimile transmission numbers (or at
such other address or
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number for a party as shall be specified by like notice), except that notices
after the giving of which there is a designated period within which to perform
an act and notices of changes of address or number shall be effective only upon
receipt:
(a) if to BHP Hawaii and BHP Pacific:
BHP Hawaii Inc.
733 Bishop Street
P.O. Box 3379
Honolulu, Hawaii 96842
U.S.A.
Attention: President
Telecopy No.: (808) 547-3091
Telephone No.: (808) 547-3111
with copies to:
BHP Petroleum Pty Ltd.
GPO Box 1911 R
Melbourne, Victoria 3001
Australia
Attn: Group General Manager,
Finance and Administration
Telecopy No.: 613-9652-6528
Telephone No.: 613-9652-6820
Orrick, Herrington & Sutcliffe LLP
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, California 94111
U.S.A.
Attention: Richard V. Smith, Esq.
Telecopy No.: (415) 773-5759
Telephone No.: (415) 392-1122
(b) If to Buyer:
Tesoro Petroleum Corporation
8700 Tesoro Drive
San Antonio, Texas 78217
U.S.A.
Attention: Corporate Secretary
Telecopy No.: (210) 283-2400
Telephone No.: (210) 283-2248
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with a copy to:
McCutchen, Doyle, Brown & Enersen, LLP
355 South Grand Avenue, Suite 4400
Los Angeles, California 90071-1560
U.S.A.
Attention: James J. Dragna, Esq.
Telecopy No.: (213) 680-6499
Telephone No.: (213) 680-6436
5.2 DISCLOSURE. Disclosure of any fact or item in any section
of Schedule 1 shall, should the existence of the fact or item or its contents be
relevant to any other section of such Schedule, be deemed to be disclosed with
respect to that other section or subsection of Schedule 1 whether or not any
explicit cross-reference appears therein. Disclosure of any matter in Schedule 1
shall not be deemed to imply that such matter is or is not material. Disclosure
of any matter in Schedule 1 shall not constitute an admission or raise any
inference that such matter constitutes a violation of law or an admission of
Liability or facts supporting Liability.
5.3 INTERPRETATION.
(a) When a reference is made in this Agreement to Sections,
subsections, Schedules or Exhibits, such reference shall be to a Section,
subsection, Schedule or Exhibit to this Agreement unless otherwise indicated.
The words "include," "includes" and "including" when used herein shall be deemed
in each case to be followed by the words "without limitation." The table of
contents and the headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. The words "herein" and "hereby" and similar references mean, except
where a specific Section or Article reference is expressly indicated, the entire
Agreement rather than any specific Section or Article. Except as otherwise
expressly provided herein, all monetary amounts referenced in this Agreement
shall mean U.S. dollars.
(b) Any references in this Agreement to the "best knowledge"
or "knowledge" of BHP Hawaii or to matters "known" to BHP Hawaii, shall mean the
actual knowledge without inquiry or investigation of only the Persons listed on
Schedule 13.4(a) of the Stock Sale Agreement and Frank Giles, Environmental
Supervisor for the BHP Refining refinery. Any references in this Agreement to
the "best knowledge" or "knowledge" of Buyer shall mean the actual knowledge
without inquiry or investigation of only the Persons listed on Schedule 13.4(b)
of the Stock Sale Agreement. Anything herein to the contrary notwithstanding, no
Person listed on any of such schedules shall have any personal Liability with
respect to any of the matters set forth in this Agreement or any representation
or warranty herein being or becoming untrue, inaccurate or incomplete.
5.4 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and
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provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the greatest extent possible.
5.5 ASSIGNMENT. None of the parties hereto shall assign this
Agreement by operation of law or otherwise without the prior written consent of
the other parties hereto. Any attempted assignment in violation of this Section
shall be deemed null and void. Notwithstanding the foregoing provisions, either
BHP Hawaii or BHP Pacific may assign its rights and obligations under this
Agreement to an Affiliate thereof without the prior written consent of Buyer so
long as such assignment shall not release either BHP Hawaii or BHP Pacific from
any of its obligations hereunder.
5.6 NO THIRD-PARTY BENEFICIARIES. This Agreement is for the
sole benefit of the parties hereto and their permitted assigns and nothing
herein expressed or implied shall give or be construed to give to any Person,
other than the parties hereto and such assigns, any legal or equitable rights
hereunder.
5.7 AMENDMENT. This Agreement may not be amended or modified
except by an instrument in writing signed by BHP Hawaii, BHP Pacific and Buyer.
5.8 NO OTHER REMEDIES. (a) Any and all remedies herein
expressly conferred upon a party hereby are deemed exclusive of any other remedy
conferred hereby or by law or equity on such party. In particular, the remedies
provided for Seller Losses or Buyer Losses shall be exclusive of any other
rights or remedies available to a party against the other party, either at law
or in equity, in relation to any breach, default or nonperformance of any
representation, warranty, covenant, agreement or undertaking made or entered
into by such other party pursuant to this Agreement, any agreement executed
pursuant to this Agreement or the transactions contemplated hereby.
Notwithstanding any provision hereof, neither party shall be liable hereunder to
any Buyer Indemnified Party or Seller Indemnified Party for any incidental or
consequential damages, damages for loss of profits or opportunities or exemplary
or punitive damages, regardless of the circumstances from which such damages
arose.
(b) No Action for termination or rescission, or claiming
repudiation, of this Agreement or any agreement executed pursuant to this
Agreement may be brought or maintained by either party against the other
following the Closing Date no matter how severe, grave or fundamental any such
breach, default or nonperformance may be by one party. Accordingly, the parties
hereby expressly waive and forego any and all rights they may possess to bring
any such Action.
5.9 FURTHER ASSURANCES. Each party agrees to cooperate fully
with the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by any other party to evidence and
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reflect the transactions described herein and contemplated hereby and to carry
into effect the intents and purposes of this Agreement.
5.10 MUTUAL DRAFTING. This Agreement is the joint product of
Buyer, BHP Hawaii and BHP Pacific and each provision hereof has been subject to
the mutual consultation, negotiation and agreement of Buyer, BHP Hawaii and BHP
Pacific and shall not be construed for or against any party hereto.
5.11 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York
applicable to agreements made and to be performed entirely within such State
(without giving effect to such State's choice of law principles).
5.12 DISPUTE RESOLUTION. Any dispute, controversy or claim
between the parties relating to, arising out of or in connection with this
Agreement (or any subsequent agreements or amendments thereto), including as to
its existence, enforceability, validity, interpretation, performance or breach
or as to indemnification or damages, including claims in tort, whether arising
before or after the termination of this Agreement (any such dispute, controversy
or claim being herein referred to as a "Dispute"), shall be settled in
accordance with Section 13.13 of the Stock Sale Agreement.
5.13 CONSENT TO JURISDICTION; WAIVERS. Subject to Section
5.12, each of the parties hereto irrevocably submits to the exclusive
jurisdiction of (a) the Supreme Court of the State of New York, New York County
and (b) the United States District Court for the Southern District of New York,
for the purposes of any Action arising out of this Agreement or any transaction
contemplated hereby. Each of the parties hereto agrees to commence any Action
relating hereto either in the United States District Court for the Southern
District of New York or, if such Action may not be brought in such court for
jurisdictional reasons, in the Supreme Court of the State of New York, New York
County. Each of the parties hereto further agrees that service of any process,
summons, notice or document by U.S. registered mail to such party's respective
address set forth in Section 5.1 shall be effective service of process for any
Action in New York with respect to any matters to which it has submitted to
jurisdiction in this Section 5.13. Each of the parties hereto irrevocably and
unconditionally waives any objection to the laying of venue of any Action
arising out of this Agreement or the transactions contemplated hereby in (i) the
Supreme Court of the State of New York, New York County or (ii) the United
States District Court for the Southern District of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such Action brought in any such court has been brought in an
inconvenient forum.
5.14 WAIVER OF JURY TRIAL. Each of the parties hereto
irrevocably and unconditionally waives trial by jury in any Action relating to
this Agreement or any transaction contemplated hereby and for any counterclaim
with respect thereto.
5.15 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when
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<PAGE> 84
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same instrument.
5.16 ENTIRE AGREEMENT. This Agreement and the Stock Sale
Agreement, together with all Schedules and Exhibits hereto and thereto,
constitute the entire agreement and supersede all prior agreements and
undertakings, both written and oral, among BHP Hawaii, BHP Pacific and Buyer
with respect to the subject matter hereof.
IN WITNESS WHEREOF, BHP Hawaii, BHP Pacific and Buyer have
caused this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
BHP HAWAII INC.,
a Hawaii corporation
By:
------------------------------------
Name: Henry G. Neal
Title: President
BHP PETROLEUM PACIFIC ISLANDS INC.,
a Hawaii corporation
By:
------------------------------------
Name: Henry G. Neal
Title: President
TESORO PETROLEUM CORPORATION,
a Delaware corporation
By:
------------------------------------
Name: Bruce A. Smith
Title: Chairman of the Board,
President and Chief Executive
Officer
19
<PAGE> 85
EXHIBIT 1.1(c)
ESCROW AGREEMENT
ESCROW AGREEMENT (this "Agreement"), dated as of March 18,
1998, by and among BHP Hawaii Inc., a Hawaii corporation ("BHP Hawaii"), BHP
Petroleum Pacific Islands Inc., a Hawaii corporation ("BHP Pacific"), Tesoro
Petroleum Corporation, a Delaware corporation ("Buyer"), and Citibank N.A., a
national banking association, as escrow agent ("Escrow Agent").
RECITALS
A. Buyer, BHP Hawaii, and BHP Pacific, have entered into a
Stock Sale Agreement, dated as of March 18, 1998 ("Stock Sale Agreement"),
pursuant to which Buyer has agreed to purchase, and BHP Hawaii and BHP Pacific
have agreed to sell, all the outstanding shares of capital stock of BHP
Petroleum Americas Refining Inc., a Hawaii corporation, and BHP Petroleum South
Pacific Inc., a California corporation.
B. The Stock Sale Agreement provides that the parties will
enter into this Agreement on the Agreement Date (as defined in the Stock Sale
Agreement) with respect to the Deposit (as defined in the Stock Sale Agreement).
In consideration of the premises and the respective agreements
herein contained, the parties hereto hereby agree as follows:
1. ESCROW AGENT. BHP Hawaii, BHP Pacific and Buyer hereby
jointly appoint the Escrow Agent as their agent to hold, administer and dispose
of the funds deposited hereunder, subject to the terms and conditions of this
Agreement, and the Escrow Agent hereby accepts such appointment.
2. ESCROW DEPOSIT. (a) On the Agreement Date, Buyer shall
deliver to the Escrow Agent, by wire transfer of immediately available funds to
the account identified in Exhibit A hereto, an amount in U.S. dollars equal to
the Deposit for deposit into an escrow account (the "Escrow Account") maintained
by the Escrow Agent. The Escrow Agent shall hold, administer and dispose of such
funds (the "Escrow Deposit"), together with all interest received thereon (the
"Escrow Interest," together with the Escrow Deposit, the "Escrow Property"), in
accordance with the terms and conditions of this Agreement. The Escrow Agent
shall have no duty to solicit the Escrow Deposit nor determine the sufficiency
of the amount received.
(b) BHP Hawaii, BHP Pacific and Buyer agree that the Escrow
Property shall not be subject to any lien or attachment of any creditor of any
party hereto and shall be used solely for the purposes and subject to the
conditions set forth in this Agreement. The Escrow Agent hereby is authorized
and directed to invest the Escrow Property in obligations of the United States
as instructed in writing from time to time by
<PAGE> 86
Buyer, provided that such obligations are backed by the full faith and credit of
the United States. All such obligations shall have maturities not exceeding 30
days.
3. DISBURSEMENT. The Escrow Agent shall disburse the Escrow
Property in the following manner:
(a) To BHP Hawaii, on behalf of itself and BHP Pacific, within
two business days after receipt by the Escrow Agent of a sworn affidavit signed
under penalty of perjury by one of the authorized officers of BHP Hawaii as
indicated on the most recent incumbency certificate for BHP Hawaii delivered to
the Escrow Agent ("BHP Hawaii's Incumbency Certificate"), confirming that the
Stock Sale Agreement has been terminated (i) by BHP Hawaii or BHP Pacific
pursuant to subsection 12.1(d) thereof or (ii) by Buyer pursuant to subsection
12.1(b) thereof and on or prior to October 31, 1998.
(b) To Buyer, within two business days after the receipt by
the Escrow Agent of a sworn affidavit signed under penalty of perjury by one of
the authorized officers of Buyer as indicated on the most recent incumbency
certificate for Buyer delivered to the Escrow Agent, confirming that the Stock
Sale Agreement has been terminated (i) by BHP Hawaii or BHP Pacific pursuant to
subsection 12.1(b), (ii) by Buyer pursuant to 12.1(b) after October 31, 1998 or
(iii) by Buyer pursuant to subsection 12.1(c) thereof.
(c) To BHP Hawaii, on behalf of itself and BHP Pacific,
promptly after receipt by the Escrow Agent of a certificate signed by one of the
authorized officers of BHP Hawaii as indicated on BHP Hawaii's Incumbency
Certificate confirming that the Closing (as defined in the Stock Sale Agreement)
has occurred.
4. ESCROW INTEREST. All Escrow Interest received by the Escrow
Agent in respect of the Escrow Deposit shall be paid as provided in Section 3
above.
5. FEES. For its services hereunder, the Escrow Agent shall
receive compensation (as payment in full) for the services to be rendered by the
Escrow Agent hereunder in the amount of $6,000 at the time of execution of this
Escrow Agreement and $6,000 annually thereafter and agrees to reimburse the
Escrow Agent for all reasonable expenses, disbursements and advances incurred or
made by the Escrow Agent in performance of its duties hereunder (including
reasonable fees, expenses and disbursements of its counsel). Buyer and BHP
Hawaii shall each be responsible for one-half of such compensation and
reimbursement amounts. Any fees or expenses of the Escrow Agent or its counsel
which are not paid as provided for herein may be taken from any property held by
the Escrow Agent hereunder. It is understood that the Escrow Agent's fees may be
adjusted from time to time to conform to its then current guidelines.
6. RESPONSIBILITIES OF ESCROW AGENT. The Escrow Agent's
acceptance of its duties under this Agreement is subject to the following terms
and conditions, which the parties hereto hereby agree shall govern and control
with respect to its rights, duties, liabilities and immunities.
2
<PAGE> 87
(a) Except as to the due execution and delivery by the Escrow
Agent's officers duly authorized, it makes no representation and has no
responsibility as to the validity of this Agreement or of any other instrument
referred to herein, or as to the correctness of any statement contained herein,
and it shall not be required to inquire as to the performance of any obligation
under the Stock Sale Agreement.
(b) The Escrow Agent shall not be under any duty to give the
Escrow Property held by it hereunder any greater degree of care than it gives to
its own similar property and shall not be required to invest any funds held
hereunder except as directed in this Agreement. Uninvested funds held hereunder
shall not earn or accrue interest.
(c) This Agreement expressly sets forth all the duties of the
Escrow Agent with respect to any and all matters pertinent hereto. No implied
duties or obligations shall be read into this Agreement against the Escrow
Agent. The Escrow Agent shall not be bound by the provisions of any agreement
among the other parties hereto except this Agreement.
(d) The Escrow Agent shall not be liable, except for its own
gross negligence or willful misconduct and, except with respect to claims based
upon such gross negligence or willful misconduct that are successfully asserted
against the Escrow Agent, the other parties hereto shall jointly and severally
indemnify and hold harmless the Escrow Agent (and any successor Escrow Agent)
from and against any and all losses, liabilities, claims, actions, damages and
expenses, including reasonable attorneys' fees and disbursements, arising out of
and in connection with this Agreement. Without limiting the foregoing, the
Escrow Agent shall in no event be liable in connection with its investment or
reinvestment of any cash held by it hereunder in good faith, in accordance with
the terms hereof, including, without limitation, any liability for any delays
(not resulting from its gross negligence or willful misconduct) in the
investment or reinvestment of the Escrow Property, or any loss of interest
incident to any such delays.
(e) The Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument or other writing delivered
to it hereunder without being required to determine the authenticity of the
correctness of any fact stated therein or the propriety or validity of the
service thereof. The Escrow Agent may act in reliance upon any instrument or
signature believed by it to be genuine and may assume that any person purporting
to give receipt or advice or make any statement or execute any document in
connection with the provisions hereof has been duly authorized to do so.
(f) The Escrow Agent may act pursuant to the advice of
competent and responsible counsel with respect to any matter relating to this
Agreement and shall not be liable for any action taken or omitted in good faith
in accordance with such advice.
(g) The Escrow Agent does not have any interest in the Escrow
Property deposited hereunder but is serving as escrow holder only and having
only possession thereof. BHP Hawaii and Buyer shall pay or reimburse the Escrow
Agent upon request for any transfer taxes or other taxes relating to the Escrow
Property incurred
3
<PAGE> 88
in connection herewith and shall indemnify and hold harmless the Escrow Agent
from any amounts that it is obligated to pay in the way of such taxes. Any
payments of income from the escrow account established hereunder shall be
subject to withholding regulations then in force with respect to United States
taxes. The parties hereto will provide the Escrow Agent with appropriate W-9
forms for tax I.D. number certifications, or W-8 forms for non-resident alien
certifications. It is understood that the Escrow Agent shall be responsible for
income reporting only with respect to income earned on investment of funds which
are a part of the Escrow Property and is not responsible for any other
reporting. This paragraph and paragraph (d) shall survive notwithstanding any
termination of this Agreement or the resignation of the Escrow Agent.
(h) The Escrow Agent makes no representation as to the
validity, value, genuineness or the collectability of any security or other
document or instrument held by or delivered to it.
(i) The Escrow Agent shall not be called upon to advise any
party as to the wisdom in selling or retaining or taking or refraining from any
action with respect to any securities or other property deposited hereunder.
(j) The Escrow Agent shall have no responsibility for the
contents of any writing of the arbitrators of any third party contemplated
herein as a means to resolve disputes and may rely without any liability upon
the contents thereof.
(k) In the event of any disagreement between the other parties
hereto resulting in adverse claims or demands being made in connection with the
Escrow Property, or in the event that the Escrow Agent in good faith is in doubt
as to what action it should take hereunder, the Escrow Agent shall be entitled
to retain the Escrow Property until the Escrow Agent shall have received (i) a
final non-appealable order of a Court of competent jurisdiction directing
delivery of the Escrow Property or (ii) a written agreement executed by the
other parties hereto directing delivery of the Escrow Property, in which event
the Escrow Agent shall disburse the Escrow Property in accordance with such
order or agreement. Any court order shall be accompanied by a legal opinion by
counsel for the presenting party satisfactory to the Escrow Agent to the effect
that said court order is final and non-appealable. The Escrow Agent shall act on
such court order and legal opinions without further question.
(l) No printed or other matter in any language (including
without limitation prospectuses, notices, reports and promotional material)
which mentions the Escrow Agent's name or the rights, powers, or duties of the
Escrow Agent shall be issued by the other parties hereto or on such parties'
behalf unless the Escrow Agent shall first have given its specific written
consent thereto.
(m) The other parties hereto authorize the Escrow Agent, for
any securities held hereunder, to use the services of any United States central
securities depository it deems appropriate, including, but not limited to, the
Depository Trust Company and the Federal Reserve Book Entry System.
4
<PAGE> 89
7. RESIGNATION OF ESCROW AGENT; APPOINTMENT OF SUCCESSOR. The
Escrow Agent (and any successor Escrow Agent) may at any time resign as Escrow
Agent by delivering the Escrow Property to any successor Escrow Agent with a
combined capital and surplus of at least $100 million and jointly designated by
BHP Hawaii and Buyer in writing or to any court of competent jurisdiction,
whereupon the Escrow Agent shall be discharged of and from any and all further
obligations arising in connection with this Agreement. The resignation of the
Escrow Agent will take effect on the earlier of (a) the appointment of a
successor Escrow Agent (including a court of competent jurisdiction) or (b) the
day which is 30 days after the date of delivery of its written notice of
resignation to the other parties hereto. If at that time the Escrow Agent has
not received a designation of a successor Escrow Agent, the Agent's sole
responsibility after that time shall be to safekeep the Escrow Property until
receipt of a designation of successor Escrow Agent or a joint written
disposition instruction by the other parties hereto or a final order of a court
of competent jurisdiction.
8. AMENDMENT AND TERMINATION. This Agreement may only be
amended or terminated by the written agreement of all the parties hereto and no
waiver hereunder shall be effective unless in a writing signed by the party to
be charged.
9. NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered or mailed if delivered personally or mailed by
registered or certified mail (postage prepaid, return receipt requested), or
sent by facsimile transmission (confirmation received), to the parties at the
following addresses and facsimile transmission numbers (or at such other address
or number for a party as shall be specified by like notice), except that the
following notices shall be effective only upon receipt of: (i) notices to the
Escrow Agent, (ii) notices after the giving of which there is a designated
period within which to perform an act and (iii) notices of changes of address or
number:
(a) If to BHP Hawaii and BHP Pacific:
BHP Hawaii Inc.
733 Bishop Street
P.O. Box 3379
Honolulu, Hawaii 96842
U.S.A.
Attention: President
Telecopy No.: (808) 547-3091
Telephone No.: (808) 547-3111
5
<PAGE> 90
with copies to:
BHP Petroleum Pty Ltd.
GPO Box 1911 R
Melbourne, Victoria 3001
Australia
Attn: Group General Manager,
Finance and Administration
Telecopy No.: 613-9652-6528
Telephone No.: 613-9652-6820
Orrick, Herrington & Sutcliffe LLP
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, California 94111
U.S.A.
Attention: Richard V. Smith, Esq.
Telecopy No.: (415) 773-5759
Telephone No.: (415) 392-1122
(b) If to Buyer:
Tesoro Petroleum Corporation
8700 Tesoro Drive
San Antonio, Texas 78217
U.S.A.
Attention: Corporate Secretary
Telecopy No.: (210) 283-2400
Telephone No.: (210) 283-2248
with a copy to:
Fulbright & Jaworski L.L.P.
1301 McKinney, 49th Floor
Houston, Texas 77010-3095
U.S.A.
Attention: Michael W. Conlon, Esq.
Telecopy No.: (713) 651-5246
Telephone No.: (713) 651-5427
6
<PAGE> 91
(c) If to the Escrow Agent
Citibank N.A.
Corporate Agency & Trust
11 Wall Street, 5th Floor, Zone 2
New York, NY 10043
Telecopy: (212) 657-3866
Telephone:(212) 657-5923
10. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by the rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect for so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the greatest
extent possible.
11. ASSIGNMENT. None of the parties hereto shall assign this
Agreement by operation of law or otherwise without the prior written consent of
the other parties hereto.
12. NO THIRD-PARTY BENEFICIARIES. This Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their
respective successors and assigns, heirs, administrators and representatives and
shall not be enforceable by or inure to the benefit of any third party except as
provided in Section 7 with respect to a resignation by the Escrow Agent.
13. MUTUAL DRAFTING. This Agreement is the joint product of
Buyer, BHP Hawaii, BHP Pacific and the Escrow Agent and each provision hereof
has been subject to the mutual consultation, negotiation and agreement of Buyer,
BHP Hawaii, BHP Pacific and the Escrow Agent and shall not be construed for or
against any party hereto.
14. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York
applicable to agreements made and to be performed entirely within such State
(without giving effect to such State's choice of law principles).
15. DISPUTE RESOLUTION. Any dispute, controversy or claim
between the parties (other than a dispute or controversy with or claim by or
against the Escrow Agent) relating to, arising out of or in connection with this
Agreement (or any subsequent agreements or amendments thereto), including as to
its existence, enforceability, validity, interpretation, performance or breach
or as to indemnification or damages, including claims in tort, whether arising
before or after the termination of this Agreement (any such
7
<PAGE> 92
dispute, controversy or claim being herein referred to as a "Dispute"), shall be
settled in accordance with Section 13.13 of the Stock Sale Agreement.
16. CONSENT TO JURISDICTION; WAIVERS. Subject to Section 15,
each of the parties hereto irrevocably submits to the exclusive jurisdiction of
(a) the Supreme Court of the State of New York, New York County and (b) the
United States District Court for the Southern District of New York, for the
purposes of any Action (as defined in the Stock Sale Agreement) arising out of
this Agreement or any transaction contemplated hereby. Each of the parties
hereto agrees to commence any Action relating hereto either in the United States
District Court for the Southern District of New York or, if such Action may not
be brought in such court for jurisdictional reasons, in the Supreme Court of the
State of New York, New York County. Each of the parties hereto further agrees
that service of any process, summons, notice or document by U.S. registered mail
to such party's respective address set forth in Section 9 shall be effective
service of process for any Action in New York with respect to any matters to
which it has submitted to jurisdiction in this Section 16. Each of the parties
hereto irrevocably and unconditionally waives any objection to the laying of
venue of any Action arising out of this Agreement or the transactions
contemplated hereby in (i) the Supreme Court of the State of New York, New York
County or (ii) the United States District Court for the Southern District of New
York, and hereby further irrevocably and unconditionally waives and agrees not
to plead or claim in any such court that any such Action brought in any such
court has been brought in an inconvenient forum.
17. WAIVER OF JURY TRIAL. Each of the parties hereto
irrevocably and unconditionally waives trial by jury in any Action relating to
this Agreement or any transaction contemplated hereby and for any counterclaim
with respect thereto.
18. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same instrument.
19. ENTIRE AGREEMENT. This Agreement, together with all
Exhibits hereto, constitutes the entire agreement and supersede all prior
agreements and undertakings, both written and oral, among BHP Hawaii, BHP
Pacific, Buyer and the Escrow Agent with respect to the subject matter hereof.
20. CERTAIN DEFINED TERMS. Capitalized terms used herein and
not defined herein shall have the meanings assigned to them in the Stock Sale
Agreement.
21. JOINT WRITTEN INSTRUCTIONS. Notwithstanding any other
provision of this Agreement, the Escrow Agent shall be entitled, at any time, to
act upon and in accordance with the joint written instructions of Buyer, BHP
Hawaii and BHP Pacific.
22. CAPTIONS. The captions contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
8
<PAGE> 93
IN WITNESS WHEREOF, BHP Hawaii, BHP Pacific, Buyer and the
Escrow Agent have caused this Agreement to be executed as of the date first
written above by their respective officers thereunto duly authorized.
BHP HAWAII INC.,
a Hawaii corporation
By:
-------------------------------------
Henry G. Neal
President
BHP PETROLEUM PACIFIC ISLANDS INC., a
Hawaii corporation
By:
-------------------------------------
Henry G. Neal
President
TESORO PETROLEUM CORPORATION,
a Delaware corporation
By:
-------------------------------------
Bruce A. Smith
Chairman of the Board of Directors,
President and Chief Executive Officer
CITIBANK N.A.,
a National Banking Association
By:
-------------------------------------
Name: Debbie DeMarco
Title: Senior Trust Officer
9
<PAGE> 94
EXHIBIT 1.1(d)
THIS NOTE AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THE SECURITIES UNDER SAID ACT UNLESS SUCH REGISTRATION IS NOT REQUIRED.
PROMISSORY NOTE
$ 50,000,000.00 __________ ______, 1998
_______________ ,___________________
FOR VALUE RECEIVED, Tesoro Petroleum Corporation, a Delaware
corporation ("Company"), promises to pay to BHP Hawaii Inc., a Hawaii
corporation ("Holder"), or its registered assigns, the principal sum of Fifty
Million Dollars ($50,000,000.00) as provided in Section 2 below. All unpaid
principal, together with any then unpaid and accrued interest and other amounts
payable under this Promissory Note ("Note"), shall be due and payable on the
earlier of (i) the dates specified in Section 2 and, if applicable, Section 3,
or (ii) when, upon or after the occurrence of an Event of Default (as defined
below), such amounts are declared due and payable by Holder or made
automatically due and payable in accordance with the terms hereof. This Note is
issued pursuant to the Stock Sale Agreement, dated as of March 18, 1998 (as
amended, modified or supplemented, the "Stock Sale Agreement"), by and among
Company, Holder and BHP Petroleum Pacific Islands Inc., a Hawaii corporation.
The following is a statement of the rights of Holder, the obligations
of Company, and the conditions to which this Note is subject, and to which
Company and Holder, by the delivery and acceptance of this Note, agree:
1. DEFINITIONS. As used in this Note, the following terms shall have
the following meanings (such definitions to be equally applicable to both the
singular and plural forms of the terms defined):
"Acceleration Event" has the meaning given in Section 3.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations under the Securities Exchange Act of 1934, as amended. The term
"Affiliate," when used herein without reference to any Person, shall mean an
Affiliate of Company.
"Annual EBITDA Report" has the meaning given in Schedule A.
"Business" means, collectively, (a) Refining's business of
manufacturing, marketing, selling and distributing petroleum products within the
State of Hawaii, (b) Refining's business of marketing and selling petroleum
products outside of the State of Hawaii, and (c)
<PAGE> 95
South Pacific's business of selling and distributing petroleum products in the
American Samoa Territory, in each case as such businesses exist on the Closing
Date.
"Closing Date" shall have the meaning given in the Stock Sale
Agreement. "Company" includes the corporation initially executing this Note and
any Person which shall succeed to or assume the obligations of Company under and
in accordance with this Note.
"EBITDA" has the meaning given in Schedule A.
"Event of Default" has the meaning given in Section 6.
"GAAP" shall mean generally accepted accounting principles as in
effect in the United States of America from time to time.
"Holder" shall mean the Person specified in the introductory
paragraph of this Note or any person who shall at the time be the registered
holder of this Note.
"Holder's Representative" shall have the meaning given to it in
paragraph 9 of Schedule A.
"Indebtedness" shall mean and include the aggregate amount of,
without duplication, (i) all obligations for borrowed money, (ii) all
obligations evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations to pay the deferred purchase price of property of services
(other than accounts payable incurred in the ordinary course of business
determined in accordance with GAAP), (iv) all obligations with respect to
capital leases, (v) all obligations created or arising under any conditional
sale or other title retention agreement with respect to property acquired by
such Person, (vi) all reimbursement and other payment of obligations, contingent
or otherwise, in respect of letters of credit, and (vii) all guaranty
obligations with respect to the types of Indebtedness listed in clauses (i)
through (vi) above.
"Material Adverse Effect" shall mean a material adverse effect on
(a) the business, assets, operations, prospects or financial or other condition
of Company and its subsidiaries taken as a whole; (b) the ability of Company to
pay or perform the Obligations in accordance with the terms of this Note and to
avoid an Event of Default or (c) the rights and remedies of Holder under this
Note or any related document, instrument or agreement.
"Obligations" shall mean and include all loans, advances, debts,
liabilities and obligations, howsoever arising, owed by Company to Holder of
every kind and description (whether or not evidenced by any note or instrument
and whether or not for the payment of money), now existing or hereafter arising
under or pursuant to the terms of this Note, including all interest, fees,
charges, expenses, attorneys' fees and costs and accountants' fees and costs
chargeable to and payable by Company hereunder, in each case whether direct or
indirect, absolute or contingent, due or to become due, and whether or not
arising after the
2
<PAGE> 96
commencement of a proceeding under Title 11 of the United States Code (11 U.S.C.
Section 101 et seq.), as amended from time to time (including post-petition
interest) and whether or not allowed or allowable as a claim in any such
proceeding.
"Person" shall mean and include an individual, a partnership, a
corporation (including a business trust), a joint stock company, a limited
liability company, an unincorporated association, a joint venture or other
entity or a governmental authority.
"Refining" shall mean BHP Petroleum Americas Refining Inc., a Hawaii
corporation.
"Stock Sale Agreement" means the Stock Sale Agreement, dated as of
March 18, 1998, by and among Company, Holder and BHP Petroleum Pacific Islands
Inc., a Hawaii corporation.
"South Pacific" shall mean BHP Petroleum South Pacific Inc., a
California corporation.
2. PAYMENTS. The principal amount of this Note shall be due and
payable in five equal installments of Ten Million Dollars ($10,000,000.00) each
on ____________, 2009, ____________, 2010, ___________ 2011, _____________2012
and ___________ 2013; provided, however, that the payment of such principal
amounts, subject to adjustment, shall be accelerated upon the occurrence of an
Event of Default as provided in Section 6 and upon the occurrence of each
Acceleration Event as provided in Section 3. Except as provided in Section 11,
no interest shall be due or payable on this Note with respect to any principal
amount outstanding at any time.
3. ACCELERATION EVENT.
(a) If EBITDA as reported in any Annual EBITDA Report delivered to
Holder for any calendar year within the Reporting Period as determined pursuant
to Schedules A and B exceeds $50 million (an "Acceleration Event"), then an
amount equal to fifty percent (50%) of such excess (the "Allocated Excess
Amount") shall be paid by Company to Holder not later than ten (10) days after
the first to occur of (i) the acceptance by Holder's Representative of Company's
calculation of EBITDA or (ii) the determination of EBITDA pursuant to the
procedures set forth in paragraph 4 of Schedule A. Each payment of an Allocated
Excess Amount shall be applied by Holder to reduce, dollar for dollar, the
principal amount outstanding under this Note. All payments by Company
representing an Allocated Excess Amount shall be applied against the unpaid
installments provided for in Section 2 on a pro rated basis. Notwithstanding the
foregoing, the $50 million EBITDA trigger amount for calendar year 1998 shall be
reduced to an amount equal to (x) $50 million multiplied by (y) a quotient equal
to the number of days of 1998 from and after the Closing (as defined in the
Stock Sale Agreement) divided by 365.
(b) Company agrees to negotiate with Holder promptly and in good
faith to reduce the $50 million EBITDA trigger amount provided in subsection
3(a) in the event that
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<PAGE> 97
Company changes the operations or assets of the Business in a manner that
results in a material reduction in EBITDA. All proposed reductions in the $50
million EBITDA trigger amount pursuant to this subsection 3(b) shall be
considered on an occurrence by occurrence basis (and shall take into account the
cumulative effect of all occurrences since the date of this Note).
(c) Holder agrees to negotiate with Company promptly and in
good faith to increase the $50 million EBITDA trigger amount provided in
subsection 3(a) in the event that Company establishes to the satisfaction of
Holder that Company has invested a material amount of capital (exclusive of any
capital invested in the ordinary course of business to maintain the quality or
performance of equipment or other assets) in the Business and that such capital
investment has directly resulted in a material increase in EBITDA. All proposed
increases in the $50 million EBITDA trigger amount pursuant to this subsection
3(c) shall be considered on a project by project basis and shall be evaluated
according to a mutually agreeable procedure, mutually agreeable assumptions and
the general principle that any increase in the $50 million EBITDA trigger amount
should have the effect of benefiting both Company and Holder on an equal sharing
basis.
4. PREPAYMENT. Company may prepay this Note at any time in whole
or in part; provided that any such prepayment will be applied to scheduled
payments of principal of this Note on a pro rated basis.
5. CERTAIN COVENANTS. While any amount is outstanding under this
Note:
(a) Mergers, Acquisitions, Etc. Without the prior written
consent of Holder, which consent shall not be unreasonably withheld, none of
Company, Refining or South Pacific shall consolidate with or merge into any
other Person or permit any other Person to merge into it, or acquire all or
substantially all of the assets or capital stock of any other Person; provided,
however, that the foregoing shall not apply to any merger or consolidation where
the surviving entity succeeds to all of the assets of Company, Refining or South
Pacific and immediately thereafter has no material liabilities other than those
of Company, Refining or South Pacific immediately prior to such merger or
consolidation; provided, however, that, with respect to Company only, the
foregoing shall only apply if such transaction results in a Change of Control
(as defined in subsection 6(i)), and provided, further, that with respect to
South Pacific, the foregoing shall not apply to a merger or consolidation of
South Pacific which would be a Transfer permitted by subsection 5(b).
(b) Asset Dispositions. Without the prior written consent of
Holder, which consent shall not be unreasonably withheld, neither Refining nor
South Pacific shall sell, lease, transfer or otherwise dispose of (collectively,
a "Transfer") in one transaction or in a series of related transactions, with or
without consideration, the stock of either Refining or South Pacific or any of
the assets or property used in the Business, whether now owned or hereafter
acquired, except (i) Transfers of assets or property in the ordinary course of
Company's, Refining's or South Pacific's business consistent with past practice,
(ii) Transfers to one or more independent third parties of the assets or
properties used in the Business, or a Transfer to a single independent third
party of all the capital stock of South Pacific in a single transaction, in any
case for an aggregate consideration of less than $5.0 million in any fiscal year
or (iii) pledges to lenders for the
4
<PAGE> 98
purpose of securing Indebtedness owed by Company, Refining or South Pacific
(including any transactions resulting from the foreclosure by any such lenders
with respect to such pledges).
(c) Change in Business. Without the prior written consent of
Holder, which consent shall not be unreasonably withheld, Company shall not make
any material change to the Business.
(d) Notices. Company shall provide Holder, promptly upon the
occurrence thereof, written notice of the occurrence of (i) any Event of Default
hereunder, (ii) any event of default by Company or any subsidiary thereof which
would, or is reasonably likely to, with the passage of time or otherwise, result
in an Event of Default.
(e) Affiliated Transactions. All Transfers and transactions
involving the purchase or sale of crudes, refinery feedstocks, products (whether
partial or finished), or other materials, stores, consummables or other assets
between Refining, South Pacific or their subsidiaries, on the one hand, and
Company and its other subsidiaries, on the other, shall be on an arms-length
basis and at fair market value.
(f) Allocations of Costs. Although Company shall be permitted
to allocate to the Business actual accounting, insurance, legal, human
resources, employee benefits, tax, credit and similar operating costs from
Company cost centers located outside of the State of Hawaii, Company covenants
and agrees that (i) it will use a reasonable allocation method to distribute
such costs amongst its various business, (ii) it will disclose such allocation
method to Holder promptly upon request and (iii) in no event will such
allocation result in overhead costs for the Business which exceed the historical
overhead costs of the Business, which historical overhead costs shall be equal
to the overhead costs incurred by the Business during the fiscal year ending May
31, 1998, as adjusted annually for inflation by the GNP Price Deflator Index.
6. EVENTS OF DEFAULT. The occurrence of any of the following
shall constitute an "Event of Default" under this Note:
(a) Failure to Pay. Company shall fail to pay when due any
principal payment on the due date hereunder and such failure shall continue for
two (2) business days after notice from Holder; or
(b) Breaches of Certain Covenants. Company shall fail to
observe or perform any covenant or agreement set forth in this Note and such
failure shall continue for a period of thirty (30) days after notice from
Holder; or
(c) Representations and Warranties. Any representation,
warranty, certificate or other statement (financial or otherwise) made or
furnished by or on behalf of Company to Holder in writing in connection with
this Note, or as an inducement to Holder to enter into this Note, shall be
false, incorrect, incomplete or misleading in any material respect when made or
furnished; or
5
<PAGE> 99
(d) Other Payment Obligations. Company or any subsidiary
thereof shall (i) fail to make any payment when due under the terms of any bond,
debenture, note or other evidence of Indebtedness to be paid by such Person
(excluding this Note and the other Ancillary Agreements, but including any other
evidence of Indebtedness of Company to Holder) and such failure shall continue
beyond any period of grace provided with respect thereto, or (ii) default in the
observance or performance of other agreement, term or condition contained in any
such bond, debenture, note or other evidence of Indebtedness, and the effect of
such failure or default is to cause, or permit the holder or holder thereof to
cause, Indebtedness in an aggregate amount of _____________________* Dollars
($_______________)* or more to become due prior to its stated date of maturity;
or
(e) Voluntary Bankruptcy or Insolvency Proceedings. Company,
Refining or South Pacific shall (i) apply for or consent to the appointment of a
receiver, trustee, liquidator or custodian of itself or of all or a substantial
part of its property or assets (including, without limitation, any Person
conducting the Business or owning the property or assets thereof), (ii) be
unable, or admit in writing its inability, to pay its debts generally as they
mature, (iii) make a general assignment for the benefit of its or any of its
creditors, (iv) be dissolved or liquidated, (v) become insolvent (as such term
may be defined or interpreted under any applicable law), (vi) commence a
voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or consent to any such relief or to
the appointment of or taking possession of its property by any official in an
involuntary case or other proceeding commenced against it, or (vii) take any
action for the purpose of effecting any of the foregoing; or
(f) Involuntary Bankruptcy or Insolvency Proceedings.
Proceedings for the appointment of a receiver, trustee, liquidator or custodian
of Company, Refining or South Pacific or of all or a substantial part of the
property thereof, or an involuntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to Company, Refining or
South Pacific or the debts thereof under any bankruptcy, insolvency or other
similar law now or hereafter in effect shall be commenced and an order for
relief entered or such proceeding shall not be dismissed or discharged within
thirty (30) days of commencement; or
(g) Judgments. A final judgment or order for the payment of
money in excess of _________________ Dollars* ($_________________)* exclusive of
amounts covered by insurance issued by an insurer not an Affiliate of Company)
shall be rendered against Company, or any subsidiary thereof and the same shall
remain undischarged for a period of thirty (30) days during which execution
shall not be effectively stayed, or any judgment, writ, assessment, warrant of
attachment, or execution or similar process shall be issued or levied against a
substantial part of the property of Company or any subsidiary thereof and such
judgment, writ or similar process shall not be released, stayed, vacated or
otherwise dismissed within thirty (30) days after issue or levy; or
- --------
* Insert amount used in Company's financing documents for the acquisition of
Refining and South Pacific.
6
<PAGE> 100
(h) Material Adverse Effect. One or more conditions exist or
events have occurred which could reasonably indicate, or reasonably result in, a
Material Adverse Effect on the Company and its subsidiaries taken as a whole; or
(i) Change of Control. There shall be a Change in Control of
Company. A "Change in Control" shall be deemed to have occurred at such time
after the original issuance of the Note as:
(i) any Person, other than Company, any subsidiary of
Company or any entity Controlled (as defined below) by the foregoing,
or any employee benefit plan of Company or any such subsidiary, is or
becomes the beneficial owner, directly or indirectly, through a
purchase or other acquisition transaction or series of transactions
(other than a merger or consolidation involving Company), of shares of
capital stock of entitling such Person to exercise in excess of 50% of
the total voting power of all shares of capital stock of Company
entitled to vote generally in the election of directors;
(ii) there occurs any consolidation of Company with,
or merger of Company into, any other Person, any merger of another
Person into Company, or any sale or transfer of the assets of Company
as, or substantially as, an entirety to another Person (other than (1)
any such transaction pursuant to which the holders of the Common Stock
of Company immediately prior to such transaction have, directly or
indirectly, shares of capital stock of the continuing or surviving
corporation immediately after such transaction which entitle such
holders to exercise in excess of 50% of the total voting power of all
shares of capital stock of the continuing or surviving corporation
entitled to vote generally in the election of directors and (2) any
merger (a) which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Company's Common
Stock or (b) which is effected solely to change the jurisdiction of
incorporation of Company and results in a reclassification, conversion
or exchange of outstanding shares of Company's Common Stock solely into
shares of common stock carrying substantially the same relative rights
as Company's Common Stock); or
(iii) a change in the Board of Directors of Company
in which the individuals who constituted the Board of Directors of
Company at the beginning of the two-year period immediately preceding
such change (together with any other director whose election by the
Board of Directors of Company or whose nomination for election by the
stockholders of Company was approved by a vote of at least a majority
of the directors then in office either who were directors at the
beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a
majority of the directors then in office.
The term "Controlled" shall mean ownership or control of more
than 50% of the voting power of such entity.
7
<PAGE> 101
7. RIGHTS OF HOLDER UPON DEFAULT. Upon the occurrence or existence of
any Event of Default (other than an Event of Default referred to in subsections
6(e) and 6(f)) and at any time thereafter during the continuance of such Event
of Default, Holder may, by written notice to Company, declare all outstanding
Obligations payable by Company hereunder to be immediately due and payable
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived, anything contained herein to the contrary
notwithstanding. Upon the occurrence or existence of any Event of Default
described in subsections 6(e) and 6(f), immediately and without notice, all
outstanding Obligations payable by Company hereunder shall automatically become
immediately due and payable, without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived, anything contained
herein to the contrary notwithstanding. In addition to the foregoing remedies,
upon the occurrence or existence of any Event of Default, Holder may exercise
any other right, power or remedy granted to it by law, either by suit in equity
or by action at law, or both. Notwithstanding the foregoing, in the event all
outstanding Obligations payable by Company hereunder are declared to be due and
payable, the amount of such Obligations shall be reduced to their then present
value using a discount rate of 9.0% per annum and discounted based on the stated
maturity of such Obligations in years 11 through 15.
8. ASSIGNMENT BY COMPANY. Neither this Note nor any of the rights,
interests or obligations hereunder may be assigned, by operation of law or
otherwise, in whole or in part, by Company without the prior written consent of
Holder. This Note may be assigned by Holder without Company's consent.
9. NOTICES. All notices, requests or other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier or personal delivery at the
respective addresses of the parties as set forth in the Stock Sale Agreement or
on the register maintained by Company. Any party hereto may by notice so given
change its address for future notice hereunder. Notice shall conclusively be
deemed to have been given when received.
10. PAYMENT. Payment shall be made in lawful tender of the United
States by wire transfer of immediately available funds to an account designated
by Holder.
11. DEFAULT RATE; USURY. During any period in which an amount is due
and payable under this Note and has not been paid at the time it is required to
be paid, Company shall pay interest on the amount so unpaid at a rate per annum
equal to the six month London interbank offered rate as published from time to
time in The Wall Street Journal plus 5.0%. In the event any interest is paid on
this Note which is deemed to be in excess of the then legal maximum rate, then
that portion of the interest payment representing an amount in excess of the
then legal maximum rate shall be deemed a payment of principal and applied
against the principal of this Note.
12. ISSUE PRICE. For income tax purposes, it is hereby agreed that (a)
the principal amount of this Note (which establishes the issue price under
Section 1274 of the U.S. Internal Revenue Code of 1986) is $16,430,307, (b) the
aggregate amounts due under this Note in excess
8
<PAGE> 102
of such amount constitute interest, (c) such interest shall accrue yearly at a
rate of 9.0% based on a constant yield method, compounded annually, (d) any
prepayments received on this Note shall be treated as a payment in retirement of
a pro rata portion of this Note and (e) any amounts paid in excess of the
principal and accrued interest attributable to such retired portion of this Note
shall be deemed an additional payment attributable to such portion. Holder and
Company agree to report the accrual of interest and payments on this Note for
income tax purposes in a manner consistent with this Section 12.
13. DISPUTE RESOLUTION. Any dispute, controversy or claim between the
parties relating to, arising out of or in connection with this Note (or any
subsequent agreements or amendments thereto), including as to its existence,
enforceability, validity, interpretation, performance or breach or as to
damages, including claims in tort, shall be settled in accordance with Schedule
A (if such dispute, controversy or claim relates to the calculation of EBITDA or
related matters) or Section 13.13 of the Stock Sale Agreement.
14. EXPENSES; WAIVERS. If action is instituted to collect this Note,
Company promises to pay all costs and expenses, including, without limitation,
reasonable attorneys' fees and costs, incurred in connection with such action.
Company hereby waives notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor and all other notices or demands
relative to this instrument.
15. GOVERNING LAW. This Note and all actions arising out of or in
connection with this Note shall be governed by, and construed in accordance
with, the internal laws of the State of New York applicable to agreements made
and to be performed entirely within such State (without giving effect to such
State's choice of law principles).
16. ENTIRE AGREEMENT. This Note, together with the Schedules hereto,
constitutes the entire agreement and supersedes all prior agreements and
undertakings, both written and oral, between Holder and Company with respect to
the subject matter hereof and are not intended to confer upon any other Person
any rights or remedies hereunder, except as otherwise expressly provided herein.
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<PAGE> 103
IN WITNESS WHEREOF, Company has caused this to be issued as of the
date first written above.
TESORO PETROLEUM CORPORATION,
a Delaware corporation
By
---------------------------
Name:
Title:
ACCEPTED AND AGREED
as of this ______ day of
______________, 1998
BHP HAWAII, INC.,
a Hawaii corporation
By:
-----------------------------
Name:
Title:
10
<PAGE> 104
EXHIBIT 1.1(e)
================================================================================
CRUDE OIL SUPPLY AGREEMENT
BY AND BETWEEN
BHP PETROLEUM TRADING AND MARKETING PTY LTD.
A.C.N. 003 401 661,
AN AUSTRALIAN CORPORATION,
AND
TESORO REFINING, MARKETING & SUPPLY COMPANY,
A DELAWARE CORPORATION
DATED AS OF __________ __, 1998
================================================================================
<PAGE> 105
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION: PAGE
<S> <C> <C>
ARTICLE I DEFINITIONS.........................................................1
1.1 Certain Defined Terms ..........................................1
1.2 Other Defined Terms ............................................3
ARTICLE II STAFFING .........................................................3
2.1 BHP Petroleum's Representative ................................3
2.2 Buyer's Representative ........................................3
2.3 Removal of Representatives ....................................3
ARTICLE III CRUDE OIL SUPPLY..................................................4
3.1 Commitment to Supply Crude Oil ................................4
3.2 Supply Request ................................................4
3.3 Supply Proposal ...............................................4
3.4 Purchase Instructions .........................................4
3.5 Modification of Crude Oil Purchases ...........................4
ARTICLE IV PAYMENT TERMS FOR CRUDE OIL PURCHASES..............................5
4.1 Payment Terms for Purchases of BHP Equity Crude Oil. ..........5
4.2 Payment Terms for Purchases of Non-BHP Equity Crude Oils ......6
4.3 BHP Petroleum Fee. ............................................6
ARTICLE V SHIPPING SERVICES...................................................6
5.1 Provision of Shipping Services ................................6
5.2 Selection of Vessel ...........................................6
5.3 Subsequent Changes ............................................7
5.4 Payment of Shipping Fees and Costs ............................7
5.5 BHP Petroleum Fee. ............................................7
ARTICLE VI TERMINATION........................................................7
6.1 Grounds for Termination .......................................7
6.2 Notice of Termination ........................................10
ARTICLE VII GENERAL PROVISIONS...............................................10
7.1 Compliance with Law ..........................................10
7.2 Taxes and Costs ..............................................11
7.3 Default Rate .................................................11
7.4 Liability and Indemnity ......................................11
7.5 Insurance ....................................................12
7.6 Force Majeure ................................................13
7.7 Governing Law ................................................14
7.8 Dispute Resolution ...........................................14
</TABLE>
<PAGE> 106
<TABLE>
<S> <C> <C>
7.9 Consent to Jurisdiction; Waivers .............................14
7.10 Waiver of Jury Trial .........................................15
7.11 Confidentiality ..............................................15
7.12 Notices ......................................................15
7.13 Interpretation ...............................................16
7.14 Severability .................................................16
7.15 Assignment ...................................................16
7.16 No Third-Party Beneficiaries .................................17
7.17 Amendment ....................................................17
7.18 Further Assurances ...........................................17
7.19 Mutual Drafting ..............................................17
7.20 Counterparts .................................................17
7.21 Entire Agreement .............................................17
</TABLE>
EXHIBIT A GENERAL PROVISIONS - SPOT FOB CRUDE OIL OR
CONDENSATE SALES
EXHIBIT B SCHEDULE OF SHIPPING CHARGES
<PAGE> 107
CRUDE OIL SUPPLY AGREEMENT
CRUDE OIL SUPPLY AGREEMENT, dated as of __________ __, 1998,
by and between BHP Petroleum Trading and Marketing Proprietary Limited, A.C.N.
003 401 661, an Australian corporation ("BHP Petroleum"), and Tesoro Refining,
Marketing & Supply Company, a Delaware corporation ("Buyer").
RECITALS
A. Buyer, BHP Hawaii Inc., a Hawaii corporation ("BHP
Hawaii"), and BHP Petroleum Pacific Islands Inc., a Hawaii corporation ("BHP
Pacific"), have entered into a Stock Sale Agreement, dated as of March 18, 1998
("Stock Sale Agreement"), pursuant to which Buyer has agreed to purchase and BHP
Hawaii and BHP Pacific have agreed to sell, all the outstanding shares of
capital stock of BHP Petroleum Americas Refining Inc., a Hawaii corporation, and
BHP Petroleum South Pacific Inc., a California corporation.
B. The Stock Sale Agreement provides that the parties will
enter into this Agreement at the Closing (as defined in the Stock Sale
Agreement) so that BHP Petroleum may supply crude oil and provide certain other
services to Buyer on the terms and subject to the conditions set forth in this
Agreement.
In consideration of the premises and the respective
representations, warranties and agreements herein contained, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such definitions to be
equally applicable to both the singular and plural forms of the terms defined):
"Action" means any claim, action, suit or arbitration, or any
proceeding, in each instance by or before any Governmental Authority.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations under the Securities Exchange Act of 1934, as amended.
"Agreement" means this Crude Oil Supply Agreement, including
all exhibits hereto, as it may be further amended from time to time as herein
provided.
"Barbers Point Refinery" means that certain refinery located
at Barbers Point Harbor, Honolulu, District of Ewa, City and County of Honolulu,
Hawaii, which is owned and operated by Refining.
<PAGE> 108
"BHP" means The Broken Hill Proprietary Company Limited,
A.C.N. 004 028 077, an Australian corporation.
"BHP Hawaii" means BHP Hawaii Inc., a Hawaii corporation.
"BHP Pacific" means BHP Petroleum Pacific Islands Inc., a
Hawaii corporation.
"Civil Liability Convention" means the Civil Liability
Convention for Oil Pollution enacted November 29, 1969.
"Crude Oil" means all grades of crude oil with the exception
of North American grades of crude oil.
"Effective Date" has the meaning set forth in Section 3.1 of
the Stock Sale Agreement.
"FOB" has the meaning prescribed in the July 1, 1990 edition
of international rules for the interpretation of trade terms prepared by the
International Chamber of Commerce except to the extent of any inconsistency with
the terms of this Agreement.
"Governmental Authority" means any Federal, state, municipal
or local government, government authority, regulatory or administrative agency,
governmental commission, department, board, bureau, agency or instrumentality,
court, tribunal, arbitrator or arbitral body.
"Oil Pollution Act of 1990" means the Oil Pollution Act of
1990 codified as 33 U.S.C.A Section 2701 et. seq.
"Parent" means Tesoro Petroleum Corporation, a Delaware
corporation.
"Person" shall have the meaning given in the Stock Sale
Agreement.
"Refining" means BHP Petroleum Americas Refining Inc., a
Hawaii corporation.
"South Pacific" means BHP Petroleum South Pacific Inc., a
California corporation.
"Stock Sale Agreement" means the Stock Sale Agreement, dated
as of March 18, 1998, by and among BHP Hawaii, BHP Pacific and Buyer, including
all schedules and exhibits thereto, as it may be further amended from time to
time as therein provided.
"Term" means the period beginning on the Effective Date and
ending on the Termination Date.
"Termination Date" means the earlier of (i) two years from
the Effective Date and (ii) the effective date of any termination of this
Agreement pursuant to the provisions of Section 6.2.
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<PAGE> 109
"Vessel" means the vessel selected by Buyer to accept delivery
of the Crude Oil at the load port pursuant to Section 5.2.
1.2 OTHER DEFINED TERMS. In addition to the terms defined in
Section 1.1, certain other terms are defined elsewhere in this Agreement and,
whenever such terms are used in this Agreement, they shall have their respective
defined meanings.
ARTICLE II
STAFFING
2.1 BHP PETROLEUM'S REPRESENTATIVE. During the Term, BHP
Petroleum shall cause one or more of its employees to be assigned to Buyer's
offices in Honolulu, Hawaii, and/or an alternate U.S. location, at Buyer's
option ("BHP Petroleum's Representative") and each of such employees shall be
assigned for a minimum of twelve consecutive months. BHP Petroleum's
Representative shall be responsible for coordinating the supply and shipping of
Crude Oil to the Barbers Point Refinery pursuant to the terms of this Agreement.
Buyer shall provide BHP Petroleum's Representative with suitable office space
and normal office equipment and support. BHP Petroleum shall bear all risks and
liabilities associated with BHP Petroleum's Representative and shall be
responsible for all salary, accommodation, benefits, living and travel costs,
insurance and expenses for BHP Petroleum's Representative.
2.2 BUYER'S REPRESENTATIVE. During the Term, Buyer shall have
the option to assign one of its employees to BHP Petroleum's offices in
Melbourne or Singapore ("Buyer's Representative"). If Buyer exercises the
aforesaid option, Buyer's Representative shall be assigned for a minimum of
twelve consecutive months. Buyer's Representative shall act on Buyer's behalf
with respect to the supply and shipping of Crude Oil to the Barbers Point
Refinery pursuant to the terms of this Agreement. BHP Petroleum shall provide
Buyer's Representative with suitable office space and normal office equipment
and support. Buyer shall bear all risks and liabilities associated with Buyer's
Representative and shall be responsible for all salary, accommodation, benefits,
living and travel costs, insurance and expenses for Buyer's Representative.
2.3 REMOVAL OF REPRESENTATIVES. Each party hereto shall
ensure that the representatives they have selected pursuant to this Article II
abide by all of the safety regulations, rules and procedures applicable in the
other parties' offices as well as all standards of behavior normally expected of
an employee of the other party. If either parties' selected representative fail
to comply with such rules and procedures or fails to fulfill any other material
obligation imposed by the terms of this Agreement, the other party may require
the removal of such representative and the replacement of such representative at
the expense of the other party.
3
<PAGE> 110
ARTICLE III
CRUDE OIL SUPPLY
3.1 COMMITMENT TO SUPPLY CRUDE OIL. During the Term, BHP
Petroleum agrees to supply, or arrange for third parties to supply, to Buyer,
and Buyer agrees to purchase and receive from BHP Petroleum or such third-party
suppliers all of the Crude Oil used in the operation of the Barbers Point
Refinery. BHP Petroleum will use commercially reasonable efforts to procure a
cost effective supply of Crude Oil for the Barbers Point Refinery pursuant to
the procedures set forth in this Article III.
3.2 SUPPLY REQUEST. Commencing the second month of the Term,
Buyer shall deliver to BHP Petroleum a written supply request (a "Supply
Request") on or before the 50th day preceding the first day of each month, which
Supply Request shall set forth (i) the total volume of Crude Oil required for
the operation of the Barbers Point Refinery in the month for which such Supply
Request relates, (ii) the volumes of the specific grades of Crude Oil required,
(iii) the number of shipments, and (iv) the preferred three-day delivery period
for each of such shipments. BHP Petroleum and Buyer shall make available to each
party's representative all marketing information, refinery economics, including
linear program data, or other information relied on to prepare each Supply
Request.
3.3 SUPPLY PROPOSAL. Within five days of receipt of the
Supply Request, BHP Petroleum shall advise Buyer's Representative by facsimile
or orally and confirmed in writing of available Crude Oil cargoes that comply
with the terms of the Supply Request (the "Supply Alternatives") and the
anticipated costs associated with each of said Supply Alternatives.
3.4 PURCHASE INSTRUCTIONS. No later than forty-eight hours
after BHP Petroleum has advised Buyer's Representative of the available Supply
Alternatives, Buyer's Representative shall irrevocably select a Supply
Alternative and provide a price range within which BHP Petroleum shall have the
authority to purchase the Crude Oil specified in the Supply Request on behalf of
Buyer. Thereafter, BHP Petroleum shall use commercially reasonable efforts to
obtain purchases which fall within or below the price range specified by Buyer
and that otherwise comply with the requirements set forth in the Supply Request;
provided, however, that Buyer acknowledges that BHP Petroleum may be unable to
secure purchases conforming with the aforesaid requirements and, other than in
the event of gross negligence, BHP Petroleum shall incur no liability for such
failure to secure a conforming purchase.
3.5 MODIFICATION OF CRUDE OIL PURCHASES. In the event that the
requirements of the Barbers Point Refinery change due to operational or economic
factors arising after Buyer has committed to purchase a shipment of Crude Oil
(the "Original Crude Oil Shipment"), Buyer shall inform BHP Petroleum
immediately of such change and BHP Petroleum and Buyer shall work together in
good faith to secure a sale of the Original Crude Oil Shipment, seek alternative
purchases, reschedule the delivery date of the Original Crude Oil Shipment or
take any other actions the parties mutually agree will provide the most cost
effective means of meeting the changed supply requirements of the Barbers Point
Refinery (each, a "Modified Crude Oil Shipment"). The parties agree that any
economic benefit derived from a Modified Crude Oil
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Shipment shall be shared equally between Buyer and BHP Petroleum and Buyer shall
pay to BHP Petroleum one half of the aggregate amount of said economic benefit
accrued during each calendar quarter on or before the 15th day of the month
following the end of the calendar quarter. The measurement of the economic
benefit associated with a Modified Crude Oil Shipment shall be calculated based
on the difference between the optimal values specified in the linear program
simulation generated by Buyer in connection with the Original Crude Oil Shipment
and the linear program simulation generated by Buyer in connection with the
Modified Crude Oil Shipment adjusted to account for any net profits or net
losses realized as a result of a sale of any Original Crude Oil Shipment. BHP
Petroleum shall not have any liability for any losses incurred by Buyer as a
result of any actions taken by the parties pursuant to this Section 3.5 or the
parties failure to secure a cost effective modification of the Original Crude
Oil Shipment.
ARTICLE IV
PAYMENT TERMS FOR CRUDE OIL PURCHASES
4.1 PAYMENT TERMS FOR PURCHASES OF BHP EQUITY CRUDE OIL.
(a) Unless otherwise agreed by the parties hereto or
stipulated by this Agreement, the terms and conditions of each purchase by Buyer
hereunder of BHP Petroleum's entitlement to equity production ("BHP Equity Crude
Oil") shall be on an FOB basis and subject to the terms and conditions set forth
in the "General Provisions - Spot FOB Crude Oil or Condensate Sales" attached
hereto as Exhibit A and as amended and supplemented after the Effective Date.
(b) Buyer shall not be required to provide any security,
other than as provided in Section 4.1(c) or 4.1(d), for purchases of a single
shipment of BHP Equity Crude Oil. Notwithstanding the foregoing, if Buyer has
previously incurred an obligation to pay for a shipment of BHP Equity Crude Oil
and seeks to purchase an additional shipment of BHP Equity Crude Oil prior to
the receipt by BHP Petroleum of the payment due for the previous shipment of BHP
Equity Crude Oil, Buyer shall secure the payment in respect of such additional
shipment with a letter of credit in a form, and issued by a bank, acceptable to
BHP Petroleum, if BHP Petroleum determines in its absolute discretion that such
letter of credit is necessary.
(c) On the Effective Date, Parent shall provide BHP
Petroleum with a letter of guarantee, in a form satisfactory to BHP Petroleum
and valid for the Term, pursuant to which Parent shall guarantee Buyer's
obligation to pay for any and all purchases of BHP Equity Crude in accordance
with this Agreement.
(d) BHP Petroleum shall have the right to require Buyer
to establish a letter of credit, in a form and issued by a bank acceptable to
BHP Petroleum, to cover all sales of BHP Equity Crude Oil to Buyer in the event
that (i) Parent's net worth is less than or equal to three hundred million
dollars ($300,000,000), (ii) the ratio of Parent's current assets to current
liabilities is less than 1.3 to 1, (iii) the ratio of Parent's total outstanding
indebtedness to its net worth is greater than or equal to 2 to 1 or (iv) Parent
incurs a net loss in any fiscal year.
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(e) In the event that Buyer fails to pay the purchase
price of any shipment of BHP Equity Crude on the date such payment is due and
payable, BHP Petroleum shall have the option to suspend any further deliveries
of BHP Equity Crude to Buyer until such payment has been made and Buyer has
agreed to new credit terms satisfactory to BHP Petroleum. The rights of BHP
Petroleum pursuant to this Section 4.1(e) shall be cumulative and not exclusive
of any other rights or remedies of BHP Petroleum provided hereunder or by law,
including BHP Petroleum's right to terminate this Agreement as set forth in
Article VI.
(f) Charges for chartering brokerage, commercial
operations, scheduling, postfixtures services for voyage charters and other
shipping services for shipments of BHP Equity Crude Oil provided pursuant to the
terms of Article V hereof shall be included in the fixed annual fee described in
Section 4.3. Notwithstanding the foregoing, the services specified in Part II of
the Schedule of Shipping Charges attached hereto as Exhibit B shall not be
included in the fixed annual fee and shall be invoiced and paid by Buyer
separately in accordance with Section 5.5.
4.2 PAYMENT TERMS FOR PURCHASES OF NON-BHP EQUITY CRUDE OILS.
For purchases by Buyer of Non-BHP Equity Crude Oil from third-party suppliers
pursuant to the terms of this Agreement, BHP Petroleum will act solely in the
capacity of purchasing agent for Buyer. All spot or other supply contracts with
third-party suppliers shall be entered into in the name of Buyer and Buyer shall
be directly responsible to such third-party supplier for ensuring compliance
with the payment terms and all other terms and conditions applicable to each of
such supply contracts.
4.3 BHP PETROLEUM FEE. In consideration for BHP Petroleum's
services in procuring purchases of Non-BHP Equity Crude Oil, procuring shipping
services for all purchases of Crude Oil hereunder pursuant to the terms of
Article V, and for the exclusion of North American grades of Crude Oil from the
scope of this Agreement, Buyer shall pay to BHP Petroleum an annual basic fee of
$1,400,000 to be paid in equal monthly installments within fifteen days of
receipt of an invoice from BHP Petroleum.
ARTICLE V
SHIPPING SERVICES
5.1 PROVISION OF SHIPPING SERVICES. During the Term, BHP
Petroleum shall subcontract the services of its affiliate BHP Transport Pty.
Limited or another subcontractor reasonably acceptable to Buyer
("Subcontractor"), and Buyer hereby appoints Subcontractor as its agent and
authorizes Subcontractor to arrange for, negotiate, schedule and coordinate on
behalf of Buyer spot voyage, affreightment or time chartered transportation of
all Crude Oil supplied to Buyer hereunder (the " Shipping Services"). All
charterparties shall be entered by Buyer in its own name.
5.2 SELECTION OF VESSEL. No later than the fourteenth day
preceding the first day of the loading range for each shipment of Crude Oil
purchased pursuant to this Agreement, Subcontractor shall provide Buyer with a
list of available vessels capable of complying with the terms of the Supply
Request, and shall provide Buyer with information regarding the name, size,
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draft and dimensions of each such vessel, the scheduled arrival date, the
shipping fees and costs and any other information which Buyer's Representative
may reasonably request. Neither BHP Petroleum nor Subcontractor shall make any
representation, warranty or guarantee, express or implied, to Buyer respecting
the merchantability or fitness of the vessels specified on the aforesaid list or
the qualifications or expertise of the masters, mates, and crews for such
vessels and Buyer expressly agrees and acknowledges that it is Buyer's
responsibility to make an independent determination as to such matters prior to
selecting a vessel to transport Crude Oil hereunder. Within forty-eight hours of
receipt of the list of available vessels, Buyer's Representative shall notify
Subcontractor of the vessel it has selected to transport the shipment of Crude
Oil.
5.3 SUBSEQUENT CHANGES. When Buyer has requested a
modification of a Crude Oil purchase pursuant to the terms of Section 3.5,
Subcontractor shall notify Buyer of any alternative vessels, delivery dates or
routings, if any, available to accommodate such change. Within twenty-four hours
after receiving such notification, Buyer's representative shall confirm which
shipping alternatives it wishes to avail itself of.
5.4 PAYMENT OF SHIPPING FEES AND COSTS. All spot shipping
contracts or charters negotiated and arranged by Subcontractor shall be in the
name of Buyer and Buyer shall be solely responsible for paying all fees, rates,
taxes, charges and duties under such contracts and cargo and all freight charges
(including demurrage costs) incurred within the territory of the country where
the ports of loading and discharge are located, including customs overtime and
port charges. All address commissions shall be for Buyer's account.
5.5 BHP PETROLEUM FEE. The annual fee paid to BHP Petroleum
pursuant to Section 4.3 shall include the charges for the Shipping Services
listed in Part I of the Schedule of Shipping Charges attached hereto as Exhibit
B (the "Schedule of Shipping Charges") and incorporated herein by this
reference. In the event Buyer shall require and request BHP Petroleum or
Subcontractor to perform any of the additional shipping services specified in
Part II of the Schedule of Shipping Charges, Buyer shall pay BHP Petroleum a fee
in addition to the annual fee specified in Section 4.3. Buyer and Subcontractor
will confer in good faith with regard to Subcontractor providing the additional
shipping services specified in Part II of the Schedule of Shipping Charges. Such
additional fee shall be determined in accordance with the Part II of the
Schedule of Shipping Charges and shall be paid by Buyer to BHP Petroleum within
15 days of receipt of an invoice from BHP Petroleum.
ARTICLE VI
TERMINATION
6.1 GROUNDS FOR TERMINATION.
(a) BHP Petroleum may terminate this Agreement upon the
occurrence of one or more of the following events:
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(i) Buyer shall default, in any material
respect, in the due performance or observance by it of any term, covenant or
agreement on its part contained in this Agreement (other than as set forth in
Section 6(a)(ii)) and (A) such default shall not have been cured within thirty
days following receipt by Buyer from BHP Petroleum of notice of such default or,
if the default is such that it will take more than thirty days to cure, within
an extended period of time which shall be no longer than what is necessary to
effect performance or compliance or (B) Buyer has failed to diligently pursue
the curing of the default within any such extended time period;
(ii) Buyer shall fail to pay any amount
owed hereunder to BHP Petroleum on the date for such payment, except for any
amounts being disputed in good faith, and such amount shall remain unpaid for
fifteen days following receipt by Buyer from BHP Petroleum of notice of such
failure to pay; and
(iii) Buyer becomes insolvent, becomes
subject to any bankruptcy or reorganization proceedings, whether voluntary or
involuntary, or is placed in a receivership.
(iv) There shall be a Change in Control
of Buyer. A "Change in Control" shall be deemed to have occurred at such time
after the Effective Date as:
(A) any Person, other than
Buyer, any Affiliate of Buyer or any entity Controlled (as
defined below) by the foregoing, or any employee benefit plan
of Buyer or any such Affiliate, is or becomes the beneficial
owner, directly or indirectly, through a purchase or other
acquisition transaction or series of transactions (other than
a merger or consolidation involving Buyer), of shares of
capital stock of Buyer entitling such Person to exercise in
excess of 50% of the total voting power of all shares of
capital stock of Buyer entitled to vote generally in the
election of directors;
(B) there occurs any
consolidation of Buyer with, or merger of Buyer into, any
other Person, any merger of another Person into Buyer, or any
sale or transfer of the assets of Buyer as, or substantially
as, an entirety to another Person (other than (1) any such
transaction pursuant to which the holders of the Common Stock
of Buyer immediately prior to such transaction have, directly
or indirectly, shares of capital stock of the continuing or
surviving corporation immediately after such transaction
which entitle such holders to exercise in excess of 50% of
the total voting power of all shares of capital stock of the
continuing or surviving corporation entitled to vote
generally in the election of directors and (2) any merger (a)
which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Buyer's
Common Stock or (b) which is effected solely to change the
jurisdiction of incorporation of Buyer and results in a
reclassification, conversion or exchange of outstanding
shares of Buyer's Common Stock solely into shares of common
stock carrying substantially the same relative rights as
Buyer's Common Stock); or
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(C) a change in the Board of
Directors of Buyer in which the individuals who constituted
the Board of Directors of Buyer at the beginning of the
two-year period immediately preceding such change (together
with any other director whose election by the Board of
Directors of Buyer or whose nomination for election by the
stockholders of Buyer was approved by a vote of at least a
majority of the directors then in office either who were
directors at the beginning of such period or whose election
or nomination for election was previously so approved) cease
for any reason to constitute a majority of the directors then
in office.
The term "Controlled" shall mean ownership or control of more
than 50% of the voting power of such entity.
(b) Buyer may terminate this Agreement upon the
occurrence of one or more of the following events:
(i) if BHP Petroleum shall default, in
any material respect, in the due performance or observance by it of any term,
covenant or agreement on its part contained in this Agreement and (A) such
default shall not have been cured within thirty days following receipt by BHP
Petroleum from Buyer of notice of such default or, if the default is such that
it will take more than thirty days to cure, within an extended period of time
which shall be no longer than what is necessary to effect performance or
compliance or (B) BHP Petroleum has failed to diligently pursue the curing of
the default within any such extended time period; and
(ii) BHP Petroleum becomes insolvent,
becomes subject to any bankruptcy or reorganization proceedings, whether
voluntary or involuntary, or is placed in a receivership.
(iii) There shall be a Change in Control
of BHP Petroleum. A "Change in Control" shall be deemed to have occurred at such
time after the Effective Date as:
(A) any Person, other than BHP
Petroleum, any Affiliate of BHP Petroleum or any entity
Controlled (as defined below) by the foregoing, or any
employee benefit plan of BHP Petroleum or any such Affiliate,
is or becomes the beneficial owner, directly or indirectly,
through a purchase or other acquisition transaction or series
of transactions (other than a merger or consolidation
involving BHP Petroleum), of shares of capital stock of BHP
Petroleum entitling such Person to exercise in excess of 50%
of the total voting power of all shares of capital stock of
BHP Petroleum entitled to vote generally in the election of
directors;
(B) there occurs any
consolidation of BHP Petroleum with, or merger of BHP
Petroleum into, any other Person, any merger of another
Person into BHP Petroleum, or any sale or transfer of the
assets of BHP Petroleum as, or substantially as, an entirety
to another Person (other than (1) any such transaction
pursuant to which the holders of the Common Stock of BHP
Petroleum immediately prior to such transaction have,
directly or indirectly,
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shares of capital stock of the continuing or surviving
corporation immediately after such transaction which entitle
such holders to exercise in excess of 50% of the total voting
power of all shares of capital stock of the continuing or
surviving corporation entitled to vote generally in the
election of directors and (2) any merger (a) which does not
result in any reclassification, conversion, exchange or
cancellation of outstanding shares of BHP Petroleum's Common
Stock or (b) which is effected solely to change the
jurisdiction of incorporation of BHP Petroleum and results in
a reclassification, conversion or exchange of outstanding
shares of BHP Petroleum's Common Stock solely into shares of
common stock carrying substantially the same relative rights
as BHP Petroleum's Common Stock); or
(C) a change in the Board of
Directors of BHP Petroleum in which the individuals who
constituted the Board of Directors of BHP Petroleum at the
beginning of the two-year period immediately preceding such
change (together with any other director whose election by
the Board of Directors of BHP Petroleum or whose nomination
for election by the stockholders of BHP Petroleum was
approved by a vote of at least a majority of the directors
then in office either who were directors at the beginning of
such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a
majority of the directors then in office.
The term "Controlled" shall mean ownership or control of more
than 50% of the voting power of such entity.
6.2 NOTICE OF TERMINATION. For either party to exercise its
termination rights pursuant to this Agreement, the party desiring the
termination must provide notice of its intent to terminate the Agreement. If the
party so notified fails to cure such ground for termination in the time period
set forth in Section 6.1 then this Agreement shall terminate. Termination
pursuant to Section 6.1(a)(iii) or Section 6.1(b)(ii) shall be effective upon
receipt of the notice of termination.
ARTICLE VII
GENERAL PROVISIONS
7.1 COMPLIANCE WITH LAW. The parties shall conduct all
operations hereunder in compliance with all applicable laws, ordinances, and
regulations of governmental authorities. Each of Buyer and BHP Petroleum in the
performance of this Agreement is engaged in an independent business from the
other party, and nothing herein contained shall be construed as reserving to
either party any right to control the other party with respect to its physical
conduct in the performance of this Agreement. It is further understood and
agreed that neither BHP Petroleum nor Buyer reserves any right to exercise
control over any of the other party's employees and that all employees of Buyer
shall be entirely under the control and direction of Buyer and the employees of
BHP Petroleum shall be entirely under the control and direction of BHP
Petroleum, each of which shall be responsible for their own employees' actions
and omissions.
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7.2 TAXES AND COSTS. Any entrance and clearance fees, whether
measured by volume of cargo or not, towing and tug charges, pilotage, harbor
dues, taxes, assessments, port charges and other charges applicable at the load
or delivery ports or terminals, levied on, or in respect of or by reference to
the Vessel or any Crude Oil purchased hereunder shall be payable by Buyer.
7.3 DEFAULT RATE. In the event Buyer shall fail to make any
payments due hereunder on the date such payment is due, Buyer shall pay BHP
Petroleum interest on the amount of the payment at a rate per annum equal to the
London interbank offered rate as published from time to time in The Wall Street
Journal plus 5.0%.
7.4 LIABILITY AND INDEMNITY.
(a) Buyer shall indemnify, defend and hold harmless
BHP Petroleum and Subcontractor, and their respective Affiliates, shareholders,
officers, directors, employees, subsidiaries, successors and assigns
(collectively, the "Indemnified Parties") from and against, and pay or
reimburse the Indemnified Parties for, any and all losses, damages, claims,
costs and expenses, interest, awards, judgments, fines and penalties (including
reasonable legal costs and expenses) incurred, sustained or suffered by the
Indemnified Parties arising out of or resulting from all (i) loss and damage
caused by any vessel, its owners, charters or operations while it is at the
loading or discharging ports, in transport or otherwise, and regardless of
whether such vessel is under pilotage or not, including (A) loss or damage to
any property of the Indemnified Parties or any other person having an interest
in the storage or other facilities from which the Crude Oil is loaded into or
discharged from the vessel or (B) death, injury or illness to any person, or
(ii) Buyer's failure to observe or perform any of its obligations under this
Agreement. Notwithstanding the foregoing but subject to Section 7.4(b), Buyer
shall not have any indemnification obligations under this Section 7.4(a) for
any indirect, consequential, special or incidental damages of any kind whether
based in contract, tort (including simple or gross negligence or strict
liability), warranty or otherwise.
(b) Without limiting the generality of Section
7.4(a), Buyer hereby releases and agrees to indemnify, defend and hold the
Indemnified Parties from and against, and pay or reimburse the Indemnified
Parties for, any and all losses, damages, claims, costs and expenses, interest,
awards, judgments, fines and penalties (including reasonable legal costs and
expenses) incurred, sustained or suffered by the Indemnified Parties arising out
of or attributable to the release, threatened release, discharge, disposal or
presence of Crude Oil or other hazardous materials related to this Agreement
when in the custody of Buyer, including (i) all foreseeable and unforeseeable
consequential damages, (ii) the costs of any required or necessary repair,
cleanup or detoxification of an area of Crude Oil or hazardous material and the
preparation and implementation of any closure, remedial or otherwise required
plans, (iii) the costs of investigation and handling of any environmental claim
by the Indemnified Parties, whether or not any suit or other formal legal
proceeding shall have been commenced with respect to the environmental claims
and (iv) the costs of the Indemnified Parties' enforcement of Buyer's
obligations under this Section 7.4(b), whether or not suit is brought.
Notwithstanding that certain legal authorities may have questioned the concept
of one party agreeing to release and/or indemnify another party for its sole or
concurrent simple or gross negligence, Buyer and the Indemnified Parties fully
understand and recognize that the nature of this Agreement and the
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parties hereto make it appropriate and equitable for Buyer's release and
indemnity pursuant to this Section 7.4(b) to apply regardless of who may be at
fault or otherwise responsible under any statute, rule or theory of law, and
even if the subject loss or claim is wholly or partially attributable to the
active, passive, concurrent or sole negligence of the Indemnified Parties and
regardless if the negligence is simple or gross.
Without limiting the generality of the foregoing release and
indemnity, Buyer's duty to release, protect, defend, indemnify, make whole and
hold harmless the Indemnified Parties under this Section 7.4(b) shall include
any loss or claim (including any loss or claim provided under Section 128D of
Hawaii Revised Statutes or the Oil Pollution Act of 1990 as such statutes may be
amended or revised from time to time) concerning environmental damage to, or
loss of, natural resources, wildlife, or public and private property or its use
asserted, imposed or assessed by any party (private, governmental or otherwise)
against the Indemnified Parties.
7.5 INSURANCE.
(a) Without in any way limiting Buyer's liability
pursuant to this Agreement, Buyer shall maintain or ensure that any carrier or
subsequent buyer of Crude Oil purchased hereunder maintain the following
insurance and all insurance that may be required under the applicable laws,
ordinances, and regulations of any Governmental Authority:
(i) Workers' Compensation and Employers'
Liability Insurance as prescribed by applicable law, including insurance
covering liability under the Longshoremen's and Harbor Workers' Act, the Jones
Act and the Outer Continental Shelf Land Act, if applicable.
(ii) Commercial General Liability
Insurance including Bodily Injury, Property Damage, Charterers and Pollution
Liability Insurance with a limit not less than $1,000,000 combined single limit
per occurrence.
(iii) Automobile Bodily Injury and
Property Damage Liability Insurance on all owned, non-owned and hired vehicles
used in receiving Crude Oil from BHP Petroleum's facilities with a limit not
less than $1,000,000 combined single limit per occurrence for bodily injury and
property damage.
(iv) Hull and Machinery Insurance
including collision liability and tower's liability on vessels engaged in towage
with a limit at least equal to the actual value of each vessel and barge.
(v) Marine Insurance under one of the
two following options:
Option One Protection and Indemnity
Insurance including coverage for injuries to or death of masters, mates and crew
and excess collision liabilities. The limits of such insurance shall not be less
than $500,000,000 per occurrence. Vessel pollution liability insurance including
coverage for liabilities imposed by the Oil Pollution Act of 1990 and federal
and state laws in an amount not less than $700,000,000.
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Option Two Protection and Indemnity
Insurance on a full entry basis with an International Group P&I Club. Such
insurance shall include, but not be limited to, coverage for injuries to or
death of masters, mates and crew; excess collision liabilities and pollution
liabilities imposed by federal and state laws as well as the Oil Pollution Act
of 1990 and Civil Liability Convention. Such insurance shall be unlimited as per
International Group, P&I Club rules except for pollution liabilities which shall
be limited to $700,000,000.
(vi) Excess Liability Insurance for all
Bodily Injury, Property Damage and Pollution Liability Insurance required above
in an amount not less than $200,000,000 combined single limit per occurrence.
(b) Each of the insurance policies specified in
this Section 7.5 shall include a requirement that the insurer provide BHP
Petroleum with 30 days' written notice prior to the effective date of any
cancellation or material change of the insurance. The insurance policies
specified in Sections 7.5(a)(ii) through 7.5(a)(vi) shall contain a waiver of
subrogation against BHP Petroleum and an assignment of statutory lien, if
applicable. The insurance specified in Sections 7.5(a)(ii), 7.5(a)(iii),
7.5(a)(iv) and 7.5(a)(vi) shall name BHP Petroleum as an additional insured and
the insurance specified in Section 7.5(a)(v), Option One or Two (as applicable),
shall name BHP Petroleum as a co-insured.
(c) Before performance of this Agreement, Buyer
shall provide BHP Petroleum with certificates or other documentary evidence
satisfactory to BHP Petroleum of the insurance coverages and endorsements.
(d) Without in any way limiting Buyer's
liability, Buyer shall obtain from any carrier or subsequent buyer of Crude Oil
purchased hereunder the insurance coverages and endorsements set forth in this
Section 7.5 excepting that both BHP Petroleum and Buyer be named as additional
insureds.
(e) Buyer acknowledges that BHP Petroleum does
not carry insurance covering loss of Crude Oil purchased hereunder while it is
in the custody of BHP Petroleum. It is expressly understood and agreed that such
insurance, if any is desired by Buyer, shall be carried by Buyer at its own
expense.
7.6 FORCE MAJEURE.
(a) If either party is rendered unable wholly or in
part by Force Majeure to observe or perform any of its obligations under this
Agreement, other than the obligation to pay money, upon such party giving
notice and reasonably full particulars of the Force Majeure to the other party
within a reasonable time after the occurrence of the Force Majeure, the
obligations of the party giving the said notice, so far as they are affected by
the Force Majeure, shall be suspended, and any time limits or requirements
imposed on the party, so far as they are affected by the Force Majeure, shall
be extended, for but no longer than the continuance of the Force Majeure and
such further period thereafter as shall be reasonable in the circumstances
provided always that the cause of the Force Majeure as far as possible shall be
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remedied with all reasonable dispatch by the party whose performance hereunder
is adversely affected.
(b) The term "Force Majeure" as used herein
shall mean act of God, act of the public enemy, war, perils of the sea,
sabotage, blockade, riot, civil commotion, pirates or assailing thieves, arrest
or restraint of or by princes, rulers or peoples, lightning, fire, storm, flood,
earthquake, tidal wave, tsunami, explosion, governmental restraint, seizure of
the Vessel or cargo under legal process provided a bond is promptly furnished to
release the Vessel or cargo, shortage, breakdown or unavailability of equipment
or supplies, temporary or permanent interruption to production, processing,
storage or transportation or supply of crude oil or condensate intended to be
delivered as Crude Oil to Buyer under this Agreement, revocation of or material
variation to governmental export approvals, exercise by any authority, agency
body or person of a right to take oil by way of royalty in kind, any action or
direction pursuant to this Agreement on International Energy Program, strike,
lock-out, ban or limitation of work or other industrial disturbance and any
other cause, whether of a kind herein enumerated or otherwise, not reasonably
within the control of the party claiming suspension of its obligations.
(c) The requirement that any Force Majeure shall
be remedied with all reasonable dispatch shall not require settlement of a
strike, lock-out, ban and limitation of work or other industrial disturbance by
either party involved therein on terms not acceptable to it.
(d) Notwithstanding the provisions of this
Section 7.6, Buyer shall not be relieved of its obligations under this Agreement
due to failure by any person to discharge contractual or other obligations in
favor of Buyer with respect to Buyer's products or the Crude Oil purchased
hereunder.
7.7 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York
applicable to agreements made and to be performed entirely within such State
(without giving effect to such State's choice of law principles).
7.8 DISPUTE RESOLUTION. Any dispute, controversy or claim
between the parties relating to, arising out of or in connection with this
Agreement (or any subsequent agreements or amendments thereto), including as to
its existence, enforceability, validity, interpretation, performance or breach
or as to indemnification or damages, including claims in tort, whether arising
before or after the termination of this Agreement (any such dispute, controversy
or claim being herein referred to as a "Dispute"), shall be settled in
accordance with Section 13.13 of the Stock Sale Agreement.
7.9 CONSENT TO JURISDICTION; WAIVERS. Subject to Section 7.8,
each of the parties hereto irrevocably submits to the exclusive jurisdiction of
(a) the Supreme Court of the State of New York, New York County and (b) the
United States District Court for the Southern District of New York, for the
purposes of any Action arising out of this Agreement or any transaction
contemplated hereby. Each of the parties hereto agrees to commence any Action
relating hereto either in the United States District Court for the Southern
District of New York or, if such Action may not be brought in such court for
jurisdictional reasons, in the Supreme Court of the State of New York, New York
County. Each of the parties hereto further agrees that
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service of any process, summons, notice or document by U.S. registered mail to
such party's respective address set forth in Section 7. shall be effective
service of process for any Action in New York with respect to any matters to
which it has submitted to jurisdiction in this Section 7.12. Each of the parties
hereto irrevocably and unconditionally waives any objection to the laying of
venue of any Action arising out of this Agreement or the transactions
contemplated hereby in (i) the Supreme Court of the State of New York, New York
County or (ii) the United States District Court for the Southern District of New
York, and hereby further irrevocably and unconditionally waives and agrees not
to plead or claim in any such court that any such Action brought in any such
court has been brought in an inconvenient forum.
7.10 WAIVER OF JURY TRIAL. Each of the parties hereto
irrevocably and unconditionally waives trial by jury in any Action relating to
this Agreement or any transaction contemplated hereby and for any counterclaim
with respect thereto.
7.11 CONFIDENTIALITY. The parties agree to keep confidential
any and all information and data received or generated pursuant to this
Agreement except for information and data which is generally available to the
public from sources other than government and regulatory agencies.
Notwithstanding the foregoing, the parties may make such disclosures which are
required by law or other governmental authority.
7.12 NOTICES. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered or mailed if delivered personally or
mailed by registered or certified mail (postage prepaid, return receipt
requested), or sent by facsimile transmission, (confirmation received) to the
parties at the following addresses and facsimile transmission numbers (or at
such other address or number for a party as shall be specified by like notice),
except that notices after the giving of which there is a designated period
within which to perform an act and notices of changes of address or number shall
be effective only upon receipt:
(a) if to BHP Petroleum
BHP Petroleum Proprietary Limited.
GPO Box 1911 R
Melbourne, Victoria 3001
Australia
Attn: Vice President Crude Oil
Marketing and Supply
Telecopy No.: 613-9652-6693
Telephone No.: 613-9652-6469
15
<PAGE> 122
(b) if to Buyer:
Tesoro Refining, Marketing & Supply Company
8700 Tesoro Drive
San Antonio, Texas 78217
U.S.A.
Attention: Corporate Secretary
Telecopy No.: (210) 283-2400
Telephone No.: (210) 283-2248
with a copy to:
Fulbright & Jaworski L.L.P.
1301 McKinney, 49th Floor
Houston, Texas 77010-3095
U.S.A.
Attention: Michael W. Conlon, Esq.
Telecopy No.: (713) 651-5246
Telephone No.: (713) 651-5427
7.13 INTERPRETATION. When a reference is made in this
Agreement to Sections, subsections, Schedules or Exhibits, such reference shall
be to a Section, subsection, Schedule or Exhibit to this Agreement unless
otherwise indicated. The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and the headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. The words "herein" and "hereby" and similar
references mean, except where a specific Section or Article reference is
expressly indicated, the entire Agreement rather than any specific Section or
Article. Except as otherwise expressly provided herein, all monetary amounts
referenced in this Agreement shall mean U.S. dollars.
7.14 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the greatest extent
possible.
7.15 ASSIGNMENT. None of the parties hereto shall assign this
Agreement by operation of law or otherwise without the prior written consent of
the other parties hereto. Without limiting the generality of the foregoing, the
sale of more than 50% of the stock or ownership interest in a party hereto shall
constitute an assignment of this Agreement for purposes of this Section. Any
attempted assignment in violation of this Section shall be deemed null and void.
Notwithstanding the foregoing provisions, BHP Petroleum and Buyer may assign
their
16
<PAGE> 123
respective rights and obligations under this Agreement to an Affiliate without
the prior written consent of the other party so long as such assignment shall
not release the assigning party from any of its obligations hereunder.
7.16 NO THIRD-PARTY BENEFICIARIES. This Agreement is for the
sole benefit of the parties hereto and their permitted assigns and nothing
herein expressed or implied shall give or be construed to give to any Person,
other than the parties hereto and such assigns, any legal or equitable rights
hereunder.
7.17 AMENDMENT. This Agreement may not be amended or modified
except by an instrument in writing signed by BHP Petroleum and Buyer.
7.18 FURTHER ASSURANCES. Each party agrees to cooperate fully
with the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by any other party to evidence and reflect the transactions described
herein and contemplated hereby and to carry into effect the intents and purposes
of this Agreement.
7.19 MUTUAL DRAFTING. This Agreement is the joint product of
BHP Petroleum and Buyer and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of BHP Petroleum and Buyer and shall not
be construed for or against any party hereto.
7.20 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same instrument.
7.21 ENTIRE AGREEMENT. This Agreement, together with all
Schedules and Exhibits hereto, constitutes the entire agreement and supersede
all prior agreements and undertakings, both written and oral, between BHP
Petroleum and Buyer with respect to the subject matter hereof and are not
intended to confer upon any other Person any rights or remedies hereunder,
except as otherwise expressly provided herein.
17
<PAGE> 124
IN WITNESS WHEREOF, BHP Hawaii, BHP Pacific and Buyer have
caused this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
BHP PETROLEUM TRADING AND
MARKETING PROPRIETARY LIMITED
A.C.N. 003 401 6611,
an Australian corporation
By:
------------------------------------------
Name:
Title:
TESORO REFINING, MARKETING & SUPPLY COMPANY,
a Delaware corporation
By:
------------------------------------------
Bruce A. Smith
Chairman and Board of Directors,
President and Chief Executive Officer
<PAGE> 125
EXHIBIT 1.1(f)
OPINION OF ORRICK, HERRINGTON & SUTCLIFFE LLP
The required opinions may contain customary assumptions,
qualifications and limitations. As to factual matters, counsel may rely on such
certificates of officers of BHP Hawaii and BHP Pacific and their Affiliates and
governmental officials as such counsel shall deem necessary or appropriate. As
to Hawaii law corporate matters, counsel may rely on the opinion of the General
Counsel of BHP Hawaii. Such opinions shall be expressed only with respect to the
laws of the States of California and New York and the United States. Such
opinions may contain such qualifications and explanations of the basis thereof
as may be reasonably acceptable to Buyer.
1. Each of BHP Hawaii, BHP Pacific, BHP Refining and Smiley's
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Hawaii.
2. BHP South Pacific is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of California.
3. Each of BHP Hawaii and BHP Pacific has full corporate power
and corporate authority to execute and deliver the Agreement and the Ancillary
Agreements to which it is a party and to consummate the transactions
contemplated thereby. The execution and delivery of the Agreement and such
Ancillary Agreements and the consummation of the transactions contemplated
thereby by each of BHP Hawaii and BHP Pacific have been duly authorized by all
necessary corporate action on the part of BHP Hawaii and BHP Pacific. The
Agreement and the Ancillary Agreements to which each of BHP Hawaii and BHP
Pacific is a party have been duly executed and delivered by BHP Hawaii and BHP
Pacific and, assuming the due execution and delivery thereof by the other
parties thereto, each of the Agreement and such Ancillary Agreements is a legal,
valid and binding obligation of BHP Hawaii and BHP Pacific, enforceable against
BHP Hawaii and BHP Pacific in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and general principles of equity (regardless of whether enforceability
is considered in a proceeding at law or in equity).
4. HERI is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Hawaii. HERI has full
corporate power and corporate authority to sell the Stock of BHP Refining. The
consummation of the transactions contemplated hereby has been duly authorized by
all necessary corporate action on the part of HERI.
* * *
<PAGE> 126
OPINION OF THE BHP GROUP COUNSEL
The required opinions may contain customary assumptions,
qualifications and limitations. As to factual matters, counsel may rely on such
certificates of officers of BHP Hawaii and BHP Pacific and their Affiliates and
governmental officials as such counsel shall deem necessary or appropriate. Such
opinions shall be expressed only with respect to the laws of Victoria,
Australia. Such opinion may contain such qualifications and explanations of the
basis thereof as may be reasonably acceptable to Buyer.
1. BHP has full corporate power and corporate authority to
execute and deliver the BHP Guaranty and to consummate the transactions
contemplated thereby. The execution and delivery of the BHP Guaranty and the
consummation of the transactions contemplated thereby have been duly authorized
by all necessary corporate action on the part of BHP. The BHP Guaranty has been
duly executed and delivered by BHP and, assuming the due execution and delivery
thereof by the other parties thereto, the BHP Guaranty is a legal, valid and
binding obligation of BHP, enforceable against BHP in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity).
* * *
<PAGE> 127
EXHIBIT 1.1(g)
OPINION OF FULLBRIGHT & JAWORSKI L.L.P.
The required opinions may contain customary assumptions,
qualifications and limitations. As to factual matters, counsel may rely on such
certificates of officers of Buyer and governmental officials as such counsel
shall deem necessary or appropriate. Such opinions shall be expressed only with
respect to the laws of the States of Delaware and New York and the United
States. Such opinions may contain such qualifications and explanations of the
basis thereof as may be reasonably acceptable to Seller.
1. Buyer is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware.
2. Buyer has full corporate power and corporate authority to
execute and deliver the Agreement and the Ancillary Agreements and to consummate
the transactions contemplated thereby. The execution and delivery of the
Agreement and the Ancillary Agreements and the consummation of the transactions
contemplated thereby by Buyer have been duly authorized by all necessary
corporate action on the part of Buyer. The Agreement and the Ancillary
Agreements have been duly executed and delivered by Buyer and, assuming the due
execution and delivery thereof by the other parties thereto, each of the
Agreement and Ancillary Agreements is a legal, valid and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and general principles of equity (regardless of whether enforceability
is considered in a proceeding at law or in equity).
* * *
<PAGE> 128
EXHIBIT 1.1(h)
CERTIFICATE OF STOCKHOLDERS
UNDER SECTION 1445 OF THE INTERNAL REVENUE CODE
The undersigned stockholder of BHP Petroleum Americas Refining Inc, a
Hawaii corporation ("BHP Refining"), is providing this certificate to inform
Tesoro Petroleum Corporation, a Delaware corporation ("Buyer"), that no
withholding is required under Section 1445 of the Internal Revenue Code of 1986
(the "Code") with respect to such stockholder's disposition of stock in BHP
Refining, and hereby certifies the following:
1. The undersigned is not a foreign corporation, foreign partnership,
foreign trust or foreign estate (as those terms are defined in the Code);
2. The U.S. employer identification number of the undersigned is:
99-0145507 and
3. The office address of the undersigned is:
733 Bishop Street
Honolulu, HI 96842
The undersigned understands that this certification may be disclosed to
the Internal Revenue Service and that any false statement in this certification
could be punished by fine, imprisonment, or both.
Under penalties of perjury the undersigned declares that it has
examined this certification and to the best of my knowledge and belief it is
true, correct, and complete.
Dated: , 1998.
--------
Hawaii Energy Resources Inc., a
Hawaii corporation
By:
---------------------------------
Name:
-------------------------------
Its:
--------------------------------
<PAGE> 129
EXHIBIT 1.1(h)
CERTIFICATE OF STOCKHOLDERS
UNDER SECTION 1445 OF THE INTERNAL REVENUE CODE
The undersigned stockholder of BHP Petroleum South Pacific Inc., a
California corporation ("BHP South Pacific"), is providing this certificate to
inform Tesoro Petroleum Corporation, a Delaware corporation ("Buyer"), that no
withholding is required under Section 1445 of the Internal Revenue Code of 1986
(the "Code") with respect to such stockholder's disposition of stock in BHP
South Pacific, and hereby certifies the following:
4. The undersigned is not a foreign corporation, foreign partnership,
foreign trust or foreign estate (as those terms are defined in the Code);
5. The U.S. employer identification number of the undersigned is:
99-0216990; and
6. The office address of the undersigned is:
733 Bishop Street
Honolulu, HI 96842
The undersigned understands that this certification may be disclosed to
the Internal Revenue Service and that any false statement in this certification
could be punished by fine, imprisonment, or both.
Under penalties of perjury the undersigned declares that it has
examined this certification and to the best of my knowledge and belief it is
true, correct, and complete.
Dated: , 1998.
---------
BHP Petroleum Pacific Islands Inc.,
a Hawaii corporation
By:
--------------------------------
Name:
------------------------------
Its:
-------------------------------
<PAGE> 130
The Schedules and Disclosure Schedule listed in the Table of Contents to the
Stock Sale Agreement together with exhibits and schedules to Exhibits have been
omitted. The Registrant will furnish a copy of any omitted Schedules or
Disclosure Schedule or exhibits or schedules to Exhibits to the Securities and
Exchange Commission upon request.
<PAGE> 1
EXHIBIT 4.4
CERTIFICATE OF TRUST
OF
TESORO CAPITAL TRUST I
This Certificate of Trust is being executed by the undersigned trustees
for the purposes of forming a business trust pursuant to the Delaware Business
Trust Act, 12 Del. C. Sections 3801 et seq. (the "Act").
The undersigned hereby certifies as follows:
1. Name. The name of the business trust is Tesoro Capital Trust I (the
"Trust").
2. Delaware Trustee. The name and business address of the trustee of
the Trust that has its principal place of business in the State of Delaware are
as follows:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
ATTN: Corporate Trust Administration
3. Effectiveness. This Certificate of Trust shall be effective
immediately upon filing in the Office of the Secretary of State of the State of
Delaware.
IN WITNESS WHEREOF, the undersigned, being all of the initial trustees
of the Trust, have duly executed this Certificate of Trust as of the date and
year first above written.
/s/ BRUCE A. SMITH
------------------------------------
Name: Bruce A. Smith
as Administrative Trustee
/s/ JAMES C. REED, JR.
------------------------------------
Name: James C. Reed, Jr.
as Administrative Trustee
/s/ GREGORY A. WRIGHT
------------------------------------
Name: Gregory A. Wright
as Administrative Trustee
WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as Delaware
Trustee of the Trust
By: /s/ JILL K. MORRISON
---------------------------------
Name: Jill K. Morrison
Title: Administrative Account Manager
<PAGE> 1
EXHIBIT 4.5
DECLARATION OF TRUST
OF
TESORO CAPITAL TRUST I
THIS DECLARATION OF TRUST is made as of April 29, 1998 (this
"Declaration"), by and among Tesoro Petroleum Corporation, a Delaware
corporation, as sponsor (the "Sponsor"), Wilmington Trust Company, a Delaware
banking corporation, as Delaware trustee (the "Delaware Trustee") and Bruce A.
Smith, James C. Reed, Jr., and Gregory A. Wright, as administrative trustees
(the "Administrative Trustees", and, together with the Delaware Trustee, the
"Trustees"). The Sponsor and the Trustees hereby agree as follows:
1. The trust created hereby shall be known as "Tesoro Capital Trust I"
(the "Trust"), in which name the Trustees or the Sponsor, to the extent provided
herein, may conduct the business of the Trust, make and execute contracts, and
sue and be sued.
2. The Sponsor hereby assigns, transfers, conveys and sets over to the
Trust the sum of $10. The Administrative Trustees hereby acknowledge receipt of
such amount in trust from the Sponsor, which amount shall constitute the initial
trust estate. The Administrative Trustees hereby declare that they will hold the
trust estate in trust for the Sponsor. It is the intention of the parties hereto
that the Trust created hereby constitute a business trust under Chapter 38 of
Title 12 of the Delaware Code, 12 Del. C. ss. 3801, et seq. (the "Business Trust
Act"), and that this document constitute the governing instrument of the Trust.
The Trustees are hereby authorized and directed to execute and file a
certificate of trust with the Delaware Secretary of State in such form as the
Trustees may approve.
3. The Sponsor and the Trustees will enter into an amended and restated
Declaration of Trust satisfactory to each such party to provide for the
contemplated operation of the Trust created hereby and the issuance of the
Preferred Securities and Common Securities referred to therein. Prior to the
execution and delivery of such amended and restated Declaration of Trust (i) the
Delaware Trustee shall not have any duty or obligation hereunder or with respect
to the trust estate, except as otherwise required by applicable law, and (ii)
the Administrative Trustees and the Sponsor shall take any action as may be
necessary to obtain prior to such execution and delivery any licenses, consents
or approvals required by applicable law or otherwise. Notwithstanding the
foregoing, the Trustees may take all actions deemed proper as are necessary to
effect the transactions contemplated herein.
4. The Sponsor hereby agrees to (i) reimburse the Trustees for all
reasonable expenses (including reasonable fees and expenses of counsel and other
experts), (ii) indemnify, defend and hold harmless the Trustees and any of the
officers, directors employees and agent of the Trustees (collectively, including
the Delaware Trustee in its individual capacity, the "Indemnified Persons") from
and against any and all losses, damages, liabilities, claims, actions, suits,
costs, expenses, disbursements (including the reasonable fees and expenses of
counsel), taxes and penalties of any kind and nature whatsoever (collectively,
"Expenses"), to the extent that such Expenses arise out of or are imposed upon
or asserted at any time against such Indemnified Persons with respect to the
performance of this
<PAGE> 2
Declaration, the creation, operation, administration or
termination of the Trust, or the transactions contemplated hereby; provided,
however, that the Sponsor shall not be required to indemnify an Indemnified
Person for Expenses to the extent such Expenses result from the willful
misconduct, bad faith or gross negligence of such Indemnified Person, and (iii)
advance to each Indemnified Person Expenses (including reasonable legal fees and
expenses) incurred by such Indemnified Person in defending any claim, demand,
action, suit or proceeding prior to the final disposition of such claim, demand,
action, suit or proceeding upon receipt by the Sponsor of an undertaking by or
on behalf of the Indemnified Person to repay such amount if it shall be
determined that the Indemnified Person is not entitled to be indemnified
therefor under this Section 4.
5. The Sponsor, as sponsor of the Trust, and each Administrative
Trustee is hereby authorized, in its discretion, (i) to file with the
Securities and Exchange Commission (the "Commission") and to execute, in the
case of the 1933 Act Registration Statement and 1934 Act Registration Statement
(each as herein defined), on behalf of the Trust, (a) the Registration
Statement, including pre-effective or post-effective amendments to such
Registration Statement, relating to the registration under the Securities Act
of 1933, as amended (the "1933 Act"), of the Preferred Securities of the Trust
(the "1933 Act Registration Statement"), (b) any preliminary prospectus or
prospectus or supplement thereto relating to the Preferred Securities required
to be filed under the 1933 Act, and (c) if required, a Registration Statement
on Form 8-A or other appropriate form (the "1934 Act Registration
Statement")(including all pre-effective and post-effective amendments thereto)
relating to the registration of the Preferred Securities of the Trust under the
Securities Exchange Act of 1934, as amended; (ii) to file with the New York
Stock Exchange or any other exchange (collectively, the "Exchange") and execute
on behalf of the Trust a listing application and all other applications,
statements, certificates, agreements and other instruments as shall be
necessary or desirable to cause the Preferred Securities to be listed on the
Exchange; (iii) to prepare, execute and file on behalf of the Trust such
applications, reports, surety bonds, irrevocable consents, appointments of
attorney for service of process and other papers and documents as shall be
necessary or desirable to register the Preferred Securities under the
securities or "Blue Sky" laws of such jurisdictions as the Sponsor, on behalf
of the Trust, may deem necessary or desirable; (iv) to negotiate, execute,
deliver and perform on behalf of the Trust, an underwriting agreement with the
Sponsor and the underwriter or underwriters of the Preferred Securities of the
Trust; (v) to prepare, execute, deliver and perform, including on behalf of the
Trust, a depository agreement with, letters and documents to, and instruments
for filing with the initial clearing agency or any other depository, relating
to the Preferred Securities; (vi) to apply for and obtain a tax identification
number for the Trust; and (vii) to prepare, execute and deliver on behalf of
the Trust any and all documents, papers and instruments as may be desirable in
connection with any of the foregoing and to direct the Delaware Trustee to do
or take actions in connection with any of the foregoing. Any power of the
Administrative Trustees hereunder to execute any document or take other action
on behalf of the Trust may be exercised by one Administrative Trustee acting
alone or by two or more Administrative Trustees acting together.
In the event that any filing referred to in this Section 5 is required
by the rules and regulations of Securities and Exchange Commission, PORTAL or
applicable state securities or
2
<PAGE> 3
Blue Sky laws to be executed on behalf of the Trust by one or more Trustees,
each Trustee, in its capacity as a trustee of the Trust, so required to execute
such filings is hereby authorized and directed to join in any such filing and to
execute on behalf of the Trust any and all of the foregoing, it being understood
that a Trustee, in its capacity as a trustee of the Trust, shall not be required
to join in any such filing or execute on behalf of the Trust any such document
unless required to do so by the rules and regulations of the Commission, PORTAL
or applicable state securities or Blue Sky laws. In connection with all of the
foregoing, the Sponsor hereby constitutes and appoints James C. Reed, Jr., as
its true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution for the Sponsor or in the Sponsor's name, place and stead, in
any and all capacities, to sign any and all amendments (including all
pre-effective and post-effective amendments) to the 1933 Act Registration
Statement and any 1934 Act Registration Statement and to file the same, with all
exhibits thereto, and any other documents in connection therewith, with the
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as the
Sponsor might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent or his respective substitute or substitutes,
shall do or cause to be done by virtue hereof.
6. The Delaware Trustee shall take such action or refrain from taking
such action under this Declaration as it may be directed in writing from time to
time by the Sponsor or any Administrative Trustee; provided, however, that the
Delaware Trustee shall not be required to take or refrain from taking any such
action if it shall have determined, or shall have been advised by counsel, that
such performance is likely to involve the Delaware Trustee in personal liability
or is contrary to the terms of this Declaration or of any document contemplated
hereby to which the Trust or the Delaware Trustee is a party or is otherwise
contrary to law. If at any time the Delaware Trustee determines that it requires
or desires guidance regarding the application of any provision of this
Declaration or any other document, then the Delaware Trustee may deliver a
notice to the Sponsor requesting written instructions as to the course of action
desired by the Sponsor, and such instructions shall constitute full and complete
authorization and protection for actions taken by the Delaware Trustee in
reliance thereon. Until the Delaware Trustee receives such instructions, it
shall refrain from taking any action with respect to the matters described in
such notice to the Sponsor.
7. This Declaration may be executed in one or more counterparts.
8. The number of trustees of the Trust initially shall be four (4) and
thereafter the number of trustees of the Trust shall be such number as shall be
fixed from time to time by a written instrument signed by the Sponsor which may
increase or decrease the number of trustees of the Trust; provided, however,
that the number of trustees shall in no event be less than two (2); provided,
further, that to the extent required by the Business Trust Act, one trustee of
the Trust shall either be a natural person who is a resident of the State of
Delaware or, if not a natural person, an entity which has its principal place of
business in the State of Delaware and otherwise meets the requirements of
applicable law. Subject to the foregoing, the Sponsor is entitled to
3
<PAGE> 4
appoint or remove without cause any trustee of the Trust at any time. Any
trustee of the Trust may resign upon thirty days' prior notice to the Sponsor.
9. This Declaration shall be governed by, and construed in accordance
with, the laws of the State of Delaware (without regard to conflict of laws
principles).
[SIGNATURE PAGE FOLLOWS]
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Declaration of
Trust to be duly executed as of the day and year first above written.
TESORO PETROLEUM CORPORATION, as Sponsor
By: /s/ BRUCE A. SMITH
---------------------------------------
Name: Bruce A. Smith
Title: Chairman of the Board
of Directors, President
and Chief Executive Officer
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Delaware
Trustee of the Trust
By: /s/ JILL K. MORRISON
---------------------------------------
Name: Jill K. Morrison
Title: Administrate Account Manager
Bruce A. Smith, not in his individual
capacity but solely as Administrative Trustee
of the Trust
/s/ BRUCE A. SMITH
------------------------------------------
James C. Reed, Jr., not in his individual
capacity but solely as Administrative Trustee
of the Trust
/s/ JAMES C. REED, Jr.
------------------------------------------
Gregory A. Wright, not in his individual
capacity but solely as Administrative Trustee
of the Trust
/s/ GREGORY A. WRIGHT
------------------------------------------
5 TESORO CAPITAL TRUST I
<PAGE> 1
EXHIBIT 4.6
CERTIFICATE OF TRUST
OF
TESORO CAPITAL TRUST II
This Certificate of Trust is being executed by the undersigned
trustees for the purposes of forming a business trust pursuant to the Delaware
Business Trust Act, 12 Del. C. Sections 3801 et seq. (the "Act").
The undersigned hereby certifies as follows:
1. Name. The name of the business trust is Tesoro Capital Trust
II (the "Trust").
2. Delaware Trustee. The name and business address of the trustee
of the Trust that has its principal place of business in the State of Delaware
are as follows:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
ATTN: Corporate Trust Administration
3. Effectiveness. This Certificate of Trust shall be effective
immediately upon filing in the Office of the Secretary of State of the State of
Delaware.
IN WITNESS WHEREOF, the undersigned, being all of the initial
trustees of the Trust, have duly executed this Certificate of Trust as of the
date and year first above written.
/s/ BRUCE A. SMITH
----------------------------------------
Name: Bruce A. Smith
as Administrative Trustee
/s/ JAMES C. REED, JR.
----------------------------------------
Name: James C. Reed, Jr.
as Administrative Trustee
/s/ GREGORY A. WRIGHT
----------------------------------------
Name: Gregory A. Wright
as Administrative Trustee
WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Delaware Trustee of the
Trust
By: /s/ JILL K. MORRISON
-------------------------------------
Name: Jill K. Morrison
Title: Administrative Account Manager
<PAGE> 1
EXHIBIT 4.7
DECLARATION OF TRUST
OF
TESORO CAPITAL TRUST II
THIS DECLARATION OF TRUST is made as of April 29, 1998 (this
"Declaration"), by and among Tesoro Petroleum Corporation, a Delaware
corporation, as sponsor (the "Sponsor"), Wilmington Trust Company, a Delaware
banking corporation, as Delaware trustee (the "Delaware Trustee") and Bruce A.
Smith, James C. Reed, Jr., and Gregory A. Wright, as administrative trustees
(the "Administrative Trustees", and, together with the Delaware Trustee, the
"Trustees"). The Sponsor and the Trustees hereby agree as follows:
1. The trust created hereby shall be known as "Tesoro Capital
Trust II" (the "Trust"), in which name the Trustees or the Sponsor, to the
extent provided herein, may conduct the business of the Trust, make and execute
contracts, and sue and be sued.
2. The Sponsor hereby assigns, transfers, conveys and sets
over to the Trust the sum of $10. The Administrative Trustees hereby acknowledge
receipt of such amount in trust from the Sponsor, which amount shall constitute
the initial trust estate. The Administrative Trustees hereby declare that they
will hold the trust estate in trust for the Sponsor. It is the intention of the
parties hereto that the Trust created hereby constitute a business trust under
Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. ss. 3801, et seq. (the
"Business Trust Act"), and that this document constitute the governing
instrument of the Trust. The Trustees are hereby authorized and directed to
execute and file a certificate of trust with the Delaware Secretary of State in
such form as the Trustees may approve.
3. The Sponsor and the Trustees will enter into an amended and
restated Declaration of Trust satisfactory to each such party to provide for the
contemplated operation of the Trust created hereby and the issuance of the
Preferred Securities and Common Securities referred to therein. Prior to the
execution and delivery of such amended and restated Declaration of Trust (i) the
Delaware Trustee shall not have any duty or obligation hereunder or with respect
to the trust estate, except as otherwise required by applicable law, and (ii)
the Administrative Trustees and the Sponsor shall take any action as may be
necessary to obtain prior to such execution and delivery any licenses, consents
or approvals required by applicable law or otherwise. Notwithstanding the
foregoing, the Trustees may take all actions deemed proper as are necessary to
effect the transactions contemplated herein.
4. The Sponsor hereby agrees to (i) reimburse the Trustees for
all reasonable expenses (including reasonable fees and expenses of counsel and
other experts), (ii) indemnify, defend and hold harmless the Trustees and any of
the officers, directors employees and agent of the Trustees (collectively,
including the Delaware Trustee in its individual capacity, the "Indemnified
Persons") from and against any and all losses, damages, liabilities, claims,
actions, suits, costs, expenses, disbursements (including the reasonable fees
and expenses of counsel), taxes and penalties of any kind and nature whatsoever
(collectively, "Expenses"), to the extent that such Expenses arise out of or
are imposed upon or asserted at any time against such Indemnified Persons with
respect to the performance of this
<PAGE> 2
Declaration, the creation, operation, administration or termination of the
Trust, or the transactions contemplated hereby; provided, however, that the
Sponsor shall not be required to indemnify an Indemnified Person for Expenses to
the extent such Expenses result from the willful misconduct, bad faith or gross
negligence of such Indemnified Person, and (iii) advance to each Indemnified
Person Expenses (including reasonable legal fees and expenses) incurred by such
Indemnified Person in defending any claim, demand, action, suit or proceeding
prior to the final disposition of such claim, demand, action, suit or proceeding
upon receipt by the Sponsor of an undertaking by or on behalf of the Indemnified
Person to repay such amount if it shall be determined that the Indemnified
Person is not entitled to be indemnified therefor under this Section 4.
5. The Sponsor, as sponsor of the Trust, and each
Administrative Trustee is hereby authorized, in its discretion, (i) to file with
the Securities and Exchange Commission (the "Commission") and to execute, in the
case of the 1933 Act Registration Statement and 1934 Act Registration Statement
(each as herein defined), on behalf of the Trust, (a) the Registration
Statement, including pre-effective or post-effective amendments to such
Registration Statement, relating to the registration under the Securities Act of
1933, as amended (the "1933 Act"), of the Preferred Securities of the Trust (the
"1933 Act Registration Statement"), (b) any preliminary prospectus or prospectus
or supplement thereto relating to the Preferred Securities required to be filed
under the 1933 Act, and (c) if required, a Registration Statement on Form 8-A or
other appropriate form (the "1934 Act Registration Statement")(including all
pre-effective and post-effective amendments thereto) relating to the
registration of the Preferred Securities of the Trust under the Securities
Exchange Act of 1934, as amended; (ii) to file with the New York Stock Exchange
or any other exchange (collectively, the "Exchange") and execute on behalf of
the Trust a listing application and all other applications, statements,
certificates, agreements and other instruments as shall be necessary or
desirable to cause the Preferred Securities to be listed on the Exchange; (iii)
to prepare, execute and file on behalf of the Trust such applications, reports,
surety bonds, irrevocable consents, appointments of attorney for service of
process and other papers and documents as shall be necessary or desirable to
register the Preferred Securities under the securities or "Blue Sky" laws of
such jurisdictions as the Sponsor, on behalf of the Trust, may deem necessary or
desirable; (iv) to negotiate, execute, deliver and perform on behalf of the
Trust, an underwriting agreement with the Sponsor and the underwriter or
underwriters of the Preferred Securities of the Trust; (v) to prepare, execute,
deliver and perform, including on behalf of the Trust, a depository agreement
with, letters and documents to, and instruments for filing with the initial
clearing agency or any other depository, relating to the Preferred Securities;
(vi) to apply for and obtain a tax identification number for the Trust; and
(vii) to prepare, execute and deliver on behalf of the Trust any and all
documents, papers and instruments as may be desirable in connection with any of
the foregoing and to direct the Delaware Trustee to do or take actions in
connection with any of the foregoing. Any power of the Administrative Trustees
hereunder to execute any document or take other action on behalf of the Trust
may be exercised by one Administrative Trustee acting alone or by two or more
Administrative Trustees acting together.
In the event that any filing referred to in this Section 5 is
required by the rules and regulations of Securities and Exchange Commission,
PORTAL or applicable state securities or
2
<PAGE> 3
Blue Sky laws to be executed on behalf of the Trust by one or more Trustees,
each Trustee, in its capacity as a trustee of the Trust, so required to execute
such filings is hereby authorized and directed to join in any such filing and to
execute on behalf of the Trust any and all of the foregoing, it being understood
that a Trustee, in its capacity as a trustee of the Trust, shall not be required
to join in any such filing or execute on behalf of the Trust any such document
unless required to do so by the rules and regulations of the Commission, PORTAL
or applicable state securities or Blue Sky laws. In connection with all of the
foregoing, the Sponsor hereby constitutes and appoints James C. Reed, Jr., as
its true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution for the Sponsor or in the Sponsor's name, place and stead, in
any and all capacities, to sign any and all amendments (including all
pre-effective and post-effective amendments) to the 1933 Act Registration
Statement and any 1934 Act Registration Statement and to file the same, with all
exhibits thereto, and any other documents in connection therewith, with the
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as the
Sponsor might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent or his respective substitute or substitutes,
shall do or cause to be done by virtue hereof.
6. The Delaware Trustee shall take such action or refrain from
taking such action under this Declaration as it may be directed in writing from
time to time by the Sponsor or any Administrative Trustee; provided, however,
that the Delaware Trustee shall not be required to take or refrain from taking
any such action if it shall have determined, or shall have been advised by
counsel, that such performance is likely to involve the Delaware Trustee in
personal liability or is contrary to the terms of this Declaration or of any
document contemplated hereby to which the Trust or the Delaware Trustee is a
party or is otherwise contrary to law. If at any time the Delaware Trustee
determines that it requires or desires guidance regarding the application of any
provision of this Declaration or any other document, then the Delaware Trustee
may deliver a notice to the Sponsor requesting written instructions as to the
course of action desired by the Sponsor, and such instructions shall constitute
full and complete authorization and protection for actions taken by the Delaware
Trustee in reliance thereon. Until the Delaware Trustee receives such
instructions, it shall refrain from taking any action with respect to the
matters described in such notice to the Sponsor.
7. This Declaration may be executed in one or more
counterparts.
8. The number of trustees of the Trust initially shall be four
(4) and thereafter the number of trustees of the Trust shall be such number as
shall be fixed from time to time by a written instrument signed by the Sponsor
which may increase or decrease the number of trustees of the Trust; provided,
however, that the number of trustees shall in no event be less than two (2);
provided, further, that to the extent required by the Business Trust Act, one
trustee of the Trust shall either be a natural person who is a resident of the
State of Delaware or, if not a natural person, an entity which has its principal
place of business in the State of Delaware and otherwise meets the requirements
of applicable law. Subject to the foregoing, the Sponsor is entitled to
3
<PAGE> 4
appoint or remove without cause any trustee of the Trust at any time. Any
trustee of the Trust may resign upon thirty days' prior notice to the Sponsor.
9. This Declaration shall be governed by, and construed in
accordance with, the laws of the State of Delaware (without regard to conflict
of laws principles).
[SIGNATURE PAGE FOLLOWS]
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this
Declaration of Trust to be duly executed as of the day and year first above
written.
TESORO PETROLEUM CORPORATION, as Sponsor
By: /s/ BRUCE A. SMITH
------------------------------------
Name: Bruce A. Smith
Title: Chairman of the Board
of Directors, President
and Chief Executive Officer
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Delaware Trustee of the Trust
By: /s/ JILL K. MORRISON
-----------------------------------
Name: Jill K. Morrison
Title: Administrative Account
Manager
Bruce A. Smith, not in his individual
capacity but solely as Administrative
Trustee of the Trust
/s/ BRUCE A. SMITH
--------------------------------------
James C. Reed, Jr., not in his
individual capacity but solely as
Administrative Trustee of the Trust
/s/ JAMES C. REED, JR.
------------------------------------
Gregory A. Wright, not in his
individual capacity but solely as
Administrative Trustee of the Trust
/s/ GREGORY A. WRIGHT
------------------------------------
5 TESORO CAPITAL TRUST II
<PAGE> 1
EXHIBIT 4.8
CERTIFICATE OF TRUST
OF
TESORO CAPITAL TRUST III
This Certificate of Trust is being executed by the undersigned
trustees for the purposes of forming a business trust pursuant to the Delaware
Business Trust Act, 12 Del. C. Sections 3801 et seq. (the "Act").
The undersigned hereby certifies as follows:
1. Name. The name of the business trust is Tesoro Capital Trust
III (the "Trust").
2. Delaware Trustee. The name and business address of the trustee
of the Trust that has its principal place of business in the State of Delaware
are as follows:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
ATTN: Corporate Trust Administration
3. Effectiveness. This Certificate of Trust shall be effective
immediately upon filing in the Office of the Secretary of State of the State of
Delaware.
IN WITNESS WHEREOF, the undersigned, being all of the initial
trustees of the Trust, have duly executed this Certificate of Trust as of the
date and year first above written.
/s/ BRUCE A. SMITH
-------------------------------------
Name: Bruce A. Smith
as Administrative Trustee
/s/ JAMES C. REED, JR.
-------------------------------------
Name: James C. Reed, Jr.
as Administrative Trustee
/s/ GREGORY A. WRIGHT
-------------------------------------
Name: Gregory A. Wright
as Administrative Trustee
WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Delaware Trustee of the
Trust
By: /s/ JILL K. MORRISON
----------------------------------
Name: Jill K. Morrison
Title: Administrative Account
Manager
<PAGE> 1
EXHIBIT 4.9
DECLARATION OF TRUST
OF
TESORO CAPITAL TRUST III
THIS DECLARATION OF TRUST is made as of April , 1998 (this
"Declaration"), by and among Tesoro Petroleum Corporation, a Delaware
corporation, as sponsor (the "Sponsor"), Wilmington Trust Company, a Delaware
banking corporation, as Delaware trustee (the "Delaware Trustee") and Bruce A.
Smith, James C. Reed, Jr., and Gregory A. Wright, as administrative trustees
(the "Administrative Trustees", and, together with the Delaware Trustee, the
"Trustees"). The Sponsor and the Trustees hereby agree as follows:
1. The trust created hereby shall be known as "Tesoro Capital Trust
III" (the "Trust"), in which name the Trustees or the Sponsor, to the extent
provided herein, may conduct the business of the Trust, make and execute
contracts, and sue and be sued.
2. The Sponsor hereby assigns, transfers, conveys and sets over to the
Trust the sum of $10. The Administrative Trustees hereby acknowledge receipt of
such amount in trust from the Sponsor, which amount shall constitute the initial
trust estate. The Administrative Trustees hereby declare that they will hold the
trust estate in trust for the Sponsor. It is the intention of the parties hereto
that the Trust created hereby constitute a business trust under Chapter 38 of
Title 12 of the Delaware Code, 12 Del. C. ? 3801, et seq. (the "Business Trust
Act"), and that this document constitute the governing instrument of the Trust.
The Trustees are hereby authorized and directed to execute and file a
certificate of trust with the Delaware Secretary of State in such form as the
Trustees may approve.
3. The Sponsor and the Trustees will enter into an amended and restated
Declaration of Trust satisfactory to each such party to provide for the
contemplated operation of the Trust created hereby and the issuance of the
Preferred Securities and Common Securities referred to therein. Prior to the
execution and delivery of such amended and restated Declaration of Trust (i) the
Delaware Trustee shall not have any duty or obligation hereunder or with respect
to the trust estate, except as otherwise required by applicable law, and (ii)
the Administrative Trustees and the Sponsor shall take any action as may be
necessary to obtain prior to such execution and delivery any licenses, consents
or approvals required by applicable law or otherwise. Notwithstanding the
foregoing, the Trustees may take all actions deemed proper as are necessary to
effect the transactions contemplated herein.
4. The Sponsor hereby agrees to (i) reimburse the Trustees for all
reasonable expenses (including reasonable fees and expenses of counsel
and other experts), (ii) indemnify, defend and hold harmless the Trustees and
any of the officers, directors employees and agent of the Trustees
(collectively, including the Delaware Trustee in its individual capacity, the
"Indemnified Persons") from and against any and all losses, damages,
liabilities, claims, actions, suits, costs, expenses, disbursements (including
the reasonable fees and expenses of counsel), taxes and penalties of any kind
and nature whatsoever (collectively, "Expenses"), to the extent that such
Expenses arise out of or are imposed upon or asserted at any time against such
Indemnified Persons with respect to the performance of this
<PAGE> 2
Declaration, the creation, operation, administration or termination of the
Trust, or the transactions contemplated hereby; provided, however, that the
Sponsor shall not be required to indemnify an Indemnified Person for Expenses to
the extent such Expenses result from the willful misconduct, bad faith or gross
negligence of such Indemnified Person, and (iii) advance to each Indemnified
Person Expenses (including reasonable legal fees and expenses) incurred by such
Indemnified Person in defending any claim, demand, action, suit or proceeding
prior to the final disposition of such claim, demand, action, suit or proceeding
upon receipt by the Sponsor of an undertaking by or on behalf of the Indemnified
Person to repay such amount if it shall be determined that the Indemnified
Person is not entitled to be indemnified therefor under this Section 4.
5. The Sponsor, as sponsor of the Trust, and each Administrative
Trustee is hereby authorized, in its discretion, (i) to file with the Securities
and Exchange Commission (the "Commission") and to execute, in the case of the
1933 Act Registration Statement and 1934 Act Registration Statement (each as
herein defined), on behalf of the Trust, (a) the Registration Statement,
including pre-effective or post-effective amendments to such Registration
Statement, relating to the registration under the Securities Act of 1933, as
amended (the "1933 Act"), of the Preferred Securities of the Trust (the "1933
Act Registration Statement"), (b) any preliminary prospectus or prospectus or
supplement thereto relating to the Preferred Securities required to be filed
under the 1933 Act, and (c) if required, a Registration Statement on Form 8-A or
other appropriate form (the "1934 Act Registration Statement")(including all
pre-effective and post-effective amendments thereto) relating to the
registration of the Preferred Securities of the Trust under the Securities
Exchange Act of 1934, as amended; (ii) to file with the New York Stock Exchange
or any other exchange (collectively, the "Exchange") and execute on behalf of
the Trust a listing application and all other applications, statements,
certificates, agreements and other instruments as shall be necessary or
desirable to cause the Preferred Securities to be listed on the Exchange; (iii)
to prepare, execute and file on behalf of the Trust such applications, reports,
surety bonds, irrevocable consents, appointments of attorney for service of
process and other papers and documents as shall be necessary or desirable to
register the Preferred Securities under the securities or "Blue Sky" laws of
such jurisdictions as the Sponsor, on behalf of the Trust, may deem necessary or
desirable; (iv) to negotiate, execute, deliver and perform on behalf of the
Trust, an underwriting agreement with the Sponsor and the underwriter or
underwriters of the Preferred Securities of the Trust; (v) to prepare, execute,
deliver and perform, including on behalf of the Trust, a depository agreement
with, letters and documents to, and instruments for filing with the initial
clearing agency or any other depository, relating to the Preferred Securities;
(vi) to apply for and obtain a tax identification number for the Trust; and
(vii) to prepare, execute and deliver on behalf of the Trust any and all
documents, papers and instruments as may be desirable in connection with any of
the foregoing and to direct the Delaware Trustee to do or take actions in
connection with any of the foregoing. Any power of the Administrative Trustees
hereunder to execute any document or take other action on behalf of the Trust
may be exercised by one Administrative Trustee acting alone or by two or more
Administrative Trustees acting together.
In the event that any filing referred to in this Section 5 is required
by the rules and regulations of Securities and Exchange Commission, PORTAL or
applicable state securities or
<PAGE> 3
Blue Sky laws to be executed on behalf of the Trust by one or more Trustees,
each Trustee, in its capacity as a trustee of the Trust, so required to execute
such filings is hereby authorized and directed to join in any such filing and to
execute on behalf of the Trust any and all of the foregoing, it being understood
that a Trustee, in its capacity as a trustee of the Trust, shall not be required
to join in any such filing or execute on behalf of the Trust any such document
unless required to do so by the rules and regulations of the Commission, PORTAL
or applicable state securities or Blue Sky laws. In connection with all of the
foregoing, the Sponsor hereby constitutes and appoints James C. Reed, Jr., as
its true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution for the Sponsor or in the Sponsor's name, place and stead, in
any and all capacities, to sign any and all amendments (including all
pre-effective and post-effective amendments) to the 1933 Act Registration
Statement and any 1934 Act Registration Statement and to file the same, with all
exhibits thereto, and any other documents in connection therewith, with the
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as the
Sponsor might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent or his respective substitute or substitutes,
shall do or cause to be done by virtue hereof.
6. The Delaware Trustee shall take such action or refrain from taking
such action under this Declaration as it may be directed in writing from time to
time by the Sponsor or any Administrative Trustee; provided, however, that the
Delaware Trustee shall not be required to take or refrain from taking any such
action if it shall have determined, or shall have been advised by counsel, that
such performance is likely to involve the Delaware Trustee in personal liability
or is contrary to the terms of this Declaration or of any document contemplated
hereby to which the Trust or the Delaware Trustee is a party or is otherwise
contrary to law. If at any time the Delaware Trustee determines that it requires
or desires guidance regarding the application of any provision of this
Declaration or any other document, then the Delaware Trustee may deliver a
notice to the Sponsor requesting written instructions as to the course of action
desired by the Sponsor, and such instructions shall constitute full and complete
authorization and protection for actions taken by the Delaware Trustee in
reliance thereon. Until the Delaware Trustee receives such instructions, it
shall refrain from taking any action with respect to the matters described in
such notice to the Sponsor.
7. This Declaration may be executed in one or more counterparts.
8. The number of trustees of the Trust initially shall be four (4) and
thereafter the number of trustees of the Trust shall be such number as shall be
fixed from time to time by a written instrument signed by the Sponsor which may
increase or decrease the number of trustees of the Trust; provided, however,
that the number of trustees shall in no event be less than two (2); provided,
further, that to the extent required by the Business Trust Act, one trustee of
the Trust shall either be a natural person who is a resident of the State of
Delaware or, if not a natural person, an entity which has its principal place of
business in the State of Delaware and otherwise meets the requirements of
applicable law. Subject to the foregoing, the Sponsor is entitled to
3
<PAGE> 4
appoint or remove without cause any trustee of the Trust at any time. Any
trustee of the Trust may resign upon thirty days' prior notice to the Sponsor.
9. This Declaration shall be governed by, and construed in accordance
with, the laws of the State of Delaware (without regard to conflict of laws
principles).
[SIGNATURE PAGE FOLLOWS]
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Declaration of
Trust to be duly executed as of the day and year first above written.
TESORO PETROLEUM CORPORATION, as Sponsor
By: /s/ BRUCE A. SMITH
-------------------------------------
Name: Bruce A. Smith
Title: Chairman of the Board
of Directors, President
and Chief Executive Officer
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Delaware Trustee of the Trust
By: /s/ JILL K. MORRISON
-------------------------------------
Name: Jill K. Morrison
Title: Administrative Account Manager
Bruce A. Smith, not in his individual
capacity but solely as Administrative
Trustee of the Trust
/s/ BRUCE A. SMITH
---------------------------------------
James C. Reed, Jr., not in his
individual capacity but solely as
Administrative Trustee of the Trust
/s/ JAMES C. REED, JR.
---------------------------------------
Gregory A. Wright,not in his individual
capacity but solely as Administrative
Trustee of the Trust
/s/ GREGORY A. WRIGHT
---------------------------------------
5 TESORO CAPITAL TRUST III
<PAGE> 1
EXHIBIT 12.1
TESORO PETROLEUM CORPORATION
Computation of Ratio of Earnings to Fixed Charges
(Dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
EARNINGS:
Earnings before income taxes and extraordinary loss
on extinguishments of debt, net ...................... $ 49,120 $115,147 $ 61,868 $ 26,056 $ 18,653
Interest expense, net of capitalized interest ........... 6,699 15,128 20,166 17,890 12,661
Amortization of debt discount ........................... -- 254 736 859 1,889
Amortization of debt issuance costs ..................... -- 257 350 332 195
Estimated interest portion of rents (a) ................. 11,509 9,185 5,908 5,248 4,487
-------- -------- -------- -------- --------
Total Earnings .................................. $ 67,328 $139,971 $ 89,028 $ 50,385 $ 37,885
======== ======== ======== ======== ========
FIXED CHARGES:
Interest expenses, whether expensed or capitalized ...... $ 7,118 $ 15,128 $ 20,166 $ 18,805 $ 12,661
Amortization of debt discount ........................... -- 254 736 859 1,889
Amortization of debt issuance costs ..................... -- 257 350 332 195
Estimated interest portion of rents (a) ................. 11,509 9,185 5,908 5,248 4,487
-------- -------- -------- -------- --------
Total Fixed Charges ............................. $ 18,627 $ 24,824 $ 27,160 $ 25,244 $ 19,232
======== ======== ======== ======== ========
PREFERRED STOCK DIVIDEND REQUIREMENTS ...................... $ -- $ -- $ -- $ 2,680 $ 9,207
======== ======== ======== ======== ========
COMBINED FIXED CHARGES AND PREFERRED STOCK
DIVIDEND REQUIREMENTS ................................... $ 18,627 $ 24,824 $ 27,160 $ 27,924 $ 28,439
======== ======== ======== ======== ========
RATIO OF EARNINGS TO FIXED CHARGES ......................... 3.61 5.64 3.28 2.00 1.97
======== ======== ======== ======== ========
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDEND REQUIREMENTS ................... 3.61 5.64 3.28 1.80 1.33
======== ======== ======== ======== ========
</TABLE>
- ----------
(a) For a majority of leases, the interest portion of rents was estimated by
using the Company's incremental borrowing rate in effect at the inception
of the leases. For the remaining leases, interest expense was estimated
by using one third of the rental payments. Total rental expense,
including marine charters, was $44.9 million, $41.5 million, $35.6
million, $33.6 million and $32.5 million for 1997, 1996, 1995, 1994 and
1993, respectively.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Tesoro Petroleum Corporation on Form S-3 of our report dated January 28, 1998,
appearing in the Annual Report on Form 10-K of Tesoro Petroleum Corporation for
the year ended December 31, 1997 and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.
DELOITTE & TOUCHE LLP
San Antonio, Texas
May 4, 1998
