By-laws - TESORO CORP /NEW/ - 3-24-1997

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By-laws - TESORO CORP /NEW/ - 3-24-1997 Powered By Docstoc
					ITEM 14(a)3, EXHIBIT 3.2 Adopted: September 22, 1971 Amended: May 31, 1973 November 20, 1974 November 1, 1975 September 29, 1976 September 29, 1979 August 27, 1980 November 22, 1988 April 14, 1989 June 28, 1989 January 2, 1992 September 29, 1992 February 9, 1994 February 23, 1995 July 26, 1995 September 27, 1995 June 6, 1996 BY-LAWS OF TESORO PETROLEUM CORPORATION (As Amended June 6, 1996)

BY-LAWS OF TESORO PETROLEUM CORPORATION ARTICLE I Meeting of Stockholders Section 1.1 Annual Meetings. The annual meeting of the stockholders for the election of directors and for the transaction of such other business as properly may come before such meeting shall be held on such date, and at such time and place within or without the State of Delaware, as may be designated by the Board of Directors. Section 1.2 Special Meetings. Special meetings of the stockholders for any proper purpose or purposes may be called at any time by the Board of Directors, the Chairman of the Board of Directors, the Vice Chairman of the Board of Directors, or any Vice President, to be held on such date, and at such time and place within or without the State of Delaware, as the Board of Directors, the Chairman of the Board of Directors, the Vice Chairman of the Board of Directors, or a Vice President, whichever has called the meeting, shall direct. A special meeting of the stockholders shall be called by the Chairman of the Board of Directors, the Vice Chairman of the Board of Directors, or any Vice President whenever stockholders holding shares representing a majority of the votes of the shares of the Corporation then issued and outstanding and entitled to vote on matters to be submitted to stockholders of the Corporation shall make application therefor in writing. Any such written request shall state a proper purpose or purposes of the meeting and shall be delivered to the Chairman of the Board of Directors, the Vice Chairman of the Board of Directors, or any Vice President. A special meeting of the stockholders shall be called by the Chairman of the Board of Directors, the Vice Chairman of the Board of Directors, or any Vice

BY-LAWS OF TESORO PETROLEUM CORPORATION ARTICLE I Meeting of Stockholders Section 1.1 Annual Meetings. The annual meeting of the stockholders for the election of directors and for the transaction of such other business as properly may come before such meeting shall be held on such date, and at such time and place within or without the State of Delaware, as may be designated by the Board of Directors. Section 1.2 Special Meetings. Special meetings of the stockholders for any proper purpose or purposes may be called at any time by the Board of Directors, the Chairman of the Board of Directors, the Vice Chairman of the Board of Directors, or any Vice President, to be held on such date, and at such time and place within or without the State of Delaware, as the Board of Directors, the Chairman of the Board of Directors, the Vice Chairman of the Board of Directors, or a Vice President, whichever has called the meeting, shall direct. A special meeting of the stockholders shall be called by the Chairman of the Board of Directors, the Vice Chairman of the Board of Directors, or any Vice President whenever stockholders holding shares representing a majority of the votes of the shares of the Corporation then issued and outstanding and entitled to vote on matters to be submitted to stockholders of the Corporation shall make application therefor in writing. Any such written request shall state a proper purpose or purposes of the meeting and shall be delivered to the Chairman of the Board of Directors, the Vice Chairman of the Board of Directors, or any Vice President. A special meeting of the stockholders shall be called by the Chairman of the Board of Directors, the Vice Chairman of the Board of Directors, or any Vice President, for the purpose of electing one additional member to the Board of Directors in the event there should occur three tie votes of the Board of Directors with respect to any matter or series of matters at any meeting or series of meetings within a three consecutive month period. Section 1.3 Notice of Meeting. Written notice, signed by the Chairman of the Board of Directors, the Vice Chairman of the Board of Directors, any Vice President, the Secretary or an Assistant Secretary, of every meeting of stockholders (other than an adjourned meeting unless otherwise required by statute) stating the purpose or purposes for which the meeting is called, and the date and time when, and the place where, it is to be held shall be either delivered personally or mailed to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the meeting, except as otherwise provided by statute. If mailed, such notice shall be

directed to a stockholder at his address as it shall appear on the stock books of the Corporation, unless he shall have filed with the Secretary a written request that notices intended for him be mailed to some other address, in which case it shall be mailed to the address designated in such request, and shall be given when deposited in the United States mail, postage prepaid. Section 1.4 Quorum. The presence at any meeting, in person or by proxy, of the holders of record of shares representing a majority of the votes of the shares then issued and outstanding and entitled to vote shall be necessary and sufficient to constitute a quorum for the transaction of business, except where otherwise provided by statute. Section 1.5 Adjournments. In the absence of a quorum, a majority of the votes of the stockholders entitled to vote, present in person or by proxy, or, if no stockholder entitled to vote is present in person or by proxy, any officer entitled to preside at or act as secretary of such meeting, may adjourn the meeting from time to time until a quorum shall be present. Section 1.6 Voting. Directors shall be chosen by a plurality of the votes cast at the election, and, except where otherwise provided by statute, or the Certificate of Incorporation, all other questions shall be determined by a majority of the votes cast on such question.

directed to a stockholder at his address as it shall appear on the stock books of the Corporation, unless he shall have filed with the Secretary a written request that notices intended for him be mailed to some other address, in which case it shall be mailed to the address designated in such request, and shall be given when deposited in the United States mail, postage prepaid. Section 1.4 Quorum. The presence at any meeting, in person or by proxy, of the holders of record of shares representing a majority of the votes of the shares then issued and outstanding and entitled to vote shall be necessary and sufficient to constitute a quorum for the transaction of business, except where otherwise provided by statute. Section 1.5 Adjournments. In the absence of a quorum, a majority of the votes of the stockholders entitled to vote, present in person or by proxy, or, if no stockholder entitled to vote is present in person or by proxy, any officer entitled to preside at or act as secretary of such meeting, may adjourn the meeting from time to time until a quorum shall be present. Section 1.6 Voting. Directors shall be chosen by a plurality of the votes cast at the election, and, except where otherwise provided by statute, or the Certificate of Incorporation, all other questions shall be determined by a majority of the votes cast on such question. Section 1.7 Proxies. Any stockholders entitled to vote may vote by proxy, provided that the instrument authorizing such proxy to act shall have been executed in writing (which shall include telegraphing or cabling) by the stockholder himself or by his duly authorized attorney. Section 1.8 Judges of Election. The Board of Directors may appoint judges of election to serve at any election of directors and at balloting on any other matter that may properly come before a meeting of stockholders. If no such appointment shall be made, or if any of the judges so appointed shall fail to attend, or refuse or be unable to serve, then such appointment may be made by the presiding officers at the meeting. Section 1.9 Consent of Stockholders in Lieu of Meeting. (a) Any action required to be taken at any annual or special meeting of the stockholders, or any action which may be taken at any annual or special meeting of the stockholders, may be taken without a meeting, without prior notice and without a vote if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to -2-

its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings or meetings of stockholders are recorded. Delivery shall be made by hand or by certified or registered mail, return receipt requested. (b) Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty days of the date the earliest dated consent is delivered to the Corporation, a written consent or consents signed by a sufficient number of holders to take action are delivered to the Corporation in the manner prescribed in paragraph (c) of this Section. (c) In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than fifteen days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary, request the Board of Directors to fix a record date. The Board of Directors shall promptly, but in all events within ten days after the date on which such a request is received, adopt a resolution fixing the record date. If no record date has been fixed by the Board of

its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings or meetings of stockholders are recorded. Delivery shall be made by hand or by certified or registered mail, return receipt requested. (b) Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty days of the date the earliest dated consent is delivered to the Corporation, a written consent or consents signed by a sufficient number of holders to take action are delivered to the Corporation in the manner prescribed in paragraph (c) of this Section. (c) In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than fifteen days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary, request the Board of Directors to fix a record date. The Board of Directors shall promptly, but in all events within ten days after the date on which such a request is received, adopt a resolution fixing the record date. If no record date has been fixed by the Board of Directors within ten days after the date on which such a request is received, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation in accordance with paragraphs (a) and (b) of this Section. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by applicable law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board of Directors adopts the resolution taking such prior action. (d) Within three business days after receipt of the earliest dated consent delivered to the Corporation in the manner provided in this Section, the Corporation shall retain nationally recognized independent inspectors of elections for the purpose of performing a ministerial review of the validity of consents and any revocations thereof. The Corporation shall promptly deliver all consents and revocations of consents received by it to the inspectors of election. The cost of retaining inspectors of election shall be borne by the Corporation. -3-

(e) At any time that stockholders soliciting consents in writing to corporate action have a good faith belief that the requisite number of valid and unrevoked consents to authorize or take the action specified has been received by them, the consents shall be delivered by the soliciting stockholders to the Corporation's registered office in the State of Delaware or principal place of business or to the Secretary of the Corporation, together with a certificate stating their belief that the requisite number of valid and unrevoked consents has been received as of a specific date, which date shall be identified in the certificate. In the event that delivery is made to the Corporation's registered office in the State of Delaware, such delivery shall be made by hand or by certified or registered mail, return receipt requested. (f) As promptly as practicable after the consents and revocations are received by them, the inspectors of election shall issue a preliminary report to the Corporation stating: (i) the number of shares represented by valid and unrevoked consents; (ii) the number of shares represented by invalid consents; (iii) the number of shares represented by invalid revocations; and (iv) the number of shares entitled to submit consents as of the record date. Unless the Corporation and the soliciting stockholders agree to a shorter or longer period, the Corporation and the soliciting stockholders shall have five days to review the consents and revocations and to advise the inspectors and the opposing party in writing as to whether they intend to challenge the preliminary report. If no timely written notice of an intention to challenge the preliminary report is received, the inspectors shall certify the preliminary report (as corrected or modified by virtue of the detection by the inspectors of clerical errors) as their final report and deliver it to the Corporation. If the Corporation or the soliciting stockholders give timely written notice of an intention to challenge the preliminary report, a challenge session shall be scheduled by the inspectors as promptly as practicable. A transcript of the challenge session shall be recorded by a certified court reporter. Following completion of the challenge session, the inspectors shall issue as promptly as practicable their final

(e) At any time that stockholders soliciting consents in writing to corporate action have a good faith belief that the requisite number of valid and unrevoked consents to authorize or take the action specified has been received by them, the consents shall be delivered by the soliciting stockholders to the Corporation's registered office in the State of Delaware or principal place of business or to the Secretary of the Corporation, together with a certificate stating their belief that the requisite number of valid and unrevoked consents has been received as of a specific date, which date shall be identified in the certificate. In the event that delivery is made to the Corporation's registered office in the State of Delaware, such delivery shall be made by hand or by certified or registered mail, return receipt requested. (f) As promptly as practicable after the consents and revocations are received by them, the inspectors of election shall issue a preliminary report to the Corporation stating: (i) the number of shares represented by valid and unrevoked consents; (ii) the number of shares represented by invalid consents; (iii) the number of shares represented by invalid revocations; and (iv) the number of shares entitled to submit consents as of the record date. Unless the Corporation and the soliciting stockholders agree to a shorter or longer period, the Corporation and the soliciting stockholders shall have five days to review the consents and revocations and to advise the inspectors and the opposing party in writing as to whether they intend to challenge the preliminary report. If no timely written notice of an intention to challenge the preliminary report is received, the inspectors shall certify the preliminary report (as corrected or modified by virtue of the detection by the inspectors of clerical errors) as their final report and deliver it to the Corporation. If the Corporation or the soliciting stockholders give timely written notice of an intention to challenge the preliminary report, a challenge session shall be scheduled by the inspectors as promptly as practicable. A transcript of the challenge session shall be recorded by a certified court reporter. Following completion of the challenge session, the inspectors shall issue as promptly as practicable their final report and deliver it to the Corporation. A copy of the final report shall be included in the book in which the proceedings of meetings of stockholders are recorded. (g) The Corporation shall give prompt notice to the stockholders of the results of any consent solicitation or the taking of corporate action without a meeting by less than unanimous written consent. (h) This Section shall in no way impair or diminish the right of any stockholder or director, or any officer whose title to office is contested, to contest the validity of any consent or revocation thereof, or to take any action with respect thereto. -4-

Section 1.10 Nominations for Director and Proposal of Business. (a) Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the stockholders may be made at an annual meeting of the stockholders (a) pursuant to the Corporation's notice of meeting, (b) by or at the direction of the Board of Directors or (c) by any stockholder who was a stockholder of record at the time of giving of notice provided for in this Section, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section. (b) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to this Section, such stockholder must have given timely notice thereof in writing to the Secretary, and such business must be a proper subject for stockholder action under the Delaware General Corporation Law. To be timely, a stockholder's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not less than sixty days nor more than ninety days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than thirty days or delayed by more than sixty days from such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the ninetieth day prior to such annual meeting and not later than the close of business on the later of the sixtieth day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director, all information relating to such person that is required to be disclosed in solicitation of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected), (b) as to any other business that the stockholder

Section 1.10 Nominations for Director and Proposal of Business. (a) Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the stockholders may be made at an annual meeting of the stockholders (a) pursuant to the Corporation's notice of meeting, (b) by or at the direction of the Board of Directors or (c) by any stockholder who was a stockholder of record at the time of giving of notice provided for in this Section, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section. (b) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to this Section, such stockholder must have given timely notice thereof in writing to the Secretary, and such business must be a proper subject for stockholder action under the Delaware General Corporation Law. To be timely, a stockholder's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not less than sixty days nor more than ninety days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than thirty days or delayed by more than sixty days from such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the ninetieth day prior to such annual meeting and not later than the close of business on the later of the sixtieth day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director, all information relating to such person that is required to be disclosed in solicitation of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected), (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made, and (c) as to the stockholder giving the notice and such beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner, and (ii) the class and number of shares of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner. (c) Notwithstanding anything in this Section to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased -5-

and there is no public announcement specifying the size of the increased Board of Directors made by the Corporation at least seventy days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice required by this Section shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth day following the day on which such public announcement is first made by the Corporation. (d) Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation's notice of meeting (a) by or at the direction of the Board of Directors or (b) by any stockholder of the Corporation who is a stockholder of record at the time of the Corporation's giving of notice provided for in this Section, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Section. Nominations by stockholders of persons for election to the Board of Directors may be made at such a special meeting of stockholders if the stockholder's notice required by this Section shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the ninetieth day prior to such special meeting and not later than the close of business on the later of the sixtieth day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. (e) Only such persons who are nominated in accordance with the procedures set forth in this Section shall be

and there is no public announcement specifying the size of the increased Board of Directors made by the Corporation at least seventy days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice required by this Section shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth day following the day on which such public announcement is first made by the Corporation. (d) Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation's notice of meeting (a) by or at the direction of the Board of Directors or (b) by any stockholder of the Corporation who is a stockholder of record at the time of the Corporation's giving of notice provided for in this Section, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Section. Nominations by stockholders of persons for election to the Board of Directors may be made at such a special meeting of stockholders if the stockholder's notice required by this Section shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the ninetieth day prior to such special meeting and not later than the close of business on the later of the sixtieth day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. (e) Only such persons who are nominated in accordance with the procedures set forth in this Section shall be eligible for election as directors at a meeting of stockholders. Only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section. The Chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Section and, if any proposed nominations or business is not in compliance with this Section, to declare that such defective proposal shall be disregarded. (f) For purposes of this Section, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service. (g) Notwithstanding the foregoing provisions of this Section, a stockholder shall also comply with all applicable requirements of the Exchange -6-

Act and the rules and regulations thereunder with respect to the matters set forth in this Section. Nothing in this Section shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act. ARTICLE II Board of Directors Section 2.1 Number, Election and Term of Office. The number of directors which shall constitute the whole Board of Directors shall be fixed from time to time by resolution of the Board of Directors but shall not be less than three. The directors shall be elected at the annual meeting of stockholders, except as provided in Section 2.2, and each director elected at an annual meeting of stockholders, and directors elected in the interim to fill vacancies and newly created directorships shall hold office until the next annual meeting of stockholders or until their successors are duly elected and qualified or until their earlier resignation or removal. A director need not be a stockholder. Section 2.2 Vacancies and Additional Directorships. Unless otherwise provided in the Certificate of Incorporation or these By-laws: (1) vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum; (2) whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the Certificate of

Act and the rules and regulations thereunder with respect to the matters set forth in this Section. Nothing in this Section shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act. ARTICLE II Board of Directors Section 2.1 Number, Election and Term of Office. The number of directors which shall constitute the whole Board of Directors shall be fixed from time to time by resolution of the Board of Directors but shall not be less than three. The directors shall be elected at the annual meeting of stockholders, except as provided in Section 2.2, and each director elected at an annual meeting of stockholders, and directors elected in the interim to fill vacancies and newly created directorships shall hold office until the next annual meeting of stockholders or until their successors are duly elected and qualified or until their earlier resignation or removal. A director need not be a stockholder. Section 2.2 Vacancies and Additional Directorships. Unless otherwise provided in the Certificate of Incorporation or these By-laws: (1) vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum; (2) whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the Certificate of Incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office. Section 2.3 The Vice Chairman of the Board of Directors. The Board of Directors may appoint a Vice Chairman of the Board of Directors who shall be a director but need not be a stockholder of the Corporation. The Vice Chairman shall not, by reason of said title, be or be deemed to be an officer of the Corporation. In the absence of the Chairman of the Board of Directors, the Vice Chairman shall preside at all meetings of the stockholders and of the Board of Directors. The Vice Chairman may sign, with an officer thereunto duly authorized (the signatures to which may be facsimile signatures) and may sign and execute in the name of the Corporation other instruments which the Board of Directors has authorized to be executed. From time to time, but only in the absence or at the direction of the Chairman of the Board of Directors, the Vice Chairman shall report to the Board of Directors all matters which to his knowledge the interests of the Corporation may require be brought to their attention. The Vice Chairman shall perform such other duties as are given to him by -7-

these By-laws or as from time to time may be assigned to him by the Board of Directors. Section 2.4 Meetings. A meeting of the Board of Directors shall be held for organization, for the election of officers and for the transaction of such other business as may properly come before the meeting, within thirty days after each annual election of directors. The Board of Directors by resolution may provide for the holding of regular meetings and may fix the times and places at which such meetings shall be held. Notice of regular meetings shall not be required to be given, provided that whenever the time or place of regular meetings shall be fixed or changed, notice of such action shall be mailed promptly to each director who shall not have been present at the meeting at which such action was taken, addressed to him at his residence or usual place of business. Special meetings of the Board of Directors may be called by the Chairman of the Board of Directors, the Vice Chairman of the Board of Directors, any Vice President or any two directors. Except as otherwise required by statute, notice of each special meeting shall be mailed to each director, addressed to him at his residence or usual place of business, or shall be sent to him at such place by telegram, radio or cable, or telephoned or delivered to him personally, not later than two days before the day on which the meeting is to be held. Such notice shall state the time and place of such meeting, but unless otherwise required by statute, the Certificate of Incorporation of the Corporation or these By-laws need not state the purposes thereof.

these By-laws or as from time to time may be assigned to him by the Board of Directors. Section 2.4 Meetings. A meeting of the Board of Directors shall be held for organization, for the election of officers and for the transaction of such other business as may properly come before the meeting, within thirty days after each annual election of directors. The Board of Directors by resolution may provide for the holding of regular meetings and may fix the times and places at which such meetings shall be held. Notice of regular meetings shall not be required to be given, provided that whenever the time or place of regular meetings shall be fixed or changed, notice of such action shall be mailed promptly to each director who shall not have been present at the meeting at which such action was taken, addressed to him at his residence or usual place of business. Special meetings of the Board of Directors may be called by the Chairman of the Board of Directors, the Vice Chairman of the Board of Directors, any Vice President or any two directors. Except as otherwise required by statute, notice of each special meeting shall be mailed to each director, addressed to him at his residence or usual place of business, or shall be sent to him at such place by telegram, radio or cable, or telephoned or delivered to him personally, not later than two days before the day on which the meeting is to be held. Such notice shall state the time and place of such meeting, but unless otherwise required by statute, the Certificate of Incorporation of the Corporation or these By-laws need not state the purposes thereof. Notice of any meeting need not be given to any director who shall attend such meeting in person or who shall waive notice thereof, before or after such meeting, in writing or by telegram, radio or cable. Section 2.5 Quorum. One-third of the total number of members of the Board of Directors as constituted from time to time, but not less than two, shall be necessary and sufficient to constitute a quorum for the transaction of business. In the absence of a quorum, a majority of those present at the time and place of any meeting may adjourn the meeting from time to time until a quorum shall be present, and the meeting may be held as adjourned without further notice of waiver. A majority of those present at any meeting at which a quorum is present may decide any question brought before such meeting, except as otherwise provided by law, the Certificate of Incorporation or these By-laws. Section 2.6 Resignation of Directors. Any director may resign at any time by giving written notice of such resignation to the Board of Directors, the Chairman of the Board of Directors, the Vice Chairman of the Board of Directors, any Vice President or the Secretary. Any such resignation shall take effect at the time specified therein, or, if no time be specified, upon receipt thereof by the Board of Directors or -8-

one of the above-named officers; and, unless specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 2.7 Removal of Directors. At any special meeting of the stockholders, duly called for the purpose of removing a director or directors as provided in these By-laws, any director or directors may, by the affirmative vote of the holders of shares representing a majority of the votes of all the shares of stock outstanding and entitled to vote for the election of directors, be removed from office, either for or without cause. Such vacancy shall be filled by the directors as provided in Section 2.2. Section 2.8 Compensation of Directors. Directors shall receive such reasonable compensation for their service as such, whether in the form of salary or a fixed fee for attendance at meetings, with expenses, if any, as the Board of Directors may from time to time determine. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Section 2.9 Indemnification. The Corporation shall indemnify to the full extent authorized or permitted by the laws of the State of Delaware 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 Corporation or serves or served any other enterprise at the request of the Corporation.

one of the above-named officers; and, unless specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 2.7 Removal of Directors. At any special meeting of the stockholders, duly called for the purpose of removing a director or directors as provided in these By-laws, any director or directors may, by the affirmative vote of the holders of shares representing a majority of the votes of all the shares of stock outstanding and entitled to vote for the election of directors, be removed from office, either for or without cause. Such vacancy shall be filled by the directors as provided in Section 2.2. Section 2.8 Compensation of Directors. Directors shall receive such reasonable compensation for their service as such, whether in the form of salary or a fixed fee for attendance at meetings, with expenses, if any, as the Board of Directors may from time to time determine. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Section 2.9 Indemnification. The Corporation shall indemnify to the full extent authorized or permitted by the laws of the State of Delaware 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 Corporation or serves or served any other enterprise at the request of the Corporation. ARTICLE III Committees of the Board Section 3.1 Designation, Power, Alternate Members and Term of Office. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees including an Executive Committee, each committee to consist of one or more of the directors of the Corporation. Any such committee, to the extent provided in such resolution or in these By-laws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger of consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the By-laws of the Corporation or, unless the resolution of the Board of Directors establishing any such -9-

committee shall expressly so provide or these By-laws shall expressly so provide, declaring a dividend on the Corporation's capital stock or authorizing the issuance of the Corporation's capital stock. The Board may designate one or more directors as alternate members of any committee who, in the order specified by the Board, may replace any absent or disqualified member at any meeting of the committee. If at a meeting of any committee one or more of the members thereof should be absent or disqualified, and if either the Board of Directors has not so designated any alternate member or members, or the number of absent or disqualified members exceeds the number of alternate members who are present at such meeting, then the member or members of such committee (including alternates) present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another director to act at the meeting in the place of any such absent or disqualified member. The term of office of the members of each committee shall be as fixed from time to time by the Board, subject to these By-laws; provided, however, that any committee member who ceases to be a member of the Board shall ipso facto cease to be a committee member. Each committee shall appoint a secretary, who may be the Secretary of the Corporation or an Assistant Secretary thereof. Section 3.2 Meetings, Notices and Records. Each committee may provide for the holding of regular meetings, with or without notice, and may fix the time and place at which such meetings shall be held. Special meetings of each committee shall be held upon call by or at the direction of its chairman or, if there be no chairman, by or at the direction of any two of its members, at the time and place specified in the respective notices or waivers of notice thereof. Notice of each special meeting of a committee shall be mailed to each member of such committee,

committee shall expressly so provide or these By-laws shall expressly so provide, declaring a dividend on the Corporation's capital stock or authorizing the issuance of the Corporation's capital stock. The Board may designate one or more directors as alternate members of any committee who, in the order specified by the Board, may replace any absent or disqualified member at any meeting of the committee. If at a meeting of any committee one or more of the members thereof should be absent or disqualified, and if either the Board of Directors has not so designated any alternate member or members, or the number of absent or disqualified members exceeds the number of alternate members who are present at such meeting, then the member or members of such committee (including alternates) present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another director to act at the meeting in the place of any such absent or disqualified member. The term of office of the members of each committee shall be as fixed from time to time by the Board, subject to these By-laws; provided, however, that any committee member who ceases to be a member of the Board shall ipso facto cease to be a committee member. Each committee shall appoint a secretary, who may be the Secretary of the Corporation or an Assistant Secretary thereof. Section 3.2 Meetings, Notices and Records. Each committee may provide for the holding of regular meetings, with or without notice, and may fix the time and place at which such meetings shall be held. Special meetings of each committee shall be held upon call by or at the direction of its chairman or, if there be no chairman, by or at the direction of any two of its members, at the time and place specified in the respective notices or waivers of notice thereof. Notice of each special meeting of a committee shall be mailed to each member of such committee, addressed to him at his residence or usual place of business, at least two days before the day on which the meeting is to be held, or shall be sent by telegram, radio or cable, addressed to him at such place, or telephoned or delivered to him personally not later than the day before the day on which the meeting is to be held. Notice of any meeting of a committee need not be given to any member thereof who shall attend the meeting in person or who shall waive notice thereof, before or after such meeting, in writing or by telegram, radio or cable. Notice of any adjourned meeting need not be given. Each committee shall keep a record of its proceedings. Section 3.3 Quorum and Manner of Acting. At each meeting of any committee the presence of one-third but not less than two of its members then in office shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the members present at any meeting at which a quorum is present shall be the act of such committee. In the absence of a quorum, a majority of the members present at the time and place of any meeting may adjourn the meeting from time to time until a quorum shall be present. Subject to the foregoing and other provisions of these By-laws and except as otherwise determined by the Board of Directors, each committee may make rules for the conduct of its business. Any - 10 -

determination made in writing and signed by all the members of such committee shall be as effective as if made by such committee at a meeting. Section 3.4 Resignations. Any member of a committee may resign at any time by giving written notice of such resignation to the Board of Directors, the Chairman of the Board of Directors, the Vice Chairman of the Board of Directors, any Vice President or the Secretary. Any such resignation shall take effect at the time specified therein, or if no time be specified, upon receipt thereof by the Board of Directors or one of the above-named officers; and, unless specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 3.5 Removal. Any member of any committee may be removed at any time by the Board of Directors with or without cause. Section 3.6 Vacancies. If any vacancy shall occur in any committee by reason of death, resignation, disqualification, removal or otherwise, the remaining members of such committee, though less than a quorum, shall continue to act until such vacancy is filled by a resolution passed by a majority of the whole Board of Directors. Section 3.7 Compensation. Committee members shall receive such reasonable compensation for their services as such, whether in the form of salary or a fixed fee for attendance at meetings, with expenses, if any, as the Board of Directors may from time to time determine. Nothing herein contained shall be construed to preclude any committee member from serving the Corporation in any other capacity and receiving compensation therefor.

determination made in writing and signed by all the members of such committee shall be as effective as if made by such committee at a meeting. Section 3.4 Resignations. Any member of a committee may resign at any time by giving written notice of such resignation to the Board of Directors, the Chairman of the Board of Directors, the Vice Chairman of the Board of Directors, any Vice President or the Secretary. Any such resignation shall take effect at the time specified therein, or if no time be specified, upon receipt thereof by the Board of Directors or one of the above-named officers; and, unless specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 3.5 Removal. Any member of any committee may be removed at any time by the Board of Directors with or without cause. Section 3.6 Vacancies. If any vacancy shall occur in any committee by reason of death, resignation, disqualification, removal or otherwise, the remaining members of such committee, though less than a quorum, shall continue to act until such vacancy is filled by a resolution passed by a majority of the whole Board of Directors. Section 3.7 Compensation. Committee members shall receive such reasonable compensation for their services as such, whether in the form of salary or a fixed fee for attendance at meetings, with expenses, if any, as the Board of Directors may from time to time determine. Nothing herein contained shall be construed to preclude any committee member from serving the Corporation in any other capacity and receiving compensation therefor. ARTICLE IV Officers Section 4.1 Officers. The officers of the Corporation shall be a Chairman of the Board of Directors who shall also be the President and Chief Executive Officer, one or more Vice Presidents (which may include Executive Vice Presidents, Group Vice Presidents, Senior Vice Presidents and other categories of Vice Presidents), a Secretary, a Treasurer, and such other officers as may be appointed in accordance with the provisions of Section 4.3. Section 4.2 Election, Term of Office and Qualifications. Each officer (except such officers as may be appointed in accordance with the provisions of Section 4.3) shall be elected by the Board of Directors. Each such officer (whether elected at the first meeting of the Board of Directors after the annual meeting of stockholders or to fill a vacancy otherwise) shall hold his office until the first meeting of the Board of - 11 -

Directors after the next annual meeting of stockholders and until his successor shall have been elected, or until his death, or until he shall have resigned in the manner provided in Section 4.4 or shall have been removed in the manner provided in Section 4.5. Section 4.3 Subordinate Officers and Agents. The Board of Directors from time to time may appoint other officers or agents (including one or more Assistant Vice Presidents, one or more Assistant Secretaries and one or more Assistant Treasurers), to hold office for such period, have such authority and perform such duties as are provided in these By-laws or as may be provided in the resolutions appointing them. The Board of Directors may delegate to any officer or agent the power to appoint any such subordinate officers or agents and to prescribe their respective terms of office, authorities and duties. Section 4.4 Resignations. Any officer may resign at any time by giving written notice of such resignation to the Board of Directors, the Chairman of the Board of Directors, the Vice Chairman of the Board of Directors, any Vice President or the Secretary. Any such resignation shall take effect at the time specified therein or, if no time be specified, upon receipt thereof by the Board of Directors or one of the above-named officers; and, unless specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 4.5 Removal. Any officer specifically designated in Section 4.1 may be removed at any time, either with

Directors after the next annual meeting of stockholders and until his successor shall have been elected, or until his death, or until he shall have resigned in the manner provided in Section 4.4 or shall have been removed in the manner provided in Section 4.5. Section 4.3 Subordinate Officers and Agents. The Board of Directors from time to time may appoint other officers or agents (including one or more Assistant Vice Presidents, one or more Assistant Secretaries and one or more Assistant Treasurers), to hold office for such period, have such authority and perform such duties as are provided in these By-laws or as may be provided in the resolutions appointing them. The Board of Directors may delegate to any officer or agent the power to appoint any such subordinate officers or agents and to prescribe their respective terms of office, authorities and duties. Section 4.4 Resignations. Any officer may resign at any time by giving written notice of such resignation to the Board of Directors, the Chairman of the Board of Directors, the Vice Chairman of the Board of Directors, any Vice President or the Secretary. Any such resignation shall take effect at the time specified therein or, if no time be specified, upon receipt thereof by the Board of Directors or one of the above-named officers; and, unless specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 4.5 Removal. Any officer specifically designated in Section 4.1 may be removed at any time, either with or without cause, at any meeting of the Board of Directors by the vote of a majority of all the Directors then in office. Any officer or agent appointed in accordance with the provisions of Section 4.3 may be removed, either with or without cause, by the Board of Directors at any meeting, by the vote of a majority of the Directors present at such meeting, or by any superior officer or agent upon whom such power of removal shall have been conferred by the Board of Directors. Section 4.6 Vacancies. A vacancy in any office by reason of death, resignation, removal, disqualification or any other cause shall be filled for the unexpired portion of the term in the manner prescribed by these By-laws for regular election or appointment to such office. Section 4.7 The Chairman of the Board of Directors. The Chairman of the Board of Directors shall be the President and Chief Executive Officer of the Corporation. Subject to the direction of the Board of Directors, he shall have general charge of the business affairs and property of the Corporation. He shall see that all orders and resolutions of the Board of Directors are carried into effect. If present, he shall preside at all meetings of stockholders. He may sign, with any other officer thereunto duly authorized, certificates of stock of the Corporation the issuance of which shall have been duly authorized (the signatures to which may be facsimile signatures), and may sign and execute in the name of the Corporation, deeds, mortgages, bonds, contracts, - 12 -

agreements or other instruments duly authorized by the Board of Directors except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by statute to some other officer or agent. From time to time he shall report to the Board of Directors all matters within his knowledge which the interests of the Corporation may require to be brought to their attention. He shall perform such other duties as are given to him by these By-laws or as from time to time may be assigned to him by the Board of Directors. Section 4.8 Executive Vice President. In the absence of the Chairman of the Board of Directors and the Vice Chairman of the Board of Directors, the Executive Vice President shall preside at all meetings of stockholders. The Executive Vice President may sign, with any other officer thereunto duly authorized, certificates of stock of the Corporation the issuance of which shall have been duly authorized (the signatures to which may be facsimile signatures), and may sign and execute in the name of the Corporation, deeds, mortgages, bonds, contracts, agreements or other instruments duly authorized by the Board of Directors except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by statute to some other officer or agent. He shall perform such other duties as are given to him by these By-laws or as from time to time may be assigned to him by the Board of Directors or the Chairman of the Board of Directors. Section 4.9 The Vice Presidents. In the event of the absence or disability of the Chairman of the Board of Directors, any Vice President designated by the Chairman of the Board of Directors (or in the absence of such designation, the Vice President designated by the Board of Directors) shall perform all the duties of the Chairman

agreements or other instruments duly authorized by the Board of Directors except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by statute to some other officer or agent. From time to time he shall report to the Board of Directors all matters within his knowledge which the interests of the Corporation may require to be brought to their attention. He shall perform such other duties as are given to him by these By-laws or as from time to time may be assigned to him by the Board of Directors. Section 4.8 Executive Vice President. In the absence of the Chairman of the Board of Directors and the Vice Chairman of the Board of Directors, the Executive Vice President shall preside at all meetings of stockholders. The Executive Vice President may sign, with any other officer thereunto duly authorized, certificates of stock of the Corporation the issuance of which shall have been duly authorized (the signatures to which may be facsimile signatures), and may sign and execute in the name of the Corporation, deeds, mortgages, bonds, contracts, agreements or other instruments duly authorized by the Board of Directors except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by statute to some other officer or agent. He shall perform such other duties as are given to him by these By-laws or as from time to time may be assigned to him by the Board of Directors or the Chairman of the Board of Directors. Section 4.9 The Vice Presidents. In the event of the absence or disability of the Chairman of the Board of Directors, any Vice President designated by the Chairman of the Board of Directors (or in the absence of such designation, the Vice President designated by the Board of Directors) shall perform all the duties of the Chairman of the Board of Directors and, when so acting, shall have all the powers of and be subject to all restrictions upon the Chairman of the Board of Directors. Any Vice President may also sign, with any other officer thereunto duly authorized, certificates of stock of the Corporation the issuance of which shall have been duly authorized (the signature to which may be a facsimile signature), and may sign and execute in the name of the Corporation, deeds, mortgages, bonds and other instruments duly authorized by the Board of Directors, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by statute to some other officer or agent. Each Vice President shall perform such other duties as are given to him by these By-laws or as from time to time may be assigned to him by the Board of Directors or the Chairman of the Board of Directors. Section 4.10 The Secretary. The Secretary shall (a) record all the proceedings of the meetings of the stockholders, the Board of Directors, and any committees in a book or books to be kept for that purpose; (b) cause all notices to be duly given in accordance with the provisions of these By-laws and as required by statute; - 13 -

(c) whenever any committee shall be appointed in pursuance of a resolution of the Board of Directors, furnish the chairman of such committee with a copy of such resolution; (d) be custodian of the records and of the seal of the Corporation, and cause such seal to be affixed to all certificates representing stock of the Corporation prior to the issuance thereof and to all instruments the execution of which on behalf of the Corporation under its seal shall have been duly authorized; (e) see that the lists, books, reports, statements, certificates and other documents and records required by statute are properly kept and filed; (f) have charge of the stock and transfer books of the Corporation, and exhibit such stock book at all reasonable times to such persons as are entitled by statute to have access thereto; (g) sign (unless the Treasurer or an Assistant Secretary or an Assistant Treasurer shall sign) certificates representing stock of the Corporation the issuance of which shall have been duly authorized (the signature to which may be a facsimile signature); and (h) in general, perform all duties incident to the office of Secretary and such other duties as are given to him by

(c) whenever any committee shall be appointed in pursuance of a resolution of the Board of Directors, furnish the chairman of such committee with a copy of such resolution; (d) be custodian of the records and of the seal of the Corporation, and cause such seal to be affixed to all certificates representing stock of the Corporation prior to the issuance thereof and to all instruments the execution of which on behalf of the Corporation under its seal shall have been duly authorized; (e) see that the lists, books, reports, statements, certificates and other documents and records required by statute are properly kept and filed; (f) have charge of the stock and transfer books of the Corporation, and exhibit such stock book at all reasonable times to such persons as are entitled by statute to have access thereto; (g) sign (unless the Treasurer or an Assistant Secretary or an Assistant Treasurer shall sign) certificates representing stock of the Corporation the issuance of which shall have been duly authorized (the signature to which may be a facsimile signature); and (h) in general, perform all duties incident to the office of Secretary and such other duties as are given to him by these By-laws or as from time to time may be assigned to him by the Board of Directors, the Chairman of the Board of Directors or the Executive Vice President. Section 4.11 Assistant Secretaries. At the request of the Secretary or in his absence or disability, the Assistant Secretary designated by him (or in the absence of such designation, the Assistant Secretary designated by the Board of Directors, the Chairman of the Board of Directors, or the Executive Vice President) shall perform all the duties of the Secretary and, when so acting, shall have all the powers of and be subject to all restrictions upon the Secretary. The Assistant Secretaries shall perform such other duties as from time to time may be assigned to them by the Board of Directors, the Chairman of the Board of Directors, the Executive Vice President or the Secretary. Section 4.12 The Treasurer. The Treasurer shall (a) have charge of and supervision over and be responsible for the funds, securities, receipts and disbursements of the Corporation; (b) cause the monies and other valuable effects of the Corporation to be deposited in the name and to the credit of the Corporation in such banks or trust companies or with such bankers or other depositaries as shall be selected - 14 -

in accordance with Section 5.3 of these By-laws or to be otherwise dealt with in such manner as the Board of Directors may direct; (c) cause the funds of the Corporation to be disbursed by checks or drafts upon the authorized depositaries of the Corporation, and cause to be taken and preserved proper vouchers for all monies disbursed; (d) render to the Board of Directors or the Chairman of the Board of Directors, whenever requested, a statement of the financial condition of the Corporation and of all his transactions as Treasurer; (e) cause to be kept at the Corporation's principal office correct books of account of all its business and transactions and such duplicate books of account as he shall determine and upon application cause such books or duplicates thereof to be exhibited to any director; (f) be empowered, from time to time, to require from the officers or agents of the Corporation reports or statements giving such information as he may desire with respect to any and all financial transactions of the Corporation;

in accordance with Section 5.3 of these By-laws or to be otherwise dealt with in such manner as the Board of Directors may direct; (c) cause the funds of the Corporation to be disbursed by checks or drafts upon the authorized depositaries of the Corporation, and cause to be taken and preserved proper vouchers for all monies disbursed; (d) render to the Board of Directors or the Chairman of the Board of Directors, whenever requested, a statement of the financial condition of the Corporation and of all his transactions as Treasurer; (e) cause to be kept at the Corporation's principal office correct books of account of all its business and transactions and such duplicate books of account as he shall determine and upon application cause such books or duplicates thereof to be exhibited to any director; (f) be empowered, from time to time, to require from the officers or agents of the Corporation reports or statements giving such information as he may desire with respect to any and all financial transactions of the Corporation; (g) sign (unless the Secretary or an Assistant Secretary or an Assistant Treasurer shall sign) certificates representing stock of the Corporation the issuance of which shall have been duly authorized (the signature to which may be a facsimile signature); and (h) in general, perform all duties incident to the office of Treasurer and such other duties as are given to him by these By-laws or as from time to time may be assigned to him by the Board of Directors, the Chairman of the Board of Directors or the Executive Vice President. Section 4.13 Assistant Treasurers. At the request of the Treasurer or in his absence or disability, the Assistant Treasurer designated by him (or in the absence of such designation, the Assistant Treasurer designated by the Board of Directors, the Chairman of the Board of Directors or the Executive Vice President) shall perform all the duties of the Treasurer and, when so acting, shall have all the powers of and be subject to all restrictions upon the Treasurer. The Assistant Treasurers shall perform such other duties as from time to time may be assigned to them by the Board of Directors, the Chairman of the Board of Directors, the Executive Vice President or the Treasurer. Section 4.14 Salaries. The salaries of the officers of the Corporation shall be fixed from time to time by the Board of Directors, except that the Board of Directors may delegate to any person the power to fix the salaries or other compensation of any officers or agents appointed in accordance with the provisions of Section 4.3. No - 15 -

officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the Corporation. Section 4.15 Surety Bonds. If the Board of Directors shall so require, any officer or agent of the Corporation shall execute to the Corporation a bond in such sum and with such surety or sureties as the Board of Directors may direct, conditioned upon the faithful discharge of his duties, including responsibilities for negligence and for the accounting for all property, funds or securities of the Corporation which may come into his hands. ARTICLE V Execution of Instruments and Deposit of Corporate Funds Section 5.1 Execution of Instruments Generally. The Chairman of the Board of Directors, the Vice Chairman of the Board of Directors, any Vice President, the Secretary or the Treasurer, subject to the approval of the Board of Directors, may enter into any contract or execute and deliver any instrument in the name and on behalf of the Corporation. The Board of Directors may authorize any officer or officers, or agent or agents, to enter into any contract or execute and deliver any instrument in the name and on behalf of the Corporation, and such

officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the Corporation. Section 4.15 Surety Bonds. If the Board of Directors shall so require, any officer or agent of the Corporation shall execute to the Corporation a bond in such sum and with such surety or sureties as the Board of Directors may direct, conditioned upon the faithful discharge of his duties, including responsibilities for negligence and for the accounting for all property, funds or securities of the Corporation which may come into his hands. ARTICLE V Execution of Instruments and Deposit of Corporate Funds Section 5.1 Execution of Instruments Generally. The Chairman of the Board of Directors, the Vice Chairman of the Board of Directors, any Vice President, the Secretary or the Treasurer, subject to the approval of the Board of Directors, may enter into any contract or execute and deliver any instrument in the name and on behalf of the Corporation. The Board of Directors may authorize any officer or officers, or agent or agents, to enter into any contract or execute and deliver any instrument in the name and on behalf of the Corporation, and such authorization may be general or confined to specific instances. Section 5.2 Borrowing. No loans or advances shall be obtained or contracted for, by or on behalf of the Corporation and no negotiable paper shall be issued in its name, unless and except as authorized by the Board of Directors. Such authorization may be general or confined to specific instances. Any officer or agent of the Corporation thereunto so authorized may obtain loans and advances for the Corporation, and for such loans and advances may make, execute and deliver promissory notes, bonds, or other evidences of indebtedness of the Corporation. Any officer or agent of the Corporation thereunto so authorized may pledge, hypothecate or transfer as security for the payment of any and all loans, advances, indebtedness and liabilities of the Corporation, any and all stocks, bonds, other securities and other personal property at any time held by the Corporation, and to that end may endorse, assign and deliver the same and so every act and thing necessary or proper in connection therewith. Section 5.3 Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to its credit in such banks or trust companies or with such bankers or other depositaries as the Board of Directors may select, or as may be selected by any officer or officers or agent or agents authorized so to do by - 16 -

the Board of Directors. Endorsements for deposit to the credit of the Corporation in any of its duly authorized depositaries shall be made in such manner as the Board of Directors from time to time may determine. Section 5.4 Checks, Drafts, etc. All checks, drafts or other orders for the payment of money, and all notes or other evidences of indebtedness issued in the name of the Corporation, shall be signed by such officer or officers or agent or agents of the Corporation, and in such manner, as from time to time shall be determined by the Board of Directors. Section 5.5 Proxies. Proxies to vote with respect to shares of stock of other corporations owned by or standing in the name of the Corporation may be executed and delivered from time to time on behalf of the Corporation by the Chairman of the Board of Directors, the Vice Chairman of the Board of Directors or a Vice President or by any other person or persons thereunto authorized by the Board of Directors. ARTICLE VI Record Dates Section 6.1. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversation or

the Board of Directors. Endorsements for deposit to the credit of the Corporation in any of its duly authorized depositaries shall be made in such manner as the Board of Directors from time to time may determine. Section 5.4 Checks, Drafts, etc. All checks, drafts or other orders for the payment of money, and all notes or other evidences of indebtedness issued in the name of the Corporation, shall be signed by such officer or officers or agent or agents of the Corporation, and in such manner, as from time to time shall be determined by the Board of Directors. Section 5.5 Proxies. Proxies to vote with respect to shares of stock of other corporations owned by or standing in the name of the Corporation may be executed and delivered from time to time on behalf of the Corporation by the Chairman of the Board of Directors, the Vice Chairman of the Board of Directors or a Vice President or by any other person or persons thereunto authorized by the Board of Directors. ARTICLE VI Record Dates Section 6.1. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversation or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall be not more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. Only those stockholders of record on the date so fixed shall be entitled to any of the foregoing rights, notwithstanding the transfer of any such stock on the books of the Corporation after any such record date fixed by the Board of Directors. ARTICLE VII Corporate Seal Section 7.1. The corporate seal shall be circular in form and shall bear the name of the Corporation and words and figures denoting its organization under the - 17 -

laws of the State of Delaware and the year thereof and otherwise shall be in such form as shall be approved from time to time by the Board of Directors. ARTICLE VIII Fiscal Year Section 8.1. The fiscal year of the Corporation shall begin on the 1st day of January in each year and shall end on the 31st day of December in the same year. ARTICLE IX Amendments Section 9.1. Except as otherwise provided in Article VII of the Certificate of Incorporation, all By-laws of the Corporation may be amended, altered or repealed, and new By-laws may be made, by the affirmative vote of the holders of record of shares representing a majority of the votes of the outstanding shares of stock of the Corporation entitled to vote cast at any annual or special meeting, or by the affirmative vote of a majority of the Directors cast at any regular or special meeting at which a quorum is present. - 18 -

laws of the State of Delaware and the year thereof and otherwise shall be in such form as shall be approved from time to time by the Board of Directors. ARTICLE VIII Fiscal Year Section 8.1. The fiscal year of the Corporation shall begin on the 1st day of January in each year and shall end on the 31st day of December in the same year. ARTICLE IX Amendments Section 9.1. Except as otherwise provided in Article VII of the Certificate of Incorporation, all By-laws of the Corporation may be amended, altered or repealed, and new By-laws may be made, by the affirmative vote of the holders of record of shares representing a majority of the votes of the outstanding shares of stock of the Corporation entitled to vote cast at any annual or special meeting, or by the affirmative vote of a majority of the Directors cast at any regular or special meeting at which a quorum is present. - 18 -

ITEM 14(a)3, EXHIBIT 4.2 SECOND AMENDED AND RESTATED GUARANTY AGREEMENT (Subsidiaries) SECOND AMENDED AND RESTATED GUARANTY AGREEMENT, dated as of January 28, 1997 (this "Guaranty Agreement"), among TESORO ALASKA PETROLEUM COMPANY, a Delaware corporation, TESORO EXPLORATION AND PRODUCTION COMPANY, a Delaware corporation, and TESORO PETROLEUM COMPANIES, INC., a Delaware corporation, DIGICOMP, INC., a Delaware corporation, TESORO TECHNOLOGY PARTNERS COMPANY, a Delaware corporation, INTERIOR FUELS COMPANY, an Alaskan corporation, TESORO ALASKA PIPELINE COMPANY, a Delaware corporation, TESORO NORTHSTORE COMPANY, an Alaskan corporation, TESORO REFINING, MARKETING & SUPPLY COMPANY, a Delaware corporation, TESORO NATURAL GAS COMPANY, a Delaware corporation, TESORO BOLIVIA PETROLEUM COMPANY, a Texas corporation, TESORO GAS RESOURCES COMPANY, INC., a Delaware corporation, TESORO E&P COMPANY, L.P., a Delaware limited partnership, TESORO VOSTOK COMPANY, a Delaware corporation, TESORO COASTWIDE SERVICES COMPANY, a Delaware corporation, COASTWIDE MARINE SERVICES, INC., a Texas corporation, KENAI PIPE LINE COMPANY, a Delaware corporation TESORO FINANCIAL SERVICES HOLDING COMPANY, a Delaware corporation, VICTORY FINANCE COMPANY, a Delaware corporation, and TESORO MARINE SERVICES COMPANY, a Delaware corporation (the "Guarantors"), in favor of BANQUE PARIBAS, individually, as Administrative Agent and as an Issuing Bank, and the other financial institutions now or hereafter parties to the Credit Agreement (as such term is hereinafter defined). RECITALS A. Tesoro Petroleum Corporation, Banque Paribas, as Administrative Agent, The Bank of Nova Scotia, as Documentation Agent and various lenders (the "Lenders") entered into that certain Amended and Restated Credit Agreement dated as of June 7, 1996 (the "Credit Agreement"). B. The conditions precedent to the effectiveness of the Credit Agreement included the execution and delivery of that certain Amended and Restated Guaranty Agreement dated of even date therewith by certain Subsidiaries of the Company (the "1996 Guaranty Agreement") which by Amended and Restated Guaranty Agreement dated as of September 12, 1996 (the "Prior Guaranty Agreement"), such 1996 Guaranty Agreement was amended and restated to include additional entities as Guarantors to obtain the benefits thereof under the Credit Agreement.

ITEM 14(a)3, EXHIBIT 4.2 SECOND AMENDED AND RESTATED GUARANTY AGREEMENT (Subsidiaries) SECOND AMENDED AND RESTATED GUARANTY AGREEMENT, dated as of January 28, 1997 (this "Guaranty Agreement"), among TESORO ALASKA PETROLEUM COMPANY, a Delaware corporation, TESORO EXPLORATION AND PRODUCTION COMPANY, a Delaware corporation, and TESORO PETROLEUM COMPANIES, INC., a Delaware corporation, DIGICOMP, INC., a Delaware corporation, TESORO TECHNOLOGY PARTNERS COMPANY, a Delaware corporation, INTERIOR FUELS COMPANY, an Alaskan corporation, TESORO ALASKA PIPELINE COMPANY, a Delaware corporation, TESORO NORTHSTORE COMPANY, an Alaskan corporation, TESORO REFINING, MARKETING & SUPPLY COMPANY, a Delaware corporation, TESORO NATURAL GAS COMPANY, a Delaware corporation, TESORO BOLIVIA PETROLEUM COMPANY, a Texas corporation, TESORO GAS RESOURCES COMPANY, INC., a Delaware corporation, TESORO E&P COMPANY, L.P., a Delaware limited partnership, TESORO VOSTOK COMPANY, a Delaware corporation, TESORO COASTWIDE SERVICES COMPANY, a Delaware corporation, COASTWIDE MARINE SERVICES, INC., a Texas corporation, KENAI PIPE LINE COMPANY, a Delaware corporation TESORO FINANCIAL SERVICES HOLDING COMPANY, a Delaware corporation, VICTORY FINANCE COMPANY, a Delaware corporation, and TESORO MARINE SERVICES COMPANY, a Delaware corporation (the "Guarantors"), in favor of BANQUE PARIBAS, individually, as Administrative Agent and as an Issuing Bank, and the other financial institutions now or hereafter parties to the Credit Agreement (as such term is hereinafter defined). RECITALS A. Tesoro Petroleum Corporation, Banque Paribas, as Administrative Agent, The Bank of Nova Scotia, as Documentation Agent and various lenders (the "Lenders") entered into that certain Amended and Restated Credit Agreement dated as of June 7, 1996 (the "Credit Agreement"). B. The conditions precedent to the effectiveness of the Credit Agreement included the execution and delivery of that certain Amended and Restated Guaranty Agreement dated of even date therewith by certain Subsidiaries of the Company (the "1996 Guaranty Agreement") which by Amended and Restated Guaranty Agreement dated as of September 12, 1996 (the "Prior Guaranty Agreement"), such 1996 Guaranty Agreement was amended and restated to include additional entities as Guarantors to obtain the benefits thereof under the Credit Agreement. C. The Company desires to include an additional entity as a Guarantor to obtain the benefits thereof under the Credit Agreement. D. Therefore, in consideration of the premises contained herein, the Guarantors and the Administrative Agent agree to amend and restate the Prior Guaranty Agreement as follows:

AGREEMENT 1. Defined Terms. As used in this Guaranty Agreement, capitalized terms defined in the Credit Agreement are used herein as defined therein unless otherwise noted herein, and the following additional capitalized terms shall have the following meanings: "Collateral" shall mean any Property in which the Agent is granted a Lien from time to time as security for the Lender Indebtedness. "Contribution Obligation" shall mean an amount equal, at any time and from time to time and for each respective Guarantor, to the product of (i) its Contribution Percentage times (ii) the sum of all payments made previous to or at the time of calculation by all Guarantors in respect of the Obligations, as a Guarantor or debtor under any Loan Document (less the amount of any such payments previously returned to any Guarantor by operation of law or otherwise, but not including payments received by any Guarantor by way of its rights of subrogation and

AGREEMENT 1. Defined Terms. As used in this Guaranty Agreement, capitalized terms defined in the Credit Agreement are used herein as defined therein unless otherwise noted herein, and the following additional capitalized terms shall have the following meanings: "Collateral" shall mean any Property in which the Agent is granted a Lien from time to time as security for the Lender Indebtedness. "Contribution Obligation" shall mean an amount equal, at any time and from time to time and for each respective Guarantor, to the product of (i) its Contribution Percentage times (ii) the sum of all payments made previous to or at the time of calculation by all Guarantors in respect of the Obligations, as a Guarantor or debtor under any Loan Document (less the amount of any such payments previously returned to any Guarantor by operation of law or otherwise, but not including payments received by any Guarantor by way of its rights of subrogation and contribution under this Guaranty Agreement), provided, however, such Contribution Obligation for any Guarantor shall in no event exceed such Guarantor's Maximum Guaranteed Amount. "Contribution Percentage" shall mean for any Guarantor for any applicable date as of which such percentage is being determined, an amount equal to the quotient of (i) the Net Worth of such Guarantor as of such date, divided by (ii) the sum of the Net Worth of all the Guarantors as of such date. "Maximum Guaranteed Amount" shall mean, for each Guarantor, the greater of (i) the "reasonably equivalent value" or "fair consideration" (or equivalent concept) received by such Guarantor in exchange for the obligation incurred hereunder by such Guarantor, within the meaning of any state or federal fraudulent conveyance or transfer laws applicable to such Guarantor; or (ii) the lesser of (A) the maximum amount that will not render such Guarantor insolvent, or (B) the maximum amount that will not leave such Guarantor (after giving effect to this Guaranty Agreement) with Property deemed an unreasonably small capital. Clauses (A) and (B) are and shall be determined pursuant to and as of the appropriate date mandated by such applicable state or federal fraudulent conveyance or transfer laws and to the extent allowed by law take into account the rights to contribution and subrogation under this Guaranty Agreement so as to provide for the largest Maximum Guaranteed Amount possible. "Net Payments" shall mean an amount equal, at any time and from time to time and for each respective Guarantor, to the difference of (i) the sum of all payments made previous to or at the time of calculation by such Guarantor in respect to the Obligations, as a Guarantor, and in respect of its obligations contained in this Guaranty Agreement or any other Financing Document, less (ii) the sum of all such payments previously returned to such Guarantor by operation of law or otherwise and including payments received by such -2-

Guarantor by way of its rights of subrogation and contribution under this Guaranty Agreements. "Net Worth" shall mean for any Guarantor, calculated on and as of any applicable date on which such amount is being determined, the greater of (i) zero or (ii) the difference between (A) the sum of all such Guarantor's property, at a fair valuation and as of such date, minus (B) the sum of all such Guarantor's debts, at a fair valuation and as of such date, excluding the Obligations. "Obligations" shall mean (i) all Lender Indebtedness now or hereafter owing, including, but not limited to, (A) the unpaid principal of and accrued interest on (including interest accruing on or after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Company, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Notes, and (B) the obligation of the Company to otherwise reimburse the Lender, whether on account of fees, indemnities, costs, taxes, expenses (including all fees and disbursements set forth in Sections 2.21 or 9.04 of the Credit Agreement) or otherwise, (ii) payment of and performance of any and all present or future obligations of the Company according to the terms of any present or future interest or currency rate swap, rate cap, rate floor, rate collar, exchange transaction, forward rate agreement or other exchange or rate protection agreements or any option with respect to any such transaction now existing or hereafter entered into between the Company and the

Guarantor by way of its rights of subrogation and contribution under this Guaranty Agreements. "Net Worth" shall mean for any Guarantor, calculated on and as of any applicable date on which such amount is being determined, the greater of (i) zero or (ii) the difference between (A) the sum of all such Guarantor's property, at a fair valuation and as of such date, minus (B) the sum of all such Guarantor's debts, at a fair valuation and as of such date, excluding the Obligations. "Obligations" shall mean (i) all Lender Indebtedness now or hereafter owing, including, but not limited to, (A) the unpaid principal of and accrued interest on (including interest accruing on or after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Company, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Notes, and (B) the obligation of the Company to otherwise reimburse the Lender, whether on account of fees, indemnities, costs, taxes, expenses (including all fees and disbursements set forth in Sections 2.21 or 9.04 of the Credit Agreement) or otherwise, (ii) payment of and performance of any and all present or future obligations of the Company according to the terms of any present or future interest or currency rate swap, rate cap, rate floor, rate collar, exchange transaction, forward rate agreement or other exchange or rate protection agreements or any option with respect to any such transaction now existing or hereafter entered into between the Company and the Administrative Agent or any of the Lenders (or any of their Affiliates) and authorized pursuant to the terms of the Credit Agreement; (iii) payment of and performance of any and all present or future obligations of the Company according to the terms of any present or future swap agreements, cap, floor, collar, exchange transaction, forward agreement or other exchange or protection agreements relating to crude oil, natural gas or other hydrocarbons or any option with respect to any such transaction now existing or hereafter entered into between the Company and the Administrative Agent or any of the Lenders (or any of their Affiliates) and authorized pursuant to the terms of the Credit Agreement; and (iv) any and all other sums payable by the Company or any of its Subsidiaries under or in respect of any Financing Document. 2. Guarantee. (a) Each of the Guarantors hereby unconditionally and irrevocably and jointly and severally guarantees to the Agent, the Issuing Banks and each Lender the prompt and complete payment when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations, and each of the Guarantors further agrees, jointly and severally, to pay any and all expenses which may be paid or incurred by the Agent, either Issuing Bank or any Lender in enforcing any rights with respect to, or collecting, any or all of the Obligations and/or enforcing any rights with respect to, or collecting against, any Guarantor under this Guaranty Agreement; provided, however, that, notwithstanding anything herein or in any other Financing Document to the contrary, the maximum liability of each Guarantor hereunder and under the other Financing Documents shall in no event exceed the Maximum Guaranteed Amount for such Guarantor. -3-

(b) Each Guarantor agrees that the Obligations may at any time and from time to time exceed the Maximum Guaranteed Amount for such Guarantor without impairing this Guaranty Agreement or affecting the rights and remedies of the Agent, either Issuing Bank or any Lender. (c) No payment or payments made by the Company, any Guarantor, any other guarantor or any other Person or received or collected by the Agent, either Issuing Bank or any Lender from the Company, any Guarantor, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of each Guarantor hereunder, which shall, notwithstanding any such payment or payments, other than payments made by such Guarantor in respect of the Obligations or payments received or collected from such Guarantor in respect of the Obligations, remain liable for the Obligations up to the Maximum Guaranteed Amount for such Guarantor until the Obligations are paid in full. (d) It is the intention of the parties hereto that all intercompany indebtedness either owed to or by any Guarantor not be included as either an asset or a liability, respectively, in determining the solvency or capital of any Guarantor. Accordingly, each Guarantor agrees that in connection with any determination of the Maximum Guaranteed Amount, such intercompany indebtedness may be treated in the manner that would achieve the result intended by the first sentence of this subsection (d).

(b) Each Guarantor agrees that the Obligations may at any time and from time to time exceed the Maximum Guaranteed Amount for such Guarantor without impairing this Guaranty Agreement or affecting the rights and remedies of the Agent, either Issuing Bank or any Lender. (c) No payment or payments made by the Company, any Guarantor, any other guarantor or any other Person or received or collected by the Agent, either Issuing Bank or any Lender from the Company, any Guarantor, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of each Guarantor hereunder, which shall, notwithstanding any such payment or payments, other than payments made by such Guarantor in respect of the Obligations or payments received or collected from such Guarantor in respect of the Obligations, remain liable for the Obligations up to the Maximum Guaranteed Amount for such Guarantor until the Obligations are paid in full. (d) It is the intention of the parties hereto that all intercompany indebtedness either owed to or by any Guarantor not be included as either an asset or a liability, respectively, in determining the solvency or capital of any Guarantor. Accordingly, each Guarantor agrees that in connection with any determination of the Maximum Guaranteed Amount, such intercompany indebtedness may be treated in the manner that would achieve the result intended by the first sentence of this subsection (d). (e) Right to Collect on the Notes. The Company and the Guarantors are personally obligated and fully liable for the amounts due under the Notes. The Lenders have the right to sue on the Notes and obtain a personal judgment against the Company and the Guarantors for satisfaction of the amounts due under the Notes either before or after a judicial foreclosure of the Alaska Deed of Trust under Alaska Statute 09.45.170 - 09.45.220. (f) Senior Debt. Tesoro Alaska's guarantee of the payment of the Obligations constitutes Senior Debt as such term is defined in that certain Subordination Agreement dated December 15, 1993, among the Company, Tesoro Alaska, and the State of Alaska, attached as Exhibit 7 to the Settlement Agreement dated December 15, 1992, among the Company, Tesoro Alaska, and the State of Alaska. 3. Right of Contribution. Each Guarantor agrees that after all the Obligations have been paid in full that if its then current Net Payments are less than the amount of its then current Contribution Obligation, such Guarantor shall pay to the other Guarantors an amount (together with any payments required of the other Guarantors by this Section 3) such that the Net Payments made by all Guarantors in respect of the Obligations shall be shared among all of the Guarantors in proportion to their respective Contribution Percentage. The provisions of this Paragraph 3 shall in no respect limit the obligations and liabilities of any Guarantor to the Agent, the Issuing Banks or any Lender, and each Guarantor shall remain liable to the Agent, the Issuing Banks and each Lender for the full amount guaranteed by such Guarantor hereunder. -4-

4. Right of Set-off. The Agent, the Issuing Bank and each Lender is hereby irrevocably authorized upon the occurrence of an Event of Default without notice to the Guarantors, any such notice being expressly waived by each Guarantor, to set-off and credit against any credits, indebtedness or claims, in any currency, in each case whether direct or indirect or contingent or matured or unmatured, at any time held or owing by the Agent, either Issuing Bank or any Lender to or for the credit or the account of any Guarantor, or any part thereof in such amounts as the Agent, such Issuing Bank or such Lender may elect, against and on account of the obligations and liabilities of the applicable Guarantor to the Agent, the Issuing Banks and the Lenders hereunder and claims of every nature and description of the Agent, the Issuing Banks and the Lenders against such Guarantor, in any currency, whether arising hereunder, under the Credit Agreement, any other Financing Document or otherwise, as the Agent, either Issuing Bank or any Lender may elect, whether or not the Agent, such Issuing Bank or such Lender has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. The Agent agrees to notify (promptly after receipt of notice by the Agent) the Company and the applicable Guarantor of any such set-off and the application made by the Agent, such Issuing Bank or any such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Agent, either Issuing Bank and each Lender under this paragraph are in addition to other rights and remedies (including, without limitation, other rights of set-off) which any such Person may have. If foreign currency is exchanged for U.S. Dollars by the Agent, either Issuing Bank or any Lender, such Person shall use

4. Right of Set-off. The Agent, the Issuing Bank and each Lender is hereby irrevocably authorized upon the occurrence of an Event of Default without notice to the Guarantors, any such notice being expressly waived by each Guarantor, to set-off and credit against any credits, indebtedness or claims, in any currency, in each case whether direct or indirect or contingent or matured or unmatured, at any time held or owing by the Agent, either Issuing Bank or any Lender to or for the credit or the account of any Guarantor, or any part thereof in such amounts as the Agent, such Issuing Bank or such Lender may elect, against and on account of the obligations and liabilities of the applicable Guarantor to the Agent, the Issuing Banks and the Lenders hereunder and claims of every nature and description of the Agent, the Issuing Banks and the Lenders against such Guarantor, in any currency, whether arising hereunder, under the Credit Agreement, any other Financing Document or otherwise, as the Agent, either Issuing Bank or any Lender may elect, whether or not the Agent, such Issuing Bank or such Lender has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. The Agent agrees to notify (promptly after receipt of notice by the Agent) the Company and the applicable Guarantor of any such set-off and the application made by the Agent, such Issuing Bank or any such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Agent, either Issuing Bank and each Lender under this paragraph are in addition to other rights and remedies (including, without limitation, other rights of set-off) which any such Person may have. If foreign currency is exchanged for U.S. Dollars by the Agent, either Issuing Bank or any Lender, such Person shall use the rate of exchange prevailing at the time for customers exchanging a similar amount of currency. 5. No Subrogation. Notwithstanding any payment or payments made by any Guarantor hereunder or any set-off or application of funds of any Guarantors by the Agent, either Issuing Bank or any Lender, any such Guarantor shall not be entitled to be subrogated to any of the rights of the Agent, either Issuing Bank or any Lender against the Company or any collateral security or guaranty or right of offset held by any such Person for the payment of the Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from the Company in respect of payments made by any such Guarantor hereunder, until all Obligations are paid in full. If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full, such amount shall be held by such Guarantor in trust for the Agent, the Issuing Banks and the Lenders, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the Agent in the exact form received by such Guarantor (duly indorsed by such Guarantor to the Agent, if required), to be applied against the Obligations, whether matured or unmatured in such order as the Agent may determine. 6. Amendments, etc. with respect to the Obligations; Waiver of Rights. Each Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against the Guarantors and without notice to or further assent by the Guarantors, any demand for payment of any of the Obligations made by the Agent, either Issuing Bank or any Lender may be rescinded and any of the Obligations continued, and the Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guaranty therefor or right of offset with respect thereto, may, -5-

from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Agent, the Issuing Banks or the Lenders and the Credit Agreement, the Notes and any collateral security document or other guaranty or document in connection therewith (including, without limitation, the other Financing Documents) may be amended, modified, supplemented or terminated, in whole or in part, as the Agent, the Issuing Banks or the Lenders may deem advisable from time to time, and any collateral security or guaranty or right of offset at any time held by the Agent, the Issuing Banks or the Lenders for the payment of the Obligations may be sold, exchanged, waived, surrendered or released, all without the necessity of any reservation of rights against the Guarantors and without notice to or further assent by the Guarantors which will remain bound hereunder, notwithstanding any such renewal, extension, modification, acceleration, compromise, amendment, supplement, termination, sale, exchange, waiver, surrender or release. Neither the Agent, either Issuing Bank nor any Lender shall have an obligation to protect, secure, perfect or insure any Lien at any time held as security for the Obligations or this Guaranty Agreement or any Property subject thereto. When making any demand hereunder against any Guarantor, the Agent may, but shall be under no obligation to, make a similar demand on the Company or any other guarantor, and any failure by the Agent to make any such demand or to collect any payments from the Company or any such other guarantor, or any release of the Company or other guarantor, shall not relieve any such Guarantor of its obligations or liabilities

from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Agent, the Issuing Banks or the Lenders and the Credit Agreement, the Notes and any collateral security document or other guaranty or document in connection therewith (including, without limitation, the other Financing Documents) may be amended, modified, supplemented or terminated, in whole or in part, as the Agent, the Issuing Banks or the Lenders may deem advisable from time to time, and any collateral security or guaranty or right of offset at any time held by the Agent, the Issuing Banks or the Lenders for the payment of the Obligations may be sold, exchanged, waived, surrendered or released, all without the necessity of any reservation of rights against the Guarantors and without notice to or further assent by the Guarantors which will remain bound hereunder, notwithstanding any such renewal, extension, modification, acceleration, compromise, amendment, supplement, termination, sale, exchange, waiver, surrender or release. Neither the Agent, either Issuing Bank nor any Lender shall have an obligation to protect, secure, perfect or insure any Lien at any time held as security for the Obligations or this Guaranty Agreement or any Property subject thereto. When making any demand hereunder against any Guarantor, the Agent may, but shall be under no obligation to, make a similar demand on the Company or any other guarantor, and any failure by the Agent to make any such demand or to collect any payments from the Company or any such other guarantor, or any release of the Company or other guarantor, shall not relieve any such Guarantor of its obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of the Agent, the Issuing Banks of the Lenders against each Guarantor. For the purposes hereof "demand" shall include the commencement and continuance of any legal proceedings. 7. Guaranty Absolute and Unconditional. Each Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Agent, either Issuing Bank or any Lender upon this Guaranty Agreement or acceptance of this Guaranty Agreement, and the Obligations (and any of them) shall conclusively be deemed to have been created, contracted or incurred and extended, amended and waived in reliance upon this Guaranty Agreement, and all dealings between the Company or the Guarantors and the Agent, either Issuing Bank or any Lender shall likewise be conclusively presumed to have been had or consummated in reliance upon this Guaranty Agreement. Each Guarantor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment, notice of intention to accelerate maturity and notice of acceleration of maturity to or upon the Company or the Guarantors with respect to the Obligations. Each Guarantor understands and agrees that this Guaranty Agreement shall be construed as a continuing, absolute, completed, unconditional (except as expressly conditioned pursuant to the terms hereof) and irrevocable guarantee of payment and not of collection without regard to (a) the validity, regularity or enforceability of the Credit Agreement, the other Financing Documents, any of the Obligations or any collateral security or guaranty therefor or right of offset with respect thereto at any time or from time to time held by the Agent, either Issuing Bank or any Lender, (b) any defense, set-off or counterclaim which may at any time be available to or be asserted by the Company or any other Person liable for the Obligations against the Agent, either Issuing Bank or any Lender, or (c) any other circumstance whatsoever (with or without notice to or knowledge of the Company or any Guarantor) which constitutes, or might be construed -6-

to constitute, an equitable or legal discharge of the Company or any other Person liable for the Obligations, or of any Guarantor under this Guaranty Agreement, in bankruptcy or in any other instance. When pursuing its rights and remedies hereunder against any Guarantor, the Agent, the Issuing Banks and the Lenders may, but shall be under no obligation to, pursue such rights and remedies as they may have against the Company or any other Person or against any collateral security or guaranty for the Obligations or any right of offset with respect thereto, and any failure by the Agent, the Issuing Banks or the Lenders to pursue such other rights or remedies or to collect any payments from the Company or any such other Person or to realize upon any such collateral security or guaranty or to exercise any such right of offset, or any release of the Company or any such other Person or any such collateral security, guaranty or right of offset, shall not relieve any Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Agent, either Issuing Bank or any Lender against any Guarantor. This Guaranty Agreement shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon each Guarantor and the respective successors and assigns thereof, and shall inure to the benefit of the Agent, Issuing Banks and the Lenders, and the respective successors, indorsees, transferees and assigns thereof, until all the Obligations and the obligations of the Guarantors under this Guaranty Agreement shall have been satisfied by payment in full.

to constitute, an equitable or legal discharge of the Company or any other Person liable for the Obligations, or of any Guarantor under this Guaranty Agreement, in bankruptcy or in any other instance. When pursuing its rights and remedies hereunder against any Guarantor, the Agent, the Issuing Banks and the Lenders may, but shall be under no obligation to, pursue such rights and remedies as they may have against the Company or any other Person or against any collateral security or guaranty for the Obligations or any right of offset with respect thereto, and any failure by the Agent, the Issuing Banks or the Lenders to pursue such other rights or remedies or to collect any payments from the Company or any such other Person or to realize upon any such collateral security or guaranty or to exercise any such right of offset, or any release of the Company or any such other Person or any such collateral security, guaranty or right of offset, shall not relieve any Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Agent, either Issuing Bank or any Lender against any Guarantor. This Guaranty Agreement shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon each Guarantor and the respective successors and assigns thereof, and shall inure to the benefit of the Agent, Issuing Banks and the Lenders, and the respective successors, indorsees, transferees and assigns thereof, until all the Obligations and the obligations of the Guarantors under this Guaranty Agreement shall have been satisfied by payment in full. 8. Reinstatement. This Guaranty Agreement shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by the Agent, either Issuing Bank or any Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Company or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Company or any Guarantor or any substantial part of such Person's property, or otherwise, all as though such payments had not been made. 9. Payments. Each Guarantor hereby guarantees that payments hereunder will be paid, without set-off or counterclaim and in immediately available funds and in lawful currency of the United States of America, to Agent in Houston, Texas, at the Agent's Payment Office, not later than 11:00 A.M., Houston time. 10. Representations and Warranties. Each Guarantor hereby represents and warrants that: (a) Corporate Existence. Each Guarantor (other than Tesoro E&P Company, L.P.) is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation and has the corporate power and authority and the legal right to own and lease its property and to conduct its business. (b) Corporate Power; Authorization. Each Guarantor (other than Tesoro E&P Company, L.P.) has the corporate power and authority and the legal right to make, deliver and perform this Guaranty Agreement. Each Guarantor has taken all necessary corporate action to authorize the execution, delivery and performance of this Guaranty Agreement. -7-

(c) Partnership Existence and Authorization. Tesoro E&P Company, L.P. is a limited partnership duly formed, validly existing and in good standing under the laws of the State of Delaware and has the partnership power and authority and the legal right to own and lease its property and to conduct its business. Tesoro E&P Company, L.P. has the partnership power and authority and the legal right to make, deliver and perform this Guaranty Agreement and has taken all necessary partnership action to authorize the execution, delivery and performance of this Guaranty Agreement. (d) Enforceable Obligations. This Guaranty Agreement has been duly executed and delivered by each Guarantor and constitutes a legal, valid and binding obligation of such Guarantor enforceable against such Guarantor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles. 11. No Waiver; Cumulative Remedies. Neither the Agent, either Issuing Bank nor any of the Lenders shall by any act, delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach of any of the terms and conditions hereof.

(c) Partnership Existence and Authorization. Tesoro E&P Company, L.P. is a limited partnership duly formed, validly existing and in good standing under the laws of the State of Delaware and has the partnership power and authority and the legal right to own and lease its property and to conduct its business. Tesoro E&P Company, L.P. has the partnership power and authority and the legal right to make, deliver and perform this Guaranty Agreement and has taken all necessary partnership action to authorize the execution, delivery and performance of this Guaranty Agreement. (d) Enforceable Obligations. This Guaranty Agreement has been duly executed and delivered by each Guarantor and constitutes a legal, valid and binding obligation of such Guarantor enforceable against such Guarantor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles. 11. No Waiver; Cumulative Remedies. Neither the Agent, either Issuing Bank nor any of the Lenders shall by any act, delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise and no delay in exercising, on the part of the Agent, either Issuing Bank or any Lender, any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof, or the exercise of any other power, privilege or right. A waiver by the Agent, either Issuing Bank or any Lender of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which any such Person would have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently, and are not exclusive of any rights or remedies provided by law. 12. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telecopy or similar teletransmission or writing) and, in the case of any Guarantor, shall be given to such Guarantor at the address or telecopy number of the Company now or hereafter provided for in the Credit Agreement and in the case of the Agent, either Issuing Bank or any Lender, at the address or telecopy number for such Person now or hereafter provided for in the Credit Agreement. Each such notice, request or other communication shall be effective (i) if given by telecopier during regular business hours, once such telecopy is transmitted to the telecopy number specified in the Credit Agreement, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means (including, without limitation, by air courier), when delivered at the address specified in the Credit Agreement; provided that notices to the Agent shall not be effective until received. 13. ENTIRE AGREEMENT. THIS GUARANTY AGREEMENT, THE CREDIT AGREEMENT, THE NOTES, THE SECURITY INSTRUMENTS, THE OTHER FINANCING DOCUMENTS REFERRED TO IN SECTIONS 3.02 THE CREDIT AGREEMENT, AND THE FEE LETTER EMBODY THE ENTIRE -8-

AGREEMENT AND UNDERSTANDING BETWEEN THE AGENT, THE ISSUING BANKS, THE LENDERS AND THE OTHER RESPECTIVE PARTIES HERETO AND THERETO AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. ANY CONFLICT OR AMBIGUITY BETWEEN THE TERMS AND PROVISIONS OF THIS AGREEMENT AND THE TERMS AND PROVISIONS IN ANY OTHER FINANCING DOCUMENT SHALL BE CONTROLLED BY THE TERMS AND PROVISIONS HEREOF. 14. Governing Law; Submission to Jurisdiction, Etc. (a) This Guaranty Agreement and the rights and obligations of the parties hereunder shall be construed in accordance with and be governed by the law (without giving effect to the conflict of law principles thereof) of the State of Texas. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, MAY BE

AGREEMENT AND UNDERSTANDING BETWEEN THE AGENT, THE ISSUING BANKS, THE LENDERS AND THE OTHER RESPECTIVE PARTIES HERETO AND THERETO AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. ANY CONFLICT OR AMBIGUITY BETWEEN THE TERMS AND PROVISIONS OF THIS AGREEMENT AND THE TERMS AND PROVISIONS IN ANY OTHER FINANCING DOCUMENT SHALL BE CONTROLLED BY THE TERMS AND PROVISIONS HEREOF. 14. Governing Law; Submission to Jurisdiction, Etc. (a) This Guaranty Agreement and the rights and obligations of the parties hereunder shall be construed in accordance with and be governed by the law (without giving effect to the conflict of law principles thereof) of the State of Texas. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, HOUSTON DIVISION, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH GUARANTOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING BUT NOT LIMITED TO ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. (c) THE COMPANY AND THE AGENT, EACH ISSUING BANK AND EACH LENDER HEREBY (I) IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS GUARANTY AGREEMENT OR ANY FINANCING DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN; (II) CERTIFY THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (III) ACKNOWLEDGE THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE FINANCING DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION. (d) Each Guarantor that is not a Texas corporation hereby irrevocably designates the General Counsel of the Company (as of the date hereof, James C. Reed, Jr.) located at 8700 Tesoro Drive, San Antonio, Texas 78217, as the designee, appointee and agent of such Guarantor to receive, for and on behalf of such Guarantor, service of process in such respective jurisdictions in any legal action or proceeding with respect to this Agreement, the Notes, the Security Instruments or the other Financing Documents. It is understood that a copy of such process served on such agent will be promptly forwarded by mail to such Guarantor at its address set forth opposite its signature below, -9-

but the failure of such Guarantor to receive such copy shall not affect in any way the service of such process. Each Guarantor further irrevocably consents to the service of process of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such Guarantor at its said address, such service to become effective 30 days after such mailing. (e) Nothing herein shall affect the right of the Agent or any Lender or any holder of a Note to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against any Guarantor in Texas or any other jurisdiction in which assets of any Guarantor are located.

but the failure of such Guarantor to receive such copy shall not affect in any way the service of such process. Each Guarantor further irrevocably consents to the service of process of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such Guarantor at its said address, such service to become effective 30 days after such mailing. (e) Nothing herein shall affect the right of the Agent or any Lender or any holder of a Note to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against any Guarantor in Texas or any other jurisdiction in which assets of any Guarantor are located. 15. Severability. Any provision of this Guaranty Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 16. Paragraph Headings. The Paragraph headings used in this Guaranty Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 17. Interest. It is the intention of the parties hereto to conform strictly to usury laws applicable to each Lender and the Transactions. Accordingly, if the Transactions would be usurious as to any Lender under applicable law, then, notwithstanding anything to the contrary in the Notes, this Agreement or in any Financing Document or agreement entered into in connection with the Transactions or as security for the Obligations, it is agreed as follows: (i) the aggregate of all consideration which constitutes interest as to any Lender under applicable law that is contracted for, taken, reserved, charged or received by such Lender under the Notes, this Agreement or under any of the Financing Documents or agreements or otherwise in connection with the Transactions shall under no circumstances exceed the maximum amount allowed by such applicable law, (ii) in the event that the maturity of the Notes is accelerated for any reason, or in the event of any required or permitted prepayment, then such consideration that constitutes interest as to any Lender under applicable law may never include more than the maximum amount allowed by such applicable law, and (iii) excess interest, if any, provided for in this Agreement or otherwise in connection with the Transactions shall be cancelled automatically and, if theretofore paid, shall be credited by such Lender on the principal amount of the Obligations (or, to the extent that the principal amount of the Obligations shall have been or would thereby be paid in full, refunded by such Lender to the Company). The right to accelerate the maturity of the Notes does not include the right to accelerate any interest which has not otherwise accrued on the date of such acceleration, and the Lenders do not intend to collect any unearned interest in the event of acceleration. All sums paid or agreed to be paid to each Lender for the use, forbearance or detention of sums included in the Obligations shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full term of the Notes until payment in full so that the rate or amount of interest on -10-

account of the Obligations does not exceed the applicable usury ceiling, if any. As used in this Section, the term "applicable law" shall mean the laws of the State of Texas (or of any other jurisdiction whose laws may be mandatorily applicable notwithstanding other provisions of this Agreement) or laws of the United States of America applicable to any Lender and the Transactions, which would permit such Lender to contract for, charge, take, reserve or receive a greater amount of interest than under Texas (or such other jurisdiction's) law. To the extent that Article 5069-1.04 of the Texas Revised Civil Statutes is relevant to the Lenders for the purpose of determining the Highest Lawful Rate, the Lenders hereby elect to determine the applicable rate ceiling under such Article by the indicated (weekly) rate ceiling from time to time in effect, subject to the Lenders' right subsequently to change such method in accordance with applicable law. In no event shall the provisions of Tex. Rev. Civ. Stat. art. 5069-2.01 through 5069-8.06 or 5069-15.01 through 5069-15.11 be applicable to the Loans evidenced hereby. 18. Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original but all of which shall together constitute one and the same instrument.

account of the Obligations does not exceed the applicable usury ceiling, if any. As used in this Section, the term "applicable law" shall mean the laws of the State of Texas (or of any other jurisdiction whose laws may be mandatorily applicable notwithstanding other provisions of this Agreement) or laws of the United States of America applicable to any Lender and the Transactions, which would permit such Lender to contract for, charge, take, reserve or receive a greater amount of interest than under Texas (or such other jurisdiction's) law. To the extent that Article 5069-1.04 of the Texas Revised Civil Statutes is relevant to the Lenders for the purpose of determining the Highest Lawful Rate, the Lenders hereby elect to determine the applicable rate ceiling under such Article by the indicated (weekly) rate ceiling from time to time in effect, subject to the Lenders' right subsequently to change such method in accordance with applicable law. In no event shall the provisions of Tex. Rev. Civ. Stat. art. 5069-2.01 through 5069-8.06 or 5069-15.01 through 5069-15.11 be applicable to the Loans evidenced hereby. 18. Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original but all of which shall together constitute one and the same instrument. [SIGNATURES BEGIN NEXT PAGE] -11-

IN WITNESS WHEREOF, the undersigned has caused this Guaranty Agreement to be duly executed and delivered by its duly authorized officer on the day and year first above written. TESORO ALASKA PETROLEUM COMPANY TESORO EXPLORATION AND PRODUCTION COMPANY TESORO PETROLEUM COMPANIES, INC. DIGICOMP, INC. TESORO TECHNOLOGY PARTNERS COMPANY INTERIOR FUELS COMPANY TESORO ALASKA PIPELINE COMPANY TESORO NORTHSTORE COMPANY TESORO REFINING, MARKETING & SUPPLY COMPANY TESORO NATURAL GAS COMPANY TESORO BOLIVIA PETROLEUM COMPANY TESORO VOSTOK COMPANY KENAI PIPE LINE COMPANY TESORO MARINE SERVICES COMPANY TESORO COASTWIDE SERVICES COMPANY COASTWIDE MARINE SERVICES, INC.
By:/s/ G. A. WRIGHT -------------------------------------------G. A. Wright Vice President and Treasurer

TESORO GAS RESOURCES COMPANY, INC. TESORO FINANCIAL SERVICES HOLDING COMPANY
By:/s/ JEFFREY B. FABIAN -------------------------------------------Jeffrey B. Fabian President

VICTORY FINANCE COMPANY
By:/s/ KAREN B. THOMAS -------------------------------------------Karen B. Thomas Assistant Secretary

-12-

BANQUE PARIBAS, AS ADMINISTRATIVE AGENT

IN WITNESS WHEREOF, the undersigned has caused this Guaranty Agreement to be duly executed and delivered by its duly authorized officer on the day and year first above written. TESORO ALASKA PETROLEUM COMPANY TESORO EXPLORATION AND PRODUCTION COMPANY TESORO PETROLEUM COMPANIES, INC. DIGICOMP, INC. TESORO TECHNOLOGY PARTNERS COMPANY INTERIOR FUELS COMPANY TESORO ALASKA PIPELINE COMPANY TESORO NORTHSTORE COMPANY TESORO REFINING, MARKETING & SUPPLY COMPANY TESORO NATURAL GAS COMPANY TESORO BOLIVIA PETROLEUM COMPANY TESORO VOSTOK COMPANY KENAI PIPE LINE COMPANY TESORO MARINE SERVICES COMPANY TESORO COASTWIDE SERVICES COMPANY COASTWIDE MARINE SERVICES, INC.
By:/s/ G. A. WRIGHT -------------------------------------------G. A. Wright Vice President and Treasurer

TESORO GAS RESOURCES COMPANY, INC. TESORO FINANCIAL SERVICES HOLDING COMPANY
By:/s/ JEFFREY B. FABIAN -------------------------------------------Jeffrey B. Fabian President

VICTORY FINANCE COMPANY
By:/s/ KAREN B. THOMAS -------------------------------------------Karen B. Thomas Assistant Secretary

-12-

BANQUE PARIBAS, AS ADMINISTRATIVE AGENT
By:/s/ BRIAN MALONE -------------------------------------------Brian Malone Vice President

By:/s/ BARTON D. SCHOUEST -------------------------------------------Barton D. Schouest Group Vice President

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ITEM 14(a)3, EXHIBIT 4.11 FIRST AMENDMENT TO AMENDED AND RESTATED SECURITY AGREEMENT (Pledge)

BANQUE PARIBAS, AS ADMINISTRATIVE AGENT
By:/s/ BRIAN MALONE -------------------------------------------Brian Malone Vice President

By:/s/ BARTON D. SCHOUEST -------------------------------------------Barton D. Schouest Group Vice President

-13-

ITEM 14(a)3, EXHIBIT 4.11 FIRST AMENDMENT TO AMENDED AND RESTATED SECURITY AGREEMENT (Pledge) THIS FIRST AMENDMENT TO AMENDED AND RESTATED SECURITY AGREEMENT (Pledge) (this "First Amendment") is executed as of September 12, 1996, by TESORO PETROLEUM CORPORATION, a Delaware corporation, with principal offices at 8700 Tesoro Drive, San Antonio, Texas 78217 ("Pledgor"); in favor of BANQUE PARIBAS, with offices at 1200 Smith Street, Houston, Texas 77002, as Administrative Agent ("Secured Party") for the Issuing Banks and the Lenders parties to the Credit Agreement referred to below. RECITALS: A. Pledgor, Banque Paribas, as Administrative Agent, The Bank of Nova Scotia, as Documentation Agent and various lenders (the "Lenders") entered into that certain Amended and Restated Credit Agreement dated as of June 7, 1996 (the "Credit Agreement"). B. The conditions precedent to the effectiveness of the Credit Agreement included the execution and delivery by Pledgor of that certain Amended and Restated Security Agreement (Pledge) dated of even date therewith (the "Security Agreement"). C. Pledgor and Secured Party mutually desire to amend (i) the description of the "Collateral" (as defined in the Security Agreement) by amending Exhibit A to the Security Agreement to include additional Securities and (ii) the definition of Issuer by amending Schedule 1.02 to the Security Agreement to include additional Persons. D. Therefore, for and in consideration of the premises and the agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Pledgor and Secured Party hereby agree as follows: AGREEMENT: 1. All capitalized terms used but not defined in this First Amendment which are defined in the Security Agreement or the Credit Agreement shall have the same meanings herein as therein unless the context otherwise requires. 2. The definition of Collateral in Section 1.02 of the Security Agreement and Exhibit A to the Security Agreement are each hereby supplemented to include the securities described on Exhibit A attached hereto (the "Additional Securities"). 3. The definition of Issuer in Section 1.02 of the Security Agreement and Schedule 1.02 to the Security Agreement are each hereby supplemented to include the Persons described on Schedule 1.02 attached hereto

ITEM 14(a)3, EXHIBIT 4.11 FIRST AMENDMENT TO AMENDED AND RESTATED SECURITY AGREEMENT (Pledge) THIS FIRST AMENDMENT TO AMENDED AND RESTATED SECURITY AGREEMENT (Pledge) (this "First Amendment") is executed as of September 12, 1996, by TESORO PETROLEUM CORPORATION, a Delaware corporation, with principal offices at 8700 Tesoro Drive, San Antonio, Texas 78217 ("Pledgor"); in favor of BANQUE PARIBAS, with offices at 1200 Smith Street, Houston, Texas 77002, as Administrative Agent ("Secured Party") for the Issuing Banks and the Lenders parties to the Credit Agreement referred to below. RECITALS: A. Pledgor, Banque Paribas, as Administrative Agent, The Bank of Nova Scotia, as Documentation Agent and various lenders (the "Lenders") entered into that certain Amended and Restated Credit Agreement dated as of June 7, 1996 (the "Credit Agreement"). B. The conditions precedent to the effectiveness of the Credit Agreement included the execution and delivery by Pledgor of that certain Amended and Restated Security Agreement (Pledge) dated of even date therewith (the "Security Agreement"). C. Pledgor and Secured Party mutually desire to amend (i) the description of the "Collateral" (as defined in the Security Agreement) by amending Exhibit A to the Security Agreement to include additional Securities and (ii) the definition of Issuer by amending Schedule 1.02 to the Security Agreement to include additional Persons. D. Therefore, for and in consideration of the premises and the agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Pledgor and Secured Party hereby agree as follows: AGREEMENT: 1. All capitalized terms used but not defined in this First Amendment which are defined in the Security Agreement or the Credit Agreement shall have the same meanings herein as therein unless the context otherwise requires. 2. The definition of Collateral in Section 1.02 of the Security Agreement and Exhibit A to the Security Agreement are each hereby supplemented to include the securities described on Exhibit A attached hereto (the "Additional Securities"). 3. The definition of Issuer in Section 1.02 of the Security Agreement and Schedule 1.02 to the Security Agreement are each hereby supplemented to include the Persons described on Schedule 1.02 attached hereto (the "Additional Issuers").

4. Section 1.02 of the Security Agreement is hereby further amended and supplemented as follows: (i) the term "Security Agreement", as defined in Section 1.02, is hereby amended to mean the Security Agreement, as amended and supplemented by this First Amendment, and as the same may from time to time be further amended or supplemented. (ii) added thereto is a new definition to read in its entirety as follows: "First Amendment" shall mean that certain First Amendment to Amended and Restated Security Agreement (Pledge) dated as of September 12, 1996, by and between Pledgor and Secured Party. 5. Pledgor hereby confirms that it has assigned and granted and does hereby assign and grant to Secured Party a

4. Section 1.02 of the Security Agreement is hereby further amended and supplemented as follows: (i) the term "Security Agreement", as defined in Section 1.02, is hereby amended to mean the Security Agreement, as amended and supplemented by this First Amendment, and as the same may from time to time be further amended or supplemented. (ii) added thereto is a new definition to read in its entirety as follows: "First Amendment" shall mean that certain First Amendment to Amended and Restated Security Agreement (Pledge) dated as of September 12, 1996, by and between Pledgor and Secured Party. 5. Pledgor hereby confirms that it has assigned and granted and does hereby assign and grant to Secured Party a security interest in, lien upon and a right of set-off against all of the Collateral, including the Additional Securities, and all other Property relating thereto, arising therefrom, or in any way connected therewith, as security for the Obligations. 6. Pledgor represents and warrants to Secured Party that (i) there exists no default or event of default or any condition or act which constitutes, or with notice or lapse of time would constitute an Event of Default under the Credit Agreement or the Security Agreement, as amended and supplemented hereby; (ii) Pledgor has performed and complied with all covenants, agreements and conditions contained in the Security Agreement, as amended and supplemented hereby, required to be performed or complied with by it; and (iii) the representations and warranties of Pledgor contained in the Security Agreement, as amended and supplemented hereby, were true and correct when made and are true and correct in all material respects as of the time of delivery of this First Amendment. 7. On and after the date on which this First Amendment becomes effective, the terms "Security Agreement", "hereof", "herein", "hereunder" and terms of like import, when used in the Security Agreement shall, except where the context otherwise requires, refer to the Security Agreement, as amended and supplemented hereby. 8. Except as amended by this First Amendment, the Security Agreement shall remain in full force and effect, and Pledgor hereby reaffirms all covenants, representations and warranties made in the Security Agreement, as amended and supplemented hereby. 8. This First Amendment shall benefit and bind the parties hereto and their respective assigns, successors and legal representatives. -2-

WITNESS THE EXECUTION HEREOF as of the date first above written. PLEDGOR: TESORO PETROLEUM CORPORATION
By: /s/ G. A. WRIGHT ---------------------------------Name: G.A. Wright Title: Vice President, Corporate Communications and Treasurer

SECURED PARTY: - -------------

BANQUE PARIBAS, AS ADMINISTRATIVE AGENT

By: /s/ BRIAN MALONE ---------------------------------Name: Brian Malone Title: Vice President

WITNESS THE EXECUTION HEREOF as of the date first above written. PLEDGOR: TESORO PETROLEUM CORPORATION
By: /s/ G. A. WRIGHT ---------------------------------Name: G.A. Wright Title: Vice President, Corporate Communications and Treasurer

SECURED PARTY: - -------------

BANQUE PARIBAS, AS ADMINISTRATIVE AGENT

By: /s/ BRIAN MALONE ---------------------------------Name: Brian Malone Title: Vice President

By: /s/ BARTON D. SCHOUEST ---------------------------------Name: Barton D. Schouest Title: Group Vice President

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SCHEDULE 1.02 ADDITIONAL ISSUERS Tesoro Financial Services Holding Company, a Delaware corporation -4-

EXHIBIT A ADDITIONAL SECURITIES 1000 shares of the common stock of Tesoro Financial Services Holding Company, a Delaware corporation ("TFHSC"), registered in the name of Tesoro Petroleum Corporation on the books of TFHSC, as represented by Certificate No. 1. -5-

ITEM 14(a)3, EXHIBIT 10.5 AMENDED AND RESTATED EMPLOYMENT AGREEMENT This Amended and Restated Employment Agreement (the "Agreement") is entered into as of December 12, 1996, by and between James C. Reed, Jr. ("Employee"), and Tesoro Petroleum Corporation, a Delaware corporation (the "Company"). Recitals:

SCHEDULE 1.02 ADDITIONAL ISSUERS Tesoro Financial Services Holding Company, a Delaware corporation -4-

EXHIBIT A ADDITIONAL SECURITIES 1000 shares of the common stock of Tesoro Financial Services Holding Company, a Delaware corporation ("TFHSC"), registered in the name of Tesoro Petroleum Corporation on the books of TFHSC, as represented by Certificate No. 1. -5-

ITEM 14(a)3, EXHIBIT 10.5 AMENDED AND RESTATED EMPLOYMENT AGREEMENT This Amended and Restated Employment Agreement (the "Agreement") is entered into as of December 12, 1996, by and between James C. Reed, Jr. ("Employee"), and Tesoro Petroleum Corporation, a Delaware corporation (the "Company"). Recitals: A. The Company and Employee are parties to an Employment Agreement dated December 14, 1994, including all amendments thereto prior to the date hereof (the "Prior Agreement"). B. The Company wishes to continue the employment of Employee as its Executive Vice President, General Counsel and Secretary; as such, Employee shall have certain responsibilities and shall receive certain compensation and benefits. C. Employee and the Company wish to formalize the continuation of this employment relationship by amending and restating the Prior Agreement, including extending its term, and by setting forth certain additional agreements between Employee and the Company. THE PARTIES AGREE AS FOLLOWS: 1. Employment and Duties. During the term of this Agreement, the Company agrees to employ Employee as Executive Vice President, General Counsel and Secretary, and Employee agrees to serve the Company in such capacity on the terms and subject to the conditions set forth in this Agreement. Employee shall devote substantially all of his business time, energy and skill to the affairs of the Company as the Company, acting through its Board of Directors or its Chief Executive Officer, shall reasonably deem necessary to discharge Employee's duties in such capacity. Employee may participate in social, civic, charitable, religious, business, educational or professional associations, so long as such participation would not materially detract from Employee's ability to perform his duties under this Agreement. Employee shall not engage in any other business activity during the term of this Agreement without the prior written consent of the Company, other than the passive management of Employee's personal investments or activities which would not materially detract from Employee's ability to perform his duties under this Agreement. 2. Compensation.

EXHIBIT A ADDITIONAL SECURITIES 1000 shares of the common stock of Tesoro Financial Services Holding Company, a Delaware corporation ("TFHSC"), registered in the name of Tesoro Petroleum Corporation on the books of TFHSC, as represented by Certificate No. 1. -5-

ITEM 14(a)3, EXHIBIT 10.5 AMENDED AND RESTATED EMPLOYMENT AGREEMENT This Amended and Restated Employment Agreement (the "Agreement") is entered into as of December 12, 1996, by and between James C. Reed, Jr. ("Employee"), and Tesoro Petroleum Corporation, a Delaware corporation (the "Company"). Recitals: A. The Company and Employee are parties to an Employment Agreement dated December 14, 1994, including all amendments thereto prior to the date hereof (the "Prior Agreement"). B. The Company wishes to continue the employment of Employee as its Executive Vice President, General Counsel and Secretary; as such, Employee shall have certain responsibilities and shall receive certain compensation and benefits. C. Employee and the Company wish to formalize the continuation of this employment relationship by amending and restating the Prior Agreement, including extending its term, and by setting forth certain additional agreements between Employee and the Company. THE PARTIES AGREE AS FOLLOWS: 1. Employment and Duties. During the term of this Agreement, the Company agrees to employ Employee as Executive Vice President, General Counsel and Secretary, and Employee agrees to serve the Company in such capacity on the terms and subject to the conditions set forth in this Agreement. Employee shall devote substantially all of his business time, energy and skill to the affairs of the Company as the Company, acting through its Board of Directors or its Chief Executive Officer, shall reasonably deem necessary to discharge Employee's duties in such capacity. Employee may participate in social, civic, charitable, religious, business, educational or professional associations, so long as such participation would not materially detract from Employee's ability to perform his duties under this Agreement. Employee shall not engage in any other business activity during the term of this Agreement without the prior written consent of the Company, other than the passive management of Employee's personal investments or activities which would not materially detract from Employee's ability to perform his duties under this Agreement. 2. Compensation. (a) Salary; Withholding. During the term of this Agreement, the Company shall pay Employee a base salary of $275,000 per year ("base salary"), payable in arrears in equal bi-weekly installments. The parties shall comply with all applicable withholding requirements in connection with all compensation payable to Employee. The Company's Board of Directors may, in its sole discretion, review and adjust upward Employee's base salary from time to time, but no downward adjustment in Employee's base salary may be made during the term of this Agreement.

ITEM 14(a)3, EXHIBIT 10.5 AMENDED AND RESTATED EMPLOYMENT AGREEMENT This Amended and Restated Employment Agreement (the "Agreement") is entered into as of December 12, 1996, by and between James C. Reed, Jr. ("Employee"), and Tesoro Petroleum Corporation, a Delaware corporation (the "Company"). Recitals: A. The Company and Employee are parties to an Employment Agreement dated December 14, 1994, including all amendments thereto prior to the date hereof (the "Prior Agreement"). B. The Company wishes to continue the employment of Employee as its Executive Vice President, General Counsel and Secretary; as such, Employee shall have certain responsibilities and shall receive certain compensation and benefits. C. Employee and the Company wish to formalize the continuation of this employment relationship by amending and restating the Prior Agreement, including extending its term, and by setting forth certain additional agreements between Employee and the Company. THE PARTIES AGREE AS FOLLOWS: 1. Employment and Duties. During the term of this Agreement, the Company agrees to employ Employee as Executive Vice President, General Counsel and Secretary, and Employee agrees to serve the Company in such capacity on the terms and subject to the conditions set forth in this Agreement. Employee shall devote substantially all of his business time, energy and skill to the affairs of the Company as the Company, acting through its Board of Directors or its Chief Executive Officer, shall reasonably deem necessary to discharge Employee's duties in such capacity. Employee may participate in social, civic, charitable, religious, business, educational or professional associations, so long as such participation would not materially detract from Employee's ability to perform his duties under this Agreement. Employee shall not engage in any other business activity during the term of this Agreement without the prior written consent of the Company, other than the passive management of Employee's personal investments or activities which would not materially detract from Employee's ability to perform his duties under this Agreement. 2. Compensation. (a) Salary; Withholding. During the term of this Agreement, the Company shall pay Employee a base salary of $275,000 per year ("base salary"), payable in arrears in equal bi-weekly installments. The parties shall comply with all applicable withholding requirements in connection with all compensation payable to Employee. The Company's Board of Directors may, in its sole discretion, review and adjust upward Employee's base salary from time to time, but no downward adjustment in Employee's base salary may be made during the term of this Agreement.

(b) Annual Incentive Plan. The Company shall establish an Annual Incentive Compensation Plan for executive officers in which the Employee shall be entitled to participate in a manner consistent with his position with the Company and the evaluations of his performance by the Board of Directors or any appropriate committee thereof. (c) Stock Options and Restricted Stock Grants. The Employee shall be entitled to receive stock options and restricted stock grants under the Company's plans in effect from time to time, if any, commensurate with his position with the Company and the evaluations of his performance by the Board of Directors or any appropriate committee thereof.

(b) Annual Incentive Plan. The Company shall establish an Annual Incentive Compensation Plan for executive officers in which the Employee shall be entitled to participate in a manner consistent with his position with the Company and the evaluations of his performance by the Board of Directors or any appropriate committee thereof. (c) Stock Options and Restricted Stock Grants. The Employee shall be entitled to receive stock options and restricted stock grants under the Company's plans in effect from time to time, if any, commensurate with his position with the Company and the evaluations of his performance by the Board of Directors or any appropriate committee thereof. (d) Flexible Perquisites Arrangement. The Employee shall receive annually a stipulated amount of $20,000 which will be expended by the Company on behalf of the Employee or paid to the Employee, at the Employee's election, to cover various business-related expenses such as monthly dues for country, luncheon or social clubs, automobile expenses and financial and tax planning expenses. The Employee may elect at any time by written notice to the Company to receive any of such stipulated amount which has not been paid to or on behalf of the Employee. In addition, the Company will pay on behalf of the Employee up to $15,000 to pay an initiation fee or fees for a country, luncheon or social club or clubs and will pay directly to the Employee an amount equal to 65 percent of the amount so paid on the Employee's behalf to offset the applicable income tax expense to the Employee. In addition, the Company will pay additional initiation fees and reimburse the Employee for related tax expenses to the extent the Board of Directors or a duly authorized committee thereof determines such fees are reasonable and in the best interest of the Company. (e) Other Benefits. Employee shall be eligible to participate in and have the benefits under the terms of all life, accident, disability and health insurance plans, pension, profit sharing, incentive compensation and savings plans and all other similar plans and benefits which the Company from time to time makes available to its management executives, including, without limitation, those listed on Exhibit A, in the same manner and at least at the same participation level as other senior management executives. 3. Business Expenses. The Company shall promptly reimburse Employee for all appropriately documented, reasonable business expenses incurred by Employee in accordance with Company policies. 4. Term. This Agreement shall commence effective as of December 12, 1996, and if not terminated earlier as herein provided, shall terminate on December 31, 1998. Notwithstanding the foregoing, if the Company shall not have offered to the Employee the opportunity to enter into a new employment agreement prior to December 31, 1998, with terms, in all respects, no less favorable to the Employee than the terms of this Agreement and with a term lasting until at least December 31, 2000, the Employee shall have the right to elect by written notice delivered to the Company prior to January 31, 1999, to terminate his employment and such termination shall be deemed to have been for Good Reason in accordance with Section 5 and the Employee shall be -2-

entitled to all payments and benefits as if he had terminated his employment for Good Reason in accordance with Section 5 on December 30, 1998. 5. Termination by the Company Without Cause, Termination by Employee for "Good Reason" or Failure to Extend Employment Contract. The Company may, by delivering 30 days prior written notice to Employee, terminate Employee's employment at any time without cause, and the Employee may, by delivering 30 days prior written notice to the Company, terminate Employee's employment for "good reason," as defined below. If such termination without cause or for good reason occurs or if the Company fails to offer to the Employee a new employment contract prior to December 31, 1998, with terms, in all respects, no less favorable to the employee than the terms of this Agreement, Employee shall be entitled to receive a lump-sum payment equal to the sum of (a) two times the sum

entitled to all payments and benefits as if he had terminated his employment for Good Reason in accordance with Section 5 on December 30, 1998. 5. Termination by the Company Without Cause, Termination by Employee for "Good Reason" or Failure to Extend Employment Contract. The Company may, by delivering 30 days prior written notice to Employee, terminate Employee's employment at any time without cause, and the Employee may, by delivering 30 days prior written notice to the Company, terminate Employee's employment for "good reason," as defined below. If such termination without cause or for good reason occurs or if the Company fails to offer to the Employee a new employment contract prior to December 31, 1998, with terms, in all respects, no less favorable to the employee than the terms of this Agreement, Employee shall be entitled to receive a lump-sum payment equal to the sum of (a) two times the sum of (i) his base salary at the then current rate and (ii) the sum of the target bonuses under all of the Company's incentive bonus plans applicable to Employee for the year in which the termination occurs and (b) if termination occurs in the fourth quarter of a calendar year, the sum of the target bonuses under all of the Company's incentive bonus plans applicable to Employee for the year in which the termination occurs prorated daily based on the number of days from the beginning of the calendar year in which the termination occurs to and including the date of termination. Employee shall also receive all unpaid bonuses for the year prior to the year in which the termination occurs and shall receive (i) for a period of two years following termination of employment continuing coverage and benefits comparable to all life, health and disability insurance plans which the Company from time to time makes available to its management executives and their families, (ii) a lump-sum payment equal to two times the stipulated flexible perquisites amount pursuant to Section 2(d), and (iii) two years additional service credit under the current nonqualified supplemental pension plans, or successors thereto, of the Company applicable to the Employee on the date of termination. All unvested stock options held by Employee on the date of the termination shall become immediately vested and all restrictions on Restricted Stock then held by the Employee shall terminate. For purposes of this Section 5, "good reason" shall mean the occurrence of any of the following events: (a) Removal, without the consent of Employee in writing, from one or more of the offices Employee holds on the date of this Agreement or a material reduction in Employee's authority or responsibility but not termination of Employee for "cause," as defined below; or (b) The Company otherwise commits a material breach of this Agreement. The Company shall pay any attorney fees incurred by Employee in reasonably seeking to enforce the terms of this Section 5. 6. Termination upon Death or Disability. If the Employee's employment is terminated because of death or on account of his becoming permanently disabled (as defined below), the Employee, or his estate, if applicable, shall be entitled to receive the Employee's base salary earned pro rata to the date of his -3-

termination of employment, plus unpaid bonuses for the year prior to the year in which the termination occurs. All unvested stock options held by the Employee on the date of termination shall become immediately vested and all restrictions on restricted stock held by the Employee shall terminate. For purposes of this Agreement, Employee shall be deemed to be "permanently disabled" if Employee shall be considered to be permanently and totally disabled in accordance with the Company's Long-Term Disability Income Plan. If there should be a dispute between the Company and Employee as to Employee's physical or mental disability for purposes of this Agreement, the question shall be settled by the opinion of an impartial reputable physician or psychiatrist agreed upon by the parties or their representatives, or if the parties cannot agree within ten calendar days after a request for designation of such party, then a physician or psychiatrist shall be designated by the San Antonio, Texas Medical Association. The parties agree to be bound by the final

termination of employment, plus unpaid bonuses for the year prior to the year in which the termination occurs. All unvested stock options held by the Employee on the date of termination shall become immediately vested and all restrictions on restricted stock held by the Employee shall terminate. For purposes of this Agreement, Employee shall be deemed to be "permanently disabled" if Employee shall be considered to be permanently and totally disabled in accordance with the Company's Long-Term Disability Income Plan. If there should be a dispute between the Company and Employee as to Employee's physical or mental disability for purposes of this Agreement, the question shall be settled by the opinion of an impartial reputable physician or psychiatrist agreed upon by the parties or their representatives, or if the parties cannot agree within ten calendar days after a request for designation of such party, then a physician or psychiatrist shall be designated by the San Antonio, Texas Medical Association. The parties agree to be bound by the final decision of such physician or psychiatrist. 7. Termination by the Company for Cause. The Company may terminate this Agreement at any time if such termination is for "cause," as defined below, by delivering to Employee written notice describing the cause of termination 30 days before the effective date of such termination and by granting Employee at least 30 days to cure the cause. In the event the employment of Employee is terminated for "cause," Employee shall be entitled only to his base salary earned pro rata to his date of termination with no entitlement to any base salary continuation payments or benefit continuation (except as specifically provided by the terms of an employee benefit plan of the Company). Except as otherwise provided in this Agreement, the determination of whether Employee is terminated for "cause" shall be made by the Board of Directors of the Company, in the reasonable exercise of its business judgment, and shall be limited to the occurrence of the following events: (a) Conviction of or a plea of nolo contendere to the charge of a felony (which, through lapse of time or otherwise, is not subject to appeal); (b) Willful refusal without proper legal cause to perform, or gross negligence in performing, Employee's duties and responsibilities; (c) Material breach of fiduciary duty to the Company through the misappropriation of Company funds or property; or (d) The unauthorized absence of Employee from work (other than for sick leave or disability) for a period of 30 working days or more during a period of 45 working days. 8. Voluntary Termination by Employee. Employee may terminate this Agreement at any time upon delivering 30 days written notice to the Company. In the event of such voluntary termination other than for "good reason," as defined above, Employee shall be entitled to his base salary earned pro rata to the date of his resignation, plus unpaid bonuses for the year prior to the year in which the termination occurs, but no base salary continuation payments or benefits continuation (except as specifically provided -4-

by the terms of an employee benefit plan of the Company). On or after the date the Company receives notice of Employee's resignation, the Company may, at its option, pay Employee his base salary through the effective date of his resignation and terminate his employment immediately. 9. Termination Following Change of Control. Notwithstanding anything to the contrary contained herein, should Employee at any time within two years of a change of control cease to be an employee of the Company (or its successor), by reason of (i) involuntary termination by the Company (or its successor) other than for "cause" (following a change of control, "cause" shall be limited to the conviction of or a plea of nolo contendere to the charge of a felony (which, through lapse of time

by the terms of an employee benefit plan of the Company). On or after the date the Company receives notice of Employee's resignation, the Company may, at its option, pay Employee his base salary through the effective date of his resignation and terminate his employment immediately. 9. Termination Following Change of Control. Notwithstanding anything to the contrary contained herein, should Employee at any time within two years of a change of control cease to be an employee of the Company (or its successor), by reason of (i) involuntary termination by the Company (or its successor) other than for "cause" (following a change of control, "cause" shall be limited to the conviction of or a plea of nolo contendere to the charge of a felony (which, through lapse of time or otherwise, is not subject to appeal), or a material breach of fiduciary duty to the Company through the misappropriation of Company funds or property), or (ii) voluntary termination by Employee for "good reason upon change of control" (as defined below), the Company (or its successor) shall pay to Employee within ten days of such termination the following severance payments and benefits: (a) A lump-sum payment equal to three times the base salary of the Employee at the then current rate; (b) A lump-sum payment equal to the sum of (i) three times the sum of the target bonuses under all of the Company's incentive bonus plans applicable to the Employee for the year in which the termination occurs or the year in which the change of control occurred, whichever is greater, and (ii) if termination occurs in the fourth quarter of a calendar year, the sum of the target bonuses under all of the Company's incentive bonus plans applicable to Employee for the year in which the termination occurs prorated daily based on the number of days from the beginning of the calendar year in which the termination occurs to and including the date of termination; and (c) A lump-sum payment equal to the amount of any unpaid bonuses to which the Employee is entitled under any incentive bonus plan. The Company (or its successor) shall also provide to Employee (i) for a period of three years following termination of employment continuing coverage and benefits comparable to all life, health and disability plans of the Company in effect at the time a change of control is deemed to have occurred; (ii) a lump-sum payment equal to three times the stipulated flexible perquisites amount pursuant to Section 2(d); and (iii) three years additional service credit under the current non-qualified supplemental pension plans, or successors thereto, of the Company applicable to the Employee on the date of termination. For purposes of this Agreement, a "change of control" shall be deemed to have occurred if (i) there shall be consummated (A) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be -5-

converted into cash, securities or other property, other than a merger of the Company where a majority of the Board of Directors of the surviving corporation are, and for a two year period after the merger continue to be, persons who were directors of the Company immediately prior to the merger or were elected as directors, or nominated for election as director, by a vote of at least two-thirds of the directors then still in office who were directors of the Company immediately prior to the merger, or (B) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company, or (ii) the shareholders of the Company shall approve any plan or proposal for the liquidation or dissolution of the Company, or (iii) (A) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than the Company or a subsidiary thereof or any employee benefit plan sponsored by the Company or a subsidiary thereof, shall become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing 20 percent or more of the combined voting power of the Company's then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise, and (B) at any time during a period of two years thereafter, individuals who immediately prior to the beginning of such period constituted the Board of Directors of the Company shall cease for any reason to constitute at least a majority

converted into cash, securities or other property, other than a merger of the Company where a majority of the Board of Directors of the surviving corporation are, and for a two year period after the merger continue to be, persons who were directors of the Company immediately prior to the merger or were elected as directors, or nominated for election as director, by a vote of at least two-thirds of the directors then still in office who were directors of the Company immediately prior to the merger, or (B) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company, or (ii) the shareholders of the Company shall approve any plan or proposal for the liquidation or dissolution of the Company, or (iii) (A) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than the Company or a subsidiary thereof or any employee benefit plan sponsored by the Company or a subsidiary thereof, shall become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing 20 percent or more of the combined voting power of the Company's then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise, and (B) at any time during a period of two years thereafter, individuals who immediately prior to the beginning of such period constituted the Board of Directors of the Company shall cease for any reason to constitute at least a majority thereof, unless the election or the nomination by the Board of Directors for election by the Company's shareholders of each new director during such period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period. For purposes of this Section 9, "good reason upon change of control" shall exist if any of the following occurs: (i) without Employee's express written consent, the assignment to Employee of any duties inconsistent with the employment of Employee to the positions set forth in Section 1, or a significant diminution of Employee's positions, duties, responsibilities and status with the Company from those immediately prior to a change of control or a diminution in Employee's titles or offices as in effect immediately prior to a change of control, or any removal of Employee from, or any failure to reelect Employee to, any of such positions; -6-

(ii) a reduction by the Company in Employee's base salary in effect immediately prior to a change of control; (iii) the failure by the Company to continue in effect any thrift, stock ownership, pension, life insurance, health, dental and accident or disability plan in which Employee is participating or is eligible to participate at the time of the change of control (or plans providing Employee with substantially similar benefits), except as otherwise required by the terms of such plans as in effect at the time of any change of control or the taking of any action by the Company which would adversely affect Employee's participation in or materially reduce Employee's benefits under any of such plans or deprive Employee of any material fringe benefits enjoyed by Employee at the time of the change of control or the failure by the Company to provide the Employee with the number of paid vacation days to which Employee is entitled in accordance with the vacation policies of the Company in effect at the time of a change of control; (iv) the failure by the Company to continue in effect any incentive plan or arrangement (including without limitation, the Company's Incentive Compensation Plan and similar incentive compensation benefits) in which Employee is participating at the time of a change of control (or to substitute and continue other plans or arrangements providing the Employee with substantially similar benefits), except as otherwise required by the terms of such plans as in effect at the time of any change of control; (v) the failure by the Company to continue in effect any plan or arrangement with respect to securities of the Company (including, without limitation, any plan or arrangement to receive and exercise stock options, stock appreciation rights, restricted stock or grants thereof or to acquire stock or other securities of the Company) in which Employee is participating at the time of a change of control (or to substitute and continue plans or arrangements providing the Employee with substantially similar benefits), except as otherwise required by the terms of such plans as in effect at the time of any change of control or the taking of any action by the Company which would adversely affect Employee's participation in or materially reduce Employee's benefits under any such plan;

(ii) a reduction by the Company in Employee's base salary in effect immediately prior to a change of control; (iii) the failure by the Company to continue in effect any thrift, stock ownership, pension, life insurance, health, dental and accident or disability plan in which Employee is participating or is eligible to participate at the time of the change of control (or plans providing Employee with substantially similar benefits), except as otherwise required by the terms of such plans as in effect at the time of any change of control or the taking of any action by the Company which would adversely affect Employee's participation in or materially reduce Employee's benefits under any of such plans or deprive Employee of any material fringe benefits enjoyed by Employee at the time of the change of control or the failure by the Company to provide the Employee with the number of paid vacation days to which Employee is entitled in accordance with the vacation policies of the Company in effect at the time of a change of control; (iv) the failure by the Company to continue in effect any incentive plan or arrangement (including without limitation, the Company's Incentive Compensation Plan and similar incentive compensation benefits) in which Employee is participating at the time of a change of control (or to substitute and continue other plans or arrangements providing the Employee with substantially similar benefits), except as otherwise required by the terms of such plans as in effect at the time of any change of control; (v) the failure by the Company to continue in effect any plan or arrangement with respect to securities of the Company (including, without limitation, any plan or arrangement to receive and exercise stock options, stock appreciation rights, restricted stock or grants thereof or to acquire stock or other securities of the Company) in which Employee is participating at the time of a change of control (or to substitute and continue plans or arrangements providing the Employee with substantially similar benefits), except as otherwise required by the terms of such plans as in effect at the time of any change of control or the taking of any action by the Company which would adversely affect Employee's participation in or materially reduce Employee's benefits under any such plan; (vi) the relocation of the Company's principal executive offices to a location outside the San Antonio, Texas, area, or the Company's requiring Employee to be based anywhere other than at the location of the Company's principal executive offices, except for required travel on the Company's business to an extent -7-

substantially consistent with Employee's present business travel obligations, or, in the event Employee consents to any such relocation of the Company's principal executive or divisional offices, the failure by the Company to pay (or reimburse Employee for) all reasonable moving expenses incurred by Employee relating to a change of Employee's principal residence in connection with such relocation and to indemnify Employee against any loss (defined as the difference between the actual sale price of such residence and the fair market value thereof as determined by the highest of three appraisals from Member Appraisal Institute- approved real estate appraisers reasonably satisfactory to both Employee and the Company at the time the Employee's principal residence is offered for sale in connection with any such change of residence); (vii) any material breach by the Company of any provision of this Agreement; (viii) any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company; or (ix) any purported termination of Employee's employment by the Company other than termination for cause fully in compliance with this Agreement and for purposes of this Agreement, no such purported termination shall be effective. In the event of a change of control as "change of control" is defined in any stock option plan or stock option agreement pursuant to which the Employee holds options to purchase common stock of the Company, Employee shall retain the rights to all accelerated vesting and other benefits under the terms of such plans and agreements. The Company shall pay any attorney fees incurred by Employee in reasonably seeking to enforce the terms of this Section 9.

substantially consistent with Employee's present business travel obligations, or, in the event Employee consents to any such relocation of the Company's principal executive or divisional offices, the failure by the Company to pay (or reimburse Employee for) all reasonable moving expenses incurred by Employee relating to a change of Employee's principal residence in connection with such relocation and to indemnify Employee against any loss (defined as the difference between the actual sale price of such residence and the fair market value thereof as determined by the highest of three appraisals from Member Appraisal Institute- approved real estate appraisers reasonably satisfactory to both Employee and the Company at the time the Employee's principal residence is offered for sale in connection with any such change of residence); (vii) any material breach by the Company of any provision of this Agreement; (viii) any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company; or (ix) any purported termination of Employee's employment by the Company other than termination for cause fully in compliance with this Agreement and for purposes of this Agreement, no such purported termination shall be effective. In the event of a change of control as "change of control" is defined in any stock option plan or stock option agreement pursuant to which the Employee holds options to purchase common stock of the Company, Employee shall retain the rights to all accelerated vesting and other benefits under the terms of such plans and agreements. The Company shall pay any attorney fees incurred by Employee in reasonably seeking to enforce the terms of this Section 9. 10. Exclusivity of Termination Provisions. The termination provisions of this Agreement regarding the parties' respective obligations in the event Employee's employment is terminated are intended to be exclusive and in lieu of any other rights or remedies to which Employee or the Company may otherwise be entitled at law, in equity, or otherwise. It is also agreed that, although the personnel policies and fringe benefit programs of the Company may be unilaterally modified from time to time, the termination provisions of this Agreement are not subject to modification, whether orally, impliedly or in writing, unless any such modification is mutually agreed upon and signed by the parties. -8-

11. Vacation. Employee shall be entitled to four weeks vacation annually in accordance with Company policy as in effect from time to time. In the event Employee does not use his entire vacation time in any year, Employee shall be entitled to carry over unused vacation into the following year until his accrued vacation reaches six weeks or such greater period as may be permitted under the Company's vacation policy for management executives. 12. Nondisclosure. During the term of this Agreement and thereafter, Employee shall not, without the prior written consent of the Board of Directors, disclose or use for any purpose (except in the course of his employment under this Agreement and in furtherance of the business of the Company) confidential information or proprietary data of the Company (or any of its subsidiaries), except as required by applicable law or legal process; provided, however, that confidential information shall not include any information known generally to the public or ascertainable from public or published information (other than as a result of unauthorized disclosure by Employee) or any information of a type not otherwise considered confidential by persons engaged in the same business or a business similar to that conducted by the Company (or any of its subsidiaries). 13. Noncompetition. The Company and Employee agree that the services rendered by Employee hereunder are unique. Employee

11. Vacation. Employee shall be entitled to four weeks vacation annually in accordance with Company policy as in effect from time to time. In the event Employee does not use his entire vacation time in any year, Employee shall be entitled to carry over unused vacation into the following year until his accrued vacation reaches six weeks or such greater period as may be permitted under the Company's vacation policy for management executives. 12. Nondisclosure. During the term of this Agreement and thereafter, Employee shall not, without the prior written consent of the Board of Directors, disclose or use for any purpose (except in the course of his employment under this Agreement and in furtherance of the business of the Company) confidential information or proprietary data of the Company (or any of its subsidiaries), except as required by applicable law or legal process; provided, however, that confidential information shall not include any information known generally to the public or ascertainable from public or published information (other than as a result of unauthorized disclosure by Employee) or any information of a type not otherwise considered confidential by persons engaged in the same business or a business similar to that conducted by the Company (or any of its subsidiaries). 13. Noncompetition. The Company and Employee agree that the services rendered by Employee hereunder are unique. Employee hereby agrees that, during the term of this Agreement and for a period of one year thereafter, he shall not (except in the course of his employment under this Agreement and in furtherance of the business of the Company (or any of its subsidiaries)) (i) engage in as principal, consultant or employee in any segment of a business of a company, partnership or firm ("Business Segment") that is directly competitive with any significant business of the Company in one of its major commercial or geographic markets or (ii) hold an interest (except as a holder of a less than 5 percent interest in a publicly traded firm or mutual fund, or as a minority stockholder or unitholder in a firm not publicly traded) in a company, partnership, or firm with a Business Segment that is directly competitive with the Company, without prior written consent of the Company. 14. Remedies. Employee acknowledges that irreparable damage would result to the Company if the provisions of Sections 12 or 13 above are not specifically enforced and agrees that the Company shall be entitled to any appropriate legal, equitable or other remedy, including injunctive relief, in respect of any failure to comply with such provisions. 15. Miscellaneous. (a) Complete Agreement. This Agreement constitutes the entire agreement between the parties and cancels and supersedes all other agreements between the parties which may have related to the subject matter contained in this Agreement, including without limitation the Prior Agreement. -9-

(b) Modification; Amendment; Waiver. No modification, amendment or waiver of any provisions of this

(b) Modification; Amendment; Waiver. No modification, amendment or waiver of any provisions of this Agreement shall be effective unless approved in writing by both parties. The failure at any time to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of either party thereafter to enforce each and every provision hereof in accordance with its terms. (c) Governing Law; Jurisdiction. This Agreement and performance under it, and all proceedings that may ensue from its breach, shall be construed in accordance with and under the laws of the State of Texas. (d) Employee's Representations. Employee represents and warrants that he is free to enter into this Agreement and to perform each of the terms and covenants of it. Employee represents and warrants that he is not restricted or prohibited, contractually or otherwise, from entering into and performing this Agreement, and that his execution and performance of this Agreement is not a violation or breach of any other agreement between Employee and any other person or entity. (e) Company's Representations. Company represents and warrants that it is free to enter into this Agreement and to perform each of the terms and covenants of it. Company represents and warrants that it is not restricted or prohibited, contractually or otherwise, from entering into and performing this Agreement, and that its execution and performance of this Agreement is not a violation or breach of any other agreement between Company and any other person or entity. The Company represents and warrants that this Agreement is a legal, valid and binding agreement of the Company, enforceable in accordance with its terms. (f) Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. (g) Assignment. The rights and obligations of the parties under this Agreement shall be binding upon and inure to the benefit of their respective successors, assigns, executors, administrators and heirs, provided, however, that neither the Company nor Employee may assign any duties under this Agreement without the prior written consent of the other. (h) Limitation. This Agreement shall not confer any right or impose any obligation on the Company to continue the employment of Employee in any capacity, or limit the right of the Company or Employee to terminate Employee's employment. (i) Notices. All notices and other communications under this Agreement shall be in writing and shall be given in person or by telegraph, facsimile or first-class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given when delivered personally or three days after mailing or one day after transmission of a telegram or facsimile, as the case may be, to the respective persons named below. -10If to the Company: Chief Executive Officer Tesoro Petroleum Corporation 8700 Tesoro Drive San Antonio, Texas 78217 James C. Reed, Jr. 9050 Bat Cave Loop San Antonio, Texas 78266

If to the Employee:

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. COMPANY: TESORO PETROLEUM CORPORATION
By /s/ BRUCE A. SMITH -----------------------------Bruce A. Smith Chairman of the Board of

If to the Company:

Chief Executive Officer Tesoro Petroleum Corporation 8700 Tesoro Drive San Antonio, Texas 78217 James C. Reed, Jr. 9050 Bat Cave Loop San Antonio, Texas 78266

If to the Employee:

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. COMPANY: TESORO PETROLEUM CORPORATION
By /s/ BRUCE A. SMITH -----------------------------Bruce A. Smith Chairman of the Board of Directors, President and Chief Executive Officer

EMPLOYEE:

/s/ JAMES C. REED, JR. ------------------------------------James C. Reed, Jr.

-11-

Exhibit A BENEFITS LISTING 1. Group Health Plan 2. Group Life and Accidental Death & Dismemberment Plan 3. Short Term Disability Income Plan 4. Long Term Disability Income Plan 5. Business Travel Accident Insurance Plan 6. Tesoro Petroleum Corporation Thrift/401K Plan 7. Tesoro Petroleum Corporation Retirement Plan 8. Tesoro Petroleum Corporation Amended Executive Security Plan 9. Tesoro Petroleum Corporation Funded Executive Security Plan 10. Tax Preparation and Financial Planning

ITEM 14(a)3, EXHIBIT 10.6 AMENDED AND RESTATED EMPLOYMENT AGREEMENT This Amended and Restated Employment Agreement (the "Agreement") is entered into as of December 12,

Exhibit A BENEFITS LISTING 1. Group Health Plan 2. Group Life and Accidental Death & Dismemberment Plan 3. Short Term Disability Income Plan 4. Long Term Disability Income Plan 5. Business Travel Accident Insurance Plan 6. Tesoro Petroleum Corporation Thrift/401K Plan 7. Tesoro Petroleum Corporation Retirement Plan 8. Tesoro Petroleum Corporation Amended Executive Security Plan 9. Tesoro Petroleum Corporation Funded Executive Security Plan 10. Tax Preparation and Financial Planning

ITEM 14(a)3, EXHIBIT 10.6 AMENDED AND RESTATED EMPLOYMENT AGREEMENT This Amended and Restated Employment Agreement (the "Agreement") is entered into as of December 12, 1996, by and between William T. Van Kleef ("Employee") and Tesoro Petroleum Corporation, a Delaware corporation (the "Company"). Recitals: A. The Company and Employee are parties to an Employment Agreement dated December 14, 1994, including all amendments thereto prior to the date hereof (the "Prior Agreement"). B. The Company wishes to continue the employment of Employee as its Executive Vice President, Operations; as such, Employee shall have certain responsibilities and shall receive certain compensation and benefits. C. Employee and the Company wish to formalize the continuation of this employment relationship by amending and restating the Prior Agreement, including extending its term, and by setting forth certain additional agreements between Employee and the Company. THE PARTIES AGREE AS FOLLOWS: 1. Employment and Duties. During the term of this Agreement, the Company agrees to employ Employee as Executive Vice President, Operations, and Employee agrees to serve the Company in such capacity on the terms and subject to the conditions set forth in this Agreement. Employee shall devote substantially all of his business time, energy and skill to the affairs of the Company as the Company, acting through its Board of Directors or its Chief Executive Officer, shall reasonably deem necessary to discharge Employee's duties in such capacity. Employee may participate in social, civic, charitable, religious, business, educational or professional associations, so long as such participation would not materially detract from Employee's ability to perform his duties under this Agreement. Employee shall not engage in any other business activity during the term of this Agreement without the prior

ITEM 14(a)3, EXHIBIT 10.6 AMENDED AND RESTATED EMPLOYMENT AGREEMENT This Amended and Restated Employment Agreement (the "Agreement") is entered into as of December 12, 1996, by and between William T. Van Kleef ("Employee") and Tesoro Petroleum Corporation, a Delaware corporation (the "Company"). Recitals: A. The Company and Employee are parties to an Employment Agreement dated December 14, 1994, including all amendments thereto prior to the date hereof (the "Prior Agreement"). B. The Company wishes to continue the employment of Employee as its Executive Vice President, Operations; as such, Employee shall have certain responsibilities and shall receive certain compensation and benefits. C. Employee and the Company wish to formalize the continuation of this employment relationship by amending and restating the Prior Agreement, including extending its term, and by setting forth certain additional agreements between Employee and the Company. THE PARTIES AGREE AS FOLLOWS: 1. Employment and Duties. During the term of this Agreement, the Company agrees to employ Employee as Executive Vice President, Operations, and Employee agrees to serve the Company in such capacity on the terms and subject to the conditions set forth in this Agreement. Employee shall devote substantially all of his business time, energy and skill to the affairs of the Company as the Company, acting through its Board of Directors or its Chief Executive Officer, shall reasonably deem necessary to discharge Employee's duties in such capacity. Employee may participate in social, civic, charitable, religious, business, educational or professional associations, so long as such participation would not materially detract from Employee's ability to perform his duties under this Agreement. Employee shall not engage in any other business activity during the term of this Agreement without the prior written consent of the Company, other than the passive management of Employee's personal investments or activities which would not materially detract from Employee's ability to perform his duties under this Agreement. 2. Compensation. (a) Salary; Withholding. During the term of this Agreement, the Company shall pay Employee a base salary of $285,000 per year ("base salary"), payable in arrears in equal bi-weekly installments. The parties shall comply with all applicable withholding requirements in connection with all compensation payable to Employee. The Company's Board of Directors may, in its sole discretion, review and adjust upward Employee's base salary from time to time, but no downward adjustment in Employee's base salary may be made during the term of this Agreement.

(b) Annual Incentive Plan. The Company shall establish an Annual Incentive Compensation Plan for executive officers in which the Employee shall be entitled to participate in a manner consistent with his position with the Company and the evaluations of his performance by the Board of Directors or any appropriate committee thereof. (c) Stock Options and Restricted Stock Grants. The Employee shall be entitled to receive stock options and restricted stock grants under the Company's plans in effect from time to time, if any, commensurate with his position with the Company and the evaluations of his performance by the Board of Directors or any appropriate committee thereof. (d) Flexible Perquisites Arrangement. The Employee shall receive annually a stipulated amount of $20,000 which will be expended by the Company on behalf of the Employee or paid to the Employee, at the Employee's

(b) Annual Incentive Plan. The Company shall establish an Annual Incentive Compensation Plan for executive officers in which the Employee shall be entitled to participate in a manner consistent with his position with the Company and the evaluations of his performance by the Board of Directors or any appropriate committee thereof. (c) Stock Options and Restricted Stock Grants. The Employee shall be entitled to receive stock options and restricted stock grants under the Company's plans in effect from time to time, if any, commensurate with his position with the Company and the evaluations of his performance by the Board of Directors or any appropriate committee thereof. (d) Flexible Perquisites Arrangement. The Employee shall receive annually a stipulated amount of $20,000 which will be expended by the Company on behalf of the Employee or paid to the Employee, at the Employee's election, to cover various business-related expenses such as monthly dues for country, luncheon or social clubs, automobile expenses and financial and tax planning expenses. The Employee may elect at any time by written notice to the Company to receive any of such stipulated amount which has not been paid to or on behalf of the Employee. In addition, the Company will pay initiation fees and reimburse the Employee for related tax expenses to the extent the Board of Directors or a duly authorized committee thereof determines such fees are reasonable and in the best interest of the Company. (e) Other Benefits. Employee shall be eligible to participate in and have the benefits under the terms of all life, accident, disability and health insurance plans, pension, profit sharing, incentive compensation and savings plans and all other similar plans and benefits which the Company from time to time makes available to its management executives, including, without limitation, those listed on Exhibit A, in the same manner and at least at the same participation level as other senior management executives. 3. Business Expenses. The Company shall promptly reimburse Employee for all appropriately documented, reasonable business expenses incurred by Employee in accordance with Company policies. 4. Term. This Agreement shall commence effective as of December 12, 1996, and if not terminated earlier as herein provided, shall terminate on December 31, 1998. Notwithstanding the foregoing, if the Company shall not have offered to the Employee the opportunity to enter into a new employment agreement prior to December 31, 1998, with terms, in all respects, no less favorable to the Employee than the terms of this Agreement and with a term lasting until at least December 31, 2000, the Employee shall have the right to elect by written notice delivered to the Company prior to January 31, 1999, to terminate his employment and such termination shall be deemed to have been for Good Reason in accordance with Section 5 and the Employee shall be entitled to all payments and benefits as if he had terminated his employment for Good Reason in accordance with Section 5 on December 30, 1998. -2-

5. Termination by the Company Without Cause, Termination by Employee for "Good Reason" or Failure to Extend Employment Contract. The Company may, by delivering 30 days prior written notice to Employee, terminate Employee's employment at any time without cause, and the Employee may, by delivering 30 days prior written notice to the Company, terminate Employee's employment for "good reason," as defined below. If such termination without cause or for good reason occurs or if the Company fails to offer to the Employee a new employment contract prior to December 31, 1998, with terms, in all respects, no less favorable to the employee than the terms of this Agreement, Employee shall be entitled to receive a lump-sum payment equal to the sum of (a) two times the sum of (i) his base salary at the then current rate and (ii) the sum of the target bonuses under all of the Company's incentive bonus plans applicable to Employee for the year in which the termination occurs and (b) if termination occurs in the fourth quarter of a calendar year, the sum of the target bonuses under all of the Company's incentive bonus plans applicable to Employee for the year in which the termination occurs prorated daily based on the

5. Termination by the Company Without Cause, Termination by Employee for "Good Reason" or Failure to Extend Employment Contract. The Company may, by delivering 30 days prior written notice to Employee, terminate Employee's employment at any time without cause, and the Employee may, by delivering 30 days prior written notice to the Company, terminate Employee's employment for "good reason," as defined below. If such termination without cause or for good reason occurs or if the Company fails to offer to the Employee a new employment contract prior to December 31, 1998, with terms, in all respects, no less favorable to the employee than the terms of this Agreement, Employee shall be entitled to receive a lump-sum payment equal to the sum of (a) two times the sum of (i) his base salary at the then current rate and (ii) the sum of the target bonuses under all of the Company's incentive bonus plans applicable to Employee for the year in which the termination occurs and (b) if termination occurs in the fourth quarter of a calendar year, the sum of the target bonuses under all of the Company's incentive bonus plans applicable to Employee for the year in which the termination occurs prorated daily based on the number of days from the beginning of the calendar year in which the termination occurs to and including the date of termination. Employee shall also receive all unpaid bonuses for the year prior to the year in which the termination occurs and shall receive (i) for a period of two years following termination of employment continuing coverage and benefits comparable to all life, health and disability insurance plans which the Company from time to time makes available to its management executives and their families, (ii) a lump-sum payment equal to two times the stipulated flexible perquisites amount pursuant to Section 2(d), and (iii) two years additional service credit under the current nonqualified supplemental pension plans, or successors thereto, of the Company applicable to the Employee on the date of termination. All unvested stock options held by Employee on the date of the termination shall become immediately vested and all restrictions on Restricted Stock then held by the Employee shall terminate. For purposes of this Section 5, "good reason" shall mean the occurrence of any of the following events: (a) Removal, without the consent of Employee in writing, from one or more of the offices Employee holds on the date of this Agreement or a material reduction in Employee's authority or responsibility but not termination of Employee for "cause," as defined below; or (b) The Company otherwise commits a material breach of this Agreement. The Company shall pay any attorney fees incurred by Employee in reasonably seeking to enforce the terms of this Section 5. 6. Termination upon Death or Disability. If the Employee's employment is terminated because of death or on account of his becoming permanently disabled (as defined below), the Employee, or his estate, if applicable, shall be entitled to receive the Employee's base salary earned pro rata to the date of his -3-

termination of employment, plus unpaid bonuses for the year prior to the year in which the termination occurs. All unvested stock options held by the Employee on the date of termination shall become immediately vested and all restrictions on restricted stock held by the Employee shall terminate. For purposes of this Agreement, Employee shall be deemed to be "permanently disabled" if Employee shall be considered to be permanently and totally disabled in accordance with the Company's Long-Term Disability Income Plan. If there should be a dispute between the Company and Employee as to Employee's physical or mental disability for purposes of this Agreement, the question shall be settled by the opinion of an impartial reputable physician or psychiatrist agreed upon by the parties or their representatives, or if the parties cannot agree within ten calendar days after a request for designation of such party, then a physician or psychiatrist shall be designated by the San Antonio, Texas Medical Association. The parties agree to be bound by the final decision of such physician or psychiatrist. 7. Termination by the Company for Cause.

termination of employment, plus unpaid bonuses for the year prior to the year in which the termination occurs. All unvested stock options held by the Employee on the date of termination shall become immediately vested and all restrictions on restricted stock held by the Employee shall terminate. For purposes of this Agreement, Employee shall be deemed to be "permanently disabled" if Employee shall be considered to be permanently and totally disabled in accordance with the Company's Long-Term Disability Income Plan. If there should be a dispute between the Company and Employee as to Employee's physical or mental disability for purposes of this Agreement, the question shall be settled by the opinion of an impartial reputable physician or psychiatrist agreed upon by the parties or their representatives, or if the parties cannot agree within ten calendar days after a request for designation of such party, then a physician or psychiatrist shall be designated by the San Antonio, Texas Medical Association. The parties agree to be bound by the final decision of such physician or psychiatrist. 7. Termination by the Company for Cause. The Company may terminate this Agreement at any time if such termination is for "cause," as defined below, by delivering to Employee written notice describing the cause of termination 30 days before the effective date of such termination and by granting Employee at least 30 days to cure the cause. In the event the employment of Employee is terminated for "cause," Employee shall be entitled only to his base salary earned pro rata to his date of termination with no entitlement to any base salary continuation payments or benefit continuation (except as specifically provided by the terms of an employee benefit plan of the Company). Except as otherwise provided in this Agreement, the determination of whether Employee is terminated for "cause" shall be made by the Board of Directors of the Company, in the reasonable exercise of its business judgment, and shall be limited to the occurrence of the following events: (a) Conviction of or a plea of nolo contendere to the charge of a felony (which, through lapse of time or otherwise, is not subject to appeal); (b) Willful refusal without proper legal cause to perform, or gross negligence in performing, Employee's duties and responsibilities; (c) Material breach of fiduciary duty to the Company through the misappropriation of Company funds or property; or (d) The unauthorized absence of Employee from work (other than for sick leave or disability) for a period of 30 working days or more during a period of 45 working days. 8. Voluntary Termination by Employee. Employee may terminate this Agreement at any time upon delivering 30 days written notice to the Company. In the event of such voluntary termination other than for "good reason," as defined above, Employee shall be entitled to his base salary earned pro rata to the date of his resignation, plus unpaid bonuses for the year prior to the year in which the termination occurs, but no base salary continuation payments or benefits continuation (except as specifically provided by the terms of an employee benefit plan of the Company). On or after the date the Company receives notice of Employee's resignation, the Company may, at its option, pay Employee his -4-

base salary through the effective date of his resignation and terminate his employment immediately. 9. Termination Following Change of Control. Notwithstanding anything to the contrary contained herein, should Employee at any time within two years of a change of control cease to be an employee of the Company (or its successor), by reason of (i) involuntary termination by the Company (or its successor) other than for "cause" (following a change of control, "cause" shall be limited to the conviction of or a plea of nolo contendere to the charge of a felony (which, through lapse of time or otherwise, is not subject to appeal), or a material breach of fiduciary duty to the Company through the

base salary through the effective date of his resignation and terminate his employment immediately. 9. Termination Following Change of Control. Notwithstanding anything to the contrary contained herein, should Employee at any time within two years of a change of control cease to be an employee of the Company (or its successor), by reason of (i) involuntary termination by the Company (or its successor) other than for "cause" (following a change of control, "cause" shall be limited to the conviction of or a plea of nolo contendere to the charge of a felony (which, through lapse of time or otherwise, is not subject to appeal), or a material breach of fiduciary duty to the Company through the misappropriation of Company funds or property), or (ii) voluntary termination by Employee for "good reason upon change of control" (as defined below), the Company (or its successor) shall pay to Employee within ten days of such termination the following severance payments and benefits: (a) A lump-sum payment equal to three times the base salary of the Employee at the then current rate; (b) A lump-sum payment equal to the sum of (i) three times the sum of the target bonuses under all of the Company's incentive bonus plans applicable to the Employee for the year in which the termination occurs or the year in which the change of control occurred, whichever is greater, and (ii) if termination occurs in the fourth quarter of a calendar year, the sum of the target bonuses under all of the Company's incentive bonus plans applicable to Employee for the year in which the termination occurs prorated daily based on the number of days from the beginning of the calendar year in which the termination occurs to and including the date of termination; and (c) A lump-sum payment equal to the amount of any unpaid bonuses to which the Employee is entitled under any incentive bonus plan. The Company (or its successor) shall also provide to Employee (i) for a period of three years following termination of employment continuing coverage and benefits comparable to all life, health and disability plans of the Company in effect at the time a change of control is deemed to have occurred; (ii) a lump-sum payment equal to three times the stipulated flexible perquisites amount pursuant to Section 2(d); and (iii) three years additional service credit under the current non-qualified supplemental pension plans, or successors thereto, of the Company applicable to the Employee on the date of termination. For purposes of this Agreement, a "change of control" shall be deemed to have occurred if (i) there shall be consummated (A) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company where a majority of the Board of Directors -5-

of the surviving corporation are, and for a two year period after the merger continue to be, persons who were directors of the Company immediately prior to the merger or were elected as directors, or nominated for election as director, by a vote of at least two-thirds of the directors then still in office who were directors of the Company immediately prior to the merger, or (B) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company, or (ii) the shareholders of the Company shall approve any plan or proposal for the liquidation or dissolution of the Company, or (iii) (A) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than the Company or a subsidiary thereof or any employee benefit plan sponsored by the Company or a subsidiary thereof, shall become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing 20 percent or more of the combined voting power of the Company's then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise, and (B) at any time during a period of two years thereafter, individuals who immediately prior to the beginning of such period constituted the Board of Directors of the Company shall cease for any reason to constitute at least a majority thereof, unless the election or the nomination by the Board of Directors for election by the Company's shareholders of each new director

of the surviving corporation are, and for a two year period after the merger continue to be, persons who were directors of the Company immediately prior to the merger or were elected as directors, or nominated for election as director, by a vote of at least two-thirds of the directors then still in office who were directors of the Company immediately prior to the merger, or (B) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company, or (ii) the shareholders of the Company shall approve any plan or proposal for the liquidation or dissolution of the Company, or (iii) (A) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than the Company or a subsidiary thereof or any employee benefit plan sponsored by the Company or a subsidiary thereof, shall become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing 20 percent or more of the combined voting power of the Company's then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise, and (B) at any time during a period of two years thereafter, individuals who immediately prior to the beginning of such period constituted the Board of Directors of the Company shall cease for any reason to constitute at least a majority thereof, unless the election or the nomination by the Board of Directors for election by the Company's shareholders of each new director during such period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period. For purposes of this Section 9, "good reason upon change of control" shall exist if any of the following occurs: (i) without Employee's express written consent, the assignment to Employee of any duties inconsistent with the employment of Employee to the positions set forth in Section 1, or a significant diminution of Employee's positions, duties, responsibilities and status with the Company from those immediately prior to a change of control or a diminution in Employee's titles or offices as in effect immediately prior to a change of control, or any removal of Employee from, or any failure to reelect Employee to, any of such positions; (ii) a reduction by the Company in Employee's base salary in effect immediately prior to a change of control; -6-

(iii) the failure by the Company to continue in effect any thrift, stock ownership, pension, life insurance, health, dental and accident or disability plan in which Employee is participating or is eligible to participate at the time of the change of control (or plans providing Employee with substantially similar benefits), except as otherwise required by the terms of such plans as in effect at the time of any change of control or the taking of any action by the Company which would adversely affect Employee's participation in or materially reduce Employee's benefits under any of such plans or deprive Employee of any material fringe benefits enjoyed by Employee at the time of the change of control or the failure by the Company to provide the Employee with the number of paid vacation days to which Employee is entitled in accordance with the vacation policies of the Company in effect at the time of a change of control; (iv) the failure by the Company to continue in effect any incentive plan or arrangement (including without limitation, the Company's Incentive Compensation Plan and similar incentive compensation benefits) in which Employee is participating at the time of a change of control (or to substitute and continue other plans or arrangements providing the Employee with substantially similar benefits), except as otherwise required by the terms of such plans as in effect at the time of any change of control; (v) the failure by the Company to continue in effect any plan or arrangement with respect to securities of the Company (including, without limitation, any plan or arrangement to receive and exercise stock options, stock appreciation rights, restricted stock or grants thereof or to acquire stock or other securities of the Company) in which Employee is participating at the time of a change of control (or to substitute and continue plans or arrangements providing the Employee with substantially similar benefits), except as otherwise required by the terms of such plans as in effect at the time of any change of control or the taking of any action by the Company which would adversely affect Employee's participation in or materially reduce Employee's benefits under any such plan; (vi) the relocation of the Company's principal executive offices to a location outside the San Antonio, Texas,

(iii) the failure by the Company to continue in effect any thrift, stock ownership, pension, life insurance, health, dental and accident or disability plan in which Employee is participating or is eligible to participate at the time of the change of control (or plans providing Employee with substantially similar benefits), except as otherwise required by the terms of such plans as in effect at the time of any change of control or the taking of any action by the Company which would adversely affect Employee's participation in or materially reduce Employee's benefits under any of such plans or deprive Employee of any material fringe benefits enjoyed by Employee at the time of the change of control or the failure by the Company to provide the Employee with the number of paid vacation days to which Employee is entitled in accordance with the vacation policies of the Company in effect at the time of a change of control; (iv) the failure by the Company to continue in effect any incentive plan or arrangement (including without limitation, the Company's Incentive Compensation Plan and similar incentive compensation benefits) in which Employee is participating at the time of a change of control (or to substitute and continue other plans or arrangements providing the Employee with substantially similar benefits), except as otherwise required by the terms of such plans as in effect at the time of any change of control; (v) the failure by the Company to continue in effect any plan or arrangement with respect to securities of the Company (including, without limitation, any plan or arrangement to receive and exercise stock options, stock appreciation rights, restricted stock or grants thereof or to acquire stock or other securities of the Company) in which Employee is participating at the time of a change of control (or to substitute and continue plans or arrangements providing the Employee with substantially similar benefits), except as otherwise required by the terms of such plans as in effect at the time of any change of control or the taking of any action by the Company which would adversely affect Employee's participation in or materially reduce Employee's benefits under any such plan; (vi) the relocation of the Company's principal executive offices to a location outside the San Antonio, Texas, area, or the Company's requiring Employee to be based anywhere other than at the location of the Company's principal executive offices, except for required travel on the Company's business to an extent substantially consistent with Employee's present business travel obligations, or, in the event Employee consents to any such relocation of the Company's principal executive or divisional -7-

offices, the failure by the Company to pay (or reimburse Employee for) all reasonable moving expenses incurred by Employee relating to a change of Employee's principal residence in connection with such relocation and to indemnify Employee against any loss (defined as the difference between the actual sale price of such residence and the fair market value thereof as determined by the highest of three appraisals from Membership Appraisal Institute- approved real estate appraisers reasonably satisfactory to both Employee and the Company at the time the Employee's principal residence is offered for sale in connection with any such change of residence); (vii) any material breach by the Company of any provision of this Agreement; (viii) any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company; or (ix) any purported termination of Employee's employment by the Company other than termination for cause fully in compliance with this Agreement and for purposes of this Agreement, no such purported termination shall be effective. In the event of a change of control as "change of control" is defined in any stock option plan or stock option agreement pursuant to which the Employee holds options to purchase common stock of the Company, Employee shall retain the rights to all accelerated vesting and other benefits under the terms of such plans and agreements. The Company shall pay any attorney fees incurred by Employee in reasonably seeking to enforce the terms of this Section 9. 10. Exclusivity of Termination Provisions.

offices, the failure by the Company to pay (or reimburse Employee for) all reasonable moving expenses incurred by Employee relating to a change of Employee's principal residence in connection with such relocation and to indemnify Employee against any loss (defined as the difference between the actual sale price of such residence and the fair market value thereof as determined by the highest of three appraisals from Membership Appraisal Institute- approved real estate appraisers reasonably satisfactory to both Employee and the Company at the time the Employee's principal residence is offered for sale in connection with any such change of residence); (vii) any material breach by the Company of any provision of this Agreement; (viii) any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company; or (ix) any purported termination of Employee's employment by the Company other than termination for cause fully in compliance with this Agreement and for purposes of this Agreement, no such purported termination shall be effective. In the event of a change of control as "change of control" is defined in any stock option plan or stock option agreement pursuant to which the Employee holds options to purchase common stock of the Company, Employee shall retain the rights to all accelerated vesting and other benefits under the terms of such plans and agreements. The Company shall pay any attorney fees incurred by Employee in reasonably seeking to enforce the terms of this Section 9. 10. Exclusivity of Termination Provisions. The termination provisions of this Agreement regarding the parties' respective obligations in the event Employee's employment is terminated are intended to be exclusive and in lieu of any other rights or remedies to which Employee or the Company may otherwise be entitled at law, in equity, or otherwise. It is also agreed that, although the personnel policies and fringe benefit programs of the Company may be unilaterally modified from time to time, the termination provisions of this Agreement are not subject to modification, whether orally, impliedly or in writing, unless any such modification is mutually agreed upon and signed by the parties. -8-

11. Vacation. Employee shall be entitled to four weeks vacation annually in accordance with Company policy as in effect from time to time. In the event Employee does not use his entire vacation time in any year, Employee shall be entitled to carry over unused vacation into the following year until his accrued vacation reaches six weeks or such greater period as may be permitted under the Company's vacation policy for management executives. 12. Nondisclosure. During the term of this Agreement and thereafter, Employee shall not, without the prior written consent of the Board of Directors, disclose or use for any purpose (except in the course of his employment under this Agreement and in furtherance of the business of the Company) confidential information or proprietary data of the Company (or any of its subsidiaries), except as required by applicable law or legal process; provided, however, that confidential information shall not include any information known generally to the public or ascertainable from public or published information (other than as a result of unauthorized disclosure by Employee) or any information of a type not otherwise considered confidential by persons engaged in the same business or a business similar to that conducted by the Company (or any of its subsidiaries). 13. Noncompetition. The Company and Employee agree that the services rendered by Employee hereunder are unique. Employee hereby agrees that, during the term of this Agreement and for a period of one year thereafter, he shall not (except in the course of his employment under this Agreement and in furtherance of the business of the Company (or any

11. Vacation. Employee shall be entitled to four weeks vacation annually in accordance with Company policy as in effect from time to time. In the event Employee does not use his entire vacation time in any year, Employee shall be entitled to carry over unused vacation into the following year until his accrued vacation reaches six weeks or such greater period as may be permitted under the Company's vacation policy for management executives. 12. Nondisclosure. During the term of this Agreement and thereafter, Employee shall not, without the prior written consent of the Board of Directors, disclose or use for any purpose (except in the course of his employment under this Agreement and in furtherance of the business of the Company) confidential information or proprietary data of the Company (or any of its subsidiaries), except as required by applicable law or legal process; provided, however, that confidential information shall not include any information known generally to the public or ascertainable from public or published information (other than as a result of unauthorized disclosure by Employee) or any information of a type not otherwise considered confidential by persons engaged in the same business or a business similar to that conducted by the Company (or any of its subsidiaries). 13. Noncompetition. The Company and Employee agree that the services rendered by Employee hereunder are unique. Employee hereby agrees that, during the term of this Agreement and for a period of one year thereafter, he shall not (except in the course of his employment under this Agreement and in furtherance of the business of the Company (or any of its subsidiaries)) (i) engage in as principal, consultant or employee in any segment of a business of a company, partnership or firm ("Business Segment") that is directly competitive with any significant business of the Company in one of its major commercial or geographic markets or (ii) hold an interest (except as a holder of a less than 5 percent interest in a publicly traded firm or mutual fund, or as a minority stockholder or unitholder in a firm not publicly traded) in a company, partnership, or firm with a Business Segment that is directly competitive with the Company, without prior written consent of the Company. 14. Remedies. Employee acknowledges that irreparable damage would result to the Company if the provisions of Sections 12 or 13 above are not specifically enforced and agrees that the Company shall be entitled to any appropriate legal, equitable or other remedy, including injunctive relief, in respect of any failure to comply with such provisions. 15. Miscellaneous. (a) Complete Agreement. This Agreement constitutes the entire agreement between the parties and cancels and supersedes all other agreements between the parties which may have related to the subject matter contained in this Agreement, including without limitation the Prior Agreement. -9-

(b) Modification; Amendment; Waiver. No modification, amendment or waiver of any provisions of this Agreement shall be effective unless approved in writing by both parties. The failure at any time to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of either party thereafter to enforce each and every provision hereof in accordance with its terms. (c) Governing Law; Jurisdiction. This Agreement and performance under it, and all proceedings that may ensue from its breach, shall be construed in accordance with and under the laws of the State of Texas. (d) Employee's Representations. Employee represents and warrants that he is free to enter into this Agreement and to perform each of the terms and covenants of it. Employee represents and warrants that he is not restricted or prohibited, contractually or otherwise, from entering into and performing this Agreement, and that his execution and performance of this Agreement is not a violation or breach of any other agreement between Employee and any other person or entity.

(b) Modification; Amendment; Waiver. No modification, amendment or waiver of any provisions of this Agreement shall be effective unless approved in writing by both parties. The failure at any time to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of either party thereafter to enforce each and every provision hereof in accordance with its terms. (c) Governing Law; Jurisdiction. This Agreement and performance under it, and all proceedings that may ensue from its breach, shall be construed in accordance with and under the laws of the State of Texas. (d) Employee's Representations. Employee represents and warrants that he is free to enter into this Agreement and to perform each of the terms and covenants of it. Employee represents and warrants that he is not restricted or prohibited, contractually or otherwise, from entering into and performing this Agreement, and that his execution and performance of this Agreement is not a violation or breach of any other agreement between Employee and any other person or entity. (e) Company's Representations. Company represents and warrants that it is free to enter into this Agreement and to perform each of the terms and covenants of it. Company represents and warrants that it is not restricted or prohibited, contractually or otherwise, from entering into and performing this Agreement, and that its execution and performance of this Agreement is not a violation or breach of any other agreement between Company and any other person or entity. The Company represents and warrants that this Agreement is a legal, valid and binding agreement of the Company, enforceable in accordance with its terms. (f) Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. (g) Assignment. The rights and obligations of the parties under this Agreement shall be binding upon and inure to the benefit of their respective successors, assigns, executors, administrators and heirs, provided, however, that neither the Company nor Employee may assign any duties under this Agreement without the prior written consent of the other. (h) Limitation. This Agreement shall not confer any right or impose any obligation on the Company to continue the employment of Employee in any capacity, or limit the right of the Company or Employee to terminate Employee's employment. (i) Notices. All notices and other communications under this Agreement shall be in writing and shall be given in person or by telegraph, facsimile or first-class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given when delivered personally or three days after mailing or one day after transmission of a telegram or facsimile, as the case may be, to the respective persons named below. -10If to the Company: Corporate Secretary Tesoro Petroleum Corporation 8700 Tesoro Drive San Antonio, Texas 78217 William T. Van Kleef 4351 F.M. 2673 Canyon Lake, Texas 78133

If to the Employee:

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. COMPANY: TESORO PETROLEUM CORPORATION
By /s/ BRUCE A. SMITH -----------------------------Bruce A. Smith Chairman of the Board of

If to the Company:

Corporate Secretary Tesoro Petroleum Corporation 8700 Tesoro Drive San Antonio, Texas 78217 William T. Van Kleef 4351 F.M. 2673 Canyon Lake, Texas 78133

If to the Employee:

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. COMPANY: TESORO PETROLEUM CORPORATION
By /s/ BRUCE A. SMITH -----------------------------Bruce A. Smith Chairman of the Board of Directors, President and Chief Executive Officer

EMPLOYEE:

/s/ WILLIAM T. VAN KLEEF ----------------------------------William T. Van Kleef

-11-

Exhibit A BENEFITS LISTING 1. Group Health Plan 2. Group Life and Accidental Death & Dismemberment Plan 3. Short Term Disability Income Plan 4. Long Term Disability Income Plan 5. Business Travel Accident Insurance Plan 6. Tesoro Petroleum Corporation Thrift/401K Plan 7. Tesoro Petroleum Corporation Retirement Plan 8. Tesoro Petroleum Corporation Amended Executive Security Plan 9. Tesoro Petroleum Corporation Funded Executive Security Plan 10. Tax Preparation and Financial Planning

ITEM 14(a)3, EXHIBIT 10.12 AMENDED AND RESTATED TESORO PETROLEUM CORPORATION EXECUTIVE LONG-TERM INCENTIVE PLAN

Exhibit A BENEFITS LISTING 1. Group Health Plan 2. Group Life and Accidental Death & Dismemberment Plan 3. Short Term Disability Income Plan 4. Long Term Disability Income Plan 5. Business Travel Accident Insurance Plan 6. Tesoro Petroleum Corporation Thrift/401K Plan 7. Tesoro Petroleum Corporation Retirement Plan 8. Tesoro Petroleum Corporation Amended Executive Security Plan 9. Tesoro Petroleum Corporation Funded Executive Security Plan 10. Tax Preparation and Financial Planning

ITEM 14(a)3, EXHIBIT 10.12 AMENDED AND RESTATED TESORO PETROLEUM CORPORATION EXECUTIVE LONG-TERM INCENTIVE PLAN ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION 1.1 ESTABLISHMENT OF THE PLAN. Tesoro Petroleum Corporation, a Delaware corporation (hereinafter referred to as the "Company"), established an incentive compensation plan to be known as the "Tesoro Petroleum Corporation Executive Long-Term Incentive Plan" (hereinafter referred to as the "Plan"), as set forth in this document. The Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted Stock, Performance Units, and Performance Shares. The Plan became effective as of September 15, 1993 (the "Effective Date"), and shall remain in effect as provided in Section 1.3 herein. Effective May 4, 1995, the Plan was amended to limit the number of Shares that can be granted in the form of an Option to any Participant during any fiscal year of the Company to 500,000. Effective June 6, 1996, the Plan was amended to (i) increase the total number of Shares available for grant under the Plan and (ii) limit the total amount of Restricted Stock that can be awarded under the Plan. 1.2 PURPOSE OF THE PLAN. The purpose of the Plan is to promote the success and enhance the value of the Company by linking the personal interests of Participants to those of Company shareholders, and by providing Participants with an incentive for outstanding performance. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of Participants upon whose judgment, interest, and special effort the successful conduct of its operation largely is dependent. 1.3 DURATION OF THE PLAN. The Plan shall commence on the Effective Date, as described in Section 1.1

ITEM 14(a)3, EXHIBIT 10.12 AMENDED AND RESTATED TESORO PETROLEUM CORPORATION EXECUTIVE LONG-TERM INCENTIVE PLAN ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION 1.1 ESTABLISHMENT OF THE PLAN. Tesoro Petroleum Corporation, a Delaware corporation (hereinafter referred to as the "Company"), established an incentive compensation plan to be known as the "Tesoro Petroleum Corporation Executive Long-Term Incentive Plan" (hereinafter referred to as the "Plan"), as set forth in this document. The Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted Stock, Performance Units, and Performance Shares. The Plan became effective as of September 15, 1993 (the "Effective Date"), and shall remain in effect as provided in Section 1.3 herein. Effective May 4, 1995, the Plan was amended to limit the number of Shares that can be granted in the form of an Option to any Participant during any fiscal year of the Company to 500,000. Effective June 6, 1996, the Plan was amended to (i) increase the total number of Shares available for grant under the Plan and (ii) limit the total amount of Restricted Stock that can be awarded under the Plan. 1.2 PURPOSE OF THE PLAN. The purpose of the Plan is to promote the success and enhance the value of the Company by linking the personal interests of Participants to those of Company shareholders, and by providing Participants with an incentive for outstanding performance. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of Participants upon whose judgment, interest, and special effort the successful conduct of its operation largely is dependent. 1.3 DURATION OF THE PLAN. The Plan shall commence on the Effective Date, as described in Section 1.1 herein, and shall remain in effect, subject to the right of the Board of Directors to terminate the Plan at any time pursuant to Article 14 herein, until all Shares subject to it shall have been purchased or acquired according to the Plan's provisions. However, in no event may an Award be granted under the Plan on or after September 15, 2003. ARTICLE 2. DEFINITIONS Whenever used in the Plan, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized: 1

(a) "Affiliated SAR" means a SAR that is granted in connection with a related Option, and which will be deemed to automatically be exercised simultaneous with the exercise of the related Option. (b) "Award" means, individually or collectively, a grant under this Plan of Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted Stock, Performance Units, or Performance Shares. (c) "Award Agreement" means an agreement entered into by each Participant and the Company, setting forth the terms and provisions applicable to Awards granted to Participants under this Plan. (d) "Beneficial Owner" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. (e) "Board" or "Board of Directors" means the Board of Directors of the Company.

(a) "Affiliated SAR" means a SAR that is granted in connection with a related Option, and which will be deemed to automatically be exercised simultaneous with the exercise of the related Option. (b) "Award" means, individually or collectively, a grant under this Plan of Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted Stock, Performance Units, or Performance Shares. (c) "Award Agreement" means an agreement entered into by each Participant and the Company, setting forth the terms and provisions applicable to Awards granted to Participants under this Plan. (d) "Beneficial Owner" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. (e) "Board" or "Board of Directors" means the Board of Directors of the Company. (f) "Cause" means: (i) willful misconduct on the part of a Participant that is materially detrimental to the Company; or (ii) the commission by a Participant of one or more acts which constitute an indictable crime under United States Federal, state, or local law. "Cause" under either (i) or (ii) shall be determined in good faith by the Committee. (g) "Change in Control" of the Company shall be deemed to have occurred if: (i) Any Person other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock or the Company is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company's then outstanding voting securities; (ii) A majority of the Board at any time shall cease to be made up of Qualified Directors. For purposes hereof a Qualified Director is a director who meets any of the following criteria: (1) Was a director immediately after the effective date of the Reclassification (as defined in the Company's Registration Statement on S-4, relating to the 1993 Annual Meeting of Stockholders), including the three new directors elected in connection therewith; (2) Was a director immediately after the Company's 1994 Annual Meeting of Stockholders; (3) Any director nominated for election as a director or elected to the Board by the directors to fill a vacancy by a vote of directors, and at the time of such nomination or election at least a majority of the directors were qualified directors; or (iii) The shareholders of the Company approve a merger or consolidation of the Company, with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being 2

converted into voting securities of the surviving entity) at least fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the shareholders of the Company approve a plan of complete liquidation of the Company, or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. However, in no event shall a "Change in Control" be deemed to have occurred with respect to a Participant, if the Participant is part of a purchasing group which consummates the Change-in-Control transaction. A Participant shall be deemed "part of a purchasing group" for purposes of the preceding sentence if the Participant is an equity participant in the purchasing company or group (except for (i) passive ownership of less than three percent (3%) of the stock of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group which is otherwise not significant, as determined prior to the Change in Control by a majority of the nonemployee continuing Directors). (h) "Code" means the Internal Revenue Code of 1986, as amended from time to time.

converted into voting securities of the surviving entity) at least fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the shareholders of the Company approve a plan of complete liquidation of the Company, or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. However, in no event shall a "Change in Control" be deemed to have occurred with respect to a Participant, if the Participant is part of a purchasing group which consummates the Change-in-Control transaction. A Participant shall be deemed "part of a purchasing group" for purposes of the preceding sentence if the Participant is an equity participant in the purchasing company or group (except for (i) passive ownership of less than three percent (3%) of the stock of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group which is otherwise not significant, as determined prior to the Change in Control by a majority of the nonemployee continuing Directors). (h) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (i) "Committee" means the committee, as specified in Article 3, appointed by the Board to administer the Plan with respect to grants of Awards. (j) "Company" means Tesoro Petroleum Corporation, a Delaware corporation, or any successor thereto as provided in Article 17 herein. (k) "Director" means any individual who is a member of the Board of Directors of the Company. (l) "Disability" means a permanent and total disability, within the meaning of Code Section 22(e)(3), as determined by the Committee in good faith, upon receipt of sufficient competent medical advice from one or more individuals, selected by the Committee, who are qualified to give professional medical advice. (m) "Employee" means any full-time, nonunion employee of the Company or of the Company's Subsidiaries. Directors who are not otherwise employed by the Company shall not be considered Employees under this Plan. (n) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor Act thereto. (o) "Fair Market Value" shall mean the average of the highest and lowest quoted selling prices for Shares on the relevant date, or (if there were no sales on such date) the weighted average of the means between the highest and lowest quoted selling prices on the nearest day before and the nearest day after the relevant date, as determined by the Committee. (p) "Freestanding SAR" means a SAR that is granted independently of any Options. 3

(q) "Incentive Stock Option" or "ISO" means an option to purchase Shares, granted under Article 6 herein, which is designated as an Incentive Stock Option and is intended to meet the requirements of Section 422 of the Code. (r) "Insider" shall mean an Employee who is, on the relevant date, an officer, director, or ten percent (10%) beneficial owner of the Company, as defined under Section 16 of the Exchange Act. (s) "Nonqualified Stock Option" or "NQSO" means an option to purchase Shares, granted under Article 6 herein, which is not intended to be an Incentive Stock Option. (t) "Option" means an Incentive Stock Option or a Nonqualified Stock Option. (u) "Option Price" means the price at which a Share may be purchased by a Participant pursuant to an Option, as determined by the Committee. (v) "Participant" means an Employee of the Company who has outstanding an Award granted under the Plan.

(q) "Incentive Stock Option" or "ISO" means an option to purchase Shares, granted under Article 6 herein, which is designated as an Incentive Stock Option and is intended to meet the requirements of Section 422 of the Code. (r) "Insider" shall mean an Employee who is, on the relevant date, an officer, director, or ten percent (10%) beneficial owner of the Company, as defined under Section 16 of the Exchange Act. (s) "Nonqualified Stock Option" or "NQSO" means an option to purchase Shares, granted under Article 6 herein, which is not intended to be an Incentive Stock Option. (t) "Option" means an Incentive Stock Option or a Nonqualified Stock Option. (u) "Option Price" means the price at which a Share may be purchased by a Participant pursuant to an Option, as determined by the Committee. (v) "Participant" means an Employee of the Company who has outstanding an Award granted under the Plan. (w) "Performance Unit" means an Award granted to an Employee, as described in Article 9 herein. (x) "Performance Share" means an Award granted to an Employee, as described in Article 9 herein. (y) "Period of Restriction" means the period during which the transfer of Shares of Restricted Stock is limited in some way (based on the passage of time, the achievement of performance goals, or upon the occurrence of other events as determined by the Committee, at its discretion), and the Shares are subject to a substantial risk of forfeiture, as provided in Article 8 herein. (z) "Person" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d). (aa) "Restricted Stock" means an Award granted to a Participant pursuant to Article 8 herein. (ab) "Retirement" shall have the meaning ascribed to it in the tax-qualified pension plan of the Company. (ac) "Shares" means the shares of common stock of the Company. (ad) "Subsidiary" means any corporation in which the Company owns directly, or indirectly through subsidiaries, at least fifty percent (50%) of the total combined voting power of all classes of stock, or any other entity (including, but not limited to, partnerships and joint ventures) in which the Company owns at least fifty percent (50%) of the combined equity thereof. 4

(ae) "Stock Appreciation Right" or "SAR" means an Award, granted alone or in connection with a related Option, designated as a SAR, pursuant to the terms of Article 7 herein. (af) "Tandem SAR" means a SAR that is granted in connection with a related Option, the exercise of which shall require forfeiture of the right to purchase a Share under the related Option (and when a Share is purchased under the Option, the Tandem SAR shall similarly be canceled). (ag) "Window Period" means the period beginning on the third business day following the date of public release of the Company's quarterly sales and earnings information, and ending on the twelfth business day following such date. ARTICLE 3. ADMINISTRATION 3.1 THE COMMITTEE. The Plan shall be administered by the Executive Long- Term Compensation Committee of the Board, or by any other Committee appointed by the Board consisting of all Directors who are not Employees (the "Committee"). The members of the Committee shall be appointed from time to time by, and shall

(ae) "Stock Appreciation Right" or "SAR" means an Award, granted alone or in connection with a related Option, designated as a SAR, pursuant to the terms of Article 7 herein. (af) "Tandem SAR" means a SAR that is granted in connection with a related Option, the exercise of which shall require forfeiture of the right to purchase a Share under the related Option (and when a Share is purchased under the Option, the Tandem SAR shall similarly be canceled). (ag) "Window Period" means the period beginning on the third business day following the date of public release of the Company's quarterly sales and earnings information, and ending on the twelfth business day following such date. ARTICLE 3. ADMINISTRATION 3.1 THE COMMITTEE. The Plan shall be administered by the Executive Long- Term Compensation Committee of the Board, or by any other Committee appointed by the Board consisting of all Directors who are not Employees (the "Committee"). The members of the Committee shall be appointed from time to time by, and shall serve at the discretion of, the Board of Directors. The Committee shall be comprised solely of Directors who are eligible to administer the Plan pursuant to Rule 16b-3(c)(2) under the Exchange Act. However, if for any reason the Committee does not qualify to administer the Plan, as contemplated by Rule 16b-3(c)(2) of the Exchange Act, the Board of Directors may appoint a new Committee so as to comply with Rule 16b-3(c)(2). 3.2 AUTHORITY OF THE COMMITTEE. The Committee shall have full power except as limited by law or by the Articles of Incorporation or Bylaws of the Company, and subject to the provisions herein, to determine the size and types of Awards; to determine the terms and conditions of such Awards in a manner consistent with the Plan; to construe and interpret the Plan and any agreement or instrument entered into under the Plan; to establish, amend, or waive rules and regulations for the Plan's administration; and (subject to the provisions of Article 14 herein) to amend the terms and conditions of any outstanding Award to the extent such terms and conditions are within the discretion of the Committee as provided in the Plan. Further, the Committee shall make all other determinations which may be necessary or advisable for the administration of the Plan. As permitted by law, the Committee may delegate its authorities as identified hereunder. 3.3 DECISIONS BINDING. All determinations and decisions made by the Committee pursuant to the provisions of the Plan and all related orders or resolutions of the Board of Directors shall be final, conclusive, and binding on all persons, including the Company, its stockholders, Employees, Participants, and their estates and beneficiaries. ARTICLE 4. SHARES SUBJECT TO THE PLAN 4.1 NUMBER OF SHARES. Subject to adjustment as provided in Section 4.3 herein, the total number of Shares available for grant under the Plan may not exceed 2,650,000. These 5

Shares may be either authorized but unissued or reacquired Shares. The following rules will apply for purposes of the determination of the number of Shares available for grant under the Plan: (a) While an Award is outstanding, it shall be counted against the authorized pool of Shares, regardless of its vested status. (b) The grant of an Option or Restricted Stock shall reduce the Shares available for grant under the Plan by the number of Shares subject to such Award. (c) The grant of a Tandem SAR shall reduce the number of Shares available for grant by the number of Shares

Shares may be either authorized but unissued or reacquired Shares. The following rules will apply for purposes of the determination of the number of Shares available for grant under the Plan: (a) While an Award is outstanding, it shall be counted against the authorized pool of Shares, regardless of its vested status. (b) The grant of an Option or Restricted Stock shall reduce the Shares available for grant under the Plan by the number of Shares subject to such Award. (c) The grant of a Tandem SAR shall reduce the number of Shares available for grant by the number of Shares subject to the related Option (i.e., there is no double counting of Options and their related Tandem SARs). (d) The grant of an Affiliated SAR shall reduce the number of Shares available for grant by the number of Shares subject to the SAR, in addition to the number of Shares subject to the related Option. (e) The grant of a Freestanding SAR shall reduce the number of Shares available for grant by the number of Freestanding SARs granted. (f) The Committee shall in each case determine the appropriate number of Shares to deduct from the authorized pool in connection with the grant of Performance Units and/or Performance Shares. 4.2 LAPSED AWARDS. If any Award granted under this Plan is canceled, terminates, expires, or lapses for any reason (with the exception of the termination of a Tandem SAR upon exercise of the related Option or the termination of a related Option upon exercise of the corresponding Tandem SAR), any Shares subject to such Award again shall be available for the grant of an Award under the Plan. However, in the event that prior to the Award's cancellation, termination, expiration, or lapse, the holder of the Award at any time received one or more "benefits of ownership" pursuant to such Award (as defined by the Securities and Exchange Commission, pursuant to any rule or interpretation promulgated under Section 16 of the Exchange Act), the Shares subject to such Award shall not be made available for regrant under the Plan. 4.3 ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any merger, reorganization, consolidation, recapitalization, separation, liquidation, stock dividend, split-up, Share combination, or other change in the corporate structure of the Company affecting the Shares, such adjustment shall be made in the number and class of Shares which may be delivered under the Plan, and in the number and class of and/or price of Shares subject to outstanding Awards granted under the Plan, as may be determined to be appropriate and equitable by the Committee, in its sole discretion, to prevent dilution or enlargement of rights; and provided that the number of Shares subject to any Award shall always be a whole number. 6

ARTICLE 5. ELIGIBILITY AND PARTICIPATION 5.1 ELIGIBILITY. Persons eligible to participate in this Plan include all full-time, active Employees of the Company and its Subsidiaries, as determined by the Committee, including Employees who are members of the Board, but excluding Directors who are not Employees. 5.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the Committee may, from time to time, select from all eligible Employees, those to whom Awards shall be granted and shall determine the nature and amount of each Award. ARTICLE 6. STOCK OPTIONS 6.1 GRANT OF OPTIONS. Subject to the terms and provisions of the Plan, Options may be granted to Employees at any time and from time to time as shall be determined by the Committee. The Committee shall have discretion in determining the number of Shares subject to Options granted to each Participant, but in no event

ARTICLE 5. ELIGIBILITY AND PARTICIPATION 5.1 ELIGIBILITY. Persons eligible to participate in this Plan include all full-time, active Employees of the Company and its Subsidiaries, as determined by the Committee, including Employees who are members of the Board, but excluding Directors who are not Employees. 5.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the Committee may, from time to time, select from all eligible Employees, those to whom Awards shall be granted and shall determine the nature and amount of each Award. ARTICLE 6. STOCK OPTIONS 6.1 GRANT OF OPTIONS. Subject to the terms and provisions of the Plan, Options may be granted to Employees at any time and from time to time as shall be determined by the Committee. The Committee shall have discretion in determining the number of Shares subject to Options granted to each Participant, but in no event shall the Committee be permitted to grant Options to any Participant in excess of 500,000 Shares during any fiscal year of the Company. The Committee may grant ISOs, NQSOs, or a combination thereof. 6.2 AWARD AGREEMENT. Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the duration of the Option, the number of Shares to which the Option pertains, and such other provisions as the Committee shall determine. The Option Agreement also shall specify whether the Option is intended to be an ISO within the meaning of Section 422 of the Code, or a NQSO whose grant is intended not to fall under the Code provisions of Section 422. 6.3 OPTION PRICE. The Option Price for each grant of an Option shall be determined by the Committee; provided that the Option Price shall not be less than the Fair Market Value of a Share on the date the Option is granted unless such Option is granted in connection with a deferral election pursuant to Article XI herein. 6.4 DURATION OF OPTIONS. Each Option shall expire at such time as the Committee shall determine at the time of grant; provided, however, that no Option shall be exercisable later than the tenth (10th) anniversary date of its grant. 6.5 EXERCISE OF OPTIONS. Options granted under the Plan shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which need not be the same for each grant or for each Participant. However, in no event may any Option granted under this Plan become exercisable prior to six (6) months following the date of its grant. 6.6 PAYMENT. Options shall be exercised by the delivery of a written notice of exercise to the Company, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares. 7

The Option Price upon exercise of any Option shall be payable to the Company in full either: (a) in cash or its equivalent, or (b) by tendering previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the total Option Price (provided that the Shares which are tendered must have been held by the Participant for at least six (6) months prior to their tender to satisfy the Option Price), or (c) by a combination of (a) and (b). The Committee also may allow cashless exercise as permitted under Federal Reserve Board's Regulation T, subject to applicable securities law restrictions, or by any other means which the Committee determines to be consistent with the Plan's purpose and applicable law. As soon as practicable after receipt of a written notification of exercise and full payment, the Company shall deliver to the Participant, in the Participant's name, Share certificates in an appropriate amount based upon the number of Shares purchased under the Option(s).

The Option Price upon exercise of any Option shall be payable to the Company in full either: (a) in cash or its equivalent, or (b) by tendering previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the total Option Price (provided that the Shares which are tendered must have been held by the Participant for at least six (6) months prior to their tender to satisfy the Option Price), or (c) by a combination of (a) and (b). The Committee also may allow cashless exercise as permitted under Federal Reserve Board's Regulation T, subject to applicable securities law restrictions, or by any other means which the Committee determines to be consistent with the Plan's purpose and applicable law. As soon as practicable after receipt of a written notification of exercise and full payment, the Company shall deliver to the Participant, in the Participant's name, Share certificates in an appropriate amount based upon the number of Shares purchased under the Option(s). 6.7 RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option under the Plan as it may deem advisable, including, without limitation, restrictions under applicable Federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares. 6.8 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR RETIREMENT. (a) TERMINATION BY DEATH. In the event the employment of a Participant is terminated by reason of death, all outstanding Options which are exercisable as of the date of death shall remain exercisable at any time prior to their expiration date, or for one (1) year after the date of death, whichever period is shorter, by such person or persons as shall have been named as the Participant's beneficiary, or by such persons that have acquired the Participant's rights under the Option by will or by the laws of descent and distribution. Options which are not exercisable as of the date of death shall be forfeited and returned to the Company; provided, however, that the Committee may, at its sole discretion, provide for accelerated vesting of unvested Options upon such terms as the Committee deems advisable. (b) TERMINATION BY DISABILITY. In the event the employment of a Participant is terminated by reason of Disability, all outstanding Options which are exercisable as of the date the Committee determines the definition of Disability to have been satisfied shall remain exercisable at any time prior to their expiration date, or for one (1) year after the date that the Committee determines the definition of Disability to have been satisfied, whichever period is shorter. 8

Options which are not exercisable as of the date the Committee determines the definition of Disability to have been satisfied shall be forfeited and returned to the Company; provided, however, that the Committee may, at its sole discretion, provide for accelerated vesting of unvested Options upon such terms as the Committee deems advisable. (c) TERMINATION BY RETIREMENT. In the event the employment of a Participant is terminated by reason of Retirement, all outstanding Options which are exercisable as of the date of Retirement shall remain exercisable at any time prior to their expiration date, or for three (3) years after the effective date of Retirement, whichever period is shorter. Options which are not exercisable as of the date of Retirement shall be forfeited and return to the Company; provided, however, that the Committee may, at its sole discretion, provide for accelerated vesting of unvested Options upon such terms as the Committee deems advisable. (d) EMPLOYMENT TERMINATION FOLLOWED BY DEATH. In the event that a Participant's employment terminates by reason of Disability or Retirement, and within the exercise period following such termination the Participant dies, then the remaining exercise period under outstanding vested Options shall equal the longer of (i) one (1) year following death; or (ii) the remaining portion of the exercise period which was triggered by the

Options which are not exercisable as of the date the Committee determines the definition of Disability to have been satisfied shall be forfeited and returned to the Company; provided, however, that the Committee may, at its sole discretion, provide for accelerated vesting of unvested Options upon such terms as the Committee deems advisable. (c) TERMINATION BY RETIREMENT. In the event the employment of a Participant is terminated by reason of Retirement, all outstanding Options which are exercisable as of the date of Retirement shall remain exercisable at any time prior to their expiration date, or for three (3) years after the effective date of Retirement, whichever period is shorter. Options which are not exercisable as of the date of Retirement shall be forfeited and return to the Company; provided, however, that the Committee may, at its sole discretion, provide for accelerated vesting of unvested Options upon such terms as the Committee deems advisable. (d) EMPLOYMENT TERMINATION FOLLOWED BY DEATH. In the event that a Participant's employment terminates by reason of Disability or Retirement, and within the exercise period following such termination the Participant dies, then the remaining exercise period under outstanding vested Options shall equal the longer of (i) one (1) year following death; or (ii) the remaining portion of the exercise period which was triggered by the employment termination. Such Options shall be exercisable by such person or persons who shall have been named as the Participant's beneficiary, or by such persons who have acquired the Participant's rights under the Option by will or by the laws of descent and distribution. (e) EXERCISE LIMITATIONS ON ISOS. In the case of ISOs, the tax treatment prescribed under Section 422 of the Internal Revenue Code of 1986, as amended, may not be available if the Options are not exercised within the Section 422 prescribed time periods after each of the various types of employment termination. 6.9 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. If the employment of a Participant shall terminate for any reason other than the reasons set forth in Section 6.8 (and other than for Cause), all Options held by the Participant which are not vested as of the effective date of employment termination immediately shall be forfeited to the Company (and shall once again become available for grant under the Plan). However, the Committee, in its sole discretion, shall have the right to immediately vest all or any portion of such Options, subject to such terms as the Committee, in its sole discretion, deems appropriate. Options which are vested as of the effective date of employment termination may be exercised by the Participant within the period beginning on the effective date of employment termination, and ending three (3) months after such date. If the employment of a Participant shall be terminated by the Company for Cause, all outstanding Options held by the Participant immediately shall be forfeited to the Company and no additional exercise period shall be allowed, regardless of the vested status of the Options. 9
6.10 NONTRANSFERABILITY OF OPTIONS. No Option granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all Options granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant.

ARTICLE 7. STOCK APPRECIATION RIGHTS 7.1 GRANT OF SARS. Subject to the terms and conditions of the Plan, a SAR may be granted to an Employee at any time and from time to time as shall be determined by the Committee. The Committee may grant Affiliated SARs, Freestanding SARs, Tandem SARs, or any combination of these forms of SARs. The Committee shall have complete discretion in determining the number of SARs granted to each Participant (subject to Article 4 herein) and, consistent with the provisions of the Plan, in determining the terms and conditions pertaining to such SARs. However, the grant price of a Freestanding SAR shall be at least equal to the

6.10

NONTRANSFERABILITY OF OPTIONS. No Option granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all Options granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant.

ARTICLE 7. STOCK APPRECIATION RIGHTS 7.1 GRANT OF SARS. Subject to the terms and conditions of the Plan, a SAR may be granted to an Employee at any time and from time to time as shall be determined by the Committee. The Committee may grant Affiliated SARs, Freestanding SARs, Tandem SARs, or any combination of these forms of SARs. The Committee shall have complete discretion in determining the number of SARs granted to each Participant (subject to Article 4 herein) and, consistent with the provisions of the Plan, in determining the terms and conditions pertaining to such SARs. However, the grant price of a Freestanding SAR shall be at least equal to the Fair Market Value of a Share on the date of grant of the SAR. The grant price of Tandem SARs and Affiliated SARs shall equal the Option Price of the related Option. In no event shall any SAR granted hereunder become exercisable within the first six (6) months of its grant. 7.2 EXERCISE OF TANDEM SARS. Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable. Notwithstanding any other provision of this Plan to the contrary, with respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR will expire no later than the expiration of the underlying ISO; (ii) the value of the payout with respect to the Tandem SAR may be for no more than one hundred percent (100%) of the difference between the Option Price of the underlying ISO and the Fair Market Value of the Shares subject to the underlying ISO at the time the Tandem SAR is exercised; and (iii) the Tandem SAR may be exercised only when the Fair Market Value of the Shares subject to the ISO exceeds the Option Price of the ISO. 7.3 EXERCISE OF AFFILIATED SARS. Affiliated SARs shall be deemed to be exercised upon the exercise of the related Options. The deemed exercise of Affiliated SARs shall not necessitate a reduction in the number of related options. 7.4 EXERCISE OF FREESTANDING SARS. Freestanding SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes upon them. 7.5 SAR AGREEMENT. Each SAR grant shall be evidenced by an Award Agreement that shall specify the grant price, the term of the SAR, and such other provisions as the Committee shall determine. 10

7.6 TERM OF SARS. The term of a SAR granted under the Plan shall be determined by the Committee, in its sole discretion; provided, however, that such term shall not exceed ten (10) years. 7.7 PAYMENT OF SAR AMOUNT. Upon exercise of a SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying: (a) The difference between the Fair Market Value of a Share on the date of exercise over the grant price; by (b) The number of Shares with respect to which the SAR is exercised. At the discretion of the Committee, the payment upon SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof. 7.8 RULE 16b-3 REQUIREMENTS. Notwithstanding any other provision of the Plan, the Committee may impose such conditions on exercise of a SAR (including, without limitation, the right of the Committee to limit the

7.6 TERM OF SARS. The term of a SAR granted under the Plan shall be determined by the Committee, in its sole discretion; provided, however, that such term shall not exceed ten (10) years. 7.7 PAYMENT OF SAR AMOUNT. Upon exercise of a SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying: (a) The difference between the Fair Market Value of a Share on the date of exercise over the grant price; by (b) The number of Shares with respect to which the SAR is exercised. At the discretion of the Committee, the payment upon SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof. 7.8 RULE 16b-3 REQUIREMENTS. Notwithstanding any other provision of the Plan, the Committee may impose such conditions on exercise of a SAR (including, without limitation, the right of the Committee to limit the time of exercise to specified periods) as may be required to satisfy the requirements of Section 16 (or any successor rule) of the Exchange Act. For example, if the Participant is an Insider, the ability of the Participant to exercise SARs for cash will be limited to Window Periods. However, if the Committee determines that the Participant is not an Insider, or if the securities laws change to permit greater freedom of exercise of SARs, then the Committee may permit exercise at any point in time, to the extent the SARs are otherwise exercisable under the Plan. 7.9 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR RETIREMENT. (a) TERMINATION BY DEATH. In the event the employment of a Participant is terminated by reason of death, all outstanding SARs which are exercisable as of the date of death shall remain exercisable at any time prior to their expiration date, or for one (1) year after the date of death, whichever period is shorter, by such person or persons as shall have been named as the Participant's beneficiary, or by such persons that have acquired the Participant's rights under the SAR by will or by the laws of descent and distribution. SARs which are not exercisable as of the date of death shall be forfeited and returned to the Company; provided, however, that the Committee may, at its sole discretion, provide for accelerated vesting of unvested SARs upon such terms as the Committee deems advisable. (b) TERMINATION BY DISABILITY. In the event the employment of a Participant is terminated by reason of Disability, all outstanding SARs which are exercisable as of the date the Committee determines the definition of Disability to have been satisfied shall remain exercisable at any time prior to their expiration date, or for 11

one (1) year after the date that the Committee determines the definition of Disability to have been satisfied, whichever period is shorter. SARs which are not exercisable as of the date the Committee determines the definition of Disability to have been satisfied shall be forfeited and returned to the Company; provided, however, that the Committee may, at its sole discretion, provide for accelerated vesting of unvested SARs upon such terms as the Committee deems advisable. (c) TERMINATION BY RETIREMENT. In the event the employment of a Participant is terminated by reason of Retirement, all outstanding SARs which are exercisable as of the date of Retirement shall remain exercisable at any time prior to their expiration date, or for three (3) years after the effective date of Retirement, whichever period is shorter. SARs which are not exercisable as of the date of Retirement shall be forfeited and returned to the Company; provided, however, that the Committee may, at its sole discretion, provide for accelerated vesting of unvested SARs upon such terms as the Committee deems advisable.

one (1) year after the date that the Committee determines the definition of Disability to have been satisfied, whichever period is shorter. SARs which are not exercisable as of the date the Committee determines the definition of Disability to have been satisfied shall be forfeited and returned to the Company; provided, however, that the Committee may, at its sole discretion, provide for accelerated vesting of unvested SARs upon such terms as the Committee deems advisable. (c) TERMINATION BY RETIREMENT. In the event the employment of a Participant is terminated by reason of Retirement, all outstanding SARs which are exercisable as of the date of Retirement shall remain exercisable at any time prior to their expiration date, or for three (3) years after the effective date of Retirement, whichever period is shorter. SARs which are not exercisable as of the date of Retirement shall be forfeited and returned to the Company; provided, however, that the Committee may, at its sole discretion, provide for accelerated vesting of unvested SARs upon such terms as the Committee deems advisable. (d) EMPLOYMENT TERMINATION FOLLOWED BY DEATH. In the event that a
Participant's employment terminates by reason of Disability or Retirement, and within the exercise period following such termination the Participant dies, then the remaining exercise period under outstanding vested SARs shall equal the longer of: (i) one (1) year following death; or (ii) the remaining portion of the exercise period which was triggered by the employment termination. Such SARs shall be exercisable by such person or persons who shall have been named as the Participant's beneficiary, or by such persons who have acquired the Participant's rights under the SAR by will or by the laws of descent and distribution. 7.10 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. If the employment of a Participant shall terminate for any reason other than the reasons set forth in Section 7.9 (and other than for Cause), all SARs held by the Participant which are not vested as of the effective date of employment termination immediately shall be forfeited to the Company (and shall once again become available for grant under the Plan). However, the Committee, in its sole discretion, shall have the right to immediately vest all or any portion of such SARs, subject to such terms as the Committee, in its sole discretion, deems appropriate. SARs which are vested as of the effective date of employment termination may be exercised by the Participant within the period beginning on the effective date of employment termination, and ending three (3) months after such date. If the employment of a Participant shall be terminated by the Company for Cause, all outstanding SARs held by the Participant immediately shall be forfeited to the Company and no additional exercise period shall be allowed, regardless of the vested status of the SARs.

12
7.11 NONTRANSFERABILITY OF SARS. No SAR granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all SARs granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant.

ARTICLE 8. RESTRICTED STOCK 8.1 GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock to eligible Employees in such amounts as

7.11

NONTRANSFERABILITY OF SARS. No SAR granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all SARs granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant.

ARTICLE 8. RESTRICTED STOCK 8.1 GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock to eligible Employees in such amounts as the Committee shall determine, but in no event shall the total number of Shares of Restricted Stock available for grant by the Committee exceed 500,000 Shares. 8.2 RESTRICTED STOCK AGREEMENT. Each Restricted Stock grant shall be evidenced by a Restricted Stock Agreement that shall specify the Period of Restriction, or Periods, the number of Restricted Stock Shares granted, and such other provisions as the Committee shall determine. 8.3 TRANSFERABILITY. Except as provided in this Article 8, the Shares of Restricted Stock granted herein may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction established by the Committee and specified in the Restricted Stock Agreement, or upon earlier satisfaction of any other conditions, as specified by the Committee in its sole discretion and set forth in the Restricted Stock Agreement. However, in no event may any Restricted Stock granted under the Plan become vested in a Participant prior to six (6) months following the date of its grant. All rights with respect to the Restricted Stock granted to a Participant under the Plan shall be available during his or her lifetime only to such Participant. 8.4 OTHER RESTRICTIONS. The Committee shall impose such other conditions and/or restrictions on any Shares of Restricted Stock granted pursuant to the Plan as it may deem advisable including, without limitation, a requirement that Participants pay a stipulated purchase price for each Share of Restricted Stock, restrictions based upon the achievement of specific performance goals (Companywide, divisional, and/or individual), and/or restrictions under applicable Federal or state securities laws; and may legend the certificates representing Restricted Stock to give appropriate notice of such restrictions. 8.5 CERTIFICATE LEGEND. In addition to any legends placed on certificates pursuant to Section 8.4 herein, each certificate representing Shares of Restricted Stock granted pursuant to the Plan may bear the following legend: "The sale or other transfer of the Shares of stock represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer as set forth in the Tesoro Petroleum Corporation Executive Long-Term Incentive Plan, and in a Restricted Stock Agreement. A copy of the Plan 13
and such Restricted Stock Agreement may be obtained from Tesoro Petroleum Corporation." The Company shall have the right to retain the certificates representing Shares of Restricted Stock in the Company's possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied. 8.6 REMOVAL OF RESTRICTIONS. Except as otherwise provided in this Article 8, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan shall become freely transferable by the Participant after the last day of the Period of Restriction. Once the Shares are released from the restrictions, the Participant shall be entitled to have the legend required by Section 8.5 removed from his or her share certificate. VOTING RIGHTS. During the Period of Restriction, Participants holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares.

8.7

and such Restricted Stock Agreement may be obtained from Tesoro Petroleum Corporation." The Company shall have the right to retain the certificates representing Shares of Restricted Stock in the Company's possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied. 8.6 REMOVAL OF RESTRICTIONS. Except as otherwise provided in this Article 8, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan shall become freely transferable by the Participant after the last day of the Period of Restriction. Once the Shares are released from the restrictions, the Participant shall be entitled to have the legend required by Section 8.5 removed from his or her share certificate. VOTING RIGHTS. During the Period of Restriction, Participants holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares. DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of Restriction, Participants holding Shares of Restricted Stock granted hereunder shall be entitled to receive all dividends and other distributions paid with respect to those Shares while they are so held. If any such dividends or distributions are paid in Shares, the Shares shall be subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid. In the event that any dividend constitutes a "derivative security" or an "equity security" pursuant to Rule 16(a) under the Exchange Act, such dividend shall be subject to a vesting period equal to the longer of: (i) the remaining vesting period of the Shares of Restricted Stock with respect to which the dividend is paid; or (ii) six months. The Committee shall establish procedures for the application of this provision. 8.9 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR RETIREMENT. In the event the employment of a Participant is terminated by reason of death, Disability, or Retirement, all unvested Shares of Restricted Stock shall immediately be forfeited by the Participant; provided, however, that the Committee, in its sole discretion, shall have the right to provide for accelerated vesting of some or all unvested Shares of Restricted Stock, upon such terms as the Committee deems advisable. The holder of the certificates of Restricted Stock shall be entitled to have any nontransferability legends required under Sections 8.4 and 8.5 of this Plan removed from the Share certificates. TERMINATION OF EMPLOYMENT FOR OTHER REASONS. If the employment of a Participant shall terminate for any reason other than those specifically set forth in Section 8.9 herein, all Shares of Restricted Stock held by the Participant which are not vested as of the effective date of employment termination immediately shall be forfeited (and, subject to Section 4.2 herein, shall once again become available for grant under the Plan).

8.7

8.8

8.10

14

With the exception of a termination of employment for Cause, the Committee, in its sole discretion, shall have the right to provide for lapsing of the restrictions on Restricted Stock following employment termination, upon such terms and provisions as it deems appropriate. ARTICLE 9. PERFORMANCE UNITS AND PERFORMANCE SHARES 9.1 GRANT OF PERFORMANCE UNITS/SHARES. Subject to the terms of the Plan, Performance Units and Performance Shares may be granted to eligible Employees at any time and from time to time, as shall be determined by the Committee. The Committee shall have complete discretion in determining the number of Performance Units and Performance Shares granted to each Participant.

With the exception of a termination of employment for Cause, the Committee, in its sole discretion, shall have the right to provide for lapsing of the restrictions on Restricted Stock following employment termination, upon such terms and provisions as it deems appropriate. ARTICLE 9. PERFORMANCE UNITS AND PERFORMANCE SHARES 9.1 GRANT OF PERFORMANCE UNITS/SHARES. Subject to the terms of the Plan, Performance Units and Performance Shares may be granted to eligible Employees at any time and from time to time, as shall be determined by the Committee. The Committee shall have complete discretion in determining the number of Performance Units and Performance Shares granted to each Participant. 9.2 VALUE OF PERFORMANCE UNITS/SHARES. Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the date of grant. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the number and/or value of Performance Units/Shares that will be paid out to the Participants. The time period during which the performance goals must be met shall be called a "Performance Period." Performance Periods shall, in all cases, exceed six (6) months in length. 9.3 EARNING OF PERFORMANCE UNITS/SHARES. After the applicable Performance Period has ended, the holder of Performance Units/Shares shall be entitled to receive payout on the number of Performance Units/Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals have been achieved. 9.4 FORM AND TIMING OF PAYMENT OF PERFORMANCE UNITS/SHARES. Payment of each Performance Units/Shares shall be made in a single lump sum, within forty-five (45) calendar days following the close of the applicable Performance Period. The Committee, in its sole discretion, may pay earned Performance Units/Shares in the form of cash or in Shares (or in a combination thereof), which have an aggregate Fair Market Value equal to the value of the earned Performance Units/Shares at the close of the applicable Performance Period. Prior to the beginning of each Performance Period, Participants may elect to defer the receipt of Performance Unit/Share payout upon such terms as the Committee deems appropriate. 9.5 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, RETIREMENT, OR INVOLUNTARY TERMINATION (WITHOUT CAUSE). In the event the employment of a Participant is terminated by reason of death, Disability, Retirement, or involuntary termination without Cause during a Performance Period, the Participant shall receive a prorated payout of the Performance Units/Shares. The prorated payout shall be determined by the Committee, in its sole discretion, and shall be based upon the length of time that the Participant held 15

the Performance Units/Shares during the Performance Period, and shall further be adjusted based on the achievement of the preestablished performance goals. Payment of earned Performance Units/Shares shall be made at the same time payments are made to Participants who did not terminate employment during the applicable Performance Period. However, the Committee, in its sole discretion, shall have the right to accelerate the timing of this payout, upon such terms and provisions as it deems appropriate. 9.6 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. In the event that a Participant's employment terminates for any reason other than those reasons set forth in Section 9.5 herein, all Performance Units/Shares shall be forfeited by the Participant to the Company, and shall once again be available for grant under the Plan. However, the Committee, in its sole discretion, may provide a payout on any or all Performance Units/Shares, upon such times and provisions as it deems appropriate.

the Performance Units/Shares during the Performance Period, and shall further be adjusted based on the achievement of the preestablished performance goals. Payment of earned Performance Units/Shares shall be made at the same time payments are made to Participants who did not terminate employment during the applicable Performance Period. However, the Committee, in its sole discretion, shall have the right to accelerate the timing of this payout, upon such terms and provisions as it deems appropriate. 9.6 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. In the event that a Participant's employment terminates for any reason other than those reasons set forth in Section 9.5 herein, all Performance Units/Shares shall be forfeited by the Participant to the Company, and shall once again be available for grant under the Plan. However, the Committee, in its sole discretion, may provide a payout on any or all Performance Units/Shares, upon such times and provisions as it deems appropriate. 9.7 NONTRANSFERABILITY. Performance Units/Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further a Participant's rights under the Plan shall be exercisable during the Participant's lifetime only by the Participant or the Participant's legal representative. ARTICLE 10. BENEFICIARY DESIGNATION Each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his or her death before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Company during the Participant's lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant's death shall be paid to the Participant's estate. ARTICLE 11. DEFERRALS The Committee may permit a Participant to defer such Participant's receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant by virtue of the exercise of an Option or SAR, the lapse or waiver of restrictions with respect to Restricted Stock, or the satisfaction of any requirements or goals with respect to Performance Units/Shares. If any such deferral election is required or permitted, the Committee shall, in its sole discretion, establish rules and procedures for such payment deferrals. 16

ARTICLE 12. RIGHTS OF EMPLOYEES
12.1 EMPLOYMENT. Nothing in the Plan shall interfere with or limit in any way the right of the Company to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Company. For purposes of the Plan, transfer of employment of a Participant between the Company and any one of its Subsidiaries (or between Subsidiaries) shall not be deemed a termination of employment. 12.2 PARTICIPATION. No Employee shall have the right to be selected to receive an Award under this Plan, or having been so selected, to be selected to receive a future Award.

ARTICLE 13. CHANGE IN CONTROL Upon the occurrence of a Change in Control, unless otherwise specifically prohibited by the terms of Section 18 herein:

ARTICLE 12. RIGHTS OF EMPLOYEES
12.1 EMPLOYMENT. Nothing in the Plan shall interfere with or limit in any way the right of the Company to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Company. For purposes of the Plan, transfer of employment of a Participant between the Company and any one of its Subsidiaries (or between Subsidiaries) shall not be deemed a termination of employment. 12.2 PARTICIPATION. No Employee shall have the right to be selected to receive an Award under this Plan, or having been so selected, to be selected to receive a future Award.

ARTICLE 13. CHANGE IN CONTROL Upon the occurrence of a Change in Control, unless otherwise specifically prohibited by the terms of Section 18 herein: (a) Any and all Options and SARs granted hereunder shall become immediately exercisable; (b) Any restriction periods and restrictions imposed on Restricted Shares shall lapse, and within ten (10) business days after the occurrence of a Change in Control, the stock certificates representing Shares of Restricted Stock, without any restrictions or legend thereon, shall be delivered to the applicable Participants; (c) The target payout opportunity attainable under all outstanding Performance Units and Performance Shares shall be deemed to have been earned for the portion of the Performance Period(s) that passed as of the effective date of the Change in Control. This pro rata value shall be paid out in cash to Participants within thirty (30) days following the effective date of the Change in Control. However, regardless of the above, Performance Units or Performance Shares that were granted less than six (6) months prior to the effective date of the Change in Control shall be forfeited in their entirety, and receive no accelerated payout. (d) Subject to Article 14 herein, the Committee shall have the authority to make any modifications to the Awards as determined by the Committee to be appropriate before the effective date of the Change in Control. (e) In the event that following the Change in Control the Shares are no longer traded over a national public securities exchange, Participants holding Options shall have the right to require the Company to make a cash payment to them in exchange for their Options. Such cash payment shall be contingent upon the Option holder surrendering his or her Option. The amount of the cash payment shall be determined by adding the total "spread" on all outstanding Options. For this purpose, the total "spread" shall equal the sum of the differences between: (i) the Fair Market Value of a Share on the date the Option is surrendered by the Participant; and (ii) the Option Price applicable to each Share held under Option. 17

ARTICLE 14. AMENDMENT, MODIFICATION, AND TERMINATION
14.1 AMENDMENT, MODIFICATION, AND TERMINATION. At any time and from time to time, the Board may terminate, amend, or modify the Plan. However, without the approval of the stockholders of the Company (as may be required by the Code, by the insider trading rules of Section 16 of the Exchange Act, by any national securities exchange or system on which the Shares are then listed or reported, or by a regulatory body having jurisdiction with respect hereto), no such termination, amendment, or modification may: (a) Materially increase the total number of Shares which may be issued under this Plan, except as provided in Section 4.3 herein; or

ARTICLE 14. AMENDMENT, MODIFICATION, AND TERMINATION
14.1 AMENDMENT, MODIFICATION, AND TERMINATION. At any time and from time to time, the Board may terminate, amend, or modify the Plan. However, without the approval of the stockholders of the Company (as may be required by the Code, by the insider trading rules of Section 16 of the Exchange Act, by any national securities exchange or system on which the Shares are then listed or reported, or by a regulatory body having jurisdiction with respect hereto), no such termination, amendment, or modification may: (a) Materially increase the total number of Shares which may be issued under this Plan, except as provided in Section 4.3 herein; or

(b) Materially modify the eligibility requirements; or (c) Materially increase the benefits accruing under the Plan.
14.2 AWARDS PREVIOUSLY GRANTED. No termination, amendment, or modification of the Plan shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant holding such Award.

ARTICLE 15. WITHHOLDING
15.1 TAX WITHHOLDING. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy Federal, state, and local taxes (including the Participant's FICA obligation) required by law to be withheld with respect to any taxable event arising or as a result of this Plan. SHARE WITHHOLDING. With respect to withholding required upon the exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock, or upon any other taxable event hereunder, Participants may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax which could be imposed on the transaction. All elections shall be irrevocable, made in writing, signed by the Participant, and elections by Insiders shall additionally comply with the applicable requirement set forth in (a) or (b) of this Section 15.2. (a) AWARDS HAVING EXERCISE TIMING WITHIN PARTICIPANTS' DISCRETION. The Insider must either: (i) Deliver written notice of the stock withholding election to the Committee at least six (6) months prior to the date specified by the Insider on which the exercise of the Award is to occur, or Make the stock withholding election in connection with an exercise of an Award which occurs during a Window Period.

15.2

(ii)

18

(b) AWARDS HAVING A FIXED EXERCISE/PAYOUT SCHEDULE WHICH IS OUTSIDE INSIDER'S CONTROL. The Insider must either. (i) Deliver written notice of the stock withholding election to the Committee at least six (6) months prior to the date on which the taxable event (e.g., exercise or payout) relating to the Award is scheduled to occur; or

(b) AWARDS HAVING A FIXED EXERCISE/PAYOUT SCHEDULE WHICH IS OUTSIDE INSIDER'S CONTROL. The Insider must either. (i) Deliver written notice of the stock withholding election to the Committee at least six (6) months prior to the date on which the taxable event (e.g., exercise or payout) relating to the Award is scheduled to occur; or (ii) Make the stock withholding election during a Window Period which occurs prior to the scheduled taxable event relating to the Award (for this purpose, an election may be made prior to such a Window Period, provided that it becomes effective during a Window Period occurring prior to the applicable taxable event). ARTICLE 16. INDEMNIFICATION Each person who is or shall have been a member of the Committee, or of the Board, shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company's approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. ARTICLE 17. SUCCESSORS All obligations of the Company under the Plan, with respect to Awards granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. ARTICLE 18. LEGAL CONSTRUCTION
18.1 GENDER AND NUMBER. Except where otherwise indicated by the context any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural. SEVERABILITY. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and

18.2

19
the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. 18.3 REQUIREMENTS OF LAW. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. Notwithstanding any other provision set forth in the Plan, if required by the then-current Section 16 of the Exchange Act, any "derivative security" or "equity security" offered pursuant to the Plan to any Insider may not be sold or transferred for at least six (6) months after the date of grant of such Award. The terms "equity security" and "derivative security" shall have the meanings ascribed to them in the then-current Rule 16(a) under the Exchange Act. 18.4 SECURITIES LAW COMPLIANCE. With respect to Insiders, transactions under this Plan are intended to comply with all applicable conditions of Rule

the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. 18.3 REQUIREMENTS OF LAW. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. Notwithstanding any other provision set forth in the Plan, if required by the then-current Section 16 of the Exchange Act, any "derivative security" or "equity security" offered pursuant to the Plan to any Insider may not be sold or transferred for at least six (6) months after the date of grant of such Award. The terms "equity security" and "derivative security" shall have the meanings ascribed to them in the then-current Rule 16(a) under the Exchange Act. 18.4 SECURITIES LAW COMPLIANCE. With respect to Insiders, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent any provision of the plan or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. GOVERNING LAW. To the extent not preempted by Federal law, the Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the State of Texas.

18.5

20

ITEM 14(a)3, EXHIBIT 10.20 SETTLEMENT AGREEMENT AND RELEASE THIS SETTLEMENT AGREEMENT AND RELEASE (hereinafter "Settlement Agreement") is made, entered into and effective as of October 1, 1996, by and between Tesoro E&P Company, L.P., acting through its General Partner, Tesoro Exploration and Production Company (hereinafter "Tesoro"), Coastal Oil & Gas Corporation and Coastal Oil & Gas USA, L.P. (collectively referred to as "Coastal"), and Tennessee Gas Pipeline Company (hereinafter "Tennessee"), as follows: WITNESSETH WHEREAS, Tesoro and Coastal (collectively referred to as "Sellers") are Sellers pursuant to a Gas Purchase and Sales Agreement dated January 16, 1979 by and between Tennessee, as buyer, National Exploration Company and Eton Partnership, as seller, and Gulf Energy & Development Corporation, as gatherer, as amended, covering certain leases in the Bob West Field and Falcon Field, Zapata County, Texas and identified as Tennessee's Contract No. 805 and the Gas Measurement Agreement dated January 16, 1979 by and between Tennessee, National Exploration Company and Eton Partnership, and Gulf Energy & Development Corporation (collectively, the "Contract"); WHEREAS, in 1990 and 1991, Sellers created two 352-acre gas units known as the Tesoro Exploration and Production Company Guerra 352 Acre Gas Unit (Guerra A Unit) and the Tesoro Exploration and Production Company U.S.A.-Guerra 352 Acre Gas Unit (Guerra B Unit) (collectively referred to as "the Guerra Units"); WHEREAS, the Guerra Units are composed of certain acreage and leases, limited to particular depths, including certain of the leases that were originally dedicated to the Contract (such leases insofar as they cover the particular depths in the Guerra Units are referred to as the "Dedicated Leases") and other leases and acreage that were not originally dedicated to the Contract, all of which is more specifically set forth and described in the Declarations of Unit recorded at Vol. 617, p. 550, and at Vol. 626, p. 168, respectively, in the official records of Starr County, Texas, and at Vol. 429, p. 529, and at Vol. 436, p. 210, respectively, in the official records of Zapata County, Texas, together with any amendments thereto (including the Amendment recorded in Vol. 516, p. 263 of the official records of Zapata County, Texas, and at Vol. 719, p. 531 of the official records of Starr County, Texas), which acreage and leases

ITEM 14(a)3, EXHIBIT 10.20 SETTLEMENT AGREEMENT AND RELEASE THIS SETTLEMENT AGREEMENT AND RELEASE (hereinafter "Settlement Agreement") is made, entered into and effective as of October 1, 1996, by and between Tesoro E&P Company, L.P., acting through its General Partner, Tesoro Exploration and Production Company (hereinafter "Tesoro"), Coastal Oil & Gas Corporation and Coastal Oil & Gas USA, L.P. (collectively referred to as "Coastal"), and Tennessee Gas Pipeline Company (hereinafter "Tennessee"), as follows: WITNESSETH WHEREAS, Tesoro and Coastal (collectively referred to as "Sellers") are Sellers pursuant to a Gas Purchase and Sales Agreement dated January 16, 1979 by and between Tennessee, as buyer, National Exploration Company and Eton Partnership, as seller, and Gulf Energy & Development Corporation, as gatherer, as amended, covering certain leases in the Bob West Field and Falcon Field, Zapata County, Texas and identified as Tennessee's Contract No. 805 and the Gas Measurement Agreement dated January 16, 1979 by and between Tennessee, National Exploration Company and Eton Partnership, and Gulf Energy & Development Corporation (collectively, the "Contract"); WHEREAS, in 1990 and 1991, Sellers created two 352-acre gas units known as the Tesoro Exploration and Production Company Guerra 352 Acre Gas Unit (Guerra A Unit) and the Tesoro Exploration and Production Company U.S.A.-Guerra 352 Acre Gas Unit (Guerra B Unit) (collectively referred to as "the Guerra Units"); WHEREAS, the Guerra Units are composed of certain acreage and leases, limited to particular depths, including certain of the leases that were originally dedicated to the Contract (such leases insofar as they cover the particular depths in the Guerra Units are referred to as the "Dedicated Leases") and other leases and acreage that were not originally dedicated to the Contract, all of which is more specifically set forth and described in the Declarations of Unit recorded at Vol. 617, p. 550, and at Vol. 626, p. 168, respectively, in the official records of Starr County, Texas, and at Vol. 429, p. 529, and at Vol. 436, p. 210, respectively, in the official records of Zapata County, Texas, together with any amendments thereto (including the Amendment recorded in Vol. 516, p. 263 of the official records of Zapata County, Texas, and at Vol. 719, p. 531 of the official records of Starr County, Texas), which acreage and leases are collectively referred to herein as "the Unitized Acreage;" WHEREAS, Sellers and Tennessee have had numerous ongoing disputes involving the rights and obligations of the parties under the Contract; WHEREAS, Sellers and Tennessee have litigated certain disputes which were resolved by

the Texas Supreme Court in THE LENAPE RESOURCES CORP. V. TENNESSEE GAS PIPELINE COMPANY, 925 S.W. 2d 565 (Tex. 1996); WHEREAS, Tennessee filed suit, styled TENNESSEE GAS PIPELINE COMPANY V. KCS RESOURCES, INC., TESORO E&P COMPANY, AND COASTAL OIL & GAS CORPORATION, Cause No. 3,510 in the 49th Judicial District Court of Zapata County Texas (hereinafter the "Lawsuit") to litigate certain disputes; WHEREAS, Sellers denied Tennessee's allegations and filed counterclaims in the Lawsuit; WHEREAS, Tennessee, after the decision by the Texas Supreme Court, has asserted additional claims for repayment of moneys previously paid by Tennessee for gas delivered under the Contract; WHEREAS, the Federal Energy Regulatory Commission ("Commission") issued Order No. 636, III FERC Stats & Regs. paragraph 30,939 (1992), which, among other things, requires interstate pipelines that provided bundled sales service to unbundle the sales, transportation, and storage services offered to customers and to provide such

the Texas Supreme Court in THE LENAPE RESOURCES CORP. V. TENNESSEE GAS PIPELINE COMPANY, 925 S.W. 2d 565 (Tex. 1996); WHEREAS, Tennessee filed suit, styled TENNESSEE GAS PIPELINE COMPANY V. KCS RESOURCES, INC., TESORO E&P COMPANY, AND COASTAL OIL & GAS CORPORATION, Cause No. 3,510 in the 49th Judicial District Court of Zapata County Texas (hereinafter the "Lawsuit") to litigate certain disputes; WHEREAS, Sellers denied Tennessee's allegations and filed counterclaims in the Lawsuit; WHEREAS, Tennessee, after the decision by the Texas Supreme Court, has asserted additional claims for repayment of moneys previously paid by Tennessee for gas delivered under the Contract; WHEREAS, the Federal Energy Regulatory Commission ("Commission") issued Order No. 636, III FERC Stats & Regs. paragraph 30,939 (1992), which, among other things, requires interstate pipelines that provided bundled sales service to unbundle the sales, transportation, and storage services offered to customers and to provide such unbundled services on a non-discriminatory basis; WHEREAS, Tennessee has determined that it must terminate, assign or otherwise realign its existing gas supply contracts with producers, including but not limited to the Contract, in connection with implementing the requirements of Order No. 636 in order to provide the unbundled services contemplated by the Commission in Order No. 636 and to mitigate any costs resulting from the realignment of Tennessee's existing gas supply contracts; and WHEREAS, Sellers and Tennessee now desire to reach a full and final settlement and compromise of all matters, claims and causes of action arising under the Contract or which were asserted or could have been asserted by them in the Lawsuit or under the Contract. NOW, THEREFORE, for and in consideration of the mutual covenants, promises and agreements herein contained Sellers and Tennessee hereby agree and stipulate as follows: 1. Tennessee and Sellers agree to settle and compromise all matters, issues, claims, demands, and causes of action, whether known or unknown, which have arisen, resulted from or arise out of or alleged to have arisen, resulted from, or arise out of the Contract or the Lawsuit and agree to terminate the Contract effective as of October 1, 1996 and release each other from the Contract. Tennessee shall have no further obligations under the Contract to Sellers or any obligation to buy gas attributable to Sellers' interests in the Dedicated Leases. Sellers shall have no further obligations under the Contract to Tennessee and shall not be obligated to sell gas attributable to their interests in the Dedicated Leases to Tennessee. In consideration of this Settlement Agreement, Tennessee shall pay to Sellers the aggregate sum of Seventy-Four Million and 00/100 Dollars ($74,000,000.00) (the "Settlement Sum"), by making, pursuant to written 2

wiring instructions timely provided by Sellers, the following wire transfers concurrently with the execution of this Settlement Agreement: Tesoro: $51,800,000.00 Coastal: $22,200,000.00 2. In further consideration of this Settlement, Tennessee grants to Sellers all rights and claims it may have to recover or recoup tax reimbursements paid by Tennessee to Sellers pursuant to the Contract. This grant does not include the right Tennessee may have to any repayment of tax reimbursements paid by Tennessee directly to KCS Resources, Inc. or its predecessors ("KCS") pursuant to the Contract. 3. In further consideration of this Settlement Agreement, Sellers and Tennessee, concurrently with the signing of this Settlement Agreement, agree to execute and deliver the Termination Agreement, a copy of which is attached

wiring instructions timely provided by Sellers, the following wire transfers concurrently with the execution of this Settlement Agreement: Tesoro: $51,800,000.00 Coastal: $22,200,000.00 2. In further consideration of this Settlement, Tennessee grants to Sellers all rights and claims it may have to recover or recoup tax reimbursements paid by Tennessee to Sellers pursuant to the Contract. This grant does not include the right Tennessee may have to any repayment of tax reimbursements paid by Tennessee directly to KCS Resources, Inc. or its predecessors ("KCS") pursuant to the Contract. 3. In further consideration of this Settlement Agreement, Sellers and Tennessee, concurrently with the signing of this Settlement Agreement, agree to execute and deliver the Termination Agreement, a copy of which is attached hereto and identified as Exhibit "A" (the "Termination Agreement"). 4. Tennessee shall immediately dismiss Sellers and Sellers shall immediately dismiss Tennessee from the Lawsuit with prejudice pursuant to the Agreed Order of Dismissal, a copy of which is attached hereto and identified as Exhibit "B". 5. Tesoro represents and warrants to Tennessee, which representations and warranties Tesoro acknowledges are material, are relied on by Tennessee in entering into this Settlement Agreement and shall survive the execution and delivery of this Settlement Agreement, as follows: (a) Tesoro is the sole owner of all interests formerly owned by Tesoro Exploration and Production Company in the Dedicated Leases, the Lawsuit, and the Contract; (b) Except for the assignments to KCS of its back-in interest and that certain Mortgage, Deed of Trust, Assignment of Production, Security Agreement and Financing Statement, dated April 20, 1994, between Tesoro Exploration and Production Company and Texas Commerce Bank National Association, as agent, as subsequently assigned and amended, Tesoro has not made any assignment, conveyance, sublease, or transfer to any other person or entity of any interest in the Dedicated Leases, the Lawsuit, or the Contract; (c) Tesoro is a limited partnership duly organized, and in good standing under the laws of the State of Delaware and that Tesoro Exploration and Production Company is the general partner of Tesoro; (d) Tesoro has the power and authority to enter into and perform this Settlement Agreement, the Agreed Order of Dismissal, and the Termination Agreement; and 3

(e) The execution, delivery and performance by Tesoro of this Settlement Agreement, the Termination Agreement, and Agreed Order of Dismissal have been duly authorized by all requisite partnership authorities, and this Settlement Agreement, the Agreed Order of Dismissal, and the Termination Agreement have been duly and validly executed and delivered on behalf of Tesoro and are legal, valid and binding obligations of Tesoro enforceable against Tesoro in accordance with their terms. 6. Coastal represents and warrants to Tennessee, which representations and warranties Coastal acknowledges are material, are relied on by Tennessee in entering into this Settlement Agreement and shall survive the execution and delivery of this Settlement Agreement, as follows: (a) Coastal is the sole owner of all interests formerly owned by Coastal Oil & Gas Corporation in the Dedicated Leases, the Lawsuit, and the Contract; (b) Except for the assignments to KCS of its back-in interest, Coastal has not made any assignment, conveyance, sublease, or transfer to any other person or entity of any interest in the Dedicated Leases, the Lawsuit, or the Contract;

(e) The execution, delivery and performance by Tesoro of this Settlement Agreement, the Termination Agreement, and Agreed Order of Dismissal have been duly authorized by all requisite partnership authorities, and this Settlement Agreement, the Agreed Order of Dismissal, and the Termination Agreement have been duly and validly executed and delivered on behalf of Tesoro and are legal, valid and binding obligations of Tesoro enforceable against Tesoro in accordance with their terms. 6. Coastal represents and warrants to Tennessee, which representations and warranties Coastal acknowledges are material, are relied on by Tennessee in entering into this Settlement Agreement and shall survive the execution and delivery of this Settlement Agreement, as follows: (a) Coastal is the sole owner of all interests formerly owned by Coastal Oil & Gas Corporation in the Dedicated Leases, the Lawsuit, and the Contract; (b) Except for the assignments to KCS of its back-in interest, Coastal has not made any assignment, conveyance, sublease, or transfer to any other person or entity of any interest in the Dedicated Leases, the Lawsuit, or the Contract; (c) Coastal Oil & Gas USA, L.P. is a limited partnership duly organized, and in good standing under the laws of the State of Delaware and that Coastal Oil & Gas Corporation is the general partner of Coastal Oil & Gas USA, L.P. Coastal Oil & Gas Corporation is a corporation duly organized, and in good standing under the laws of the State of Delaware; (d) Coastal has the power and authority to enter into and perform this Settlement Agreement, the Agreed Order of Dismissal, and the Termination Agreement; and (e) The execution, delivery and performance by Coastal of this Settlement Agreement, the Termination Agreement, and Agreed Order of Dismissal have been duly authorized by all requisite corporate and partnership authorities, and this Settlement Agreement, the Agreed Order of Dismissal, and the Termination Agreement have been duly and validly executed and delivered on behalf of Coastal and are legal, valid and binding obligations of Coastal enforceable against Coastal in accordance with their terms. 7. Tennessee represents and warrants to Sellers, which representations and warranties Tennessee acknowledges are material, are relied on by Sellers in entering into this Settlement Agreement and shall survive the execution and delivery of this Settlement Agreement, as follows: (a) Tennessee is the sole buyer under the Contract and is the sole owner of all rights and obligations of the Buyer under the Contract and is the sole owner of all the claims it has made in the lawsuit; (b) Tennessee has not made any assignment, conveyance, sublease, or transfer to any other person or entity of any interest in the Lawsuit or the Contract; 4

(c) Tennessee is a corporation duly organized, and in good standing under the laws of the State of Delaware; (d) Tennessee has the power and authority to enter into and perform this Settlement Agreement, the Agreed Order of Dismissal, and the Termination Agreement; and (e) The execution, delivery and performance by Tennessee of this Settlement Agreement, the Termination Agreement, and Agreed Order of Dismissal have been duly authorized by all requisite corporate authorities, and this Settlement Agreement, the Agreed Order of Dismissal, and the Termination Agreement have been duly and validly executed and delivered on behalf of Tennessee and are legal, valid and binding obligations of Tennessee enforceable against Tennessee in accordance with their terms. 8. Sellers, for themselves, their affiliates, and their successors and assigns, covenant and agree that all rights and obligations under the Contract are terminated and Sellers' interests under the Contract are released. Sellers agree that their interests in the Dedicated Leases and the leases pooled therewith are not now and will not in the future

(c) Tennessee is a corporation duly organized, and in good standing under the laws of the State of Delaware; (d) Tennessee has the power and authority to enter into and perform this Settlement Agreement, the Agreed Order of Dismissal, and the Termination Agreement; and (e) The execution, delivery and performance by Tennessee of this Settlement Agreement, the Termination Agreement, and Agreed Order of Dismissal have been duly authorized by all requisite corporate authorities, and this Settlement Agreement, the Agreed Order of Dismissal, and the Termination Agreement have been duly and validly executed and delivered on behalf of Tennessee and are legal, valid and binding obligations of Tennessee enforceable against Tennessee in accordance with their terms. 8. Sellers, for themselves, their affiliates, and their successors and assigns, covenant and agree that all rights and obligations under the Contract are terminated and Sellers' interests under the Contract are released. Sellers agree that their interests in the Dedicated Leases and the leases pooled therewith are not now and will not in the future be committed to any other gas purchase agreement under which Tennessee purchases gas without the express written agreement of Tennessee. 9. Tesoro, on behalf of itself, its parent, affiliates, successors, assigns, agents, officers, directors and employees (collectively, the "Tesoro Parties"), forever waives, relieves, acquits, and fully discharges Tennessee, its parent, affiliates, successors, assigns, agents, officers, directors, and employees, including, without limitation, El Paso Energy Corporation, (collectively, the "Tennessee Parties"), of and from any and all claims, demands, actions, causes of action, suits, damages, liabilities or other remedies whatsoever, known or unknown, in law or in equity, whether arising by statute or at common law, that Tesoro now has, had or may hereafter have or which could have been asserted, whether known or unknown, through and including the execution date hereof, arising out of, associated with or related in any way to the Contract or to the claims alleged in the Lawsuit (the "Tesoro Released Claims"). Tesoro acknowledges that the foregoing is a general release and' without limiting the generality thereof, is intended to release and extinguish all of Tesoro's interest in, and rights under, the Tesoro Released Claims. 10. Coastal, on behalf of itself, its parents, affiliates, successors, assigns, agents, officers, directors and employees (collectively, the "Coastal Parties"), forever waives, relieves, acquits, and fully discharges the Tennessee Parties of and from any and all claims, demands, actions, causes of action, suits, damages, liabilities or other remedies whatsoever, known or unknown, in law or in equity, whether arising by statute or at common law, that Coastal now has, had or may hereafter have or which could have been asserted, whether known or unknown, through and including the execution date hereof, arising out of, associated with or related in any way to the Contract or to the claims alleged in the Lawsuit (the "Coastal Released Claims"). Coastal acknowledges that the foregoing is a general release and, without limiting the generality thereof; is intended to release and extinguish all of Coastal's interests in, and rights under, the Coastal Released Claims. 5

11. Tennessee, on behalf of the Tennessee Parties, forever waives, relieves, acquits, and fully discharges the Tesoro Parties and the Coastal Parties of and from any and all claims, demands, actions, causes of action, suits, damages, liabilities or other remedies whatsoever, known or unknown, in law or in equity, whether arising by statute or at common law, that Tennessee now has, had or may hereafter have or which could have been asserted, whether known or unknown, through and including the execution date hereof, arising out of, associated with or related in any way to the Contract or to the claims alleged in the Lawsuit (the "Tennessee Released Claims"). Tennessee acknowledges that the foregoing is a general release and, without limiting the generality thereof; is intended to release and extinguish all of Tennessee's interests in, and rights under, the Tennessee Released Claims. 12. Tesoro agrees to indemnify, defend, and hold harmless the Tennessee Parties from and against all claims, costs, expenses (including, without limitation, attorneys fees), damages and liability whatsoever arising directly or indirectly from or in connection with: (a) any claim by the State of Texas or the Comptroller of the State of Texas for severance taxes (including any penalties and interest) for gas attributable to Tesoro's interest in the Dedicated Leases;

11. Tennessee, on behalf of the Tennessee Parties, forever waives, relieves, acquits, and fully discharges the Tesoro Parties and the Coastal Parties of and from any and all claims, demands, actions, causes of action, suits, damages, liabilities or other remedies whatsoever, known or unknown, in law or in equity, whether arising by statute or at common law, that Tennessee now has, had or may hereafter have or which could have been asserted, whether known or unknown, through and including the execution date hereof, arising out of, associated with or related in any way to the Contract or to the claims alleged in the Lawsuit (the "Tennessee Released Claims"). Tennessee acknowledges that the foregoing is a general release and, without limiting the generality thereof; is intended to release and extinguish all of Tennessee's interests in, and rights under, the Tennessee Released Claims. 12. Tesoro agrees to indemnify, defend, and hold harmless the Tennessee Parties from and against all claims, costs, expenses (including, without limitation, attorneys fees), damages and liability whatsoever arising directly or indirectly from or in connection with: (a) any claim by the State of Texas or the Comptroller of the State of Texas for severance taxes (including any penalties and interest) for gas attributable to Tesoro's interest in the Dedicated Leases; (b) any claim made by any royalty owner or any other non-working interest owner in the Unitized Acreage for any royalty arising from or out of Tesoro's interest in the Dedicated Leases as a result of or in connection with the Contract, this Settlement Agreement, or the payments made by Tennessee hereunder; (c) the breach of any representation, warranty or covenant of Tesoro set forth in this Settlement Agreement; (d) nonperformance by Tesoro of any obligation under this Settlement Agreement, the Agreed Order of Dismissal, or the Termination Agreement; and (e) any claim related to the Contract asserted by any person or entity (other than KCS under the back-in assignments) who claims to have received the assignment, conveyance, license or other transfer from Tesoro of any interest under the Lawsuit, the Contract, the Unitized Acreage, or the Dedicated Leases. 13. Coastal agrees to indemnify, defend, and hold harmless the Tennessee Parties from and against all claims, costs, expenses (including, without limitation, attorneys fees), damages and liability whatsoever arising directly or indirectly from or in connection with: (a) any claim by the State of Texas or the Comptroller of the State of Texas for severance taxes (including any penalties and interest) for gas attributable to Coastal's interest in the Dedicated Leases; 6

(b) any claim made by any royalty owner or any other non-working interest owner in the Unitized Acreage for any royalty arising from or out of Coastal's interests in the Dedicated Leases as a result of or in connection with the Contract, this Settlement Agreement, or the payments made by Tennessee hereunder; (c) the breach of any representation, warranty or covenant of Coastal set forth in this Settlement Agreement; (d) nonperformance by Coastal of any obligation under this Settlement Agreement, the Agreed Order of Dismissal, or the Termination Agreement; and (e) any claim related to the Contract asserted by any person or entity who claims to have received the assignment, conveyance, license or other transfer from Coastal of any interest under the Lawsuit, the Contract, the Unitized Acreage, or the Dedicated Leases. 14. Tennessee agrees to indemnify, defend, and hold harmless the Tesoro Parties and Coastal Parties from and against all claims, costs, expenses (including, without limitation, attorneys fees), damages and liability whatsoever arising directly or indirectly from or in connection with: (a) any claim by Gulf Energy Pipeline Company, its parents, affiliates, successors, assigns, agents, officers,

(b) any claim made by any royalty owner or any other non-working interest owner in the Unitized Acreage for any royalty arising from or out of Coastal's interests in the Dedicated Leases as a result of or in connection with the Contract, this Settlement Agreement, or the payments made by Tennessee hereunder; (c) the breach of any representation, warranty or covenant of Coastal set forth in this Settlement Agreement; (d) nonperformance by Coastal of any obligation under this Settlement Agreement, the Agreed Order of Dismissal, or the Termination Agreement; and (e) any claim related to the Contract asserted by any person or entity who claims to have received the assignment, conveyance, license or other transfer from Coastal of any interest under the Lawsuit, the Contract, the Unitized Acreage, or the Dedicated Leases. 14. Tennessee agrees to indemnify, defend, and hold harmless the Tesoro Parties and Coastal Parties from and against all claims, costs, expenses (including, without limitation, attorneys fees), damages and liability whatsoever arising directly or indirectly from or in connection with: (a) any claim by Gulf Energy Pipeline Company, its parents, affiliates, successors, assigns, agents, officers, directors and employees (the "Gulf Parties") arising from or in connection with the Contract; provided, however, if Tennessee, Tesoro or Coastal is held to be liable to the Gulf Parties for such claim pursuant to either a judgement or a settlement, then Tesoro and Coastal shall be liable for 565/4100 of the amount of the judgement or settlement up to a maximum liability of Tesoro and Coastal, collectively, of Five Hundred Sixty Five Thousand Dollars ($565,000.00) and Tennessee shall be liable for the remaining portion; (b) any claim made by any customer of Tennessee for any refund, damages or other compensation as a result of or in connection with the Contract, this Settlement Agreement, or the payments made by Tennessee hereunder; (c) the breach of any representation, warranty or covenant of Tennessee set forth in this Settlement Agreement; (d) nonperformance by Tennessee of any obligation under this Settlement Agreement, the Agreed Order of Dismissal, or the Termination Agreement; and (e) any claim related to the Contract asserted by any person or entity who claims to have received the assignment, conveyance, license or other transfer from Tennessee of any interest under the Lawsuit or the Contract. 15. This Settlement Agreement and its attachments, including but not limited to the 7

Termination Agreement, embody the complete and entire agreement among the parties concerning its subject matter and supersede any prior oral or written representations, agreements or understandings or any contemporaneous oral understandings, representations or agreements. This Settlement Agreement may not be amended except in writing signed by all parties. Each party shall bear its own costs and attorneys' fees in connection with the preparation, negotiation, review and documentation of this Settlement Agreement and its various attachments. The parties may execute this Settlement Agreement in counterparts, by telecopy, which they shall confirm by promptly furnishing written originals to each of the other parties. Counterparts when executed by all parties shall constitute a complete Settlement Agreement as if each party had executed a single document. 16. This Settlement Agreement shall extend to, be binding upon, and inure to the benefit of the parties and their respective successors and assigns; provided, however, that any assignment shall not release a party of its obligations under this Settlement Agreement. 17. This Settlement Agreement shall be construed interpreted and enforced in accordance with the laws of the State of Texas. Venue for any claim arising out of this Settlement Agreement shall be Harris County, Texas. 18. Nothing in this Settlement Agreement or in the Termination Agreement shall (i) in any way constitute an

Termination Agreement, embody the complete and entire agreement among the parties concerning its subject matter and supersede any prior oral or written representations, agreements or understandings or any contemporaneous oral understandings, representations or agreements. This Settlement Agreement may not be amended except in writing signed by all parties. Each party shall bear its own costs and attorneys' fees in connection with the preparation, negotiation, review and documentation of this Settlement Agreement and its various attachments. The parties may execute this Settlement Agreement in counterparts, by telecopy, which they shall confirm by promptly furnishing written originals to each of the other parties. Counterparts when executed by all parties shall constitute a complete Settlement Agreement as if each party had executed a single document. 16. This Settlement Agreement shall extend to, be binding upon, and inure to the benefit of the parties and their respective successors and assigns; provided, however, that any assignment shall not release a party of its obligations under this Settlement Agreement. 17. This Settlement Agreement shall be construed interpreted and enforced in accordance with the laws of the State of Texas. Venue for any claim arising out of this Settlement Agreement shall be Harris County, Texas. 18. Nothing in this Settlement Agreement or in the Termination Agreement shall (i) in any way constitute an admission of liability by Tennessee or Sellers with respect to the Lawsuit or any matters alleged therein, or (ii) in any way constitute an admission against interest of either Tennessee or Sellers. Executed this 24th day of December, 1996.
TENNESSEE GAS PIPELINE COMPANY COASTAL OIL & GAS USA, L.P. By Coastal Oil & Gas Corporation its Managing Partner By: /s/ R. D. ERSKINE ------------------------------Name: R. D. Erskine ---------------------------Title: Sr. Vice President ---------------------------COASTAL OIL & GAS CORPORATION

By: /s/ JOHN W. SOMERHALDER II --------------------------------Name: John W. Somerhalder II ------------------------------Title: President -----------------------------TESORO E&P COMPANY, L.P. By Tesoro Exploration and Production Company its General Partner By: /s/ BRUCE A. SMITH -------------------------------Name: Bruce A. Smith ----------------------------Title: Chairman of the Board -----------------------------

By: /s/ R. D. ERSKINE -------------------------------Name: R. D. Erskine ----------------------------Title: Sr. Vice President -----------------------------

8

ACKNOWLEDGMENTS
STATE OF TEXAS COUNTY OF HARRIS ) ) )

This instrument was acknowledged before me on this 9th day of January, 1997, by John W. Somerhalder II, President of Tennessee Gas Pipeline Company, a Delaware corporation, on behalf of said company.
[SEAL] /s/ ANN C. MEYER --------------------------------------------Notary Public in and for the State of Texas

ACKNOWLEDGMENTS
STATE OF TEXAS COUNTY OF HARRIS ) ) )

This instrument was acknowledged before me on this 9th day of January, 1997, by John W. Somerhalder II, President of Tennessee Gas Pipeline Company, a Delaware corporation, on behalf of said company.
[SEAL] /s/ ANN C. MEYER --------------------------------------------Notary Public in and for the State of Texas

STATE OF TEXAS COUNTY OF BEXAR

) ) )

This instrument was acknowledged before me on this 13th day of January, 1997, by Bruce A. Smith, Chairman of the Board of Tesoro Exploration and Production Company, a Delaware corporation, general partner of Tesoro E&P Company, L.P., a limited partnership, on behalf of said partnership.
[SEAL] /s/ LINDA IDEN --------------------------------------------Notary Public in and for the State of Texas

STATE OF TEXAS COUNTY OF HARRIS

) ) )

This instrument was acknowledged before me on this 23rd day of December, 1996 by R. D. Erskine, Sr. Vice President of Coastal Oil & Gas Corporation, a Delaware corporation, on behalf of said corporation.
[SEAL] /s/ SHIRLEY A. COOPER --------------------------------------------Notary Public in and for the State of Texas

9
STATE OF TEXAS COUNTY OF HARRIS ) ) )

This instrument was acknowledged before me on this 23rd day of December, 1996 by R. D. Erskine, Sr. Vice President of Coastal Oil & Gas Corporation, a Delaware corporation, general partner of Coastal Oil & Gas of Texas, L.P., a limited partnership, on behalf of said partnership.
[SEAL] /s/ SHIRLEY A. COOPER --------------------------------------------Notary Public in and for the State of Texas

10

STATE OF TEXAS COUNTY OF HARRIS

) ) )

This instrument was acknowledged before me on this 23rd day of December, 1996 by R. D. Erskine, Sr. Vice President of Coastal Oil & Gas Corporation, a Delaware corporation, general partner of Coastal Oil & Gas of Texas, L.P., a limited partnership, on behalf of said partnership.
[SEAL] /s/ SHIRLEY A. COOPER --------------------------------------------Notary Public in and for the State of Texas

10

EXHIBIT "A" TERMINATION AGREEMENT THIS TERMINATION AGREEMENT (hereinafter "Termination Agreement") is made, entered into and effective as of October 1, 1996, by and between Tesoro E&P Company, L.P., acting through its General Partner, Tesoro Exploration and Production Company (hereinafter "Tesoro"), Coastal Oil & Gas Corporation and Coastal Oil & Gas USA, L.P. (collectively referred to as "Coastal"), and Tennessee Gas Pipeline Company (hereinafter "Tennessee"), as follows: WITNESSETH WHEREAS, Tesoro and Coastal (collectively referred to as "Sellers") are Sellers pursuant to a Gas Purchase and Sales Agreement dated January 16, 1979 by and between Tennessee, as buyer, National Exploration Company and Eton Partnership, as seller, and Gulf Energy & Development, as gatherer, covering certain leases in the Bob West Field and Falcon Field, Zapata County, Texas and identified as Tennessee's Contract No. 805 (the "Contract"); WHEREAS, in 1990 and 1991, Sellers created two 352-acre gas units known as the Tesoro Exploration and Production Company Guerra 352 Acre Gas Unit (Guerra A Unit) and the Tesoro Exploration and Production Company U.S.A.-Guerra 352 Acre Gas Unit (Guerra B Unit) (collectively referred to as "the Guerra Units"); WHEREAS, the Guerra Units are composed of certain acreage and leases, limited to particular depths, including certain of the leases that were originally dedicated to the Contract (such leases insofar as they cover the particular depths in the Guerra Units are referred to as the "Dedicated Leases") and other leases and acreage that were not originally dedicated to the Contract, all of which is more specifically set forth and described in the Declarations of Unit recorded at Vol. 617, p. 550, and at Vol. 626, p. 168, respectively, in the official records of Starr County, Texas, and at Vol. 429, p. 529, and at Vol. 436, p. 210, respectively, in the official records of Zapata County, Texas, together with any amendments thereto (including the Amendment recorded in Vol. 516, p. 263 of the official records of Zapata County, Texas, and at Vol. 719, p. 531 of the official public records of Starr County, Texas), which acreage and leases are collectively referred to herein as "the Unitized Acreage;" and WHEREAS, the Federal Energy Regulatory Commission ("Commission") issued Order No. 636, III FERC Stats & Regs. paragraph 30,939 (1992), which, among other things, requires interstate pipelines that provided bundled sales service to unbundle the sales, transportation, and storage services offered to customers and to provide such unbundled services on a non-discriminatory basis; 1

WHEREAS, Tennessee has determined that it must terminate, assign or otherwise realign its existing gas supply contracts with producers, including but not limited to the Contract, in connection with implementing the

EXHIBIT "A" TERMINATION AGREEMENT THIS TERMINATION AGREEMENT (hereinafter "Termination Agreement") is made, entered into and effective as of October 1, 1996, by and between Tesoro E&P Company, L.P., acting through its General Partner, Tesoro Exploration and Production Company (hereinafter "Tesoro"), Coastal Oil & Gas Corporation and Coastal Oil & Gas USA, L.P. (collectively referred to as "Coastal"), and Tennessee Gas Pipeline Company (hereinafter "Tennessee"), as follows: WITNESSETH WHEREAS, Tesoro and Coastal (collectively referred to as "Sellers") are Sellers pursuant to a Gas Purchase and Sales Agreement dated January 16, 1979 by and between Tennessee, as buyer, National Exploration Company and Eton Partnership, as seller, and Gulf Energy & Development, as gatherer, covering certain leases in the Bob West Field and Falcon Field, Zapata County, Texas and identified as Tennessee's Contract No. 805 (the "Contract"); WHEREAS, in 1990 and 1991, Sellers created two 352-acre gas units known as the Tesoro Exploration and Production Company Guerra 352 Acre Gas Unit (Guerra A Unit) and the Tesoro Exploration and Production Company U.S.A.-Guerra 352 Acre Gas Unit (Guerra B Unit) (collectively referred to as "the Guerra Units"); WHEREAS, the Guerra Units are composed of certain acreage and leases, limited to particular depths, including certain of the leases that were originally dedicated to the Contract (such leases insofar as they cover the particular depths in the Guerra Units are referred to as the "Dedicated Leases") and other leases and acreage that were not originally dedicated to the Contract, all of which is more specifically set forth and described in the Declarations of Unit recorded at Vol. 617, p. 550, and at Vol. 626, p. 168, respectively, in the official records of Starr County, Texas, and at Vol. 429, p. 529, and at Vol. 436, p. 210, respectively, in the official records of Zapata County, Texas, together with any amendments thereto (including the Amendment recorded in Vol. 516, p. 263 of the official records of Zapata County, Texas, and at Vol. 719, p. 531 of the official public records of Starr County, Texas), which acreage and leases are collectively referred to herein as "the Unitized Acreage;" and WHEREAS, the Federal Energy Regulatory Commission ("Commission") issued Order No. 636, III FERC Stats & Regs. paragraph 30,939 (1992), which, among other things, requires interstate pipelines that provided bundled sales service to unbundle the sales, transportation, and storage services offered to customers and to provide such unbundled services on a non-discriminatory basis; 1

WHEREAS, Tennessee has determined that it must terminate, assign or otherwise realign its existing gas supply contracts with producers, including but not limited to the Contract, in connection with implementing the requirements of Order No. 636 in order to provide the unbundled services contemplated by the Commission in Order No. 636 and to mitigate any costs resulting from the realignment of Tennessee's existing gas supply contracts. NOW, THEREFORE, for and in consideration of the mutual covenants, promises and agreements herein contained Sellers and Tennessee hereby agree to terminate the Contract and do hereby terminate the Contract as between Sellers and Tennessee effective as of October 1, 1996 insofar as the Contract covers Sellers' interest. Executed this ____ day of ________, 199__.
TENNESSEE GAS PIPELINE COMPANY COASTAL OIL & GAS USA, L.P. By Coastal Oil & Gas Corporation its Managing Partner By: -------------------------------Name: ------------------------------

By: --------------------------------Name: -------------------------------

WHEREAS, Tennessee has determined that it must terminate, assign or otherwise realign its existing gas supply contracts with producers, including but not limited to the Contract, in connection with implementing the requirements of Order No. 636 in order to provide the unbundled services contemplated by the Commission in Order No. 636 and to mitigate any costs resulting from the realignment of Tennessee's existing gas supply contracts. NOW, THEREFORE, for and in consideration of the mutual covenants, promises and agreements herein contained Sellers and Tennessee hereby agree to terminate the Contract and do hereby terminate the Contract as between Sellers and Tennessee effective as of October 1, 1996 insofar as the Contract covers Sellers' interest. Executed this ____ day of ________, 199__.
TENNESSEE GAS PIPELINE COMPANY COASTAL OIL & GAS USA, L.P. By Coastal Oil & Gas Corporation its Managing Partner By: -------------------------------Name: -----------------------------Title: -----------------------------

By: --------------------------------Name: ------------------------------Title: ------------------------------

TESORO E&P COMPANY, L.P. By Tesoro Exploration and Production Company, its General Partner By: --------------------------------Name: ------------------------------Title: ------------------------------

COASTAL OIL & GAS CORPORATION

By: -------------------------------Name: -----------------------------Title: -----------------------------

2

ACKNOWLEDGMENTS
STATE OF TEXAS COUNTY OF HARRIS ) ) )

This instrument was acknowledged before me on this _____ day of _______________, 199__, by __________________________________, ________________________________ of Tennessee Gas Pipeline Company, a _______________ corporation, on behalf of said company. [SEAL] Notary Public in and for the State of Texas STATE OF TEXAS ) ) COUNTY OF __________ ) This instrument was acknowledged before me on this _____ day of _______________, 199__, by __________________________________, ________________________________ of Tesoro Exploration and Production Company, a Delaware corporation, general partner of Tesoro E&P Company, L.P., a limited

ACKNOWLEDGMENTS
STATE OF TEXAS COUNTY OF HARRIS ) ) )

This instrument was acknowledged before me on this _____ day of _______________, 199__, by __________________________________, ________________________________ of Tennessee Gas Pipeline Company, a _______________ corporation, on behalf of said company. [SEAL] Notary Public in and for the State of Texas STATE OF TEXAS ) ) COUNTY OF __________ ) This instrument was acknowledged before me on this _____ day of _______________, 199__, by __________________________________, ________________________________ of Tesoro Exploration and Production Company, a Delaware corporation, general partner of Tesoro E&P Company, L.P., a limited partnership, on behalf of said partnership. [SEAL] Notary Public in and for the State of Texas
STATE OF TEXAS COUNTY OF HARRIS ) ) )

This instrument was acknowledged before me on this _____ day of _____________, 199__ by ________________________, Vice President of Coastal Oil & Gas Corporation, a Delaware corporation, on behalf of said corporation. [SEAL] Notary Public in and for the State of Texas 3
STATE OF TEXAS COUNTY OF HARRIS ) ) )

This instrument was acknowledged before me on this _____ day of _____________, 199__ by ________________________, Vice President of Coastal Oil & Gas Corporation, a Delaware corporation, general partner of Coastal Oil & Gas of Texas, L.P., a limited partnership, on behalf of said partnership. [SEAL] Notary Public in and for the State of Texas 4

STATE OF TEXAS COUNTY OF HARRIS

) ) )

This instrument was acknowledged before me on this _____ day of _____________, 199__ by ________________________, Vice President of Coastal Oil & Gas Corporation, a Delaware corporation, general partner of Coastal Oil & Gas of Texas, L.P., a limited partnership, on behalf of said partnership. [SEAL] Notary Public in and for the State of Texas 4

EXHIBIT "B"
No. 3,510 TENNESSEE GAS PIPELINE COMPANY Plaintiff, v. KCS RESOURCES, INC. TESORO E&P COMPANY, and COASTAL OIL & GAS CORPORATION, Defendants. ) ) ) ) ) ) ) ) ) ) ) IN THE DISTRICT COURT OF

ZAPATA COUNTY, TEXAS

49TH JUDICIAL DISTRICT

JOINT MOTION TO DISMISS TO THE HONORABLE COURT: Tennessee Gas Pipeline Company ("Tennessee"), plaintiff, and Tesoro E&P Company L.P. ("Tesoro"), and Coastal Oil & Gas Corporation ("Coastal") defendants, move the Court to dismiss the claims each of them has asserted against the other in this action because all matters of fact and things in controversy between Tennessee and Tesoro and Coastal have been fully and finally compromised and settled. WHEREFORE, plaintiff Tennessee Gas Pipeline Company and Tesoro and Coastal request that the Court dismiss the claims asserted by Tennessee against Tesoro and Coastal with prejudice and dismiss the claims asserted by Tesoro and Coastal against Tennessee with prejudice, each party to bear its own costs. Respectfully submitted, SUSMAN GODFREY L.L.P. By: Mark L.D. Wawro Texas State Bar No. 20988275 Charles R. Eskridge III Texas State Bar No. 06666350

EXHIBIT "B" 1000 Louisiana Street, Suite 5100 Houston, Texas 77002-5096 Telephone: 713-651-9366 Facsimile: 713-653-7897

EXHIBIT "B"
No. 3,510 TENNESSEE GAS PIPELINE COMPANY Plaintiff, v. KCS RESOURCES, INC. TESORO E&P COMPANY, and COASTAL OIL & GAS CORPORATION, Defendants. ) ) ) ) ) ) ) ) ) ) ) IN THE DISTRICT COURT OF

ZAPATA COUNTY, TEXAS

49TH JUDICIAL DISTRICT

JOINT MOTION TO DISMISS TO THE HONORABLE COURT: Tennessee Gas Pipeline Company ("Tennessee"), plaintiff, and Tesoro E&P Company L.P. ("Tesoro"), and Coastal Oil & Gas Corporation ("Coastal") defendants, move the Court to dismiss the claims each of them has asserted against the other in this action because all matters of fact and things in controversy between Tennessee and Tesoro and Coastal have been fully and finally compromised and settled. WHEREFORE, plaintiff Tennessee Gas Pipeline Company and Tesoro and Coastal request that the Court dismiss the claims asserted by Tennessee against Tesoro and Coastal with prejudice and dismiss the claims asserted by Tesoro and Coastal against Tennessee with prejudice, each party to bear its own costs. Respectfully submitted, SUSMAN GODFREY L.L.P. By: Mark L.D. Wawro Texas State Bar No. 20988275 Charles R. Eskridge III Texas State Bar No. 06666350

EXHIBIT "B" 1000 Louisiana Street, Suite 5100 Houston, Texas 77002-5096 Telephone: 713-651-9366 Facsimile: 713-653-7897 Attorneys for Plaintiff Tennessee Gas Pipeline Company SCOTT, DOUGLASS, LUTON & McCONNICO, L.L.P. By: Elizabeth N. Miller State Bar No. 14071100 Jane Webre State Bar No. 21050060 600 Congress Avenue, Suite 1500 Austin, Texas 78701-3234 Telephone: 512-495-6300 Facsimile: 512-474-0731 Attorney for Defendants Tesoro E&P Company L.P. Coastal Oil & Gas Corporation

EXHIBIT "B" 1000 Louisiana Street, Suite 5100 Houston, Texas 77002-5096 Telephone: 713-651-9366 Facsimile: 713-653-7897 Attorneys for Plaintiff Tennessee Gas Pipeline Company SCOTT, DOUGLASS, LUTON & McCONNICO, L.L.P. By: Elizabeth N. Miller State Bar No. 14071100 Jane Webre State Bar No. 21050060 600 Congress Avenue, Suite 1500 Austin, Texas 78701-3234 Telephone: 512-495-6300 Facsimile: 512-474-0731 Attorney for Defendants Tesoro E&P Company L.P. Coastal Oil & Gas Corporation 2

EXHIBIT "B"
No. 3,510 TENNESSEE GAS PIPELINE COMPANY Plaintiff, v. KCS RESOURCES, INC. TESORO E&P COMPANY, and COASTAL OIL & GAS CORPORATION, Defendants. ) ) ) ) ) ) ) ) ) ) ) IN THE DISTRICT COURT OF

ZAPATA COUNTY, TEXAS

49TH JUDICIAL DISTRICT

AGREED ORDER OF DISMISSAL On _______________, 199__, this Court heard the Joint Motion of Tennessee Gas Pipeline Company, plaintiff, and Tesoro E&P Company L.P. ("Tesoro"), and Coastal Oil & Gas Corporation ("Coastal"), defendants, seeking dismissal of the claims each of them has asserted against the other with prejudice. The Court finds that all matters in dispute between Tennessee Gas Pipeline Company and Tesoro and Coastal have been fully and finally compromised and settled. IT IS, THEREFORE, ORDERED that the claims asserted by Tennessee Gas Pipeline Company against Tesoro and Coastal be and are hereby dismissed with prejudice to the rights of Tennessee to re-file the claims or any part of them against Tesoro and Coastal. IT IS FURTHER ORDERED that the claims asserted by defendants against Tennessee Gas Pipeline Company be and are dismissed with prejudice to the rights of Tesoro and Coastal to re-file the claims or any part of them against Tennessee. Each party is to bear its own costs.

EXHIBIT "B"
No. 3,510 TENNESSEE GAS PIPELINE COMPANY Plaintiff, v. KCS RESOURCES, INC. TESORO E&P COMPANY, and COASTAL OIL & GAS CORPORATION, Defendants. ) ) ) ) ) ) ) ) ) ) ) IN THE DISTRICT COURT OF

ZAPATA COUNTY, TEXAS

49TH JUDICIAL DISTRICT

AGREED ORDER OF DISMISSAL On _______________, 199__, this Court heard the Joint Motion of Tennessee Gas Pipeline Company, plaintiff, and Tesoro E&P Company L.P. ("Tesoro"), and Coastal Oil & Gas Corporation ("Coastal"), defendants, seeking dismissal of the claims each of them has asserted against the other with prejudice. The Court finds that all matters in dispute between Tennessee Gas Pipeline Company and Tesoro and Coastal have been fully and finally compromised and settled. IT IS, THEREFORE, ORDERED that the claims asserted by Tennessee Gas Pipeline Company against Tesoro and Coastal be and are hereby dismissed with prejudice to the rights of Tennessee to re-file the claims or any part of them against Tesoro and Coastal. IT IS FURTHER ORDERED that the claims asserted by defendants against Tennessee Gas Pipeline Company be and are dismissed with prejudice to the rights of Tesoro and Coastal to re-file the claims or any part of them against Tennessee. Each party is to bear its own costs. SIGNED this _____ day of ___________________, 199___. JUDGE PRESIDING

EXHIBIT "B" APPROVED: SUSMAN GODFREY L.L.P. By: Mark L.D. Wawro Texas State Bar No. 20988275 Charles R. Eskridge III Texas State Bar No. 06666350 1000 Louisiana Street, Suite 5100 Houston, Texas 77002-5096 Telephone: 713-651-9366 Facsimile: 713-653-7897 Attorneys for Plaintiff Tennessee Gas Pipeline Company SCOTT, DOUGLASS, LUTON & McCONNICO, L.L.P.

EXHIBIT "B" APPROVED: SUSMAN GODFREY L.L.P. By: Mark L.D. Wawro Texas State Bar No. 20988275 Charles R. Eskridge III Texas State Bar No. 06666350 1000 Louisiana Street, Suite 5100 Houston, Texas 77002-5096 Telephone: 713-651-9366 Facsimile: 713-653-7897 Attorneys for Plaintiff Tennessee Gas Pipeline Company SCOTT, DOUGLASS, LUTON & McCONNICO, L.L.P. By: Elizabeth N. Miller State Bar No. 14071100 Jane Webre State Bar No. 21050060 600 Congress Avenue, Suite 1500 Austin, Texas 78701-3234 Telephone: 512-495-6300 Facsimile: 512-474-0731 Attorneys for Defendants Tesoro E&P Company L.P. Coastal Oil & Gas Corporation 2

ITEM 14(a)3, EXHIBIT 10.21 TERMINATION AGREEMENT THIS TERMINATION AGREEMENT (hereinafter "Termination Agreement") is made, entered into and effective as of October 1, 1996, by and between Tesoro E&P Company, L.P., acting through its General Partner, Tesoro Exploration and Production Company (hereinafter "Tesoro"), Coastal Oil & Gas Corporation and Coastal Oil & Gas USA, L.P. (collectively referred to as "Coastal"), and Tennessee Gas Pipeline Company (hereinafter "Tennessee"), as follows: WITNESSETH WHEREAS, Tesoro and Coastal (collectively referred to as "Sellers") are Sellers pursuant to a Gas Purchase and Sales Agreement dated January 16, 1979 by and between Tennessee, as buyer, National Exploration Company and Eton Partnership, as seller, and Gulf Energy & Development, as gatherer, covering certain leases in the Bob West Field and Falcon Field, Zapata County, Texas and identified as Tennessee's Contract No. 805 (the "Contract"); WHEREAS, in 1990 and 1991, Sellers created two 352-acre gas units known as the Tesoro Exploration and Production Company Guerra 352 Acre Gas Unit (Guerra A Unit) and the Tesoro Exploration and Production

ITEM 14(a)3, EXHIBIT 10.21 TERMINATION AGREEMENT THIS TERMINATION AGREEMENT (hereinafter "Termination Agreement") is made, entered into and effective as of October 1, 1996, by and between Tesoro E&P Company, L.P., acting through its General Partner, Tesoro Exploration and Production Company (hereinafter "Tesoro"), Coastal Oil & Gas Corporation and Coastal Oil & Gas USA, L.P. (collectively referred to as "Coastal"), and Tennessee Gas Pipeline Company (hereinafter "Tennessee"), as follows: WITNESSETH WHEREAS, Tesoro and Coastal (collectively referred to as "Sellers") are Sellers pursuant to a Gas Purchase and Sales Agreement dated January 16, 1979 by and between Tennessee, as buyer, National Exploration Company and Eton Partnership, as seller, and Gulf Energy & Development, as gatherer, covering certain leases in the Bob West Field and Falcon Field, Zapata County, Texas and identified as Tennessee's Contract No. 805 (the "Contract"); WHEREAS, in 1990 and 1991, Sellers created two 352-acre gas units known as the Tesoro Exploration and Production Company Guerra 352 Acre Gas Unit (Guerra A Unit) and the Tesoro Exploration and Production Company U.S.A.-Guerra 352 Acre Gas Unit (Guerra B Unit) (collectively referred to as "the Guerra Units"); WHEREAS, the Guerra Units are composed of certain acreage and leases, limited to particular depths, including certain of the leases that were originally dedicated to the Contract (such leases insofar as they cover the particular depths in the Guerra Units are referred to as the "Dedicated Leases") and other leases and acreage that were not originally dedicated to the Contract, all of which is more specifically set forth and described in the Declarations of Unit recorded at Vol. 617, p. 550, and at Vol. 626, p. 168, respectively, in the official records of Starr County, Texas, and at Vol. 429, p. 529, and at Vol. 436, p. 210, respectively, in the official records of Zapata County, Texas, together with any amendments thereto (including the Amendment recorded in Vol. 516, p. 263 of the official records of Zapata County, Texas, and at Vol. 719, p. 531 of the official public records of Starr County, Texas), which acreage and leases are collectively referred to herein as "the Unitized Acreage;" and WHEREAS, the Federal Energy Regulatory Commission ("Commission") issued Order No. 636, III FERC Stats & Regs. paragraph 30,939 (1992), which, among other things, requires interstate pipelines that provided bundled sales service to unbundle the sales, transportation, and storage services offered to customers and to provide such unbundled services on a non-discriminatory basis; 1

WHEREAS, Tennessee has determined that it must terminate, assign or otherwise realign its existing gas supply contracts with producers, including but not limited to the Contract, in connection with implementing the requirements of Order No. 636 in order to provide the unbundled services contemplated by the Commission in Order No. 636 and to mitigate any costs resulting from the realignment of Tennessee's existing gas supply contracts. NOW, THEREFORE, for and in consideration of the mutual covenants, promises and agreements herein contained Sellers and Tennessee hereby agree to terminate the Contract and do hereby terminate the Contract as between Sellers and Tennessee effective as of October 1, 1996 insofar as the Contract covers Sellers' interest. Executed this 24th day of December, 1996.
TENNESSEE GAS PIPELINE COMPANY COASTAL OIL & GAS USA, L.P. By Coastal Oil & Gas Corporation its Managing Partner

By: /s/ JOHN W. SOMERHALDER II

By: /s/ R. D. ERSKINE

WHEREAS, Tennessee has determined that it must terminate, assign or otherwise realign its existing gas supply contracts with producers, including but not limited to the Contract, in connection with implementing the requirements of Order No. 636 in order to provide the unbundled services contemplated by the Commission in Order No. 636 and to mitigate any costs resulting from the realignment of Tennessee's existing gas supply contracts. NOW, THEREFORE, for and in consideration of the mutual covenants, promises and agreements herein contained Sellers and Tennessee hereby agree to terminate the Contract and do hereby terminate the Contract as between Sellers and Tennessee effective as of October 1, 1996 insofar as the Contract covers Sellers' interest. Executed this 24th day of December, 1996.
TENNESSEE GAS PIPELINE COMPANY COASTAL OIL & GAS USA, L.P. By Coastal Oil & Gas Corporation its Managing Partner

By: /s/ JOHN W. SOMERHALDER II --------------------------------Name: John W. Somerhalder II -----------------------------Title: President ------------------------------

By: /s/ R. D. ERSKINE -------------------------------Name: R.D. Erskine ----------------------------Title: V.P. Production -----------------------------

TESORO E&P COMPANY, L.P. By Tesoro Exploration and Production Company, its General Partner By: /s/ BRUCE A. SMITH --------------------------------Name: Bruce A. Smith -----------------------------Title: Chairman of the Board ------------------------------

COASTAL OIL & GAS CORPORATION

By: /s/ R. D. ERSKINE -------------------------------Name: R. D. Erskine ----------------------------Title: V. P. Production -----------------------------

2

ACKNOWLEDGMENTS
STATE OF TEXAS COUNTY OF HARRIS ) ) )

This instrument was acknowledged before me on this 9th day of January, 1997, by John W. Somerhalder II, President of Tennessee Gas Pipeline Company, a Delaware corporation, on behalf of said company.
[SEAL] /s/ ANN C. MEYER --------------------------------------------Notary Public in and for the State of Texas

STATE OF TEXAS COUNTY OF BEXAR

) ) )

This instrument was acknowledged before me on this 13th day of January, 1997, by Bruce A. Smith, Chairman of the Board of Tesoro Exploration and Production Company, a Delaware corporation, general partner of

ACKNOWLEDGMENTS
STATE OF TEXAS COUNTY OF HARRIS ) ) )

This instrument was acknowledged before me on this 9th day of January, 1997, by John W. Somerhalder II, President of Tennessee Gas Pipeline Company, a Delaware corporation, on behalf of said company.
[SEAL] /s/ ANN C. MEYER --------------------------------------------Notary Public in and for the State of Texas

STATE OF TEXAS COUNTY OF BEXAR

) ) )

This instrument was acknowledged before me on this 13th day of January, 1997, by Bruce A. Smith, Chairman of the Board of Tesoro Exploration and Production Company, a Delaware corporation, general partner of Tesoro E&P Company, L.P., a limited partnership, on behalf of said partnership.
[SEAL] /s/ LINDA IDEN --------------------------------------------Notary Public in and for the State of Texas

STATE OF TEXAS COUNTY OF HARRIS

) ) )

This instrument was acknowledged before me on this 23rd day of December, 1996 by R.D. Erskine, Sr. Vice President of Coastal Oil & Gas Corporation, a Delaware corporation, on behalf of said corporation.
[SEAL] /s/ SHIRLEY A. COOPER ------------------------------------------Notary Public in and for the State of Texas

3
STATE OF TEXAS COUNTY OF HARRIS ) ) )

This instrument was acknowledged before me on this 23rd day of December, 1996 by R. D. Erskine, Sr. Vice President of Coastal Oil & Gas Corporation, a Delaware corporation, general partner of Coastal Oil & Gas of Texas, L.P., a limited partnership, on behalf of said partnership.
[SEAL] /s/ SHIRLEY A. COOPER --------------------------------------------Notary Public in and for the State of Texas

4

STATE OF TEXAS COUNTY OF HARRIS

) ) )

This instrument was acknowledged before me on this 23rd day of December, 1996 by R. D. Erskine, Sr. Vice President of Coastal Oil & Gas Corporation, a Delaware corporation, general partner of Coastal Oil & Gas of Texas, L.P., a limited partnership, on behalf of said partnership.
[SEAL] /s/ SHIRLEY A. COOPER --------------------------------------------Notary Public in and for the State of Texas

4

ITEM 14(A)3, EXHIBIT 11 TESORO PETROLEUM CORPORATION AND SUBSIDIARIES INFORMATION SUPPORTING EARNINGS PER SHARE COMPUTATIONS (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31, ---------------------------1996 1995 1994 -----------------PRIMARY EARNINGS PER SHARE COMPUTATION Earnings before extraordinary loss on extinguishment of debt...................................................... Extraordinary loss on extinguishment of debt, net of income tax benefit............................................... Net earnings................................................ Dividend requirements on preferred stock.................... Net earnings applicable to common stock..................... Average outstanding common shares........................... Average outstanding common equivalent shares................ Average outstanding common and common equivalent shares... Primary Earnings Per Share: Earnings before extraordinary loss on extinguishment of debt................................................... Extraordinary loss on extinguishment of debt, net......... Net earnings..............................................

$76,800 (2,290) ------74,510 -------$74,510 ======= 25,999 500 ------26,499 =======

57,489 (2,857) -----54,632 ------54,632 ====== 24,557 550 -----25,107 ======

20,483 (4,752) ------15,731 2,680 ------13,051 ======= 22,552 644 ------23,196 =======

2.90 (.09) ------$ 2.81 =======

$

2.29 (.11) -----2.18 ======

.77 (.21) ------.56 =======

FULLY DILUTED EARNINGS PER SHARE COMPUTATION Net earnings applicable to common stock..................... Add: Dividend requirements on preferred stock............... Net earnings applicable to common stock -- fully diluted.... Average outstanding common and common equivalent shares..... Shares issuable on conversion of preferred shares........... Additional fully diluted shares.............................

Fully Diluted Earnings Per Share*...........................

$74,510 -------$74,510 ======= 26,499 -50 ------26,549 ======= $ 2.81 =======

54,632 ------54,632 ====== 25,107 -------25,107 ====== 2.18 ======

13,051 2,680 ------15,731 ======= 23,196 1,476 58 ------24,730 ======= .56 =======

ITEM 14(A)3, EXHIBIT 11 TESORO PETROLEUM CORPORATION AND SUBSIDIARIES INFORMATION SUPPORTING EARNINGS PER SHARE COMPUTATIONS (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31, ---------------------------1996 1995 1994 -----------------PRIMARY EARNINGS PER SHARE COMPUTATION Earnings before extraordinary loss on extinguishment of debt...................................................... Extraordinary loss on extinguishment of debt, net of income tax benefit............................................... Net earnings................................................ Dividend requirements on preferred stock.................... Net earnings applicable to common stock..................... Average outstanding common shares........................... Average outstanding common equivalent shares................ Average outstanding common and common equivalent shares... Primary Earnings Per Share: Earnings before extraordinary loss on extinguishment of debt................................................... Extraordinary loss on extinguishment of debt, net......... Net earnings..............................................

$76,800 (2,290) ------74,510 -------$74,510 ======= 25,999 500 ------26,499 =======

57,489 (2,857) -----54,632 ------54,632 ====== 24,557 550 -----25,107 ======

20,483 (4,752) ------15,731 2,680 ------13,051 ======= 22,552 644 ------23,196 =======

2.90 (.09) ------$ 2.81 =======

$

2.29 (.11) -----2.18 ======

.77 (.21) ------.56 =======

FULLY DILUTED EARNINGS PER SHARE COMPUTATION Net earnings applicable to common stock..................... Add: Dividend requirements on preferred stock............... Net earnings applicable to common stock -- fully diluted.... Average outstanding common and common equivalent shares..... Shares issuable on conversion of preferred shares........... Additional fully diluted shares.............................

Fully Diluted Earnings Per Share*...........................

$74,510 -------$74,510 ======= 26,499 -50 ------26,549 ======= $ 2.81 =======

54,632 ------54,632 ====== 25,107 -------25,107 ====== 2.18 ======

13,051 2,680 ------15,731 ======= 23,196 1,476 58 ------24,730 ======= .56 =======

* This calculation is submitted in accordance with paragraph 601(b)(11) of Regulation S-K, although it is not required by APB Opinion No. 15 because it produces an immaterial dilutive effect for 1996 and 1995 and an anti-dilutive result for 1994.

ITEM 14(A)3, EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT Tesoro Petroleum Corporation is publicly held and has no parent. The subsidiaries listed below are whollyowned. Small or inactive subsidiaries are omitted from the list below. Such omitted subsidiaries, considered in the aggregate as a single subsidiary, would not constitute a "significant subsidiary" at the end of the year covered by this annual report.

ITEM 14(A)3, EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT Tesoro Petroleum Corporation is publicly held and has no parent. The subsidiaries listed below are whollyowned. Small or inactive subsidiaries are omitted from the list below. Such omitted subsidiaries, considered in the aggregate as a single subsidiary, would not constitute a "significant subsidiary" at the end of the year covered by this annual report.
INCORPORATED OR ORGANIZED UNDER LAWS OF ------------Delaware Delaware Texas Delaware Delaware Delaware Delaware Delaware Delaware Delaware Delaware Alaska

NAME OF SUBSIDIARY(1) --------------------Tesoro Alaska Petroleum Company............................. Tesoro Alaska Pipeline Company.............................. Tesoro Bolivia Petroleum Company............................ Tesoro Exploration and Production Company(2)................ Tesoro Financial Services Holding Company................... Victory Finance Company................................ Tesoro Gas Resources Company, Inc.(2)....................... Tesoro E&P Company, L.P.(2)............................ Tesoro Marine Services Company.............................. Tesoro Coastwide Services Company...................... Tesoro Natural Gas Company.................................. Tesoro Northstore Company...................................

(1) Where the name of a subsidiary is indented, it is wholly-owned by its immediate parent listed at the margin above it, unless otherwise indicated. (2) Tesoro E&P Company, L.P. is owned 99% by Tesoro Gas Resources Company, Inc. and 1% by Tesoro Exploration and Production Company.

ITEM 14(a)3, EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT Board of Directors and Stockholders Tesoro Petroleum Corporation We consent to the incorporation by reference in Registration Statement No. 33- 53293 of Tesoro Petroleum Corporation on Form S-8 of our report dated January 23, 1997, appearing in this Annual Report on Form 10-K of Tesoro Petroleum Corporation for the year ended December 31, 1996. DELOITTE & TOUCHE LLP San Antonio, Texas March 24, 1997

ITEM 14(a)3, EXHIBIT 23.2 CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS

ITEM 14(a)3, EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT Board of Directors and Stockholders Tesoro Petroleum Corporation We consent to the incorporation by reference in Registration Statement No. 33- 53293 of Tesoro Petroleum Corporation on Form S-8 of our report dated January 23, 1997, appearing in this Annual Report on Form 10-K of Tesoro Petroleum Corporation for the year ended December 31, 1996. DELOITTE & TOUCHE LLP San Antonio, Texas March 24, 1997

ITEM 14(a)3, EXHIBIT 23.2 CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS We hereby consent to the references to our firm in the Annual Report of Tesoro Petroleum Corporation on Form 10-K for the fiscal year ended December 31, 1996, filed with the Securities and Exchange Commission in Washington, D.C. pursuant to the Securities Exchange Act of 1934. NETHERLAND, SEWELL & ASSOCIATES, INC.
By: /s/ CLARENCE M. NETHERLAND -------------------------------------Clarence M. Netherland Chairman

Dallas, Texas

March 21, 1997

ARTICLE 5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TESORO PETROLEUM CORPORATION'S FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. MULTIPLIER: 1,000

PERIOD TYPE FISCAL YEAR END PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS

YEAR DEC 31 1996 DEC 31 1996 22,796 0 129,528 1,515 74,488 237,343 573,353 256,842 582,587

ITEM 14(a)3, EXHIBIT 23.2 CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS We hereby consent to the references to our firm in the Annual Report of Tesoro Petroleum Corporation on Form 10-K for the fiscal year ended December 31, 1996, filed with the Securities and Exchange Commission in Washington, D.C. pursuant to the Securities Exchange Act of 1934. NETHERLAND, SEWELL & ASSOCIATES, INC.
By: /s/ CLARENCE M. NETHERLAND -------------------------------------Clarence M. Netherland Chairman

Dallas, Texas

March 21, 1997

ARTICLE 5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TESORO PETROLEUM CORPORATION'S FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. MULTIPLIER: 1,000

PERIOD TYPE FISCAL YEAR END PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS COMMON PREFERRED MANDATORY PREFERRED OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER EXPENSES LOSS PROVISION INTEREST EXPENSE INCOME PRETAX INCOME TAX INCOME CONTINUING DISCONTINUED EXTRAORDINARY CHANGES NET INCOME EPS PRIMARY EPS DILUTED
1

YEAR DEC 31 1996 DEC 31 1996 22,796 0 129,528 1,515 74,488 237,343 573,353 256,842 582,587 137,868 79,260 4,402 0 0 299,663 582,587 975,361 1,039,778 854,311 854,311 41,459 0 15,382 115,147 38,347 76,800 0 (2,290) 0 74,510 2.81 1 2.81 1

ARTICLE 5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TESORO PETROLEUM CORPORATION'S FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. MULTIPLIER: 1,000

PERIOD TYPE FISCAL YEAR END PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS COMMON PREFERRED MANDATORY PREFERRED OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER EXPENSES LOSS PROVISION INTEREST EXPENSE INCOME PRETAX INCOME TAX INCOME CONTINUING DISCONTINUED EXTRAORDINARY CHANGES NET INCOME EPS PRIMARY EPS DILUTED
1

YEAR DEC 31 1996 DEC 31 1996 22,796 0 129,528 1,515 74,488 237,343 573,353 256,842 582,587 137,868 79,260 4,402 0 0 299,663 582,587 975,361 1,039,778 854,311 854,311 41,459 0 15,382 115,147 38,347 76,800 0 (2,290) 0 74,510 2.81 1 2.81 1

Earnings per share is after an extraordinary loss of $2.3 million ($.09 loss per share) on extinguishment of debt.