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Registration Rights Agreement, Dated 07/02/98

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EXHIBIT 10.1


REGISTRATION RIGHTS AGREEMENT 2


REGISTRATION RIGHTS AGREEMENT


This Registration Rights Agreement (this "Agreement") is made and entered into as of July 2, 1998 by and among Tesoro Petroleum Corporation, a Delaware corporation (the "Company"), each of the guarantors set forth on the signature pages hereto (the "Guarantors") and Lehman Brothers Inc., Bear, Stearns & Co. Inc. and Salomon Smith Barney (the "Initial Purchasers"), who have agreed to purchase the Company's 9% Senior Subordinated Notes due 2008 (the "Senior Subordinated Notes") pursuant to and subject to the terms and conditions of a certain Purchase Agreement, dated July 2, 1998 (the "Purchase Agreement"), by and among the Company, the Guarantors and the Initial Purchasers. In order to induce the Initial Purchasers to purchase the Senior Subordinated Notes, the Company has agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligation of the Initial Purchasers to purchase the Senior Subordinated Notes pursuant to the Purchase Agreement.


The parties hereby agree as follows:


SECTION 1. DEFINITIONS


As used in this Agreement, the following capitalized terms shall have the following meanings:


Advice: As defined in Section 6(d) hereof.


Affiliate: With respect to any specified person, "Affiliate" shall mean any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person. For the purposes of this definition, "control," when used with respect to any person, means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise and the terms "affiliated," "controlling" and "controlled" have meanings correlative to the foregoing.


Broker-Dealer: Any broker or dealer registered under the Exchange Act.


Broker-Dealer Transfer Restricted Securities: New Senior Subordinated Notes that are acquired by a Broker- Dealer in the Exchange Offer in exchange for Senior Subordinated Notes that such Broker-Dealer acquired for its own account as a result of market-making activities or other trading activities (other than Senior Subordinated Notes acquired directly from the Company or any of its Affiliates).


Business Day: Any day except a Saturday, Sunday or other day in the City of New York, or in the city of the corporate trust office of the Trustee, on which banks are authorized to close.


Closing Date: The date of this Agreement.


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Commission: The Securities and Exchange Commission.


Consummate: An Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (i) the filing and effectiveness under the Securities Act of the Exchange Offer Registration Statement relating to the New Senior Subordinated Notes to be issued in the Exchange Offer, (ii) the maintenance of such Exchange Offer Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the minimum period required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company to the Trustee under the Indenture of New Senior Subordinated Notes in the same aggregate principal amount as the aggregate principal amount of Senior Subordinated Notes that were tendered by Holders thereof pursuant to the Exchange Offer.


Damages Payment Date: With respect to the Transfer Restricted Securities, each Interest Payment Date.


Definitive Notes: As defined in the Indenture.


Effectiveness Target Date: As defined in Section 5.


Exchange Act: The Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.


Exchange Offer: The registration by the Company under the Securities Act of the New Senior Subordinated Notes pursuant to an Exchange Offer Registration Statement pursuant to which the Company offers the Holders of all outstanding Transfer Restricted Securities the opportunity to exchange all such outstanding Transfer Restricted Securities held by such Holders for New Senior Subordinated Notes in an aggregate principal amount equal to the aggregate principal amount of the Transfer Restricted Securities tendered in such exchange offer by such Holders.


Exchange Offer Registration Statement: The Registration Statement relating to the Exchange Offer, including the related Prospectus.


Exempt Resales: The transactions in which the Initial Purchasers propose to sell the Senior Subordinated Notes (a) to certain "qualified institutional buyers," as such term is defined in Rule 144A under the Securities Act, and (b) outside the United States to certain persons in reliance on Regulation S under the Securities Act.


Global Note Holder: As defined in the Indenture.


Holders: As defined in Section 2(b) hereof.


indemnified party: As defined in Section 8(c) hereof.


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indemnifying party: As defined in Section 8(c) hereof.


Indenture: The Indenture, dated as of the Closing Date, among the Company and The Bank of New York, as trustee (the "Trustee"), pursuant to which the Notes are to be issued, as such Indenture is amended or supplemented from time to time in accordance with the terms thereof.


Initial Purchasers: As defined in the preamble hereto.


Interest Payment Date: As defined in the Indenture and the Notes.


NASD: National Association of Securities Dealers, Inc.


Notes: The Senior Subordinated Notes and the New Senior Subordinated Notes.


New Senior Subordinated Notes: The Company's New 9% Senior Subordinated Notes due 2008 to be issued pursuant to the Indenture (i) in the Exchange Offer or (ii) upon the request of any holder of Senior Subordinated Notes covered by a Shelf Registration Statement, in exchange for such Senior Subordinated Notes.


Offering Memorandum: As defined in the Purchase Agreement.


Person: An individual, partnership, corporation, limited liability company, joint venture, association, joint- stock company, trust or unincorporated organization, or a government or agency or political subdivision thereof or any other entity.


Prospectus: The prospectus included in a Registration Statement at the time such Registration Statement is declared effective, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus.


Record Holder: With respect to any Damages Payment Date relating to Notes, each Person who is a Holder of Notes on the record date with respect to the Interest Payment Date on which such Damages Payment Date shall occur.


Registration Default: As defined in Section 5 hereof.


Registration Statement: Any registration statement of the Company and the Guarantors relating to (a) an offering of New Senior Subordinated Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, in each case (i) which is filed pursuant to the provisions of this Agreement, and (ii) including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein.


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Restricted Broker-Dealer: Any Broker-Dealer which holds Broker-Dealer Transfer Restricted Securities.


Securities Act: The Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.


Shelf Filing Deadline: As defined in Section 4 hereof.


Shelf Registration Statement: As defined in Section 4 hereof.


TIA: The Trust Indenture Act of 1939, as amended (15 U.S.C. Section 77aaa-77bbbb), as in effect on the date of the Indenture.


Transfer Restricted Securities: Each Senior Subordinated Note, until the earliest to occur of (a) the date on which such Senior Subordinated Note is exchanged in the Exchange Offer and entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Securities Act, (b) the date on which such Senior Subordinated Note has been effectively registered under the Securities Act and disposed of in accordance with a Shelf Registration Statement, (c) the date on which such Senior Subordinated Note is distributed to the public pursuant to Rule 144 or is saleable pursuant to Rule 144(k) under the Securities Act and (d) the date on which such Senior Subordinated Note is distributed by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the Exchange Offer Registration Statement (including delivery of the Prospectus contained therein).


Underwritten Registration or Underwritten Offering: A registration in which securities of the Company are sold to an underwriter for reoffering to the public.


SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT


(a) Transfer Restricted Securities. The securities entitled to the benefits of this Agreement are the Transfer Restricted Securities.


(b) Holders of Transfer Restricted Securities. A Person is deemed to be a holder of Transfer Restricted Securities (each, a "Holder") whenever such Person owns Transfer Restricted Securities.


SECTION 3. REGISTERED EXCHANGE OFFER


(a) Unless the Exchange Offer shall not be permissible under applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with), the Company shall (i) cause to be filed with the Commission as soon as practicable after the Closing Date, but in no event later than 60 days after the Closing Date, the Exchange Offer Registration Statement under the Securities Act relating to the New Senior Subordinated Notes and the Exchange


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Offer, (ii) use its best efforts to cause such Exchange Offer Registration Statement to become effective at the earliest possible time, but in no event later than 120 days after the Closing Date, (iii) in connection with the foregoing, (A) file all pre-effective amendments to such Exchange Offer Registration Statement as may be necessary in order to cause such Exchange Offer Registration Statement to become effective, (B) if applicable, file a post-effective amendment to such Exchange Offer Registration Statement pursuant to Rule 430A under the Securities Act and (C) cause all necessary filings, if any, in connection with the registration and qualification of the New Senior Subordinated Notes to be made under the Blue Sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer and (iv) upon the effectiveness of such Exchange Offer Registration Statement, commence and Consummate the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting registration of the New Senior Subordinated Notes to be offered in exchange for the Transfer Restricted Securities and to permit sales of Broker-Dealer Transfer Restricted Securities by Broker-Dealers as contemplated by Section 3(c) below.


(b) The Company shall use its best efforts to cause the Exchange Offer Registration Statement to be effective continuously and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than twenty (20) Business Days. The Company shall cause the Exchange Offer to comply with all applicable federal and state securities laws. No securities other than the Notes shall be included in the Exchange Offer Registration Statement. The Company shall use its best efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but in no event later than thirty (30) Business Days thereafter.


(c) The Company shall include a "Plan of Distribution" section in the Prospectus contained in the Exchange Offer Registration Statement and indicate that any Restricted Broker-Dealer who holds Senior Subordinated Notes that are Transfer Restricted Securities and that were acquired for the account of such Restricted Broker-Dealer as a result of market-making activities or other trading activities (other than Transfer Restricted Securities acquired directly from the Company or one of its Affiliates) may exchange such Senior Subordinated Notes pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Securities Act and must, therefore, deliver a prospectus meeting the requirements of the Securities Act in connection with its initial sale of the New Senior Subordinated Notes received by such Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may be satisfied by the delivery by such Broker-Dealer of the Prospectus contained in the Exchange Offer Registration Statement. Such "Plan of Distribution" section shall also contain all other information with respect to such resales of Broker-Dealer Transfer Restricted Securities that the Commission may require in order to permit such sales pursuant thereto but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of Notes held by any such Broker-Dealer except to the extent required by the Commission as a result of a change in policy after the date of this Agreement.


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The Company and the Guarantors shall use their respective best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 6(c) below to the extent necessary to ensure that it is available for resales of Broker-Dealer Transfer Restricted Securities acquired by Restricted Broker-Dealers and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of 180 days from the date on which the Exchange Offer Registration Statement is declared effective or, if shorter, until all Broker-Dealer Transfer Restricted Securities have been sold thereunder.


The Company shall provide sufficient copies of the latest version of such Prospectus to such Restricted Broker- Dealers promptly upon request at any time during such 180 day period in order to facilitate such sales.


SECTION 4. SHELF REGISTRATION


(a) Shelf Registration. If (i) the Company is not required to file an Exchange Offer Registration Statement or to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with) or (ii) if any Holder of Transfer Restricted Securities shall notify the Company within twenty (20) Business Days of the Consummation of the Exchange Offer that (A) such Holder is prohibited by applicable law or Commission policy from participating in the Exchange Offer, or (B) such Holder may not resell the New Senior Subordinated Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and that the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder, or (C) such Holder is a Broker-Dealer and holds Senior Subordinated Notes acquired directly from the Company or one of its Affiliates, then the Company and the Guarantors shall:


(x) cause to be filed a shelf registration statement
pursuant to Rule 415 under the Securities Act, which may be an
amendment to the Exchange Offer Registration Statement (in either
event, the "Shelf Registration Statement") on or prior to the earliest
to occur of (1) the 60th day after the date on which the Company
receives notice from the Commission or determines that it is not
required to file the Exchange Offer Registration Statement pursuant to
clause (i) above, (2) the 60th day after the date on which the Company
receives notice from a Holder of Transfer Restricted Securities as
contemplated by clause (ii) above, and (3) the 120th day after the
Closing Date (such earliest date being the "Shelf Filing Deadline"),
which Shelf Registration Statement shall provide for resales of all
Transfer Restricted Securities the Holders of which shall have
provided the information required pursuant to Section 4(b) hereof; and


(y) use its best efforts to cause such Shelf Registration
Statement to be declared effective by the Commission on or before the
60th day after the Shelf Filing Deadline.


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The Company and the Guarantors shall use their respective best efforts to keep such Shelf Registration Statement continuously effective, supplemented and amended as required by and subject to the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is available for sales of Transfer Restricted Securities by the Holders thereof entitled to the benefit of this Section 4(a), and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least two years (as extended pursuant to Section 6(c)(i)) following the date on which such Shelf Registration Statement first becomes effective under the Securities Act or such shorter period ending when all of the Transfer Restricted Securities available for sale thereunder have been sold pursuant thereto.


(b) Provision by Holders of Certain Information in Connection with the Shelf Registration Statement. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 20 Business Days after receipt of a request therefor, such information as the Company may reasonably request for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. No Holder of Transfer Restricted Securities shall be entitled to Liquidated Damages pursuant to Section 5 hereof unless and until such Holder shall have provided all such reasonably requested information. Each Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading.


SECTION 5. LIQUIDATED DAMAGES


If (i) any of the Registration Statements required by this Agreement are not filed with the Commission on or prior to the date specified for such filing in this Agreement, (ii) any of such Registration Statements have not been declared effective by the Commission on or prior to the date specified for such effectiveness in this Agreement (the "Effectiveness Target Date"), (iii) the Exchange Offer has not been Consummated within 30 Business Days after the Effectiveness Target Date with respect to the Exchange Offer Registration Statement or (iv) any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded within 30 days by a post-effective amendment to such Registration Statement, the effectiveness of another Registration Statement or the use of the Prospectus (as amended or supplemented) is again permitted that cures such failure (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company hereby agrees to pay Liquidated Damages to each Holder of Transfer Restricted Securities with respect to the first 90-day period immediately following the occurrence of such Registration Default, in an amount equal to $0.05 per week per $1,000 principal amount of Transfer Restricted Securities held by such Holder for each week or portion thereof that the Registration Default continues. The amount of the Liquidated Damages shall increase by an additional $0.05 per week per $1,000 in principal amount of Transfer Restricted Securities with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of


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Liquidated Damages of $0.50 per week per $1,000 principal amount of Transfer Restricted Securities. All accrued Liquidated Damages shall be paid to the Global Note Holder by the Company by wire transfer of immediately available funds or by federal funds check and to Holders of Certificated Securities by wire transfer to the accounts specified by them or by mailing checks to their registered addresses if no such accounts have been specified on each Damages Payment Date, as provided in the Indenture. Notwithstanding anything to the contrary set forth herein, (1) upon filing of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (i) above, (2) upon the effectiveness of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon the filing of a post-effective amendment to the Registration Statement or an additional Registration Statement that causes the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement) to again be declared effective or the Prospectus to be made usable in the case of (iv) above, the Liquidated Damages payable with respect to the Transfer Restricted Securities as a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.


All obligations of the Company and the Guarantors set forth in the preceding paragraph that are outstanding with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such obligations with respect to such security shall have been satisfied in full.


SECTION 6. REGISTRATION PROCEDURES


(a) Exchange Offer Registration Statement. In connection with the Exchange Offer, the Company and the Guarantors shall comply with all applicable provisions of Section 6(c) below, shall use their respective best efforts to effect such exchange to permit the sale of Broker-Dealer Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof (which shall be in a manner consistent with the terms of this Agreement), and shall comply with all of the following provisions:


(i) If, following the date hereof and prior to the
Consummation of the Exchange Offer, there has been published a change
in Commission policy with respect to exchange offers such as the
Exchange Offer, such that in the reasonable opinion of counsel to the
Company there is a substantial question as to whether the Exchange
Offer is permitted by applicable law or Commission policy, the Company
and the Guarantors hereby agree to seek a no-action letter or other
favorable decision from the Commission allowing the Company and the
Guarantors to Consummate an Exchange Offer for such Senior
Subordinated Notes. The Company and the Guarantors hereby agree to
pursue the issuance of such a decision to the Commission staff level
but shall not be required to take commercially unreasonable action to
effect a change of Commission policy. The Company and the Guarantors
hereby agree, however, to take all such other actions as are
reasonably requested by the Commission staff or otherwise required in
connection with the issuance of such decision, including without
limitation, to (A) participate in telephonic conferences with the
Commission staff,


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(B) deliver to the Commission staff an analysis prepared by counsel to
the Company setting forth the legal bases, if any, upon which such
counsel has concluded that such an Exchange Offer should be permitted
and (C) diligently pursue a resolution (which need not be favorable)
by the Commission staff of such submission.


(ii) As a condition to its participation in the Exchange
Offer pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Company,
prior to the Consummation thereof, a written representation to the
Company (which may be contained in the letter of transmittal
contemplated by the Exchange Offer Registration Statement) to the
effect that (A) it is not an Affiliate of the Company, (B) it is not
engaged in, and does not intend to engage in, and has no arrangement
or understanding with any person to participate in, a distribution of
the New Senior Subordinated Notes to be issued in the Exchange Offer
and (C) it is acquiring the New Senior Subordinated Notes in its
ordinary course of business. In addition, all such Holders of
Transfer Restricted Securities shall otherwise reasonably cooperate in
the Company's preparations for the Exchange Offer. Each Holder hereby
acknowledges and agrees that any Broker-Dealer and any such Holder
using the Exchange Offer to participate in a distribution of the
securities to be acquired in the Exchange Offer (1) could not under
Commission policy as in effect on the date of this Agreement rely on
the position of the Commission enunciated in Morgan Stanley and Co.,
Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation
(available May 13, 1988), as interpreted in the Commission's letter to
Sherman & Sterling dated July 2, 1993, and similar no-action letters
(including any no- action letter obtained pursuant to clause (i)
above), and (2) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a
secondary resale transaction and that such a secondary resale
transaction should be covered by an effective registration statement
containing the selling security holder information required by Item
507 or 508, as applicable, of Regulation S-K if the resales are of New
Senior Subordinated Notes obtained by such Holder in exchange for
Senior Subordinated Notes acquired by such Holder directly from the
Company or an Affiliate thereof.


(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Company and the Guarantors shall provide a
supplemental letter to the Commission (A) stating that the Company and
the Guarantors are registering the Exchange Offer in reliance on the
position of the Commission enunciated in Exxon Capital Holdings
Corporation(available May 13, 1988), Morgan Stanley and Co., Inc.
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