Exhibit 10.1

TESORO CORPORATION
 
EXECUTIVE SEVERANCE AND CHANGE IN CONTROL PLAN
 
EFFECTIVE JANUARY 12, 2011
 
 
 

 
 

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TESORO CORPORATION
 
EXECUTIVE SEVERANCE AND CHANGE IN CONTROL PLAN
 
PREAMBLE
 
The principal objective of this Executive Severance and Change in Control Plan
(the "Plan") is to reduce uncertainty to select executives of the Company and
its Subsidiaries in the event of certain fundamental events involving the
control or existence of the Company as well as to provide a benefit in the event
of an executive’s termination of employment under certain conditions that are
beyond the executive’s control.  The Plan is designed to provide a benefit that
will meet the objectives described above.  The Plan is intended to conform to
the requirements of Section 409A of the Code, together with the Regulations, and
is intended to qualify as an unfunded plan maintained primarily for the purpose
of providing benefits for a select group of management and highly compensated
employees of the Company and its Subsidiaries.
 

SECTION I
DEFINITIONS
 
 1.1  
"Affiliate" means each entity that would be considered a single employer with
the Company under Section 414(b) or Section 414(c) of the Code, except that the
phrase "at least 50%" shall be substituted for the phrase "at least 80%" as used
therein.

 
 1.2  
"Aggregated Plan" means all agreements, methods, programs and other arrangements
that are aggregated with this Plan under Section 1.409A-1(c) of the Regulations.

 
 1.3  
"Base Salary" means the rate of base pay as in effect for a Participant on the
effective date of such Participant’s eligibility for a benefit hereunder, as
provided in Section II hereof.

 
 1.4  
"Board" means the Board of Directors of the Company.

 
 1.5  
“Bonus” means the target bonus applicable to a Participant for the year in which
such Participant’s employment terminates under conditions that result in the
eligibility of such Participant to a benefit hereunder, as provided in Section
II hereof.

 
 1.6  
“Cause” means 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); a
willful refusal without proper legal cause to perform, or gross negligence in
performing, the Participant’s duties and responsibilities; a material breach of
fiduciary duty to the Company through the misappropriation of Company funds or
property; or the unauthorized absence of the Participant from work (other than
for sick or approved disability leave or leave under the Family Medical Leave
Act) for a period of thirty (30) or more working days out of a consecutive
forty-five (45)-working day period.

 
 
 

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 1.7  
"Change in Control" means (i) there shall be consummated (A) any consolidation
or merger of Company in which Company is not the continuing or surviving
corporation or pursuant to which shares of Company's common stock would be
converted into cash, securities or other property, other than a merger of
Company where a majority of the board of directors of the surviving corporation
are, and for a one-year period after the merger continue to be, persons who were
directors of 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 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 Company, or (ii) the shareholders of Company shall approve
any plan or proposal for the liquidation or dissolution of 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), other than Company or a Subsidiary thereof or
any employee benefit plan sponsored by Company or a Subsidiary thereof, shall
become the beneficial owner (within the meaning of Rule 13c-3 under the
Securities Exchange Act of 1934) of securities of Company representing
thirty-five percent (35%) or more of the combined voting power of 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
one-year thereafter, individuals who immediately prior to the beginning of such
period constituted the Board shall cease for any reason to constitute at least a
majority thereof, unless election or the nomination by the Board for election by
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.

 
 1.8  
“Change in Control Benefit” means the benefit payable under Section 3.1 hereof
in the event of an involuntary termination of employment without Cause or a
voluntary termination of employment for Good Reason following a Change in
Control.

 
 1.9  
"Chief Executive Officer" means the Chief Executive Officer of the Company.

 
 1.10  
"Code" means the Internal Revenue Code of 1986, as amended from time to time.

 
 1.11  
"Committee" means the Compensation Committee of the Board.

 
 1.12  
"Company" means Tesoro Corporation, a Delaware corporation, or any successor
thereto.

 
 1.13  
“Compensation” means a Participant’s Base Salary and Bonus.

 
 1.14  
“Good Reason” means the occurrence of any of the following:

 
(a)  
without Participant's express written consent, the assignment to Participant of
any duties inconsistent with the employment of Participant immediately prior to
the Change in Control, or a significant diminution of Participant's positions,
duties, responsibilities and status with the Company from those immediately
prior to a Change in Control or a diminution in Participant's titles or offices
as in effect immediately prior to a Change in Control, or any removal of
Participant from, or any failure to reelect Participant to, any of such
positions;

 
 
 

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(b)  
a material reduction by the Company in Participant's Base Salary, as in effect
immediately prior to a Change in Control;

 
(c)  
the failure by the Company to continue benefits, including but not limited to,
thrift, pension, life insurance, and health plans, substantially equal in value,
in the aggregate, to those in which Participant is participating or is eligible
to participate at the time of the Change in Control except as otherwise required
by the terms of such plans as in effect at the time of any Change in Control;

 
(d)  
the failure by the Company to continue in effect any incentive plan or
arrangement in which Participant is participating at the time of a Change in
Control (or to substitute and continue other plans or arrangements providing the
Participant with substantially similar benefits), except as otherwise required
by the terms of such plans as in effect at the time of any Change in Control;

 
(e)  
the occurrence of an event that meets the criteria set forth under the Company's
relocation policy, as in effect from time to time, with respect to which either
(i) the Participant fails to provide express written consent to the relocation
or (ii) the Company fails to provide the relocation benefit set forth in such
policy; or

 
(f)  
any failure by the Company to obtain the assumption of this Agreement by any
successor or assign of the Company;

 
 1.15  
"Participant" means an individual who, on the date of his or her termination of
employment under the circumstances described in Section II hereof, is
either:  (i) an officer of the Company or a Subsidiary with the title of Senior
Vice President or above whose compensation is approved by the Committee or (ii)
an officer of the Company or a Subsidiary with the title of Vice President who
is approved for participation by the Chief Executive Officer, and, in each case,
who is not otherwise entitled to a change in control or severance benefit, as
applicable, under an employment agreement, management stability agreement, or
similar type of agreement.

 
 1.16  
"Plan" means the Tesoro Corporation Executive Severance and Change in Control
Plan, effective January 12, 2011, as amended from time to time.

 
 1.17  
"Regulations" means the Treasury Regulations promulgated under the Code.

 
 1.18  
"Separation from Service" means a termination of employment of a Participant
under the circumstances described in Section II hereof that will result in a
reasonably anticipated permanent reduction in the level of bona fide services
performed by the Participant for the Company and its Affiliates to 20% or less
of the average level of bona fide services performed by the Participant for the
Company and its Affiliates (whether as an employee or an independent contractor)
in the immediately preceding thirty-six (36) months (or the full period of
service to the Company and its Affiliates if the Participant has been providing
services to the Company and its Affiliates for fewer than thirty-six (36)
months).  The determination of whether a Separation from Service has occurred
shall be made by the Committee in accordance with the provisions of Section 409A
of the Code and the Regulations.

 
 
 

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 1.19  
“Severance Benefit” means the benefit payable under Section 3.2 hereof in the
absence of a Change in Control but in the event of an involuntary termination of
employment without Cause.

 
 1.20  
"Subsidiary" means any entity in which the Company owns or otherwise controls,
directly or indirectly, stock or other ownership interests having the voting
power to elect a majority of the board of directors, or other governing group
having functions similar to a board of directors, as determined by the
Committee.

 
The masculine gender, where appearing in the Plan, will be deemed to include the
feminine gender, and the singular may include the plural, unless the context
clearly indicates to the contrary.
 
SECTION II
ELIGIBILITY FOR BENEFITS
 
 2.1  
Eligibility for Change in Control Benefit.  Each Participant is eligible to
receive a Change in Control Benefit if, within the two-year period following a
Change in Control, such Participant’s employment with the Company or a
Subsidiary is terminated by reason of: (i) involuntary termination other than
for Cause or by reason of death, or (ii) voluntary termination by the
Participant for Good Reason.  The determination of whether a termination of
employment shall be for Cause or Good Reason shall be made in the sole and
absolute discretion of the Committee.  Such benefit shall commence as provided
in Section 4.1 hereof.

 
 2.2  
Eligibility for Severance Benefit.

 
(a)  
Chief Executive Officer and Executive Vice Presidents.  Each Participant who is
the Chief Executive Officer or an Executive Vice-President of the Company is
eligible to receive a Severance Benefit if such Participant’s employment with
the Company or a Subsidiary is terminated in the absence of a Change in Control
by reason of either: (i) involuntary termination other than for Cause or by
reason of death or (ii) voluntary termination following the occurrence or
failure of any of the following:

 
(i)  
Chief Executive Officer.  Without the Chief Executive Officer’s express written
consent, a material adverse change in the governing body to which the Chief
Executive Officer regularly reports, including a requirement that the Chief
Executive Officer report to another corporate officer rather than to the Board.

 
 
 

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(ii)  
Executive Vice-Presidents.  Without the Executive Vice President’s express
written consent, a material adverse change in the level of executive officer to
whom the Executive Vice President regularly reports.

 
(b)  
Senior Vice Presidents.  A Senior Vice President of the Company is eligible to
receive a Severance Benefit if such Participant’s employment with the Company or
a Subsidiary is terminated in the absence of a Change in Control by reason of
involuntary termination other than for Cause or by reason of death.

 
The determination of whether a termination of employment shall be for Cause or
whether a material adverse change in the reporting relationship has occurred
under Section 2.2 (a)(i) or (ii) shall be made in the sole and absolute
discretion of the Committee.  Severance benefits shall commence as provided in
Section 4.1 hereof.
 
SECTION III
AMOUNT AND FORM OF BENEFIT
 
 3.1  
Change in Control Benefit.  The Change in Control Benefit to which an eligible
Participant shall be entitled shall be as follows:

 
(a)  
Chief Executive Officer.  The Chief Executive Officer shall be entitled to a
Change in Control Benefit, payable in cash, equal to three (3) times his
Compensation.  Furthermore, the Chief Executive Officer and his or her eligible
dependents shall be entitled to participate in the Company's group medical plan
(excluding dental and vision benefits) for the thirty (30)-month period
commencing on the date of the Chief Executive Officer's Separation from Service.

 
(b)  
Executive Vice-Presidents.  Each Executive Vice-President shall be entitled to a
Change in Control Benefit, payable in cash, equal to two and one-half (2.5)
times his Compensation.  Furthermore, the Executive Vice-President and his or
her eligible dependents shall be entitled to participate in the Company's group
medical plan (excluding dental and vision benefits) for the thirty (30)-month
period commencing on the date of the Executive Vice-President's Separation from
Service.

 
(c)  
Senior Vice-Presidents.  Each Senior Vice-President shall be entitled to a
Change in Control Benefit, payable in cash, equal to two (2) times his
Compensation.  Furthermore, the Senior Vice-President and his or her eligible
dependents shall be entitled to participate in the Company's group medical plan
(excluding dental and vision benefits) for the twenty-four (24)-month period
commencing on the date of the Senior Vice-President's Separation from Service.

 
(d)  
Vice-Presidents.  Each Vice-President who is a Participant in this Plan shall be
entitled to a Change in Control Benefit, payable in cash, equal to either one
(1) times or one and one-half (1.5) times his Compensation, as determined by the
Chief Executive Officer in his sole and absolute discretion.  Furthermore, the
Vice-President and his or her eligible dependents shall be entitled to
participate in the Company's group medical plan (excluding dental and vision
benefits) for a period of either twelve (12) or eighteen (18) months (as
determined by the Chief Executive Officer in his sole and absolute discretion)
commencing on the date of the Vice-President's Separation from Service.

 
 
 

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 3.2  
Severance Benefit.  The Severance Benefit to which an eligible Participant shall
be entitled shall be as follows:

 
(a)  
Chief Executive Officer.  The Chief Executive Officer shall be entitled to a
Severance Benefit, payable as a lump sum cash payment, equal to two (2) times
his Compensation, together with the benefits described in Section 3.2(d) hereof.

 
(b)  
Executive Vice-Presidents.  Each Executive Vice-President shall be entitled to a
Severance Benefit, payable in cash, equal to one and three-fourths (1.75) times
his Compensation, together with the benefits described in Section 3.2(d) hereof.

 
(c)  
Senior Vice-Presidents.  Each Senior Vice-President shall be entitled to a
Severance Benefit, payable in cash, equal to one and one-half (1.5) times his
Compensation, together with the benefits described in Section 3.2(d) hereof.

 
(d)  
Additional Benefits.  Each of the foregoing eligible Participants set forth in
this Section 3.2 shall be entitled to the following benefits, in addition to the
benefits described in (a), (b) and (c) above:

 
(i)  
participation in the Company's medical plan (excluding dental and vision
benefits) for a period of eighteen (18) months commencing on the date of the
Participant’s Separation from Service; and

 
(ii)  
receipt of reasonable outplacement services, at no cost to the Participant, for
up to twelve (12) months, such twelve (12)-month period to commence on the date
of the Participant’s Separation from Service.

 
SECTION IV
PAYMENT OF BENEFITS
 
 4.1  
Benefits payable in accordance with Section III as cash payments will be paid in
a single lump sum payment on the first day of the seventh (7th) calendar month
beginning after the Participant's Separation from Service.  If a Participant who
is entitled to continued coverage under the Company’s group medical plan elects
to continue such participation, the Company shall pay the applicable premium for
such coverage (which amount shall be the employer-subsidized portion of the
premium that applies to active employees of the Company) in accordance with the
Company's standard payroll practices for the period of coverage that applies
under Section III hereof. The continued medical plan coverage described herein
and the payment of the applicable premium in connection therewith may not affect
the benefit to be provided in any other taxable year and may not be liquidated
or exchanged for any other benefit.

 
 4.2  
The Company will be liable for all benefits due the Participants under the Plan.

 
 
 

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 4.3  
The Plan is a general corporate commitment and each Participant must rely upon
the general credit of the Company for the fulfillment of its obligations under
the Plan.  Under all circumstances the rights of Participants to any asset held
by the Company shall be no greater than the rights expressed in this
Plan.  Nothing contained in this Plan shall constitute a guarantee by the
Company that the assets of the Company will be sufficient to pay any benefits
under the Plan or would place the Participant in a secured position ahead of
general creditors and judgment creditors of the Company.  Though the Company may
establish or become a signatory to a rabbi trust to accumulate assets to help
fulfill its obligations, the Plan and any trust created, shall not create any
lien, claim, encumbrance, right, title or other interest of any kind in any
Participant in any asset held by the Company, contributed to any trust created,
or otherwise be designated to be used for payment of any of its obligations
created in this agreement.  No specific assets of the Company have been or will
be set aside, or will be transferred to a trust or will be pledged for the
performance of the Company's obligations under the Plan which would remove those
assets from being subject to the general creditors and judgment creditors of the
Company.

 
 4.4  
It is intended that this Plan shall be unfunded for tax purposes and for
purposes of Title I of ERISA.

 
 4.5  
Notwithstanding any provision of this Section IV to the contrary, the benefits
payable hereunder may, to the extent expressly provided in this Section 4.5, be
paid prior to or later than the date on which they would otherwise be paid to
the Participant.

 
(a)  
Distribution in the Event of Income Inclusion Under Code Section 409A.  If any
portion of a Participant's benefit hereunder is required to be included in
income by the Participant prior to receipt due to a failure of this Plan or any
Aggregated Plan to comply with the requirements of Section 409A of the Code or
the Regulations, the Committee may determine that such Participant shall receive
a distribution from the Plan in an amount equal to the portion of his or her
benefit required to be included in income as a result of the failure of the Plan
or any Aggregated Plan to comply with the requirements of Section 409A of the
Code or the Regulations.

 
(b)  
Distribution Necessary to Satisfy Applicable Tax Withholding.  If the Company is
required to withhold amounts to pay the Participant’s portion of the Federal
Insurance Contributions Act (FICA) tax imposed under Code Sections 3101, 3121(a)
or 3121(v)(2) with respect to amounts that are or will be paid to the
Participant under the Plan before they otherwise would be paid, the Committee
may determine that such Participant shall receive a distribution from the Plan
in an amount equal to the lesser of:  (i) the amount of the Participant's
benefit hereunder or (ii) the aggregate of the FICA taxes imposed and the income
tax withholding related to such amount.

 
(c)  
Delay for Payments in Violation of Federal Securities Laws or Other Applicable
Law.  In the event the Company reasonably anticipates that the payment of
benefits as specified hereunder would violate Federal securities laws or other
applicable law, the Committee may delay the payment of such benefit hereunder
until the earliest date at which the Company reasonably anticipates that the
making of such payment would not cause such violation.

 
 
 

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(d)  
Delay for Insolvency or Compelling Business Reasons.  In the event the Company
determines that the making of any payment of benefits on the date specified
hereunder would jeopardize the ability of the Company to continue as a going
concern, the Committee may delay the payment of such benefits until the first
calendar year in which the Company notifies the Committee that the payment of
benefits would not have such effect.

 
(e)  
Administrative Delay in Payment.  The payment of benefits hereunder shall begin
at the date specified in accordance with the provisions of the foregoing
paragraphs of this Section IV; provided that, in the case of administrative
necessity, the payment of such benefits may be delayed up to the later of the
last day of the calendar year in which payment would otherwise be made or the
15th day of the third calendar month following the date on which payment would
otherwise be made.  Further, if, as a result of events beyond the control of the
Participant, it is not administratively practicable for the Committee to
calculate the amount of benefits due to the Participant as of the date on which
payment would otherwise be made, the payment may be delayed until the first
calendar year in which calculation of the amount is administratively
practicable.

 
SECTION V
CLAIMS PROCEDURES
 
 5.1  
Claims for Benefits.  The Committee shall determine the rights of any
Participant to any benefits hereunder.  Any Participant who believes that he has
not received the benefits to which he is entitled under the Plan may file a
claim in writing with the Committee.  The Committee shall, no later than 90 days
after the receipt of a claim (plus an additional period of 90 days if required
for processing, provided that notice of the extension of time is given to the
claimant with the first 90-day period), either allow or deny the claim in
writing.

 
A denial of a claim by the Committee, wholly or partially, shall be written in a
manner intended to be understood by the claimant and shall include:
 
(a)  
the specific reasons for the denial;

 
(b)  
specific reference to pertinent Plan provisions on which the denial is based;

 
(c)  
a description of any additional material or information necessary for the
claimant to perfect the claim and an explanation of why such material or
information is necessary; and

 
(d)  
an explanation of the claim review procedure and the time limits applicable to
such procedures, including a statement of the claimant's right, if applicable,
to bring a civil action under Section 502(a) of ERISA.

 
 5.2  
Appeal Provisions.  A claimant whose claim is denied (or his duly authorized
representative) may within 60 days after receipt of denial of a claim file with
the Committee a written request for a review of such claim.  If the claimant
does not file a request for review of his claim within such 60-day period, the
claimant shall be deemed to have acquiesced in the original decision of the
Committee on his claim, the decision shall become final and the claimant will
not be entitled to bring a civil action under Section 502(a) of ERISA.  If such
an appeal is so filed within such 60-day period the Committee (or its delegate)
shall conduct a full and fair review of such claim.  During such review, the
claimant (or the claimant's authorized representative) shall be given the
opportunity to review all documents that are pertinent to his claim and to
submit issues and comments in writing.

 
 
 

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The Committee shall mail or deliver to the claimant a written decision on the
matter based on the facts and the pertinent provisions of the Plan within 60
days after the receipt of the request for review (unless special circumstances
require an extension of up to 60 additional days, in which case written notice
of such extension shall be given to the claimant prior to the commencement of
such extension).  Such decision shall be written in a manner intended to be
understood by the claimant, shall state the specific reasons for the decision
and the specific Plan provisions on which the decision was based and shall, to
the extent permitted by law, be final and binding on all interested persons.
 
SECTION VI
MISCELLANEOUS
 
 6.1  
The Board, or its delegate, may, in its sole discretion, terminate, suspend or
amend this Plan at any time, in whole or in part.  However, the termination,
amendment or suspension of this Plan will not operate to decrease the benefit to
which a Participant has become entitled but which has not yet been
paid.  Notwithstanding the foregoing, the Plan shall automatically terminate,
without further action of the Company, upon Insolvency of the Company.  For this
purpose, Insolvency shall mean the inability of the Company to continue as a
going concern.

 
 6.2  
Notwithstanding any provision of the Plan to the contrary, the Committee may at
any time (without the consent of any Participant) modify, amend or terminate any
or all of the provisions of this Plan to the extent necessary to conform the
provisions of the Plan with Section 409A of the Code, regardless of whether such
modification, amendment or termination of this Plan shall adversely affect the
rights of a Participant under the Plan.

 
 6.3  
Nothing contained herein will confer upon any Participant the right to be
retained in the service of the Company, nor will it interfere with the right of
the Company to discharge or otherwise deal with a Participant without regard to
the existence of this Plan.

 
 6.4  
No benefit under this Plan shall be assignable or subject to any manner of
alienation, sale, transfer, claims of creditors, pledge, attachment or
encumbrances of any kind.

 
 6.5  
The Committee may adopt rules and regulations to assist it in the administration
of the Plan and may delegate such of its duties hereunder as it may deem
advisable.

 
 
 

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 6.6  
This Plan is established under and will be construed according to the laws of
the State of Texas, except to the extent preempted by federal law.

 
 6.7  
The effective date of this Plan, as signed this 12th day of  January, 2011, is
January 12, 2011.

 

 
TESORO CORPORATION

By:           /s/ SUSAN A.
LERETTE                                                      
Name:     Susan A. Lerette                                                      
 
Title:
Senior Vice President, Human Resources and Communications
 

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