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Market Stock Unit Award Granted in 2017

Summary of Key Provisions

Purpose
w To advance the interests of Tesoro (the “Company”) by motivating plan
participants to contribute to the long-term success and progress of the Company.
Eligibility
w All senior executives and employees in the Company as approved by the
Compensation Committee of Tesoro’s Board of Directors.
Plan
w These awards are granted under the general terms and conditions of the Amended
and Restated 2011 Long-Term Incentive Plan.
Market Stock Unit
w A Market Stock Unit Award is a grant of stock units in which the number of
shares of the Company’s common stock earned at vesting is based on the stock
price performance.
Performance Period
w The performance period for the Market Stock Unit Award granted in 2017 is 36
months (February 14, 2017 through February 14, 2020).
Vesting
w The Market Stock Unit Award will vest at the end of the 36 month performance
period.
Form and Timing of Payout
w The Market Stock Unit Award will be settled in common stock of the Company
within 2 ½ months after the end of the performance period.
Calculation of Market Stock Unit Award at Vesting
w The number of shares earned at time of vesting will be calculated as follows:
Shares Earned at Vesting* = A times (C/B)
 
Symbol
Description
 
A
# of Targeted Market Stock Units at Grant
 
B
Average closing stock price for the 30 trading days** prior to the Grant Date
 
C
Average closing stock price for the 30 trading days** prior to the Vesting Date
 
*Shares Earned at Vesting is capped at 200% of number of Targeted Market Stock
Units at Grant.
**Normal dividends are assumed to have been reinvested on the date they are paid
in order to calculate the average 30-trading day stock price.

Payout Range
w The payout for the Market Stock Unit Award can range from 50% to 200% based on
stock price appreciation. However, there is no payout if the average closing
stock price for the 30 trading days prior to the Vesting Date (or Change in
Control) has decreased by more than 50% from the average closing stock price for
the 30 trading days prior to the Grant Date.

Market Stock Unit Award Granted in 2017
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Termination of Employment
w Death/Disability - The payout of the award will be pro-rated based on the
number of full months worked within the performance period divided by 36 and
issued assuming target performance. Shares will be issued as soon as
administratively practical.

w Retirement - The payout of the award will be pro-rated based on the number of
full months worked within the performance period divided by 36 and adjusted for
actual performance results at the end of the performance period. Shares will be
issued within 2 ½ months after the end of the performance period.

w Voluntary Termination (except as set forth below), Termination for Cause
including a violation of Tesoro’s Code of Business Conduct, or involuntary
termination without eligibility for severance under a Company sponsored
severance plan - Award will be forfeited.

w Involuntary Termination under circumstances qualifying for severance
compensation under any severance plan sponsored by the Company (not in
connection with a Change in Control) - The payout of the award will be pro-rated
based on the number of full months worked (minimum of 12 months required) within
the performance period divided by 36 and adjusted for actual performance results
at the end of the period. Shares will be issued within 2 ½ months after the end
of the performance period.

w Involuntary Termination or Voluntary Termination for Good Reason within two
years following a Change in Control - The full award (as converted as described
below) will be paid out as soon administratively practical.

w Separation Under Severance/Separation Agreement - If an employee is terminated
pursuant to a severance or separation agreement under any circumstance, the
Committee may, at its discretion, further reduce the award payout percentage
beyond the pro-rated reduction described above.

Market Stock Unit Award Granted in 2017
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Good Reason (under Change in Control only)
w Good Reason means the occurrence of any of the following:

w 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;

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

w 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;

w 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;

w 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

w any failure by the Company to obtain the assumption of this Agreement by any
successor or assign of the Company.

Market Stock Unit Award Granted in 2017
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Change in Control
w In the event of a Change in Control of the Company, the award will either be
(i) assumed and continued by the acquirer or surviving corporation in the
transaction, or (ii) will be immediately paid out with the number of shares
earned equal to the greater of the Targeted number of Market Stock Units at
Grant or the amount calculated as follows:

Shares Earned At Vesting* = A times (C/B)
 
Symbol
Description
 
A
# of Targeted Market Stock Units at Grant
 
B
Average closing stock price for the 30 trading days** prior to the Grant Date
 
C
Average closing stock price for the 30 trading days** prior to the Change in
Control
 
*Shares Earned at Vesting is capped at 200% of number of Targeted Market Stock
Units at Grant.

**Normal dividends are assumed to have been reinvested on the date they are paid
in order to calculate the average 30-trading day stock price.

w If the award is assumed and continued in connection with a Change in Control,
the award will be converted into a time-based restricted stock unit award upon
consummation of the Change in Control with the number of shares subject to the
award determined as set forth above. Following such conversion, the award will
vest based on continued employment through the end of the performance period.

Nothing herein is intended to modify any referenced Plan. The applicable Plan is
the legally governing document and is the final authority on the terms of such
Plan unless the Compensation Committee of the Board of Directors (or in the
absence of the Compensation Committee, the Board itself) specifies otherwise
(either in an Award Agreement or otherwise).

Market Stock Unit Award Granted in 2017
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