Exhibit 10.2
AMENDED AND RESTATED
MANAGEMENT STABILITY AGREEMENT
     This Amended and Restated Management Stability Agreement is dated August 2,
2005, between Tesoro Corporation, a Delaware corporation (the “Company”), and
Daniel J. Porter (“Employee”), and supersedes and replaces that certain
Management Stability Agreement dated as of September 6, 2000.
Recitals:
     WHEREAS, the Board of Directors of the Company has determined that it is in
the best interest of the Company to reduce uncertainty to certain key employees
of the Company in the event of certain fundamental events involving the control
or existence of the Company;
     WHEREAS, the Board of Directors of the Company has determined that an
agreement protecting certain interests of key employees of the Company in the
event of certain fundamental events involving the control or existence of the
Company is in the best interest of the Company because it will assist the
Company in attracting and retaining key employees such as this Employee; and
     WHEREAS, the Employee is relying on this Agreement and the obligations of
the Company hereunder in continuing to work for the Company.
     NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
     1. Termination Following Change of Control.
     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), 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 two and one-half times the base salary of the
Employee at the then current rate; and
(b) A lump-sum payment equal to (i) two and one-half 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.
     The Company (or its successor) shall also provide continuing coverage and
benefits comparable to all life, health and disability plans of the Company for
a period of 30 months from the date of termination, and Employee shall receive
two and one-half 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

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     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 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
directors, 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 one year 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 1, “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 immediately prior to the
change of control, 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;
(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;

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(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 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 higher of (a) Employee’s
aggregate investment in such residence or (b) the fair market value thereof as
determined by a real estate appraiser 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 failure by the Company to obtain the assumption of this Agreement by
any successor or assign of the Company;
     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 thereof.
     The Company shall pay any attorney fees incurred by Employee in reasonably
seeking to enforce the terms of this Paragraph 1.
     2.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.
     3. 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.

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     4. 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.
     5. 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.
     6. 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 the Company may not
assign any duties under this Agreement without the prior written consent of the
Employee.
     7. 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.
     8. 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 representative persons named below:

         
 
  If to the Company:   Corporate Secretary
Tesoro Corporation
300 Concord Plaza Drive
San Antonio, Texas 78216-6999
 
       
 
  If to the Employee:   Daniel J. Porter
 
       
 
       
 
       

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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.

                  COMPANY:   TESORO CORPORATION
 
           
 
      By:  
/s/ Bruce A. Smith 
 
          Bruce A. Smith
 
          Chairman of the Board of Directors,
 
          President and Chief Executive Officer  
 
  EMPLOYEE:      
/s/ Daniel J. Porter 
 
          Daniel J. Porter

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