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SECOND AMENDMENT TO

EMPLOYMENT AGREEMENT




     This Second Amendment to Employment Agreement (“Second Amendment”) is entered into as of July
11, 2007 (the “Effective Date”) as a Second Amendment to the Employment Agreement entered into by
and between Tesoro Corporation (the “Company”) and William J. Finnerty (the “Executive”) as of
February 2, 2005 (the “Employment Agreement”), as amended by that certain First Amendment to
Employment Agreement dated as of February 2, 2006 (the “First Amendment”) by and between the
Company and the Executive.



WITNESSETH:




     WHEREAS, the Company and the Executive have previously entered into the Employment Agreement
and the First Amendment;



     WHEREAS, effective as of February 2, 2006, the Executive received a promotion from Executive
Vice President, Operations to Executive Vice President and Chief Operating Officer; and



     WHEREAS, the Company and the Executive wish to further amend the Employment Agreement by
entering into this Second Amendment so as to (i) reflect the Executive’s promotion from Executive
Vice President, Operations to Executive Vice President and Chief Operating Officer and change (ii)
the amount of certain fee reimbursements to the Executive;



     NOW, THEREFORE, in consideration of the mutual promises, covenants and conditions set
forth herein including, but not limited to, the Executive’s employment and the payments and
benefits described herein, the sufficiency of which is hereby acknowledged, the Company and the
Executive hereby agree as follows:



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	1.	 	Defined Terms. Capitalized terms not otherwise defined in this Second Amendment shall
have the meaning set forth in the Employment Agreement.

	 
	2.	 	Amendments.





     (a) All references in the Employment Agreement to “Executive Vice President, Operations” are
hereby amended to read “Executive Vice President and Chief Operating Officer”. Without limiting
the generality of the foregoing, the Employment Agreement is hereby amended as follows:




     (i) The first recital set forth in the Employment Agreement under “WITNESSETH”
is hereby amended to read, in its entirety, as follows:




“WHEREAS, the Company wishes to employ the Executive as its
Executive Vice President and Chief Operating Officer and the
Executive wishes to continue such employment; and”




     (ii) Section 3(a) of the Employment Agreement is hereby amended to read, in its
entirety, as follows:




(a) Executive shall serve as Executive Vice President and Chief
Operating Officer of the Company. In such capacities, Executive
shall perform such duties and have the power, authority and
functions commensurate with such positions in similarly sized public
companies and such other authority and functions consistent with
such positions as may be assigned to Executive from time to time by
the Chief Executive Officer.



     (b) Section 4(a) of the Employment Agreement is hereby amended to read, in its entirety, as
follows:




     (a) ANNUAL BASE SALARY. During the Employment Period, the Executive shall
receive an annual base salary (the “Annual Base Salary”) at an annual rate of
$754,000 less applicable taxes, or such higher rate as may be determined from time
to time by the Board of Directors of the Company (the “Board). The annual Base
Salary shall be paid at such intervals as the Company pays executive salaries
generally. During the Employment Period, the Annual Base Salary shall be reviewed
at least annually, beginning no more than 12 months after the last salary increase
awarded to the Executive prior to the Effective Date. Any increase in the Annual
Base Salary shall not serve to limit or reduce any other obligation to the Executive
under this Agreement. The Annual



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Base Salary shall not be reduced after any such increase and the term “Annual
Base Salary” shall refer to the Annual Base Salary as so increased.



     (c) Section 4(e) of the Employment Agreement is hereby amended to read, in its entirety, as
follows:




     (e) FEE REIMBURSEMENTS.




     The Company will reimburse the Executive as provided in the Company’s policies
and procedures for an initiation fee or fees and dues for a country, luncheon or
social club or clubs. In addition, the Company will reimburse the Executive for
additional initiation fees 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.



     3. Acknowledgement and Waiver. The Company and the Executive acknowledge and agree
that the promotion of the Executive from Executive Vice President, Operations to Executive Vice
President and Chief Operating Officer and the related change in his positions, duties and
responsibilities shall not be deemed to constitute (i) a material diminution of Executive’s
positions, duties or responsibilities under the Employment Agreement or the assignment to the
Executive of duties or responsibilities that are inconsistent with the Executive’s position, (ii)
the removal of the Executive from officer positions with the Company specified in the Employment
Agreement, or (iii) a material breach by the Company of any provision of the Employment Agreement,
for purposes of the definition of “Good Reason” set forth in the Employment Agreement. The
Executive hereby irrevocably waives any claim that the promotion from Executive Vice President,
Operations to Executive Vice President and Chief Operating Officer constitutes Good Reason under
the terms of the Employment Agreement.



     4. Employment Agreement Remains in Full Force and Effect. Except as expressly amended
by this Second Amendment, the Employment Agreement, as amended by the First Amendment, shall remain
in full force and effect and all of the terms of the Employment



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Agreement, as amended by the First Amendment, are hereby incorporated into this Second
Amendment.



     5. Governing Law. This Second Amendment shall be governed by and construed in
accordance with the laws of the State of Texas applicable to agreements made and to be performed in
that State, without regard to its conflict of laws provisions.



     6. Miscellaneous.




     (a) Waiver. The failure of a party to insist upon strict adherence to any term of this
Second Amendment on any occasion shall not be considered a waiver thereof or deprive that
party of the right thereafter to insist upon strict adherence to that term or any other term
of this Second Amendment.




     (b) Separability. If any term or provision of this Second Amendment is declared
illegal or unenforceable by any court of competent jurisdiction, and cannot be modified to
be enforceable, such term or provision shall immediately become null and void, leaving the
remainder of this Second Amendment in full force and effect.




     (c) Headings. Section headings are used herein for convenience of reference only and
shall not affect the meaning of any provision of this Second Amendment.




     (d) Rules of Construction. Whenever the context so requires, the use of the singular
shall be deemed to include the plural and vice versa.




     (e) Counterparts. This Second Amendment may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, and such counterparts will
together constitute but one Second Amendment.



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     IN WITNESS WHEREOF, the parties hereto have duly executed this Second Amendment as of the day
and year first above written.



	 	 	 	 	 
	 	TESORO CORPORATION

 	 
	 	 
 	 
	 	By: Bruce A. Smith 	 
	 	Title:  	Chairman of the Board of Directors,

President and Chief Executive Officer 	 
	 
	 	 	 
	 	 
 	 
	 	William J. Finnerty, Executive 	 
	 	
	 
	 




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