exv10w1






Exhibit 10.1




SEPARATION, CONSULTING, WAIVER OF LIABILITY AGREEMENT




     I, Otto C. Schwethelm, am an employee of Tesoro Companies, Inc. My last day of employment is
November 20, 2008 (the “Separation Date”). I have voluntarily agreed to accept certain separation
benefits being offered to me, on the terms and conditions set forth below, and voluntarily enter
into this Separation, Consulting, Waiver of Liability Agreement (“Agreement”).




1. Payments and Other Considerations. 



     In consideration of the payments and benefits listed below, and other good and valuable
consideration (the “Consideration”), the sufficiency of which I acknowledge, I make the following
agreements and RELEASE AND FOREVER DISCHARGE the persons and organizations specified in paragraph 3
below. I acknowledge that the Consideration is in addition to anything of value to which I am
already entitled. This release and these agreements are made for myself, and on behalf of my
heirs, executors, legal representatives, administrators, successors, and assigns. As used in this
Agreement, the term “Consideration” shall include the following:




	 	(a)	 	Cash payment to me of the sum of ONE MILLION TWO HUNDRED FIFTY THOUSAND AND
NO/100 DOLLARS ($1,250,000.00) in separation pay (hereinafter, the “Separation Pay”).
I understand and agree that Tesoro Companies, Inc. will deduct from this Separation Pay
withholdings for federal income taxes, social security taxes, any other deductions
required by law, and any other deductions agreed to by me in writing.
	 
	 	 	 	The Separation Pay shall be paid as follows (assuming Employee has timely executed
and not revoked the Agreement): ONE MILLION TWO HUNDRED FIFTY THOUSAND AND NO/100
DOLLARS ($1,250,000.00) shall be paid on May 31, 2009. I acknowledge and agree that
these payments are not otherwise required by Tesoro’s policies, procedures, and
practices and that I would not be entitled to the Separation Pay but for the
promises made by me in this Agreement. These payments shall be made via direct
deposit to the account information I provide to Tesoro Companies, Inc.
	 
	 	(b)	 	In the event that Senior Vice Presidents of Tesoro are paid a cash bonus based
on performance during the 2008 calendar year, I will receive a cash payment equal to a
pro rata portion of the bonus to which I would otherwise have been entitled if my
employment with Tesoro Companies, Inc. had continued through December 31, 2008. The
amount of the cash payment will be determined by prorating such cash bonus, if any,
based on the number of days in 2008 that I was providing services as an employee of
Tesoro, and will be paid no later than March 15, 2009. If Senior Vice Presidents of
Tesoro are not entitled to receive a cash bonus based on performance in 2008, no amount
under this sub-paragraph (b) will be paid;
	 
	 	(c)	 	Benefits under the Tesoro Corporation Amended and Restated Executive Security
Plan determined as if I had attained age fifty-five (55) on my Separation Date;




 









 












	 	(d)	 	Waiver of the non-competition provisions of Section 2.3 of the Tesoro
Corporation Amended and Restated Executive Security Plan;
	 
	 	(d)	 	Reimbursement of expenses, other than travel expenses, that I incur for a
physical examination in the same nature and scope generally made available to other
peer executives of Tesoro Companies, Inc., provided such expenses are incurred within
the six (6) month period following my Separation Date;
	 
	 	(e)	 	Continuation of health care and life insurance benefits for me, my spouse and
my dependents for the eighteen (18) month period following my Separation Date at the
same level of coverage as in effect on the day immediately preceding my Separation
Date, with the cost of such continuation coverage to be paid directly by Tesoro
Companies, Inc.; provided, however, that if I become employed with another employer and
am eligible to receive health care and life insurance benefits under another employer
provided plan, the health care and life insurance benefits, as applicable, hereunder
shall cease, except, with respect to the health care benefits, to the extent otherwise
required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended;





     I acknowledge that, prior to entering this Agreement, I have already received or have been
advised that I will receive payment from Tesoro Companies, Inc. for the following items in
accordance with applicable state law, less standard deductions as required by law:




	 	(a)	 	All previously unpaid salary earned through the Separation Date;
	 
	 	(b)	 	All earned but unused vacation pay earned through the Separation Date; and
	 
	 	(c)	 	Immediate termination pay in lieu of two weeks notice.






2. Consulting Services.



     I agree to provide consulting services as requested from time to time by Tesoro Companies,
Inc., its parent and affiliates, specifically, I agree to consult with the Chief Financial Officer
from time to time at his request, but no more than eight (8) hours per week, on matters including,
but not limited to, Tesoro Corporation’s 2008 year-end financial reporting, and on-going matters
related to accounting and finance that may arise.  I agree to continue as a consultant for Tesoro
Companies, Inc. and affiliates until the earlier of (i) the last day of the six-month period
commencing on the Separation Date or (ii) the day on which I commence employment elsewhere (the
“Consulting Period”). If I commence employment elsewhere prior to the end of the Consulting Period
or I am approved for release from the Consulting Period prior to the end of Consulting Period
(“Early Release”), I shall be entitled to a lump sum payment for the remaining compensation from
the date of the Early Release through the end of the six month period. I shall further be required
to provide the Senior Vice President, Administration of Tesoro Companies, Inc. with written notice
indicating that I have commenced employment elsewhere if such commencement is during the Consulting
Period. Such approval for Early Release shall be in writing and signed by the Senior Vice
President, Administration of Tesoro Companies, Inc.



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     I agree that payment for my services during the Consulting Period shall be THIRTY-THREE
THOUSAND THREE HUNDRED THIRTY-THREE AND NO/100 DOLLARS ($33,333.00) per month payable on the first
day of each calendar month during the Consulting Period.




3. Persons and Organizations Released.



     I release Tesoro Corporation, any subsidiary or other affiliated companies, successors, and
assigns and all of their past, present, and future shareholders, owners, agents, representatives,
officers, directors, administrators, trustees, insurers, successors, and employees. Collectively,
these persons and organizations are referred to in this Agreement as “Tesoro”.




4. Matters Released. 



     I release Tesoro from all existing, past and present, known and unknown claims, demands, and
causes of action of any nature for all existing, past and present, known and unknown damages and
remedies of any nature, which have accrued or which may ever accrue to me or to others on whose
behalf I enter into this Agreement, resulting from or relating to any act or omission of any kind
occurring on or before the date of signing this Agreement.



     This release includes but is not limited to all claims under any federal, state, or local
employment law or regulation. I understand and agree that this release is intended to include but
is not limited to all claims that I could assert concerning the terms and conditions of my
employment, concerning anything that happened to me while I was an employee, or concerning the
separation of my employment.



     This release includes but is not limited to claims under Title VII of the Civil Rights Act of
1964, as amended; the Civil Rights Act of 1991; 42 U.S.C. § 1981; the Americans with Disabilities
Act; the Rehabilitation Act of 1973; Executive Order 11246; the Age Discrimination in Employment
Act, as amended by the Older Workers Benefit Protection Act; the Worker Adjustment and Retraining
Notification Act (“WARN”), the Employment Retirement Income Security Act, as amended; the
retaliation provisions of the Texas Workers’ Compensation Act, the Texas Commission on Human Rights
Act, Chapter 451 of the Texas Labor Code; the Fair Labor Standards Act; the Equal Pay Act; and the
Family and Medical Leave Act.



     This release also includes but is not limited to all claims under any other state, federal, or
local law or regulation and all claims at common law (including but not limited to negligence,
contract, or tort claims). The release also includes all claims for back pay, front pay, damages,
liquidated damages, exemplary and punitive damages, injunctive relief, costs, or attorneys’ fees.



     This release is not intended to waive rights or claims, if any, that arise after the date this
Agreement is executed. Further, this release is not intended to waive vested rights, if any, that I
might have in any written benefit plan or program. I understand that the terms and conditions
contained within any such benefit plan or program, specifically including those relating to any
rights that I may have in such plan or program, shall be controlling.



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     In addition, notwithstanding the foregoing, nothing in this Agreement shall prevent me from
filing a charge with any federal, state or administrative agency, but I agree not to participate
in, and waive any rights with respect to, any monetary or financial relief arising from any such
proceeding that relates to the matters released by this Agreement.




5. OWBPA Compliance.



     I acknowledge that the release and waiver provisions of this Agreement comply with the
requirements of the Older Workers Benefit Protection Act, 29 U.S.C. § 626(f)(1) (A)-(G). I have
knowingly and voluntarily agreed, for the consideration set forth herein, to waive, among other
things, any and all rights and claims I may have against Tesoro under the Age Discrimination in
Employment Act of 1967, as amended, 29 U.S.C. § 621 et seq. (“ADEA”). I specifically acknowledge
that the waiver of rights under the ADEA is written in a manner that I understand, that the waiver
specifically refers to claims arising under the ADEA, that I have not waived any rights or claims
under the ADEA that arise after the date this Agreement is executed, that my waiver of rights or
claims under the ADEA is in exchange for consideration in addition to anything of value that I am
otherwise entitled to receive from Tesoro.




6. Consultation with Attorney.



     I have voluntarily chosen to sign this Agreement and to agree to its terms and provisions. I
have been advised in writing to consult with an attorney prior to executing this Agreement. I have
also been advised and have had the opportunity to request, before signing, sufficient time to
thoroughly discuss all terms, provisions, and aspects of this Agreement with an attorney.




7. Understanding of Agreement.



     In signing this Agreement, I have relied on my own judgment and/or the advice of my attorney,
and not on any statement or representation of Tesoro.



     I understand the terms and conditions of this Agreement, agree to abide by it, and voluntarily
execute it without reservation. I understand that this agreement is a full, complete, and final
release of any and all claims that I may have against Tesoro.



8. Confidentiality and Non-Disclosure of Proprietary Information.




     I acknowledge that I have had access to and become familiar with various trade secrets and
proprietary and confidential information of Tesoro, including, but not limited to, the identity,
responsibilities, and/or income of employees, costs of doing business, financial information,
formulas, processes, and suppliers, compilations of information, records, customer information,
methods of doing business, information about past, present, pending, and/or planned transactions,
and other confidential information (collectively referred to as “Confidential Information”), which
are owned by Tesoro and regularly used in the operation of its business, and as to which Tesoro
takes precautions to prevent dissemination to persons other than certain directors, officers, and
employees. I acknowledge that the Confidential Information (i) is secret and not known in the
industry; (ii) gives Tesoro an advantage over competitors who do not know



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or use the Confidential Information; (iii) is of such value and nature as to make it
reasonable and necessary to protect and preserve the confidentiality and secrecy of the
Confidential Information; and (iv) constitutes a valuable, special, and unique asset of Tesoro, the
disclosure of which could cause substantial injury and loss of profits and goodwill to Tesoro.
Confidential Information does not include material, data, documents, and/or information that Tesoro
has voluntarily placed in the public domain; that has been lawfully and independently developed and
publicly disclosed by third parties; that constitutes general knowledge and skills that I gained
during the time period of my employment with Tesoro, or that otherwise enters the public domain
though lawful means.



     I agree that I will not in any way use or disclose any Confidential Information, directly or
indirectly, at any time in the future, and shall otherwise protect such information from
unauthorized use or disclosure by others. All files, records, documents, information, data, and
similar items relating to the business of Tesoro, or its prospects, services, suppliers, products,
customers, finances, data processing, purchasing, accounting, or marketing systems, whether
prepared by me or otherwise coming into my possession, will remain the exclusive property of
Tesoro, and in any event must be promptly delivered to Tesoro upon execution of this Agreement.



     As a result of my employment by Tesoro, I may have had access to, or knowledge of,
confidential business information or trade secrets of third parties. I also agree to preserve and
protect the confidentiality of such third-party confidential information and trade secrets to the
same extent, and on the same basis, as the privileged confidential business and/or trade secret
information of Tesoro.



9. Return of Property and Confidential Information.




     I agree that all documents or materials that I obtained while employed by Tesoro and that
contain or disclose privileged, confidential business and/or trade-secret information are and
remain the property of Tesoro. I agree that I will immediately deliver any such materials,
including all copies, to Tesoro.



     I also agree to immediately return, if I have not already returned such property, all company
property, which includes but is not limited to computers, equipment, identification badges,
computer passwords, keys, credit cards, books, records, and any other items belonging to Tesoro.



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10. Non-Disparagement. 




     I agree not to disclose or make public (directly or indirectly) any facts or allegations about
any Tesoro employees. I also agree not to disparage or communicate negatively about the business,
products, services, customers, management, or employment/compensation/benefit practices and
policies of Tesoro. To the extent allowed by law, I also agree not to help, encourage, or
participate (directly or indirectly) in any claims or lawsuits against Tesoro for any claims
related to any individual’s employment (or separation from employment) with Tesoro.



11. Non-Solicitation of Employees.




     I agree that for a period of two (2) years after my last day of active employment with Tesoro
that I will not, either directly or indirectly, on my own behalf or on behalf of others, solicit,
attempt to hire, or hire any person currently employed by Tesoro or who was employed by Tesoro at
any time during the six months prior to such solicitation or job offer, to work for Employee or for
another entity, firm, corporation, or individual.



12. Breach. 




     I agree that any breach or threatened breach of Paragraphs 8 through 11 cannot be remedied
solely by money damages, and that in addition to any other remedies Tesoro may have, any such
breach or threatened breach shall entitle Tesoro to obtain injunctive relief against me. Nothing
herein, however, shall be construed as limiting Tesoro’s right to pursue any other available remedy
at law or in equity, including recovery of damages and termination of this Agreement; provided
further, that any breach of Paragraphs 8 through 11 by me will result in forfeiture of all rights
to the payments referenced in Paragraph 1, above.



13. Outplacement Compensation. 




     In consideration of the promises and agreements contained herein, Tesoro agrees to provide me
with outplacement services through a firm chosen solely by Tesoro, for a twelve (12) month period
beginning on the date of the execution of this Agreement. However, such outplacement services
shall cease upon Employee’s acceptance of a position offer, even if such acceptance of a position
offer is within the twelve month period as described above.



14. Independent Covenants.




     The covenants in Paragraphs 8 through 13 of this Agreement shall be construed as agreements
independent of any other provision of this Agreement, and the existence of any claim or cause of
action that I might have against Tesoro, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by Tesoro of such covenants.



15. Entire Agreement.




     This Agreement represents the entire agreement between Tesoro and me, and there are no other
agreements or understandings other than those contained in this Agreement. I do not rely



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upon any other consideration, promise or agreement not contained in this Agreement. This
Agreement substitutes for all prior and contemporaneous agreements and understandings, written or
oral, between Tesoro and me related to the subject matter of this Agreement. I understand that
this Agreement may not be changed unless the modification is in writing and signed by both the
President or Chief Executive Officer of Tesoro and me.



16. Governing Law.




     This Agreement is entered into and performable in San Antonio, Texas, and shall be governed
by, construed, and enforced in accordance with, and subject to, federal law where applicable or, to
the extent that federal law does not control, the laws of the State of Texas. Venue shall lie
exclusively with the United States District Court in San Antonio, Texas, where applicable, or with
the courts of Bexar County, Texas.



17. Headings. 




     The headings in this Agreement have been used for administrative convenience only and shall
not be used in interpreting or construing the meaning of any provision in this Agreement.



18. Invalid Provision.




     If any provision of this Agreement is or may be held by a court of competent jurisdiction to
be invalid, void, or unenforceable to any extent, the validity of the remaining parts, terms, or
provisions of this Agreement will not be affected thereby. Rather, such illegal or invalid part,
term, or provision shall be deemed not to be part of this Agreement. The remaining provisions
shall nevertheless survive and continue in full force and effect without being invalidated in any
way.



19. Counterparts.




     This Agreement may be executed in a number of identical counterparts, each of which for all
purposes is deemed an original and all of which constitute collectively one Agreement.



20. Acceptance of the Agreement.




     I have been provided and understand that I have at least twenty-one (21) days from receipt of
this Agreement to decide wither to accept it. I understand that I may elect to accept this
Agreement and execute it any time prior to the expiration of this period. I have been provided
with a full opportunity to review and consider all terms, provisions and aspects of the Agreement.
I understand that if I fail to execute and return this Agreement within four (4) days of the 21-day
period, the Agreement will be considered rejected and I will not be entitled to the Consideration
offered by Tesoro. I also understand that I shall have seven (7) full days following execution of
the Agreement during which I may revoke the Agreement in its entirety. I understand that any
revocation within this period must be submitted, in writing, to Tesoro and state, “I hereby revoke
my acceptance of the release provisions of my Separation, Consulting, Waiver of Liability
Agreement.” Revocation must be personally delivered to Tesoro, or express



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overnight mailed to Tesoro and postmarked within seven (7) days of execution of this
Agreement.



21. Effective Date of the Agreement.




     The release provisions of this Agreement will become effective and enforceable on the first
day after the revocation period has expired, provided that I have not revoked my acceptance of this
Agreement. If the last day of the revocation period is a Saturday, Sunday, or legal holiday in
Texas, then the revocation period will not expire until the next following day which is not a
Saturday, Sunday, or legal holiday. I understand that if I revoke the release provisions under the
Agreement, I will not receive the Consideration, as defined above.



ACCEPTED:




Employee:




	 	 	 	 	 	 	 	 	 
	By:

	 	 
	 	Date:	 	 	 	 
	 

	 	 

Otto C. Schwethelm
	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 
	Tesoro Companies, Inc.	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	Date:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	Susan A. Lerette	 	 	 	 	 	 
	 

	 	Senior Vice President, Administration	 	 	 	 	 	 







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