exv10w2






EXHIBIT 10.2




TESORO CORPORATION




BOARD OF DIRECTORS DEFERRED PHANTOM STOCK PLAN




Effective January 1, 2009




 









 





TESORO CORPORATION

BOARD OF DIRECTORS DEFERRED PHANTOM STOCK PLAN




TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page
	ARTICLE I DEFINITIONS
	 	 	1	 
	 
	 	 	 	 
	1.1 Account
	 	 	1	 
	1.2 Aggregated Plan
	 	 	1	 
	1.3 Beneficiary
	 	 	1	 
	1.4 Board of Directors
	 	 	1	 
	1.5 Code
	 	 	1	 
	1.6 Committee
	 	 	1	 
	1.7 Common Stock
	 	 	1	 
	1.8 Corporation
	 	 	2	 
	1.9 Deferred Phantom Stock Ledger
	 	 	2	 
	1.10 Disability
	 	 	2	 
	1.11 Distribution Schedule
	 	 	2	 
	1.12 Effective Date
	 	 	2	 
	1.13 NYSE
	 	 	2	 
	1.14 Participant
	 	 	2	 
	1.15 Plan
	 	 	2	 
	1.16 Plan Year
	 	 	2	 
	1.17 Regulations
	 	 	2	 
	1.18 Retirement
	 	 	2	 
	1.19 Separation from Service
	 	 	3	 
	1.20 Unit
	 	 	3	 
	1.21 Vested Interest
	 	 	3	 
	 
	 	 	 	 
	ARTICLE II ELIGIBILITY AND PARTICIPATION
	 	 	3	 
	 
	 	 	 	 
	2.1 Eligibility to Participate
	 	 	3	 
	2.2 Participation Agreements
	 	 	3	 
	 
	 	 	 	 
	ARTICLE III DEFERRAL CONTRIBUTIONS
	 	 	4	 
	 
	 	 	 	 
	3.1 Annual Nonelective Deferral Contributions
	 	 	4	 
	3.2 Nonelective Deferral Contribution for Committee Chairmen
	 	 	4	 
	3.3 Election to Defer Fees
	 	 	5	 
	 
	 	 	 	 
	ARTICLE IV CREDITING ACCOUNTS
	 	 	5	 
	 
	 	 	 	 
	4.1 Establishing a Participant’s Account
	 	 	5	 
	4.2 Credit of Deferral Contributions
	 	 	5	 
	4.3 Crediting of Earnings and Losses
	 	 	5	 
	4.4 Crediting of Dividends and Distributions
	 	 	5	 
	4.5 Voting Rights
	 	 	5	 
	 
	 	 	 	 
	ARTICLE V VESTING
	 	 	5	 
	 
	 	 	 	 
	5.1 Annual Nonelective Deferral Contribution
	 	 	5	 
	5.2 Other Deferral Contributions
	 	 	6	 
	 
	 	 	 	 
	ARTICLE VI DISTRIBUTIONS
	 	 	6	 
	 
	 	 	 	 
	6.1 General
	 	 	6	 
	6.2 Distribution Upon Death
	 	 	6	 
	6.3 Designation of Beneficiary
	 	 	6	 






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	 	 	Page
	6.4 Disability
	 	 	6	 
	6.5 Responsibility for Distributions and Withholding of Taxes
	 	 	7	 
	6.6 Change in Time of Payments
	 	 	7	 
	 
	 	 	 	 
	ARTICLE VII ADMINISTRATION
	 	 	8	 
	 
	 	 	 	 
	7.1 Committee Appointment
	 	 	8	 
	7.2 Committee Organization and Voting
	 	 	8	 
	7.3 Powers of the Committee
	 	 	8	 
	7.4 Committee Discretion
	 	 	9	 
	7.5 Annual Statements
	 	 	9	 
	7.6 Reimbursement of Expenses
	 	 	9	 
	7.7 Indemnification
	 	 	9	 
	 
	 	 	 	 
	ARTICLE VIII AMENDMENT AND/OR TERMINATION
	 	 	9	 
	 
	 	 	 	 
	8.1 Amendment or Termination of the Plan
	 	 	9	 
	8.2 No Retroactive Effect on Account
	 	 	9	 
	8.3 Effect of Termination
	 	 	9	 
	 
	 	 	 	 
	ARTICLE IX UNFUNDED PLAN
	 	 	10	 
	 
	 	 	 	 
	9.1 Benefits from General Assets of Corporation
	 	 	10	 
	9.2 No Requirement to Fund
	 	 	10	 
	9.3 Adoption of Trust
	 	 	11	 
	9.4 Status as Unsecured Creditor
	 	 	11	 
	 
	 	 	 	 
	ARTICLE X MISCELLANEOUS
	 	 	11	 
	 
	 	 	 	 
	10.1 Distributions to Incompetents or Minors
	 	 	11	 
	10.2 Nonalienation of Benefits
	 	 	11	 
	10.3 Reliance Upon Information
	 	 	11	 
	10.4 Severability
	 	 	12	 
	10.5 Notice
	 	 	12	 
	10.6 Gender and Number
	 	 	12	 
	10.7 Governing Law
	 	 	12	 







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TESORO CORPORATION

BOARD OF DIRECTORS DEFERRED PHANTOM STOCK PLAN




     WHEREAS, Tesoro Corporation (the “Corporation”) previously established the Tesoro Corporation
Board of Directors Deferred Phantom Stock Plan, effective March 6, 1997 (the “Plan”) for the
benefit of non-employee members of the Board of Directors;



     WHEREAS, the Plan is a nonqualified deferred compensation plan that entitles such directors to
receive annual nonelective contributions (“Annual Contributions”) for each year during which they
serve as a director, subject to limitations prescribed under the Plan, and, if applicable, a single
nonelective contribution with respect to services performed as a chairman of a Board committee and,
further, to defer any part or all of the cash portion of directors’ fees earned with respect to
their services performed as directors; and



     WHEREAS, the Corporation desires to amend the Plan to comply with Section 409A of the Code and
the Regulations promulgated thereunder;



     NOW, THEREFORE, the Corporation adopts this amended and restated Tesoro Corporation Board of
Directors Deferred Phantom Stock Plan, effective January 1, 2009 (except as otherwise specifically
noted herein), as follows:



ARTICLE I

DEFINITIONS




     1.1 Account. “Account” means a bookkeeping account in the Deferred Phantom Stock
Ledger which reflects the benefits to which a Participant is entitled under this Plan.



     1.2 Aggregated Plan. “Aggregated Plan” means all agreements, methods, programs, and
other arrangements sponsored by the Corporation that would be aggregated with this Plan under
Section 1.409A-1(c) of the Regulations.



     1.3 Beneficiary. “Beneficiary” means a person or entity designated by the Participant
in accordance with Section 6.3 hereof to receive amounts credited to his Account following his
death.



     1.4 Board of Directors. “Board of Directors” means the Board of Directors of the
Corporation.



     1.5 Code. “Code” means the Internal Revenue Code of 1986, as amended from time to
time.



     1.6 Committee. “Committee” means the committee designated by the Corporation to
administer the Plan.



     1.7 Common Stock. “Common Stock” means the common stock, $.16 par value, of the
Corporation.



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     1.8 Corporation. “Corporation” means Tesoro Corporation, or any successor entity that
maintains the Plan.



     1.9 Deferred Phantom Stock Ledger. “Deferred Phantom Stock Ledger” means the ledger
established and maintained by the Committee to reflect each Participant’s Account under the Plan.



     1.10 Disability. “Disability” means a Participant’s inability to engage in any
substantial gainful activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last for a continuous period of not
less than twelve (12) months. The determination of whether a Participant suffers from a Disability
shall be made by the Committee in accordance with the provisions of Code Section 409A and the
Regulations promulgated thereunder.



     1.11 Distribution Schedule. “Distribution Schedule” shall mean the time and method of
distributions elected (or deemed elected) by a Participant, which method may be either a lump sum
payment (except that in-service lump sum payments shall not be permitted for non-elective deferral
contributions) or installment payments, pursuant to which distribution of the Participant’s Vested
Interest in his Account shall be made or shall commence. Such election shall be made at the time
and in the manner described in Section 2.2 hereof; provided, however, that a Distribution Schedule
elected by the Participant pursuant to which installment payments are to be made must require
annual installments for a period not to exceed ten (10) years.



     1.12 Effective Date. “Effective Date” means January 1, 2009, except as specifically
noted herein.



     1.13 NYSE. “NYSE” shall mean the New York Stock Exchange, or, if the Common Stock is
no longer traded on such exchange, the principal stock exchange or other securities market on which
the Common Stock is publicly traded.



     1.14 Participant. “Participant” means an eligible member of the Board of Directors
described in Section 2.1 below.



     1.15 Plan. “Plan” means this amended and restated Tesoro Corporation Board of
Directors Deferred Phantom Stock Plan, effective January 1, 2009 (except as specifically noted
herein), as set forth in this document and as may be amended from time to time.



     1.16 Plan Year. “Plan Year” means the calendar year.



     1.17 Regulations. “Regulations” means the Treasury Regulations promulgated under the
Code.



     1.18 Retirement. “Retirement” or “Retired” means the cessation of a Participant’s
service for the Board of Directors, as determined by the Board of Directors pursuant to a written
resolution
adopted by its members (other than the Participant) following the Participant’s (a) attainment
of the age at which he is no longer eligible for re-election under the Corporation’s Governance
Policy or (b) completion of at least three (3) years of service as a director.



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     1.19 Separation from Service. “Separation from Service” means the date on which the
Participant ceases to be a director of the Corporation; provided that a Separation from Service
shall not have occurred if the Corporation anticipates that the Participant will continue to
provide services to the Corporation or a subsidiary, whether as an employee or consultant or in any
other capacity. The determination of whether a Separation from Service has occurred shall be made
by the Committee in accordance with Section 1.409A-1(h) of the Treasury Regulations, or such other
guidance with respect to Code Section 409A that may be in effect on the date of determination.



     1.20 Unit. “Unit” shall mean a unit of beneficial interest allocated to a
Participant’s Account pursuant to Article IV hereunder. The value of a Unit for purposes of this
Plan shall be determined by the Committee based upon the closing quotation of the Common Stock on
the NYSE on the date of the determination.



     1.21 Vested Interest. “Vested Interest” shall mean that portion of the Participant’s
Account in which he has a nonforfeitable right. A Participant’s Vested Interest shall be
determined in accordance with Article V hereof.



ARTICLE II

ELIGIBILITY AND PARTICIPATION




     2.1 Eligibility to Participate. All members of the Board of Directors who are not
otherwise employed and have not been employed within the last three years by the Corporation or a
subsidiary of the Corporation will be eligible to participate in this Plan. An eligible member of
the Board of Directors will automatically become a Participant in this Plan as of the date on which
his service as a member of the Board of Directors commences.



     2.2 Participation Agreements.




     (a) Elections Upon Commencement of Participation. An eligible director may
elect to defer any part or all of the cash portion of his directors’ fees under the Plan by
executing a participation agreement in such form and at such time as the Committee shall
require, provided that the participation agreement shall be executed within thirty (30) days
of the date on which his service as a member of the Board of Directors commences. The
Participant’s election shall become effective immediately following the Committee’s receipt
of the Participant’s executed participation agreement. The Participant may, at such time,
also irrevocably elect the Distribution Schedule under which benefits hereunder will be
paid, subject to the restrictions of the Plan. A Participant’s failure to timely submit a
participation agreement in accordance with this paragraph (a) shall be deemed an election by
the Participant to defer zero percent (0%) of his directors’ fees for the Plan Year during
which the Participant first becomes eligible to participate. A Participant’s failure to
elect a Distribution Schedule in accordance with this paragraph (a) shall be deemed an
election by the Participant to receive his benefits hereunder in a lump sum payment within
the ninety (90) day period
following such Participant’s Separation from Service. The Participant’s election (or
deemed election) shall become irrevocable as of the last day of the 30-day period during
which the Participant is permitted to make an election in accordance with this paragraph
(a).



3









 






     (b) Annual Deferral Elections. A Participant’s election (or deemed election)
shall remain effective for each subsequent Plan Year for which the Participant is eligible
to participate in the Plan, unless and until such election (or deemed election) is modified
or revoked by the Participant in accordance with this paragraph (b). A Participant may
modify or revoke an election (including a deemed election) with respect to the deferral of
directors’ fees to be earned in a subsequent Plan Year by submitting an executed
participation agreement to the Committee, in such form as the Committee shall require, no
later than the day immediately preceding the Plan Year in which such directors’ fees will be
earned.




     (c) Subsequent Elections Regarding Method of Payment. The Committee may, in
its sole and absolute discretion, permit a Participant to subsequently modify a prior
election (or deemed election) in order to change the method of payment to be received
hereunder, provided that (i) such subsequent election shall not take effect for at least
twelve (12) months following the date on which the subsequent election is made, (ii) with
respect to a payment that the Participant is entitled to receive following his Separation
from Service or pursuant to a Distribution Schedule, the payment with respect to which such
subsequent election is made is deferred at least five (5) years from the date on which such
payment would otherwise have been made absent such subsequent election (or in the case of
installment payments, five (5) years from the date the first payment was scheduled to be
made), and (iii) with respect to the payment of benefits hereunder pursuant to a
Distribution Schedule, such subsequent election is made no less than twelve (12) months
prior to the date the payment is scheduled to be made (or in the case of installment
payments, five (5) years from the date the first payment was scheduled to be made).




     (d) 2008 Special Election. Notwithstanding any provision herein to the
contrary, effective December 12, 2008, each Participant may elect to modify an existing
election (or deemed election) provided that such election: (i) may apply only to amounts
that would not otherwise be payable in 2008, (ii) may not cause an amount to be paid in 2008
that would not otherwise be payable in 2008, (iii) shall be made no later than December 31,
2008 and prior to such earlier date as may be established by the Committee, (iv) shall not
apply to non-elective deferral contributions and (v) shall be made in the manner and subject
to such restrictions as shall be determined by the Committee.



ARTICLE III

DEFERRAL CONTRIBUTIONS




     3.1 Annual Nonelective Deferral Contributions. As of the last day of each Plan Year,
the Committee shall credit a nonelective deferral contribution to each Participant’s Account in an
amount equal to $7,250.00 (or such pro rata amount determined by the Committee based upon the
actual number of days served by the Participant during the Plan Year). Notwithstanding the
foregoing, the annual credits under this Section 3.1 are limited to fifteen (15) full annual
credits (partial credits being aggregated for the purposes of this limitation), taking into account
both the
previous accruals of retirement benefits under the Director Retirement Plan (based on the
effective date of such director’s service) and credits under this Plan.



     3.2 Nonelective Deferral Contribution for Committee Chairmen. Each Participant who is
serving as a chairman of a committee of the Board of Directors immediately prior to his



4









 







Separation
from Service and who has served at least three (3) years as a director shall have an additional
nonelective deferral contribution in the amount of $5,000.00 credited to his Account as of the date
of his Separation from Service.



     3.3 Election to Defer Fees. Each Participant shall have the right to irrevocably
elect, on an annual basis, to defer any part or all of the cash portion of his directors’ fees in
accordance with Section 2.2 hereof. The amount elected to be deferred by the Participant shall be
credited to the Participant’s Account as of the last business day of the calendar quarter following
the date on which such fees would otherwise have been paid.



ARTICLE IV

CREDITING ACCOUNTS




     4.1 Establishing a Participant’s Account. The Committee will establish and maintain
an Account for each Participant, which shall be reflected in the Deferred Phantom Stock Ledger.



     4.2 Credit of Deferral Contributions. The Committee will credit the Participant’s
Account with a number of Units equal in value to the Nonelective Deferral Contributions and the
Participant deferrals, as provided in Article III above.



     4.3 Crediting of Earnings and Losses. As of the last business day of each calendar
quarter, the Committee shall update the Accounts to reflect the increase or decrease in the value
of the Units credited to each Participant’s Account.



     4.4 Crediting of Dividends and Distributions. As of the date on which dividends or
distributions are paid with respect to Common Stock, the Committee shall credit each Participant’s
Account with an amount equal to the value of such dividends or distributions as if paid with
respect to the Units credited to the Participant’s Account on such date. If dividends or
distributions are paid in the form of shares of Common Stock, the Participant’s Account shall be
credited with a number of Units equal to the number of shares deemed distributed with respect to
each Unit credited to his Account on such date. If dividends or distributions are paid in any
other form, the Participant’s Account shall be credited with a number of Units equal in value to
the amounts deemed distributed with respect to each Unit credited to his Account on such date. The
value of any dividend or distribution that is not paid in cash or shares of Common Stock shall be
determined by the Committee in its sole and absolute discretion.



     4.5 Voting Rights. No Participant shall have voting rights with respect to any Units
credited to his Account.



ARTICLE V

VESTING




     5.1 Annual Nonelective Deferral Contribution. Except as otherwise provided in Section
8.3 hereof, the Participant shall be 100% vested in the nonelective deferral contributions made
pursuant to Section 3.1 above as of the earlier of (a) his completion of three (3) years of service
as a member of the Board of Directors or (b) his death, Retirement, or Disability. A Participant’s
service, for the purpose of determining his vested interest under this Section 5.1, shall



5









 







be
measured from the date on which the Participant’s service as a member of the Board of Directors
commences. Amounts credited to a Participant’s Account to which he does not have a vested interest
shall be forfeited as of the date of the Participant’s Separation from Service.



     5.2 Other Deferral Contributions. The Participant shall be immediately 100% vested in
the nonelective and elective deferral contributions made pursuant to Sections 3.2 and 3.3,
respectively.



ARTICLE VI

DISTRIBUTIONS




     6.1 General. Except to the extent otherwise provided in this Article VI, distribution
of a Participant’s Vested Interest shall be made, or shall commence, in accordance with the
Distribution Schedule elected (or deemed elected) by such Participant under Section 2.2 within
ninety (90) days of the Participant’s Separation from Service. All distributions shall be made in
cash. The amount credited to the Participant’s Account for purposes of a distribution hereunder
shall be determined based upon the number of Units credited to the Participant’s Account as of the
date of the Participant’s Separation from Service, increased by the amount, if any, to which the
Participant is entitled under Article III after such date.



     6.2 Distribution Upon Death. Distribution of a Participant’s Vested Interest on
account of death while serving as a director shall be made in a lump sum payment to his
Beneficiary(ies) within the ninety (90) day period following the Participant’s death. In the event
of the Participant’s death during a period of installment payments, the remainder of the
Participant’s Vested Interest shall be paid to his Beneficiary(ies) in a lump sum within the ninety
(90) day period following the Participant’s death.



     6.3 Designation of Beneficiary. Each Participant, at the time of making his initial
deferral election, must file with the Committee a designation of one or more Beneficiaries to whom
distributions otherwise due the Participant will be made in the event of his death prior to the
complete distribution of the amount credited to his Account. The designation will be effective
upon receipt by the Committee of a properly executed form which the Committee has approved for that
purpose. The Participant may from time to time revoke or change any designation of Beneficiary by
filing another approved Beneficiary designation form with the Committee. If there is no valid
designation of Beneficiary on file with the Committee at the time of the Participant’s death, or if
all of the Beneficiaries designated in the last Beneficiary designation have predeceased the
Participant or otherwise ceased to exist, the Beneficiary will be the Participant’s spouse, if the
spouse survives the Participant, or otherwise the Participant’s estate. A Beneficiary must survive
the Participant by
60 days in order to be considered to be living on the date of the Participant’s death. If any
Beneficiary survives the Participant but dies or otherwise ceases to exist before receiving all
amounts due to the Beneficiary from the Participant’s Account, the balance of the amount that would
have been paid to that Beneficiary will, unless the Participant’s designation provides otherwise,
be distributed to the individual deceased Beneficiary’s estate or to the Participant’s estate in
the case of a Beneficiary which is not an individual.



     6.4 Disability. Distribution of a Participant’s Vested Interest on account of
Disability while serving as a director shall be made in a lump sum payment to him within the
ninety (90) day



6









 







period following the Committee’s determination of the Participant’s Disability. In
the event of the Participant’s Disability during a period of installment payments, the remainder of
the Participant’s Vested Interest shall be paid to him in a lump sum within the ninety (90) day
period following the Committee’s determination of the Participant’s Disability.



     6.5 Responsibility for Distributions and Withholding of Taxes. The Committee will
furnish to the Corporation information sufficient for the Corporation to pay the amount of any
distribution hereunder. The Corporation shall be authorized to calculate and withhold from any
distribution such amounts as it determines necessary to satisfy its obligations to withhold for any
federal, state or local income and/or employment taxes.



     6.6 Change in Time of Payments. Notwithstanding any provision of this Article VI to
the contrary, the benefits payable hereunder may, to the extent expressly provided in this Section
6.6, 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 Account 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 Code Section 409A and the Regulations, the Committee may determine
that such Participant shall receive a distribution from the Plan in an amount equal to the
lesser of: (i) the portion of his or her Account 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
Code Section 409A and the Regulations, or (ii) the balance of the Participant’s Account.




     (b) Distribution Necessary to Satisfy Applicable Tax Withholding. If the
Corporation 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 in the Participant’s Account 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 Corporation 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 under this Article VI until the earliest date at which
the Corporation reasonably anticipates that making of such payment would not cause such
violation.




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



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     (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 Article VI; 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 (or following the Participant’s death, the
Participant’s Beneficiary), it is not administratively practicable for the Committee to
calculate the amount of benefits due to 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.




     (f) No Participant Election. Notwithstanding the foregoing provisions, if the
period during which payment of benefits hereunder will be made occurs, or will occur, in two
calendar years, the Participant shall not be permitted to elect the calendar year in which
the payment shall be made.



ARTICLE VII

ADMINISTRATION




     7.1 Committee Appointment. The Board of Directors will have the sole discretion to
remove any one or more Committee members and appoint one or more replacement or additional
Committee members from time to time.



     7.2 Committee Organization and Voting. The Committee will select from among its
members a chairman who will preside at all of its meetings and will elect a secretary without
regard to whether that person is a member of the Committee. The secretary will keep all records,
documents and data pertaining to the Committee’s supervision and administration of the Plan. A
majority of the members of the Committee will constitute a quorum for the transaction of business
and the vote of a majority of the members present at any meeting will decide any question brought
before the meeting. In addition, the Committee may decide any question by vote, taken without a
meeting, of a majority of its members. A member of the Committee who is also a Participant will
not vote or act on any matter relating solely to himself.



     7.3 Powers of the Committee. The Committee will have the exclusive responsibility for
the general administration of the Plan according to the terms and provisions of the Plan and will
have
all powers necessary to accomplish those purposes, including but not by way of limitation the
right, power and authority:




     (a) To make rules and regulations for the administration of the Plan;




     (b) To construe all terms, provisions, conditions and limitations of the Plan;




     (c) To correct any defect, supply any omission or reconcile any inconsistency that may
appear in the Plan in the manner and to the extent it deems expedient to carry the Plan into
effect for the greatest benefit of all parties at interest;



8









 






     (d) To determine all controversies relating to the administration of the Plan,
including but not limited to:




     (i) Differences of opinion arising between the Corporation and a Participant;
and




     (ii) Any question relating to the uniform administration of the Plan; and




     (e) To delegate those clerical and recordation duties of the Committee, as it deems
necessary or advisable for the proper and efficient administration of the Plan.



     7.4 Committee Discretion. The Committee in exercising any power or authority granted
under this Plan or in making any determination under this Plan shall perform or refrain from
performing those acts using its sole discretion and judgment. Any decision made by the Committee
or any refraining to act or any act taken by the Committee in good faith shall be final and binding
on all parties. The Committee’s decision shall be final and binding on all parties and shall not
be subject to review.



     7.5 Annual Statements. The Committee will cause each Participant to receive an annual
statement as soon as administratively practicable after the conclusion of each Plan Year, which
statement shall describe the number of Units credited to his Account during that Plan Year, the
total number of Units credited to his Account as of the end of the Plan Year and the value of those
Units as of the end of the Plan Year.



     7.6 Reimbursement of Expenses. The members of the Committee will serve without
compensation for their services but will be reimbursed by the Corporation for all expenses properly
and actually incurred in the performance of their duties under the Plan.



     7.7 Indemnification. To the extent permitted by applicable law, the Corporation shall
indemnify and hold harmless each member of the Committee from and against any and all claims and
expenses (including, without limitation, attorney’s fees and related costs), in connection with the
performance by such member of his duties in that capacity, other than any of the foregoing arising
in connection with the willful neglect or willful misconduct of the person so acting.



ARTICLE VIII

AMENDMENT AND/OR TERMINATION




     8.1 Amendment or Termination of the Plan. The Corporation may amend or terminate the
Plan at any time by written instrument adopted by the members of the Board of Directors.



     8.2 No Retroactive Effect on Account. No amendment will affect the rights of any
Participant to his Account or change the method of valuing the Units then credited to his Account
without the Participant’s consent.



     8.3 Effect of Termination. If the Plan is terminated, each Participant’s Account
shall become fully vested. In addition, to the extent provided by the Corporation in accordance
with Section 8.1, the Plan may be liquidated following a termination under any of the following
circumstances:



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     (a) the termination and liquidation of the Plan within twelve (12) months of a
complete dissolution of the Corporation taxed under Section 331 of the Code or with the
approval of a bankruptcy court pursuant to 11 U.S.C. § 503(b)(1)(A); provided that the
amounts deferred under this Plan are included in the Participants’ gross incomes in the
latest of the following years (or, if earlier, the taxable year in which the amount is
actually or constructively received): (i) the calendar year in which the Plan is terminated;
(ii) the first calendar year in which the amount is no longer subject to a substantial risk
of forfeiture; or (iii) the first calendar year in which the payment is administratively
practicable.




     (b) the termination and liquidation of the Plan pursuant to irrevocable action taken by
the Corporation within the thirty (30) days preceding or the twelve (12) months following a
Change of Control; provided that all Aggregated Plans are terminated and liquidated with
respect to each Participant that experienced the Change of Control, so that under the terms
of the termination and liquidation, all such Participants are required to receive all
amounts of deferred compensation under this Plan and any other Aggregated Plans within
twelve (12) months of the date the Corporation irrevocably takes all necessary action to
terminate and liquidate this Plan and such other Aggregated Plans;




     (c) the termination and liquidation of the Plan, provided that: (i) the termination and
liquidation does not occur proximate to a downturn in the Corporation’s financial health;
(2) the Corporation terminates and liquidates all Aggregated Plans; (3) no payments in
liquidation of this Plan are made within twelve (12) months of the date the Corporation
irrevocably takes all necessary action to terminate and liquidate this Plan, other than
payments that would be payable under the terms of this Plan if the action to terminate and
liquidate this Plan had not occurred; (4) all payments are made within twenty four (24)
months of the date on which the Corporation irrevocably takes all action necessary to
terminate and liquidate this Plan; and (5) the Corporation does not adopt a new Aggregated
Plan at any time within three (3) years following the date on which the Corporation
irrevocably takes all action necessary to terminate and liquidate the Plan.


For purposes of this Section 8.3, the term “Change of Control” shall have the meaning ascribed to
it under the Tesoro Board of Directors Deferred Compensation Plan, effective January 1, 2009, as
may be amended from time to time.




ARTICLE IX

UNFUNDED PLAN




     9.1 Benefits from General Assets of Corporation. The Corporation may establish a
trust fund for the purpose of retaining assets set aside by the Corporation pursuant to a trust
agreement for payment of all or a portion of the benefits payable pursuant to Article VI of the
Plan. Any such benefits not paid from a trust fund shall be paid from the Corporation’s general
assets. The trust fund, if such shall be established, shall be subject to the claims of general
creditors of the Corporation in the event the Corporation is Insolvent (as defined in the trust
agreement).



     9.2 No Requirement to Fund. The Corporation is not required to set aside any assets
for payment of the benefits provided under this Plan; however, it may do so as provided in the
trust agreement, if any. A Participant shall have no security interest in any such amounts.



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     9.3 Adoption of Trust. All benefits under the Plan shall be the unsecured obligations
of the Corporation and, except for those assets that may be placed in a trust fund established in
connection with this Plan, no assets will be placed in trust or otherwise segregated from the
general assets of the Corporation for the payment of obligations hereunder. If assets are placed
in a trust fund, the trust agreement, to the extent required by the Code, shall conform in all
material respects to the model trust set forth in Internal Revenue Service Revenue Procedure 92-64.
To the extent that any person acquires a right to receive payments hereunder, such right shall be
no greater than the right of any unsecured general creditor of the Corporation.



     9.4 Status as Unsecured Creditor. The establishment of this Plan shall not be
construed as giving to any Participant or Beneficiary or any person whomsoever, any legal,
equitable or other rights against the Corporation, or its officers, directors, agents or
shareholders, or as giving to any Participant or Beneficiary any equity or other interest in the
assets or business of the Corporation or shares of Corporation stock or as giving any director the
right to be retained in the service of the Corporation. All directors shall be subject to
discharge to the same extent they would have been if this Plan had never been adopted. The rights
of a Participant hereunder shall be solely those of an unsecured general creditor of the
Corporation.



ARTICLE X

MISCELLANEOUS




     10.1 Distributions to Incompetents or Minors. Should a Participant become incompetent
or should a Participant designate a Beneficiary who is a minor or incompetent, the Committee is
authorized to distribute any funds due to the parent of the minor or to the guardian of the minor
or incompetent or directly to the minor or to apply those funds for the benefit of the minor or
incompetent in any manner the Committee determines in its sole discretion.



     10.2 Nonalienation of Benefits. No right or benefit provided in this Plan will be
transferable by the Participant except, upon his death, to a named Beneficiary as provided in this
Plan. No right or benefit under this Plan will be subject to anticipation, alienation, sale,
assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign,
pledge, encumber, or charge the same will be void. No right or benefit under this Plan will in any
manner be liable for or subject to any debts, contracts, liabilities or torts of the person
entitled to a benefit. If any Participant or any Beneficiary becomes bankrupt or attempts to
anticipate, alienate, sell, assign, pledge, encumber or charge any right or benefit under this
Plan, that right or benefit will, in the discretion of the Committee, cease. In that event, the
Committee may have the Corporation hold or apply the right or benefit or any part of it to the
benefit of the Participant or Beneficiary, his or her spouse, children or other dependents or any
of them in any manner and in any proportion the Committee believes to be proper in its sole and
absolute discretion, but is not required to do so.



     10.3 Reliance Upon Information. The Committee will not be liable for any decision or
action taken in good faith in connection with the administration of this Plan. Without limiting
the generality of the foregoing, any decision or action taken by the Committee when it relies upon
information supplied it by any officer of the Corporation, the Corporation’s legal counsel, the
Corporation’s independent accountants or other advisors in connection with the administration of
this Plan will be deemed to have been taken in good faith.



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     10.4 Severability. If any term, provision, covenant or condition of the Plan is held
to be invalid, void or otherwise unenforceable, the rest of the Plan will remain in full force and
effect and will in no way be affected, impaired or invalidated.



     10.5 Notice. Any notice or filing required or permitted to be given to the Committee
or a Participant will be sufficient if in writing and hand delivered or sent by U.S. mail to the
principal office of the Corporation or to the residential mailing address of the Participant.
Notice will be deemed to be given as of the date of hand delivery or if delivery is by mail, as of
the date shown on the postmark.



     10.6 Gender and Number. Words used in this Plan of one gender are to be construed as
though they were also used in another gender in all cases where they would so apply and likewise
words in the singular or plural are to be construed as though they also included the other in all
cases where they would so apply.



     10.7 Governing Law. The Plan will be construed, administered and governed in all
respects by the laws of the State of Texas.



     IN WITNESS WHEREOF, the Corporation has executed this document on this 12th day of December, 2008, to be effective as of January 1, 2009 (except as otherwise
specifically noted herein).



	 	 	 	 	 	 	 
	 	 	TESORO CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ SUSAN A. LERETTE	 	 
	 

	 	 	 	 

	 	 
	 

	 	Name:	 	Susan A. Lerette	 	 
	 

	 	Its:	 	SVP, Administration	 	 
	 

	 	 	 	 

	 	 







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